CHAPTER ONE

INTRODUCTION AND DESIGN OF THE STUDY

“Happiness is not in the mere possession of money; it lies in the joy of

achievement, in the thrill of creative effort”.

- Franklin D. Roosevelt1

1.1 INTRODUCTION

Wealth creation is an art. People aspire for buying a home, explore for
better educational opportunities for their children and accord a comfortable
retirement for themselves for which money is required. Money does not grow on
trees, it can only grow when people save and invest wisely. Saving money is one
of the human practices which people must adopt to increase happiness and
contentment. In order to overcome the financial problems in future, everyone has
to save money. Saving money at earlier ages enables one to avoid regrets in later
life. Knowing how to secure financial well-being is one of the most important
things needed in life.

Savings is a portion of income, not spent on current expenditures because

a person does not know what will happen in the future. Money should be saved
for financial security and safety to meet unplanned financial events. Therefore,
savings helps an individual or family financially secure. Money can also be
saved to purchase expensive items that are too costly to buy with the monthly
income. Buying a new smart phone, purchasing a bike or paying for a vacation
can all be accomplished by saving a portion of income. Savings becomes the
cushion for the future’s intercourse of the unforeseen and upcoming as well as
the uncertain circumstances of life. To be considered financially secure, an
individual or household should save at least six months’ worth of expenses.

1
http://www.forbes.com/sites/robertberger/2014/04/30/top-100-money-quotes-of-all-time/

1
 Investment means putting the saved money in various products in order
to earn returns and increase the wealth. Investment improves the financial
well-being by making the money to work for the investor. Investment is the
commitment of funds which have been saved from current consumption with
the hope that some benefits will be received in future. Thus, it is a reward for
waiting. Investment of hard- earned money is a crucial activity of every
human being. Savings of the people are invested in assets, depending on their
risk and return demands. Wise investment paves path for wealth creation.
Keeping a close watch on the performance of the employee i.e. money makes
one a boss, for which the boss must be empowered with financial knowledge.

An investor has to keep in mind the factors safety, returns, liquidity,

gestation period and periodic income generation before going for investment. For
the higher economic growth of the country, marginal propensity to save should be
higher as it paves path for multiple process. The determinants and patterns of
saving differ from rural to urban region. In rural areas, the marginal propensity to
consume is more rather than the marginal propensity to save which seems to be
vice-versa in urban areas where the marginal propensity to save is more than that
of the marginal propensity to consume. For short periods of time and for small
amounts of money, the piggy bank method may work, but long-term savers
should use a profitable method assuring handful returns with easy liquidity. The
current research is a maiden attempt to understand the investment pattern of
individual investors in securities market which in turn fulfills the objectives of
easy liquidity and profitability.

1.1.1 Investment Avenues

An investment is a commitment of funds made in the expectation of some

positive rate of returns. If the investment is properly undertaken, the returns will
commensurate with risk the investor assumes”2. In general terms, investment
means the use of money in the hope of making more money. In finance,

2
Donald E. Fischer and Ronald J.Jordan (1995) “Security Analysis and PortfolioManagement”
Prentice Hall of India,New Delhi,6th Edition,p:14.

2
investment means the purchase of a financial product or other item of value with
an expectation of favourable future returns. Wealth maximization is a
wholesome goal of investment. The essential ingredient of a good investment is
maximization of profit. Liquidity and solvency are other goals. The term
investment means “conversion of cash or money into a monetary asset or claim
on future money for a return”.3 “Investment is considered the sacrifice of certain
present value of money in anticipation of a reward.” 4 “Investment is the
employment of funds with the aim of earning income or capital appreciation.”5

Savings and investment are viewed differently. Savings means keeping

aside a part of the income. Investment means putting the saved money in
financial products to earn returns and grow wealth. Savings are usually used to
meet the short term needs. People save in order to deal with emergency
situations and to meet unexpected expenses. Investment generally entails a
longer horizon of six months or more. It is designed to provide returns and grow
money over a period of time. Another difference between savings and
investment is the risk they bear and returns they offer. While savings stored in a
safety vault are very safe, they will not generate any returns over the years. Even
if money is kept in a savings account, it will provide a negligible rate of return.
On the other hand, money invested in various products like stocks, mutual funds,
gold, etc. is subject to more risks but has the potential to grow over time. If
invested wisely, money can grow manifold over years. When it comes to
liquidity, savings are the most liquid assets which can be accessed at any time,
but this is not the case with investments. Investors consider a number of factors
before deciding to invest their funds in various securities involving varying
degrees of risk and return.

3
Vashisht A.K ,Gupta R.K , (2005), “Investment Management and Stock Market”, Deep &
Deep Publications Pvt.Ltd, New Delhi, p: 4.
4
Natarajan, (2005) “Investment Management”, Margam Publications, Chennai, ,p:1.1
5
Punithavathy Pandian (2013),” Security Analysis and Portfolio Management”, Vikas
Publishing House Pvt Ltd, Chennai, p:23.

3
 Financial investment is the allocation of money to assets that are expected
to yield some gain and experience capital growth over a period of time. The
various investment avenues thrown open to the people are as follows:

1.1.1.1 Bank Deposits

Bank deposits are flexible, liquid and offer good interest rates today. The
two-in-one savings accounts that banks offer (surplus over a specified sum is
transferred to a deposit), the depositor is able to get a higher return on the money
accumulated in savings account. In the recent Budget, the benefit of Section 80C
was also extended to bank deposits, which are kept with scheduled banks for a
minimum period of five years. Investments in Bank Fixed Deposit or FD accrue
only 8.25 % of annual returns for non-senior citizen, depending on the bank's
tenure and guidelines, which makes it widely sought after and safe investment
alternative. The minimum tenure of FD is 15 days and maximum tenure is 5
years and above.

1.1.1.2 Mutual Funds

A mutual fund is a body corporate registered with SEBI that pools money
from the Individuals / Corporate investors and invests the same in a variety of
different financial instruments or securities such as Equity Shares, Government
Securities, Bonds, Debentures, etc. The income earned through these
investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund, is the
most suitable investment for a common man as it offers an opportunity to invest
in a diversified, professionally managed basket of securities at a relatively low
cost. Mutual fund units are issued and redeemed by an Asset Management
Company (AMC) based on the fund’s Net Asset Value (NAV), which is
determined at the end of each trading session.

4
1.1.1 3 Shares (Equity)

Equities are often regarded as the best performing asset class vis
vis-à-vis its
peers over longer time frames. However, equity-oriented
oriented investments are also
capable of exposing inve
investors
stors to the highest degree of volatility and risk. There
are a number of micro and macro factors that affect the performance of equities
and understanding all of them can be challenging for most. A smart portfolio
positioned for a long-term
long growth includes
des strong stocks from different
industries. Before investing in stock market, one should be prepared to assume
risk equivalent to sum invested in the market. Investing in securities market
yields higher profits but influenced by unanticipated turn of mar
market
ket events,
securities market to some extent cannot be considered as the safest investment
options. However, to accrue higher gains, an investor must update himself on the
recent stock market news and events.

1.1.1.4 Gold

In India, gold has traditionally played a multi

multi-faceted
faceted role. Apart from
being used for adornment purpose, it has also served as an asset of the last resort
and a hedge against inflation and currency depreciation. India has more than
13,000 tones of hoardedd gold, which translates to around 6, 50,000 crores. Gold
is an asset class that’s associated with safety. However, the volatality that the
yellow metal has seen, has made it look similar to other market investment assets.
This is due to an unprecedented
unprecedented demand, for gold has been an investment avenue
since the last couple of years.

Controlled by SBI, Gold Deposit Scheme was instigated in the year 1999.
Investments in this scheme are open for trusts and firms with no specific upper
limit. The investor can
an deposit minimum of 200 gm in exchange for gold bonds
holding a tariff free rate of interest of 3% - 4% on the basis of the period of the
bond varying with a lock in period of 3 to 7 years. Moreover, Gold bonds are not
entitled to capital gains tax and wealth tariff. The sum insured can be accrued
back in cash or gold, as per the investor's preference.

5
1.1.1. 5 Real Estate

Real estate is a great investment option as it gives capital appreciation

and rental income. It is an investment option since it fights inflation. The
fundamentals for investing in property markets remain strong in India due to low
interest rates, strong capital flows, high employment growth, abundant liquidity,
attractive demographics and increase in affordability. The price paid for a
property should reflect the future rent/income. Indian real estate industry has
huge prospects in sectors like commercial, housing, hospitality, retail,
manufacturing, healthcare etc. and termed as the "money making industry".
Realty sector of India promises annual profits of 30% to 100% through real estate
investments6.

1.1.1. 6 Insurance

Insurance is a means of protection against money loss from many kinds of

hazards. Insurance is transfer of risk and a vehicle which provides security and
protection against financial loss up to some limit. In the emerging Indian
economy, Life Insurance Company is the largest life insurance company and the
country’s largest investor which is regulated by the government. Insurance
features among the best investment alternative as it offers services to indemnify
one’s life, assets and money besides providing satisfactory and risk free profits.
Indian Insurance Market offers various investment options with reasonably priced
premium. Some of the popular Insurance policies in India are Home Insurance
policies, Life Insurance policies, Health Insurance policies and Car Insurance
policies. Some top Insurance firm in India under whom investors can buy
insurance scheme are LIC, SBI Life, ICICI Prudential, Bajaj Allianz, Birla
Sunlife, HDFC Standard Life, Reliance Life, Max New York Life, Metlife, Tata
AIG, Kotak Mahindra Life, ING Life Insurance, etc.

6
http://business.mapsofindia.com/investment-industry/top-10-investment-options.html
#sthash.nLSRdeWA.dpuf accessed on 12.12.2014

6
1.1.2 Household Investments in India

Savings and investments in banks, stock markets, post office schemes,

and company deposits are considered as financial savings. Investments in
properties, gold and silver are physical savings. The household investments in
India is published in RBI annual report and the following table gives a detailed
picture of the investment preference of Indians for a period of five years from
2009-10 to 2013-14.

TABLE 1.1
Household Investments in India
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014
Financial Assets in in in in in
Percentage Percentage Percentage Percentage Percentage
Currency 9.8 13.0 11.4 10.2 8.7
Fixed Income
85.5 86.7 89.3 86.3 88
investments
Deposits 43.4 49.9 59.1 56.6 58.8
Insurance/Provident
39.3 33.4 34.2 31.0 28.6
Pension Funds
Small Savings 4.3 3.4 2.3 -0.9 0.6
Securities Market 4.2 -0.3 -1.0 3.5 2.9
Mutual Funds 3.3 -1.1 -1.1 2.5 1.8

Government Securities 0.0 0.0 -0.2 0.0 0.0

Other Securities 0.9 0.8 0.3 1.0 1.1
Source: RBI Annual Report 2013-2014

According to the table 1.1, investments in fixed income instruments

accounted for 86.3 per cent of the household financial savings during financial
year 2013, a marginal decline in comparison to 89.3 per cent in financial year
2012. During the financial year 2013, the household sector invested 56.6 per cent
of financial savings in deposits, 31 per cent in insurance/ provident funds, -0.9
per cent in small savings, and 3.5 per cent in the securities market 2.5 per cent
and 1 per cent of household investments are directed to government securities,

7
units of mutual funds and other securities respectively. To sum up, fixed-
income-bearing instruments were the preferred assets of the household sector7.

Investments in fixed income instruments accounted for 88 per cent of the

household financial savings during 2013–2014, which has increased in
comparison to 85 per cent in 2012-13. In the fiscal year 2013-2014, the
household sector invested 59 per cent of financial savings in deposits, 29 per cent
in insurance/provident funds and 3 per cent in the securities market including
government securities, units of mutual funds, and other securities A nationwide
survey was carried out by NCAER (National Council of Applied Economic
Research) and used a sample of about 38,000 households in 44 cities and 40
villages across the states. It is estimated that there are 24.5 million investors in
India. The study points to the relatively low rates of participation by the
households in the securities market, though there has been growth in the investor
population over the past 10 years since the last survey carried out by NCAER.
Fifty four per cent of all households treat commercial banks and insurance
schemes as their primary choice for savings at all India level. The degree of risk
aversion is extremely high in Indian households. Households engaging in more
risky instruments are only at the margin. Education plays a significant role in
influencing risk preferences. The degree of risk was the highest among investors
with more than 15 years of schooling. Villages that are close to urban centre
significantly participate in financial markets particularly in the mutual funds.
Other characteristics of rural households, like marital status and gender, do not
significantly alter the distribution of investment.8

Therefore, fixed-income bearing instruments continue to be the preferred

assets of the household sector. Though fixed deposits is the most preferred
investment avenue in India, the efficiency of Securities market in economic
development cannot be overemphasized. Efficient Securities market provides the

7
ISMR Indian Securities market 2014 -A review, p: 16 accessed from www.nseindia.com on
10.4.2015.
8
National Council of Applied Economic Research (2011). “How Household save and invest :
Evidence from NCAER Household Survey”- Main Report sponsored by Securities Exchange
Board of India.

8
vehicle for mobilizing savings and investment resources for developmental
purposes. They afford opportunities to investors to diversify their portfolios
across a variety of assets. Indian’s investment in various financial avenues for the
year 2015 is shown in the following table.

TABLE 1.2
Indian’s Investment in Financial Avenues for the Year 2015
Bank Savings Insurance Pension plans Securities market
(72%) (42.9%) (11.9%) (3.6%)

Urban Rural Urban Rural Urban Rural Urban Rural

area area area area area area area area

77% 67% 50.7% 35.7% 15.5% 8.6% 5.8% 1.6%

Source: Nanaya Vikadan –Tamil Weekly Magazine (2015)

From the above table 1.2, it is crystal clear that the bank savings account
for 72 per cent followed by Insurance accounting for 42.9 per cent. Pension
plans accounts for 11.9 per cent while securities market investments attracts only
3.6 per cent of Indians9. From the above table it can be perceived that securities
market attracts 5.8 per cent of urban investors while only 1.6 per cent of the
investors are from rural area. 67 per cent of the people from rural area prefer bank
deposits while 1.6 per cent prefer securities market. It can be concluded that
there is lack of financial awareness about securities market investment.

TABLE 1.3
Gender- wise Indian’s Investment in Financial Avenues for the Year 2015

Bank savings Insurance Pension plans Securities market

(72%) (42.9%) (11.9%) (3.6%)

Male Female Male Female Male Female Male Female

78% 64% 49.5% 34.3% 15.5% 7.3% 4.9% 1.9%

Source: Nanaya Vikadan – Tamil Weekly Magazine dated 2015

From the above table, it is evident that both male and female prefer to
invest in bank fixed deposits rather than on securities market. Only 4.9 per cent
of male are securities market participants while 1.9 per cent of female are

9
“Top Puli Vivarangal”(2015) Nanaya Vikadan Weekly Magazine, 6th September p:82.

9
participating in securities market.10 This may be due to lack of awareness and
fear about securities market. Securities market is a secured avenue or not is the
question as the participants ar
are very meager in number.

1. 1.3 Impact of Inflation on Investment Avenues

Inflation has the habit of corroding the people’s savings.Inflation

savings Inflation is
defined as a sustained increase in the general level of prices for goods and
services. It is measured as an annual percentage increase. As inflation rises,
every rupee owned buys a smaller percentage of a good or service. The cost of
living increases thereby increasing the human basic need of food, clothing and
shelter. In the last few years,
years, inflation has ranged from 6% to 10% at different
periods of time. The prices of basic consumer goods during the year 1980, 2000
and 2015 are depicted in the table 1.4 which will help in understanding the
impact of inflation on consumer goods.

TABLE 1.4
Price per unit of basic Consumer Goods
Item 1980 ( ) 2000( ) 2015( )
Tooth Paste 4.00 19.00 85.00
LPG Gas 25.00 250.00 450.00
Masal Dosai 1.50 15.00 50.00
Petrol 8.00 32.00 70.00
Movie Ticket 5.00 50.00 100.00
Source: Compiled
ed data

It is observed from the table 1.4 that in India the cost of all consumer
goods has increased several times in 2015 when compared to the year 1980.
Tooth paste rate was 4.00 in the year 1980 and has been sold for 85 in the
year 2015, which is 14 times greater. LPG gas which was sold at the rate of
25.00 in the year 1980 has increased to 450 in the year 2015 which is 18
times higher. Movie ticket rate has increased from 5 in 1980 to 100 in 2015.
Likewise, the prices of basic consumer goods
go such as masala dosa and petrol had
increased. So an ordinary individual must look for investment option which

10
Ibid 9

10
provides an alternate source of income to counter the negative effects of inflation.
To beat the inflation, people must go for investment in the assets that yield better
returns but only 20 percent of Indians are financially literate11 and are able to deal
effectively with the inflation.

Cumulative returns is the aggregate amount that an investment has gained

or lost over time, independent of the period of time involved.12 The inflation rate
is predicted as 7.7% and the annualized cumulative returns from various asset
classes from the year 1985 to 2015 are depicted in table 1.5.

TABLE 1.5
Annualised Cumulative Returns from Various
Asset Classes (1985-2015)

Annualised Return in
Asset classes Difference in per cent
per cent

Fixed deposit 9.1 1.4

PPF 10.2 2.5

Gold 9.2 1.5

Real estate 12 4.3

Equity 15.68 7.98

Source: Compiled from CPI Data Jan 2015, Labour Bureau, Government of
India.

If the money is lying in a bank as fixed deposit, it earns just 1.4 per cent
against the inflation rate of 7.7 per cent. Public provident fund yields 10.2 per
cent. Gold, which is mostly preferred by Indians yields a cumulative annualized
returns of 9.2 per cent only. It is noteworthy that equity has better returns than
most other asset classes, so that wealth multiplies over time. Figure 1.1 depicts
the annualized returns from various sources against inflation.

11
http://www.ncfeindia.org/national-survey
12
http://www.investopedia.com/terms/c/cumulativereturn.asp#ixzz3movrcHk4 accessed on 15th
April2015.

11
 FIGURE 1.1
Annualised Cumulative Returns from various Asset Classes

16.00%

14.00%

12.00%

10.00%

8.00% Inflation
7.7 per cent
6.00%

4.00%

2.00%

0.00%
Fixed deposit PPF Gold Real estate Equity

Source: CPI Data Jan 2015, Labour Bureau, Government of India.

An emergency situation can derail one’s finances. To encash FD’s at

short notice without incurring a penalty is not possible. Securities Markets
provide an attractive opportunity for making money. There is no other form of
investment as on today which can offer a better rate of return than that offered by
shares. In case of Bank deposits, an average rate of 8.5% interest is assured on
deposits. As far as post office is concerned, 8% interest is assured on deposits or
the deposited money gets doubled only after 7 ½ years. Purchase of Gold under
investment scheme is also admissible but the sky rocketing price hike of
sovereign gold day-by-day is a critical matter for investors. Moreover, human
mentality is that they won’t sell physical gold, as sentiment plays a dominant
role. Indian property prices, which had taken off like Jet planes makes real estate
business, an attractive sector but the selling and buying of real estate’s have to
pass through several hard procedures, even the documentation charges and sales
deed cost had hiked. Some prefer Mutual fund wherein the liquidity and fund
flow will not be as that of equity market. So an investor with the motive of profit
maximization can choose investment or trading option in securities market.

12
 Real estate takes time to sell and distress sale invariably erodes the
return. Unlike other investments like Bank FDs, gold or property, equity has no
lock in periods. Equities are the best bet in the long term.13 Investor can easily
buy or sell basket of securities whenever needed over a longer time frame. This
can have a significant impact on the wealth and accumulated saving. Moreover
hassle-free entry and tax-free returns are assured in securities market. Unlike
most asset classes like FD’s or property, income from dividends in equity funds
are tax free.

1.2 RELATED REVIEWS

Investors’ perception and analysing the market facts differs based on his
demographic and psychographic factors like age, gender and income groups.
This will be helpful to the stock brokers and portfolio managers also, so that they
can offer better portfolios to their investors. A few studies have been made and
were indirectly helpful for the investigation. A review of such study is presented
below.

Tomy Varhese (1999) has researched and found that there are different
investment avenues with varying degrees of risk and return. The advent of the
capital market has offered a number of investment choices to the investors. The
financial environment in Kerala along with its high capital market potential has
inspired thousands of individual investors to enter the market. The exuberant and
collective enthusiasm witnessed in the 80’s and especially in the early 90’s was
unusual and artificial. The enthusiasm of the investors was not based on an
assessment of the intrinsic value of shares. The indiscriminate among them
suffered heavy losses and were compelled to withdraw - at least temporarily from
the field. Investment in the capital market need not be a nerve-racking
experience provided the decisions are taken on the basis of analysis and

13
Morgan Stanley reports to Ashutosh Shyam, ET Bureau, (2015), “The Economic Times”,
30th January, p: 3.

13
reasoning. This necessitates the investor to set the investment goals and to work
towards the target on the basis of sound analysis of market information.14

Rajan and Raja (2000) brings out interesting details about the association
between life styles of individual investor and their demographic and investment
related characteristics on the basis of primary data collected from 405 individual
investors. They suggest the use of these characteristics for a better understanding
of individual investors and their financial product needs. This analysis clearly
brought out the associations between life styles clusters and investment related
characteristics.15

Elsamma Joseph (2001) has selected 300 respondents at random from the three
districts - Kozhikode, Ernakulam and Thiruvananthapuram of Kerala and found
that eighty three per cent of the investors are above the age of 36. Women
investors form about 13 per cent of the total number of investors. Fifty five per
cent of the investors are not actively operating in the stock market. Twenty four
percent of the investors pointed out political instability as the major reason for
not actively participating in the stock market. Youngsters in the state of Kerala
are reluctant to enter into the capital market, partly because of low income and
partly due to their reluctance to risk. Many investors are yet to warm up to the
dematerialisation of their shares. Thirty four percent of the investors have not
converted their shares into the electronic form.16

Kannadhasan.M (2004) in his article studied about 183 retail investors who
were spread over in different locations in Chennai city in the year 2004 and has
found that 79 per cent of the retail investors are interested to invest in Shares and
Debentures as well. Only 25 per cent of the sample respondents are aware of all
the investment avenues available in the capital market. However all of them are
aware of at least one avenue. The awareness helps to know more investment

14
Tomy Varhese (1999) “A Study of Individual Investors in the Capital Market in
Kerala”Ph.D Thesis, Cochin University of Science and Technology, Cochin.
15
Rajan and Raja, (2000), “Investor’s Life Styles and Investment Characteristics”, Finance
India, 24(2) pp:465- 478
16 Elsamma Joseph (2001), “Management of Risk Factors of Investing in Corporate
Securities”, Ph.D Thesis submitted to Mahatma Gandhi University, Kottayam.

14
options to invest their savings and it leads to increase in safety and security. The
levels of education of the sample respondents are not influenced by their
awareness about investment option. Nearly 80 per cent of the sample
respondents prefer long-term mode as their investment strategy and hence they
invest in capital market to have considerable savings and for their tax planning
the majority of the sample respondents are not impressed by the financial market
and also understand the terminology used by them. Only a small percentage of
the respondents know the measures taken by the government to instil confidence
in capital market and such retail investors only get benefited.17

Rajeswari, T. R. and Moorthy, V. E. R. (2005) have analyzed that in the

financial market, ‘expectations’ of the investors play a vital role. They influence
the price of the securities, the volume traded and determines quite a lot of things
in actual practice. These ‘expectations’ of the investors have been influenced by
their “perception” and people generally relate perception to action. Investors are
influenced by the extent and quality of disclosure of information subsequent to
their investment. At the retail level, investors are unique and are a highly
heterogeneous group. Hence, their fund/scheme selection also widely differs.18

Thirumalvalavan (2006) in his study has indicated that a firm uses dividends as
a mechanism for financial signaling to the outsiders regarding the stability and
growth prospects of the firm. Dividend announcements have recorded high
cumulative abnormal returns of 2.1 per cent within one day of the event. This
result of positive and statistically significant abnormal returns around the
announcement date existed only for the day after the announcements, after which
the extent of positivity of shares started decreasing. A possible explanation is
that the market reaction in the Indian market to events or announcements such as
dividends is completed within a day or two. Studies indicate that stock prices
typically change to reflect dividend policy changes within the trading day of the

17
Kannadhasan.M (2004), “Risk Appetite and Attitudes of Retail Investors’ with special
reference to Capital Market”, papers.ssrn.com/sol3/papers.cfm?abstract_id=1820862
retrived on 12.12.2012.
18
Rajeswari, T. R. and Moorthy, V. E. R. (2005), “An Empirical Study on Factors Influencing
the Mutual Fund/ Scheme Selection by Retail Investors”, retrived on 12.12.2012 from
http://www.utiicm.com/cmc/PDFs/2001/rajeswari.pdf

15
announcement. Reacting quickly to the market reaction is difficult, it was
impossible for investors to make extra money after the announcement has been
made. The only way for an individual to take advantage of a positive or negative
surprise is that dividend announcement can be positioned prior to the
announcement.19

Ganapathy .R and Ramasamy .T (2006) have helped to ascertain the

customers’ expectations from share brokers in Coimbatore city through their
survey. The survey is conducted with the motive to help the share brokers to
identify their customers’ expectations and to improve the quality of the service
according to their customers’ expectations. The survey has revealed that the
share brokers have satisfied the customers and they are able to retain the existing
customers. Guidance in the revenue loss to existing customers enables them to
acquire more number of customers through the existing customers.20

Gnana Desigan.C and Kalaiselvi (2006) analysed the women investors’

investment pattern, influencing factors, risk preference levels, problems in
various investment avenues, level of awareness about share market investment
and other investment related issues. General profile of the women investors is
changing in tune with the time. There are certain problems in investment for
women but they can be rectified by inducing more and more women investors to
invest in the investment outlets.21

Sachthanantham.et.al(2007) have attempted to study the relationship between

capital market reforms and amount of money invested by the investors and the
result showed that educative reforms and attractive reforms are statistically
significant but they have negative influence over money invested by investors at
the capital market.22

19
Thirumalvalavan P (2006) “Signaling Effect of Dividend Announcements in India”, SMART
Journal of Business Management Studies, 2 (1) p: 36.
20 Ganapathy.R and Ramasamy.T, “A Study on Customer’s Expectations towards Share
brokers”, Indian Journal of Marketing, 36, p:1
21
Gnana Desigan.C and Kalaiselvi (2006)’ “Women Investors’ Perception towards Investment”,
Indian Journal of Marketing, 37, p: 38.
22
Sachthanantham.V,Sayed Jaffer.M, Raja.Jand Suresh kumar.A (2007) “Investors’ Perception
Towards Capital Market Reforms In India”, SMART Journal of Business Management
Studies, 3(1) pp: 39 – 43.

16
José Luiz Barros Fernandes (2007) has evaluated the optimal asset allocation
under prospect theory preferences considering mental accounting, loss aversion,
asymmetric risk taking behaviour, and probability weighting and concluded that
absolute evaluations based on final wealth are limited. Risk taking decisions,
where the perception of gains or losses drives the process in an emerging market.
No salient sex or age effect is found however, some cultural differences among
countries seem to have influenced on the risk taking decision. An investor who
evaluates every security in its own mental account will not necessarily view
additional securities as redundant.23

Chiaku Chukwuogor (2007) has examined the general patterns of recent global
stock market returns and the volatility of such returns using 40 global stock
indexes of countries classified into developed and emerging markets as
barometers for the period 1997-2004 and also investigated the presence of the
day-of-the-week return in these countries and the correlation of the returns of
these global stock indexes to that of US market. Evidence suggests general high
returns in emerging stock markets. Contrary to existing evidence, there are also
very high returns in some developed stock markets. This evidence suggests that
the volatility of stock returns is a global phenomenon and not predominantly an
emerging market issue as earlier findings indicate. The returns from the US
markets compared to other global stock markets reveals that there is negative and
low correlation of returns between the US stock markets and many global
markets. These findings present interesting opportunities and dynamics for
enhanced return through diversification in global portfolio investments.24

Vanita Tripathi (2008) has opined that most of the investors use both
fundamental as well as technical analysis while investing in Indian stock
market. The investors strongly agree that various company fundamentals
significantly influence stock prices in India. Majority of the respondents agree
that other factors such as size, book to market equity, leverage and P/E ratio

23
José Luiz Barros Fernandes (2007) “Risk taking in Financial Markets: A Behavioral
Perspective” Ph.D Thesis, Universidad Carlos III De Madrid, Getafe.
24
Chiaku Chukwuogor (2007) “Stock Markets Returns and Volatilities: A Global
Comparison”, Global Journal of Financial & Banking Services 1(1), pp: 1-27.

17
can better explain cross sectional variations in equity returns in India. Five
most worthy investment strategies in Indian stock market are buying stocks for
which some good news is expected, buying stocks which are expected to
announce bonus issue, momentum strategy, size strategy and following
investment behaviour of FIIs. 30 days moving average and buying stocks on the
basis of relative strength index are the substantial change in investment strategies
used by active investors in Indian stock market for the past five years.25

John Mylonakis and Dikaos Tserkezos(2008) have examined ‘January effect’

in the Athens Stock Exchange (ASE) for the period from January 1985 to
December 2001, depending on the investment scenario in which investors ‘buy’
and ‘sell’ a portfolio of stocks, based on the General Index. This period is
considered as one of the most significant in the economic and financial history of
the country. In contrast with other studies, significantly higher returns are
documented in January and low returns in November over the sample period.
According to the research results, the mean daily returns in January have fallen
by almost 25% over a ten-year period, pointing to a weakening January effect.26

Bing Xu and Junzo Watada (2008) have investigated the liquidity impact on
sector returns in Stock Exchanges in China using the data of financial services,
traffic facilities, and nonferrous metals sectors from Shanghai and Shenzhen
Stock Exchanges. First, negative relationship between return and liquidity is
found and the expected returns of sectors are obviously reduced with liquidity
impact. Second, the expected return of finance sector witnesses a weaker
liquidity.27

Ramakrishna Reddy.G and Krishnudu. Ch. (2009) have studied on the

investors’ perceptions and preferences of 550 rural investors in Rayalaseema
region. The empirical study summarized that a majority of the investors are quite

25
Vanita Tripathi (2008) “Investment Strategies in Indian Stock Market: A Survey” ICSSR
project report.
26
John Mylonakis and Dikaos Tserkezos (2008), “The ‘January Effect’ Results in the Athens
Stock Exchange (ASE)”, Global Journal of Financial & Banking Services, 2(2) pp: 44-55.
27
Bing Xu and Junzo Watada (2008) “Liquidity Impact on Sector Returns of Stock Market:
Evidence of China” Global Journal of Financial & Banking Services, 2(2), pp: 56-69.

18
unaware of corporate investment avenues like equity, mutual funds, debt
securities and deposits. They are highly aware of traditional investment avenues
like real estate, bullion, bank deposits, life insurance schemes and small saving
schemes.28

Logeshwari. K and Ramadevi V.(2009) have studied the preferences of

investors towards various investment avenues in relation to commodity market.
The sample of 150 is taken by them from the regular investors in Coimbatore
city. They have advocated that a commodities market provides a platform for the
investors as well as hedgers to protect their economic interests as well as increase
their inventible wealth. The findings have revealed that the majority of the
investors are within the age group of 26-35 years, so the company can provide
their customers some additional assistance like daily trading tips, daily positions,
and general news.29

Chinnathambi.S (2009) has studied the investment preference and awareness of

the investors in Sivakasi and found that out of 120 respondents 35.60 per cent of
the investors prefer to invest their money in Bank deposits because they want
only safety to their investment. 71 respondents are aware of the investment
avenues. Investment decision in secondary market is influenced by friends and
only 18 respondents are interested to invest their money in equity market. The
Majority of the investors have lost an amount between 10,000 to 15,000
through stock market. Earnings made through stock market are very low.30

Amaresh Das (2010) in his article has measured the empirical relevance by the
volatility of stock market return on aggregate investment for a set of countries in
Asia. The results strongly suggest that there is difference between the impact of
low and high levels of uncertainity on the aggregate investment levels.31

28
Ramakrishna Reddy G and Krishnudu Ch (2009), “Investment Behaviour of Rural
Investors”, Finance India, 23 (4), pp: 1281-1294
29
Logeshwari. K and Ramadevi V.(2009) ,www.commodities market .org pp:1-17, retrieved on
9.1.2013.
30
Chinnathambi.S, “A Study on Investment preference and Awarness of the Investors in
Sivakasi”, M.Phil Dissertation, Madurai Kamaraj University, Madurai.
31
Amaresh Das (2010), “Is Investment Uncertainity Relationship Monotonic?”, Indian Journal
of Finance, 4(1), p:20.

19
Anjali Choksi (2010) has revealed that the awareness of derivatives among new
investors and those investors having no knowledge about derivatives depend
mostly on broker and take advice of friends in order to make an investment and
the investors most focus is on risk element and uncertainty. Attraction towards
cash market is due to low risk and high return whereas in derivatives there are no
long term capital gains.32

Gaurav Kabra .et.al (2010) from their study have concluded that modern
investor is a mature and adequately groomed person. In spite of the phenomenal
growth in the security market and quality Initial Public Offerings (IPOs) in the
market, the individual investors prefer investments according to their risk
preference. Though they are in the trap of some kind of cognitive illusions such
as overconfidence and narrow farming, they consider multiple factors and seek
diversified information before executing some kind of investment transaction.33

Rajarajen Vanjeko (2010) collected information from over thousand individual

investors of 11 different cities in India and revealed the investors’ investment
strategy that nearly two fifths of the investors sell the shares as soon as the price
reaches their target. Only negligible per cent of investors were long term
investors. It was found that there exist significant differences among the
investors in their investment strategies on the basis of their age, income and city
of living.34

Syed Tabassum Sultana (2010) has pointed that the individual investor still
prefers to invest in financial products which give risk free returns. Indian
investors are reluctant to take risk. Indian investors even if they are of high
income, well-educated, salaried, independent are conservative investors who
prefer to play safe.35

32
Anjali Choksi(2010),” DerivativeTrading in Indian Stock Market- Investors Perceptions”,
Indian Journal of Finance,4(3), pp:50-58.
33
Gaurav Kabra, Prashant Mishra and Manoj Dash (2010), “Factors Influencing Investment
Decision of Generations in India: An Econometric Study”, Asian Journal of
Management Research Journal of Finance and Economics, 1(1), pp: 308-326.
34
Rajarajen Vanjeko (2010) “Indian Investors’ Investment Characteristics” Finance India, 24(4),
p: 1292.
35
Syed Tabassum Sultana (2010) “An Empirical Study of Indian Individual Investors Behavior”
Global Journal of Finance and Management, 2(1) pp: 19-33.

20
Saravana Kumar (2010) has emerged with the conclusion that most of the
investors are aware of high risks involved in the derivatives market. To reduce
the risk in the market, the investor should follow the stop loss method. Most of
the investors prefer cash market where the script can be held for long term and
the risk is less and it is transferable to others with the minimal time period. The
investors are highly satisfied with equity shares because of liquidity, low
investment and capital approximation.36

Vanitha .S (2011) have focused their study on four stock markets of emerging
countries, namely the Brazil, Russia, India and China collectively called BRIC
with that of developed countries namely U.S, U.K, Japan and Germany and have
revealed that the returns of the BRIC countries are higher during the period,
which gives better place for investment by consistent returns. BRIC countries
move along with the developed markets and there is co-integration with
developed markets and found that it is better to invest long term in the BRIC
countries stock market.37

Puwanenthiren Pratheepkanth (2011) has concluded that the dividend

announcement has significant influence on the stock price of Milanka companies,
Srilanka at the time of actual announcement day even though lot of internal and
external variables affect the share price of the firms. Present and future investors
should consider the dividend announcement when they invest in the Colombo
Stock Exchange.38

Selvaraj .V and Bala Murugan A (2011) have identified that self- decision is
the most influencing factor for scheme selection as far as Mutual fund is
concerned. Friend’s suggestion, Brokers recommendation and advertisement also
influence the scheme selection. The analysis has revealed that the investor

36
Saravana Kumar (2010), “An Analysis of Investor Preference towards Equity and Derivatives”
The Indian Journal of Commerce, 63(3) p:78.
37
Vanitha .S (2011) “Stock Market Development of BRIC Countries: Integration with Global
Financial Markets.”, The Indian Journal of Commerce, 64(4), p: 6.
38
Puwanenthiren Pratheepkanth (2011), “Impact of Dividend Announcement on Share Price
Movements: A Study of Milanka Companies in Colombo Stock Exchange.” The Indian
Journal of Commerce, 64(4), p: 15.

21
considers Fund/Schemes brand name, rating by a rating agency, innovative of the
scheme, products with tax benefits, Schemes portfolio constituents are the first
five important factors in their selection of fund/scheme.39

Varadharajan P and Vikkraman.P (2011) have opined that people see into a
few factors to invest/trade into irrespective of their experience or returns. The
kind of stocks chosen such as the Large Cap, Mid Cap and Small Cap stocks are
not affected by the experience or returns obtained. Opinions from family/
friends/colleague, broker’s recommendation and other professional advice
influence the returns. It is evident that the investment strategies of people keep
changing as well as the factors that influence the decision -making keeps
changing.40

Shanmugsundaram V and Balakrishnan V (2011) have identified that the

ability to understand the judgment heuristics, like rationality or irrationality of the
investment pattern and behaviour will enable the investor to act with caution as
the consequences affect the asset value, lifestyle, relationship with other and
social interaction. The investors show a market preference for investing in the
capital markets and that too, both the primary as well as the secondary markets.41

Umesh Rawal, (2011) has studied the Investors’ behaviour in Financial Market
in some selected cities of Saurashtra Region and found that the highest choice of
investment tool is for bank savings account with 41.43. Insurance at second
place, P.P.F. at third place. Investment in Mutual Fund is higher than that of
Equity Markets which shows that investors in Saurashtra are investing in risky
assets with calculative risk. The percentage of investor investing in Post Office
Monthly Scheme is also higher than those investing in Recurring Deposits and
Fixed Deposits. It is obvious that the Safety of Principal, Income Stability,
Tax Advantage, Risk, Returns and Information are equally important for

39
Selvaraj .V and Bala Murugan A (2011) “Perception of Mutual Fund Investors.” The Indian
Journal of Commerce, 64(1), p: 54.
40
Varadharajan P and Vikkraman.P (2011) “A Study on Investor’s Perception towards
Investment Decision in Equity Market” International Journal of Management, IT and
Engineering, 1(3), p: 80.
41
Shanmugsundaram V and Balakrishnan V(2011) "Investment Decisions-Influence of
Behavioral Factors" ,Indian Journal of Finance, 5 (9), pp:25-33.

22
determining individual’s portfolio, while Liquidity and Hedge against inflation is
comparatively less important. 42

Gulser Meric et.al, (2011) in a study about Co- Movement of the Indian Stock
Market with other stock Markets have found that there is correlation between the
Indian stock market and the other national stock markets have increased
substantially and the benefits of global portfolio diversification have decreased
considerably from May 15, 2006- October 9, 2007 pre-crisis period to March 9,
2009- August 5, 2012 post- crisis period.43

Sushil kumar Mehta and Neha Aggarwal (2011) have revealed that most of the
investors preferred to consult their family members for taking investment
decision and invest for one to five years. Most of the investors have invested
their money for the safety of the money. This shows that people in Jammu region
are conservative in nature and want that their money should be safe. They are not
that concerned for the growth of the money of liquidity. There is no association
of income, age, gender, occupation, education on the percentage of income an
investor wants to save for the future requirements. There is also no association of
age, gender, occupation education with the appropriate investment period but
there is significant relationship of income with the appropriate investment
period.44

Palaneeswari T and Kaleeswari J (2011) have unveiled the investors attitude in

Sivakasi and revealed that though there is an increased volatility in the capital
market, the investor prefer to invest in shares and securities, as they are known
for higher returns over the long term.45.

42
Umesh Rawal, (2011) “A Study on Investors’ Behaviour in Financial Market with Special
Reference to Some Selected Cities of Saurashtra Region”,Ph.D thesis, Maharaja
Krishnakumarsinhji Bhavnagar University, Bhavnagar retrived on 12th December 2012 from
http://shodhganga.inflibnet.ac.in/handle/10603/9152?mode=full
43
Gulser Meric, Niranjan Pati & Ilhan Meric (2011) “Co- Movement of the Indian Stock Market
with Other Stock Markets: Implications for Portfolio Diversification” Indian Journal of
Finance, 5(10), pp: 13-20
44
Sushil kumar Mehta & Neha Aggarwal (2011)"The Effect of Demographics on Investment
Choice-An Empirical Study of Investors in Jammu" Indian Journal of Finance, 5(10),
pp: 43-55.
45
Palaneeswari T and Kaleeswari J (2011) "Investors' Perception Towards Capital Market-An
Empirical Study" Indian Journal of Finance, 5(11), pp: 34-38.

23
Meenakshee Sharma and Sumeet Gupta (2011) in their study have concluded
that casual investors are influenced by the return on investment than the risk in
investment and most of the investors are influenced by financial advisers'
recommendation because they don't have in depth knowledge about the market.46

Rajalakshmi Sivam (2011) has projected that the Retail investors often flock to
shares sold in an Initial Public Offer (IPO) because they appear cheap and may
even be available close to face value. But those attributes do not always make
them attractive investment options. In contrast, seasoned blue chip stocks often
appear expensive and quote at a considerable premium to their face values. They
may actually turn out to be the more attractive ones.47

Sivasubramaniam (2011) insists that SIP investing is a great trend for the long
term. After all, investors get jittery about short-term volatility in markets only
when they have too much money invested in equities. When the investment is
measured and regular, people tend to take it in their stride. The investors who
have made the most money in our funds are those who bought many years ago
and have not actively traded them.48

Ebenezer Bennet, et.al (2011) have analysed the investors’ tolerance for risk
and found that the strength of the Indian economy, media focus on the stock
market, political stability and finally government policy towards business are the
factors that had very high influence over the retail investor’s attitude towards
investing in equity stocks.49

Prabhakaran and Karthika (2011) in their study have revealed that the
investors in Coimbatore city are not aware of portfolio which will minimize risk

46
Meenakshee Sharma and Sumeet Gupta (2011) "Role of Subjective Norm in Investment
Decision Marketing of Casual Investors" Indian Journal of Finance, 5(11), pp: 39- 46.
47
Rajalakshmi Sivam (2011) "Seasoned Blue Chip Stocks Deliver Better Returns Than IPOs-
Offers from Realty Power Retail Hit Most" Business Line ,3rd December, p:8.
48
Sivasubramaniam K.N (2011) "Focus on Cash Flows, Not Just Earnings" Business Line, 4th
December, p: 5.
49
Ebenezer Bennet, Murugesan Selvam.Gunasekaran Indhumathi Ramachandran Rajesh
Ramkumar, Venkatraman Karpagam (2011) “Factors Influencing Retail Investors’ Attitude
Towards Investing in Equity Stocks: A Study in Tamil Nadu” Journal of Modern
Accounting and Auditing, 7(3), pp: 316-321.

24
and maximize the return. And also it is clear that the investors in Coimbatore city
have low level of understanding about risk and the importance of portfolio
management as they are not aware of the factors that reduce their profit. Hence
necessary action should to be taken in order to improve the awareness level in the
minds of the investors.50

Uma Maheswar Rao & Kotishwar (2012) in their study have revealed that most
of the people dealing in stock markets are investors as against traders. This
signifies that stock markets, despite its risky nature is a good investment avenue
for investors who are generally looking for short to medium term investment. On
the other hand, people with trading nature that prefer investment for very short
term mostly trade in cash/delivery, followed very closely by intraday and futures
and options.51

Bennet E, et.al(2012) in their study have revealed that the investor optimism or
'nothing can go wrong attitude' was reflected. They concluded that there is no
alternative investment option other than the stock market and the stock market is
the best game in town. The low returns offered by post office, Government
Bonds etc, make them relatively unattractive and persuade them to invest in
stocks.52

Rikesh Vinod Parikh (2012) has stated that the investors have understood that
leverage hurts. They have, therefore reduced leverage and that is reflected in the
lower open interest. Investors are now investing with a longer perspective.
When market moves higher, they may again start trading but they seem to have
realized that they should have limited leverage and slightly longer term horizon.53

50
Prabhakaran K and Karthika .P (2011)“A Study on Risk Perception and Portfolio Management
of Equity Investors in Coimbatore City” Journal of Management and Science, 1 (2), pp: 1-13.
51
UmaMaheswar Rao. G , Kotishwar . (2012) "Analysis of Investor Behaviour and Decision
Making in Indian Stock Markets" International Journal of Marketing Financial Services
Management Research 1(1)p:139
52
Bennet. E, M. Selvam, N.Vivek, and Eva Esther shalin (2012)"The Impact of Investors'
Sentiment on the Equity Market: Evidence from Indian Stock Market" African Journal of
Business Management, l6 (2), pp:475-483.
53
Rikesh Vinod Parikh (2012) "Investors Have Now Understood That Leveraged Positions Hurt",
Business line, 27th April, p:4.

25
Thomas T.C and Rajendran .G (2012) have used psychological theories to
study the relationship between investor behaviour and investment choices
and suggested that the personality of an investor influences the investment
patterns and types of investments made. They have identified commodities as
one of the most potential avenues for understanding the investors’ choices.54

Ganeshamoorthy.L And Sankar .H (2012) have made a study on FII

investment the impact on the returns of the Indian investors and found that the FII
flow is considered as the major factor affecting the market behaviour in Indian
Stock market. When FII inflows are increasing SENSEX rises and investors are
having positive attitude towards the market.55

Yegya Narayanam .R (2012) has analysed the style of investment in different

cities and compared the urban and rural investors investment perception. He has
expressed that a common perception is that investment in the capital markets
particularly equities, is largely an urban phenomenon essentially a metro show.56

Gangineni Dhanaiah et.al (2012) in a study about FII investments and Market
return relationship, opined that the India’s Index options market is registering a
phenomenal growth in terms of turnover. The results indicate that there is
significant impact of FIIs on the CNX-Nifty index, and there is a moderate
relationship between FII investments and market returns in India.57

Srividhya (2012) has opined that the debt market is a huge automated
superstore that allows exchanging of instruments between buyers and
sellers. The exchanging process takes place between the sellers and the buyers of
debt market instruments influences the prices of the investments vehicles. As far

54
Thomas T. C and. Rajendran G, “BB&K Five-way Model and Investment Behavior of
Individual Investors: Evidence from India” International Journal of Economics and
Management, 6(1), pp: 243-252.
55
Ganeshamoothy.L and Sankar H “Dynamics of x FII Investment and Stock Market Returns In
India: An Empirical Analysis” Indian Journal of Finance, 6(5), p: 25.
56
R.Yegya Narayanam (2012)” Investment Style: Each City has its Own Preference” Business
Line 20th May, p:13.
57
Gangineni Dhanaiah,Raghunatha Reddy.D, Prasad T.N.L (2012) “ INDIA VIX: Examining the
Negative an Asymmetric Volatility Index- Market Return Relationship” Indian Journal of
Finance 6(5), pp: 4-10.

26
as Chennai is concerned, investment in debt market is becoming one of the
most important investment decisions, it is considered as a very good decision in
the long term; this is because it involves a better tradeoff between the
risks and returns.58

Rajasekaran (2012) vividly indicates that the share market in India does not
support the efficient market though the market responds quickly to the domestic
and globe glues. The size of assets in the financial market is also less than one
percent of the total assets. It is also dwindling consistently. The expected returns
remain to be meager; the prevalent risk is an increasingly systematic risk. This
manifests that there is a financial instability in the economy. It necessitates the
attention of the financial regulation mechanisms.59

Suresh Partha Sarathy (2012) has reported that all asset classes will not
perform in a uniform way. So the investor must always construct a diversified
portfolio. Investments should be based on time horizon and risk tolerance.
Although the portfolio consists of quite a few good large cap stocks it is still
necessary to monitor one's portfolio. Buy and hold strategy may be a good
concept but that alone will not produce great returns. Whenever there is an
abnormal return in the markets taking profits is often a good idea. With markets
in doldrums, investor should wait for a bounce back to sell their equity holding
For those who don't have adequate time to monitor their portfolio, he has
suggested to stick to mutual funds.60.

Arvind Jayaram (2012) has reported that despite all the bad economic news,
Indian stock indicators have performed better than global peers such as the Dow
Jones S &P 500, NASDAQ, FTSE 100 Dax and Nikkei in the first half of 2012.
While the Sensex rose 1208 per cent in the January-June 2012 period, the Dow

58
Srividhya N(2012),”The Retail Investors Behaviour on Equity Shares in Chennai City – A
Study”, Ph.D Thesis, Bharathidasan University, Tiruchirapalli, pp:232-243
59
Rajasekaran N (2012) "Portfolio Selection in BSE: Expected Return And Risk Analysis
Through Markowitz Theorem" Indian Journal of Finance, 6(6), pp: 46-54.
60
Suresh Partha Sarathy (2012)"Book Profits When Sitting on Abnormal Returns",
Business Line, 3rd June, p:11.

27
Jones has gained 504 per cent , the S&P 500 8.3 per cent, the Nasdaq 1207 per
cent, the DAX 808 per cent and the Nikkei 605 per cent.61.

Narayan Baser .et.al (2012) have identified that the Investors in Gujarat prefer
to invest in government securities and fixed deposits of nationalised banks
where they can have complete safety of their funds though they get less
returns. The investors are willing to take risk, invest in equity markets, land,
gold etc. Access to financial consultant for the management of the funds is
costly.So very few investors prefer to have their own financial consultant
for the management of their funds. Investors generally see the past
performance of the funds for investing their money, which is not the right way to
analyze the funds portfolio62.

Shanmuga sundaram .V and Jansirani (2012) have presented that the small
investors depend on the advice of leading companies. It shows their lack of
confidence in their knowledge to decide. Investors behave differently during
bullish and bearish market conditions and rationally towards various capital
market information. Stock market investment does not need extra brilliance to
make profitable investment decisions, but it requires a lot of discipline.63

Venkatesh (2012) has highlighted that the investor should set up a systematic
investment plan (SIP) allocating their savings between stocks and bonds. The
investment in stocks should be through equity index ETFs and investment in
bonds should be in PPF and recurring deposit with banks. An aggressive investor
can invest up to 75 per cent of his monthly saving in equity ETFs. Otherwise,
they can invest 63 per cent of their monthly savings in such ETFs. The balance
can be invested in PPF and bank recurring deposits.64

61
Arvind Jayaram (2012) "Indian Equity Market Niftier Than Peers in Jan- June Advantage
India as FII Raise Emerging Market Allocation " Business Line, 30th June, p:5.
62
Narayan Baser, Mamta Brahmbhatt, Jay Talati & Riddhi Sanghavil (2012) “An Analytical
Study on Investors’ Awareness and Perception Towards the Hedge Funds in Gujarat” Journal
of Advanced Research in Management 3(1), pp:1-10.
63
Shanmuga sundaram .V and Jansirani .N “P.Sathish Chandra Influential Factors in Investment
Decision Making” South Asian Academic Research Journals, 2 (6), pp: 96-106.
64
Venkatesh.B, (2012) "Investment Strategy for Young Professional”, Business Line, 30th
July, p: 10.

28
Vethirajan .C(2012) has revealed that the Financial sector reforms have been
successful in bringing significant improvements in various market segments by
effecting regulatory and legal changes, building up institutional infrastructure
constant fine tuning in market microstructure and substantial upgradation of
technological infrastructure.65.

Gagan Kukreja (2012) has indicated that investor has huge scope for current
earnings and capital appreciation in emerging market like India. But this
can be possible only if the elements like trust, guidance and regulations
existed steadily in the capital market among the brokers and investors. Now
brokers have access to the best technique and tools due to technological
developments and globalization, like, online trading software, online capital
market information, etc. They should make the best use of the opportunities
created by reforms and fight competitively on the issues affecting them.66

Bhuvaneswari.C (2012) has studied the various parameters that govern the
investors’ perception towards Equity/Tax saving mutual funds and identified that
the following major parameters namely, Liquidity, Rate of Return and Market
share decide the performance of the Equity/Tax saving mutual fund. As the
organization plays with the funds of the investment it is the moral responsibility
to wealth maximization of the investors. Hence it is imperative that the
organization should be cautious in making investment towards the various
financial instruments which safeguards the interest of the investors.67

Deleep Kumar P.M (2012) clarifies that the urge for speculation is high in the
high income group of investors of Kerala.60.6 per cent engage in speculative
trades where in 41.1 per cent of investors are of middle income group. Overall
only 15 per cent of investors finds speculative trading as rewarding68.

65
Vethirajan.C(2012) “The Indian Capital Market at Cross –Roads”, Banking Finance, 25 (10),
pp:18-21
66
Gagan Kukreja(2012) Investors’ Perception for Stock Market: Evidences from National Capital
Region of India”, Interdisciplinary Journal of Contemporary Research in Business” 4(8)
pp:712-725
67
Bhuvaneswari C (2012) “A Study on Investor’s Perception Towards Equity/Tax Saving Mutual
Funds”, CARE Journal of Applied Research, pp: 18-21.
68
Deleep Kumar P.M (2012) “ A Study on Capital Market Investment in Kerala with Special
Reference to Investor Grievances and Redressal Measures”, Ph.D Thesis, University of
Kerala, Thiruvanathapuram,

29
Pankunni.V (2012) reveals that Stock Market is a promising avenue for
prospective investors. In the post-recession period there has been a general
apathy towards stock market among the investing community. The investors
have lost their confidence in the stock market due to the extreme form of price
and return volatility. Excessive sophistication and insider trading made Indian
stock market totally strange to the retail investors69.

Singh K.B and Singh S.K (2012) have analyzed the impact of FIIs investment in
the fluctuation of the CNX-Nifty index for period under study and found that
there is significant difference between the investment made in the debt and the
equity by the FIIs. It is suggested that the authorities can focus on domestic
economic policies to promote the development of the capital market and ensure
the safety of the investors.70

Sanjiv Mittal (2012) in his path breaking study has revealed that mispricing is
low on an average for good governance companies compared to bad governance
companies. Stock prices of good governance companies are closer to their
intrinsic value compared to bad governance companies. During merger/takeover
and dividend announcements, the bad governance companies are highly under
priced. The volatility in the private information period during sale of assets
periods is higher for good governance.71

Rekha Gupta (2012) has examined the share price reaction to the announcement
of bonus issue of 52 NSE listed companies which declared bonus shares in 2010
and 2011 and the result showed that the companies’ prices, liquidity and volume
are not affected by bonus issues. On the expiration day, the reaction of market
participant to bonus share is found to be insignificant.72

69
Pankunni.V (2012) “Stock Price Movement in India”, Ph.D Thesis submitted to University of
Kerala, Thiruvanathapuram.
70
Singh K.B and Singh S.K (2012) “Impact of FII’s Investment on the Indian Capital Market”,
International Journal of Research in Commerce and Management, 3(12), pp: 61-63.
71
Sanjiv Mittal (2012)“ Impact of Corporate Governance on Share Returns” ,The Indian Journal
of Commerce, 65(4), p:28.
72
Rekha Gupta (2012), “Analysis of Market Reaction around the Bonus Issues: A Case Study of
NSE Listed Companies”, The Indian Journal of Commerce, 65(4), p: 13.

30
Himanshu Barot & V.K. Sapovadia (2012) have found that the investors are
losing their capital as they are not able to hedge it because they don’t have
enough knowledge of derivatives products and strategy; they are just
following brokers, friends and relatives. The study also argues that cash
segment is more preferred than derivatives segment in the investors group.73

Ebenezer Bennet et.al. (2012) have opined that the investor of Ghanian stock
market are optimistic. ‘Nothing can go wrong attitude’ is reflected in the belief
that there is no alternative investment option other than the stock market and the
stock market is the best game in town. Researchers have found from the
interactions with the selected investors that Provident Fund and Gratuity would
not be able to cover the investors old age retirement life. Therefore to manage
the retirement / old age, the investors know that they would need to save and
invest in Stock Market. Out of various vehicles to invest, the investors find the
Ghanaian stock market to be very attractive. The low returns offered by Post
Office, Government Bonds etc, make them relatively unattractive and persuade
them to invest in Stocks.74

Nopphon Tangjitprom (2012) has examined whether the market timing

strategy with Gilt-Equity Yield Ratio or GEYR can create abnormal returns
in Thai Stock market. The results have revealed that switching portfolios
can outperform buy-and-hold equity-only portfolio, even after the transaction
costs from switching strategies are included. However, the year-by-year results
suggest that switching portfolios cannot consistently outperform equity-only
portfolio and has concluded that these switching strategies are more useful for
long-term investment horizons.75

73
Himanshu Barot & V.K. Sapovadia (2012), “A Study of Investors’ Preferences Towards Various
Investment Avenues in Capital Market with Special Reference to Derivatives in
Ahmedabad City”, International Journal of Management, IT and Engineering, 2(10),
pp:225-242.
74
Ebenezer Bennet Lydia Obenewaa Amoako, Ricky Okine Charles, Asumadu Edward and
Joseph Asante Darkwah,”The Impact of Investors’ Sentiment on the Equity Market: Evidence
from Ghanaian Stock Market” International Journal of Business Administration, 3(5),
pp: 99-109.
75
Nopphon Tangjitprom (2012) “Market Timing with GEYR in Emerging Stock Market: The
Evidence from Stock Exchange of Thailand”,Journal of Finance and Investment Analysis.
1(4), pp 53-65.

31
Katharina Sachse.et.al (2012) have studied the individual behavior of German
investors using convenient sampling method and found that individual investors
use the same characteristics as professionals to judge the risk of potential
investments. However, the differences between laymen and experts might exist
in the perceived level of the risk aspects. Lay investors perceive the uncertainty
(variability) in expected returns as lower than financial experts do. Financial
literacy, influence on investment risk perception. Perceived investment risk
decreases with an increase in knowledge. Lay investors perceive lower
controllability, higher complexity, and less investors´ protection than experts do.
Portfolio diversification is seen as the most important measure to optimize the
balance of risk and return in one´s assets. Behaviour, gender and age seem to
play a minor role in the perception of investment risk. No evidence is found
suggesting that women perceive higher risks than men do.76

Rohan Laxmichand Rambhia (2012) has explored the risk anomaly in Indian
Equity market and declared that even with low risks superior returns can be
obtained but in the real world, high-volatility stocks are still preferred. The
researchers have tried to understand why high-volatility stocks are preferred to
low-volatility stocks in spite of the unexpected higher returns of low-volatility
vis-à-vis high-volatility portfolios and explained not only does LV give higher
absolute returns, but it also gives higher risk-adjusted returns, as seen from its
higher sharpe ratio. It also provides a useful cushion against the ‘draw-down
effect’. Thus, it can be considered a very good strategy when the markets do not
exhibit any specific direction and the volatility in general is relatively high. In
such situations, it ensures minimum erosion of wealth while ensuring that an
investor does not miss the upside returns entirely.77

Bennet. E et.al (2012) have concluded that the average value of the five factors,
namely, Return on Equity, Quality of Management, Return on Investment, and
Price to Earnings Ratio and various ratios of the company have influenced the
76
Katharina Sachse , Helmut Jungermann, Julia M. Belting “Investment Risk – The Perspective
of Individual Investors”, Journal of Economic Psychology, 33, pp: 437-447.
77
Rohan Laxmichand Rambhia (2012), “Exploring Risk Anomaly in Indian Equity Market”,
PGDM, Students research project ,S P Jain Institute of Management & Research, Mumbai
sponsored by NSE.

32
decision makers. Further, other five factors, namely, recommendation by
analysts, Broker and Research Reports, Recommended by Friend, Family and
Peer, Geographical Location of the Company and Social Responsibility are given
the lowest priority or which have low influence on the stock selection decision by
the retail investor.78

Balasubramanian and Radhakrishnan.R (2013) have sampled Equity investors

in Coimbatore and found that there exists an association between the occupation,
age, family income, sex, educational level, reading habit and the regularity of
Investment. But there exists no association between the occupation, age, family
income, sex, educational level, reading habit and the annual value of trading.79

Bahram Adrangi et.al (2013) have studied on the market behaviour following
the liberalization of the banking sector in a transition economy such as India and
pointed that evidence of asymmetric market response to negative and positive
shocks. It is surprising that the Indian market responds to shocks in the
development markets, it is noteworthy that shocks in the Indian market have
induced a response in the development markets in recent years.80

Purohit and Neel Kamal (2013) have measured the investors’ perception and
attitude towards Indian stock market with reference to Tamilnadu and found that
income has significant impact on frequency of trading in stock market, selection
of mode of trading and selection of market segments. Age and income has
significant impact on taking exposure.81

Bhanu Sireesha and Sree laxmi (2013) have investigated the shareholders in
Hyderabad and Secunderabad and found that the maximum numbers of
respondents are males within the age group of 26-35 showing a medium level of

78
Bennet. E, M. Selvam, Eva Ebenezer, V. Karpagam, S. Vanitha (2012) "The Impact of
Investors' Sentiment on the Equity Market: Evidence from Indian stock market”, African
Journal of Business Management, 6 (2), pp: 475-483.
79
Balasubramanian & Radhakrishnan.R (2013) "A Study on Investment Behaviour of Equity
Investors with Special Reference to Coimbatore District” Journal of Commerce &
Management Thought, 3(3), pp: 497-501.
80
Bahram Adrangi Arjun Chatrath,Kambiz Raffiee & Nitin Sharma (July 2013)"Volatility
Spillovers Developed /Developing Markets :The Case of India", Indian Journal of Finance,
7(7),pp:5-31.
81
Purohit and Neel Kamal (June 2013) “Investors' Perception and Attitude towards Indian Stock
Market With Reference to Tamilnadu”, Indian Streams Research Journal, 3(5), p:1.

33
risk bearing attitude, focusing on return from their funds for an average period of
5 to 10 years of investment. The people in Hyderabad and Secunderabad are
conservative in nature and want their money to be safe and they are not
concerned for the growth of money or liquidity and concluded that demographic
variables affect investment choice.82

Suganthi P and Brindha Devi (2013) have stated that there is a significant
relationship between the market returns represented by S & P BSESENSEX and
the five selected sectoral indices namely, S & P BSEFMCG and S & P BSEPSU
list on BSE. The events in the corporate like declaration of dividend, bonus
shares, interim results rights issue, mergers and acquisitions, etc, impact the
constituent companies' indices and market return.83

Lokeshwari S.K (2013) has reported that Indian market too has a seasonal
election cycle as like United States. According to this cycle, stocks tend to rally
during the first two years of rule when a stable government is formed at the
centre. Coalition government results in sub-par stock returns in the election year.
There are also some months which are better for stock investors since 1979,
Sensex has recorded the maximum positive closes in December. October and
March are the worst months for stocks according to this metric.84

Radhika Merwin (2013) has suggested that while NSE has enjoyed considerable
success in ramping volumes, driven by derivative products, it hasn’t managed to
get retail investors flocking to equities or even financial instruments despite its
state-of-the –art trading systems. As India’s dominant exchange, it does shoulder
this responsibility along with the regulators85.

Ravichandran .K (2013) has indicated that in the current scenario, investing

in stock markets is a major challenge even for professionals. Derivatives
82
Bhanu Sireesha .P and Sree laxmi CH (2013) “Impact of Demographics on Select Investment
Avenues: A Case Study of Twin Cities of Hyderabad and Secunderabad, India “International
Journal of Marketing, Financial Services & Management Research, 2(6), pp: 47-55.
83
Suganthi & Brindha Devi, (2013) "An Analysis of Relationship Between The Market Returns
and The Selected Sector Returns" Multidisciplinary Research Journal of V.V.V.college,
pp: 97-101.
84
Lokeshwari S.K(2013) "How Long Do Cycles Last?", Business Line, 24th November, p:5.
85
Radhika Merwin(2013)"Promises To Keep", Business Line, 15th December, p:5.

34
acts as a major tool for reducing the risk involved in investing in stock markets
for getting the best results out of it. The investors should be aware of the various
hedging and speculation strategies, which can be used for reducing their risk.
Awareness about the various uses of derivatives can help investors to
reduce risk and increase profits. Though the stock market is subjected to high
risk, by using derivatives the loss can be minimized to an extent.86

Palanivelu and Chandrakumar (2013) have studied the perceptions of the

respondents residing in Namakkal Taluk, Tamil Nadu, India and found that the
perceptions differed due to diversity in social life, living pattern, income level
etc. All the age groups give more importance to invest in insurance and bank
deposit. Income level of a respondent is an important factor which affects
portfolio of the respondent. Middle age group, lower income level groups
respondents preferred to invest in insurance and bank deposit rather than
any other investment avenues. They are more aware about various investment
avenues like insurance, bank deposits, small savings like post office savings etc.
Awareness program has to be conducted by Stock Broking firms, because most of
the respondents are unaware about the new services about stock market87.

Jayaraj .S (2013) has analysed the six psychological axes that drive individual
trading behaviour in Indian Stock Market and they are conservatisms, diligent
and discreet, remorse abhorrence, cognition, prudence and precaution, under
confidence. The results reveal that the psychological axes conservatisms,
diligent and discreet, remorse abhorrence fall in line to some extent. But
prudence and under confidence are the contrary behaviour axes . These
psychological components seem to be influencing individual investors trading
behaviour88.

86
Ravichandran K (2013). “A Study on Investors Preferences towards Various Investment
Avenues in Capital Market with Special Reference to Derivatives” retrieved on 29.11.2013
from http://jms.nonolympictimes.org/Articles/1.pdfpp.
87
Palanivelu V.R and.Chandrakumar K (2013)“A Study on Preferred Investment Avenues
Among Salaried Peoples With Reference To Namakkal Taluk, Tamil Nadu, India”,
Proceedings at an International Conference on Business, Economics, and Accounting 20 –
23 March 2013, Bangkok – Thailand.
88
Jayaraj .S (2013) “The Factor Model for Determining The Individual Investment Behavior in
India” IOSR Journal of Economics and finance, 1(4), pp 21-32.

35
Arthur e. Gooding (2014) has stated that the investors' average stock
perceptions are highly related to risk and return measures lends behavioral
support to capital market theories. Investors, on average, may actually use risk
and return perceptions to distinguish among stocks as possible investment
candidates. The investors' average perceptions are not as highly or consistently
correlated with ex- post risk measures as their perceptions are with ex post return
measures, parallels the difficulties that researchers have had modeling the
structure of share prices and more recently, the nature of return premium.89

K.Prabhakaran & P.Karthika (2014) have revealed that the investors in

Coimbatore city are not aware of portfolio which would minimize risk and
maximize the return and also it is clear that the investors in Coimbatore city have
low level of understanding about risk and the importance of portfolio
management. Hence they have suggested that proper steps should be taken, like
organizing seminars to educate the investors in order to improve the awareness
level in their minds.90

Ruta Khaparde and Anjali Bhute (2014) have applied the judgment or
purposive sampling technique and selected the 200 investors in the Mumbai city
which is similar to the sample size used in other research works With the selected
macroeconomic factors and categorical variables it is also observed that the
perception of the investors towards the macroeconomic factors causing stock
market volatility with respect to factors like age, income and market experience
do not differ much. The top four macroeconomic variables having the mean
scores of 3.90 to 4.50 for all the outlook categories are FII, EXCRATE, IIP and
WPI.91

89
Arthur E. Gooding “Quantification of Investors' Perceptions of Common Stocks: Risk and
Return Dimensions” The Journal of Finance, 15(5), p: 1314 retrieved from
http://www.jstor.org/stable/2326656 accessed on 15th March 2014.
90
K.Prabhakaran & P.Karthik “A Study on Risk Perception and Portfolio Management of Equity
Investors in Coimbatore City”, http://jms.nonolympictimes.org/Articles/1.pdf accessed on 13th
April 2015. pp 2-13.
91
Ruta Khaparde and Anjali Bhute, (2014) “Investors’ Outlook Towards Macroeconomic Factors
Causing Stock Market Volatility”, IRACST- International Journal of Research in Management &
Technology (IJRMT), 4(1), pp: 24-34.

36
 There is no full- fledged study in this area analyzing the perception of
individual investors towards securities market and majority of the studies are
mainly on the secondary data. Only few studies are made on the perception of
rural investors in Tamilnadu. Hence there crops up a need for a study on the
perception of investors’ towards securities market and the study deals with the
investor’s reaction to various market information, decision taken by them and the
factors influencing their investment behavior.

1.3 STATEMENT OF THE PROBLEM

The Indian securities market has witnessed a radical transformation and

grown manifold both in qualitative and quantitative terms. It now occupies the
centre stage of the domestic financial system. NSE and BSE have widened the
investment horizon, enabling traders for easy access to Stock market by
providing options such as Dial and Trade, Online Trading Software and Broker
house Mobile alerts, mobile apps at free of cost and television channels are
updating the investors with current market scenario and guide the market
participants to act and react to the current scenario. With the advancement of
Information and Communication Technology after 2005 and because of stable
government in the year 2014, securities market investment surged to new high.
The role of media attracts more and more people towards this money making
arena. The problem is whether the latest technological advancement has reached
the nuke and corner of India or only the metropolitan cities enjoys the latest
technological advancement.

The investor invests depending upon his/her personal investment goals

and objectives. For an aggressive investor or trader every moment and every
movement in stock market counts. So there are chances that they get frustrated,
anxious and sometimes greedy. There is wide spread apprehension that
institutional investors are sound in perceiving the securities market and are with
the risk taking attitude to invest or trade and reap huge profits whereas the
individual investors are meager in number and whether such a wide arena to
make money is at an easy access to them. The small and household investors

37
constitute a vital segment of the Indian securities market and greater
understanding of the perceptions, preferences, and behaviour of these investors is
very vital in the policy formulation on development and regulation of the
securities market to ensure the promotion and protection of interests of small and
household investors.

Investors desiring to invest in stocks require countless preparation and

homework. It requires skill, understanding the attitude of various participants in
the market run and moreover it requires them to rely on the advice of the share
brokers, fund managers and experts to invest in securities. Indian layman
considers securities market as a gambling arena and their perception towards the
market is that rich becomes richer, hence there is need for a research on “A Study
on Investors’ perception towards Securities market”. The present study is an
attempt to analyze the rural investors’ preference, attitude towards securities
market and their perception towards pre-investment pattern and post-investment
pattern.

1.4 OBJECTIVES OF THE STUDY

The objectives set forth for the present research are:

To evaluate the performance of Indian securities market.

To study the demographic profile and investment profile of the

individual investors with respect to investment in Securities market

To perceive the pre-investment pattern in terms of investment analysis

made by the individual investors in the study area.

To study the factors influencing investment decisions of the individual

investors in the study area.

To analyze the post- investment pattern of individual investors in terms

of investment decision, profit booking situation and changes in life style.

38
1.5 SCOPE OF THE STUDY

Securities market provides opportunity for the investors to ride on the

back of the firms that makes huge profits. A common perception is that
investment in the capital markets, particularly equities is largely an urban
phenomenon, essentially a metro show92. Mumbai occupies the top slot and the
people in metropolitan cities are well -versed in on- line trading and the field of
finance is a fascinating one for them. The study is essential to identify whether
such a huge arena for making money is an illusion for rural investors in
Virudhunagar district. Virudhunagar District is an industrial district where world
quality fireworks and printing work are done. i) Sivakasi popularly called as
“Kutty Japan” is known for its industrious, hard working people, wherein
fireworks and printing are world famous. ii) Rajapalayam is famous for its export
oriented cotton mills. iii) Sattur is famous for its match industries. iv) Koilpatti
is popularly called as “Matches city”. v) Srivilliputhur Andal Temple is world
famous and Andal temple tower is the seal of Tamil Nadu Government.
Srivilliputhur is famous for its dairy products. vi) Virudhunagar is famous for
edible oil, pulses and chilli exports. The above said areas are revenue generating
areas and contribute a lot to Government. Hence it is essential to study how
investors invest their hard-earned money and how they multiply their money for
the remote future by investing in Securities market and their perception towards
Securities market. Whether the investment decisions are taken rationally and to
study whether individual investors decision is fuelled by the recommendations
from their family, friends or peers.

The present study evaluates whether the participants of securities market

from Virudhunagar district are defensive investors, aggressive traders or
enterprising investor. The current research tries to probe into the factors
influencing the investment decision of the investors in the study area. It
highlights the investment avenues preferred by them and their level of awareness
towards securities market avenues. An in-depth study of whether these rural
market participants are able to time the market and reach their goal.
92
R.Yegya Narayanam (2012)” Investment Style: Each City has its Own Preference”, Business
Line, 20th May, p:13.

39
1.6 METHODOLOGY

The study is both descriptive and analytical in nature and hence designed
as an empirical one based on survey method.

1.67.1 Research Design

Vast data has also been collected from secondary sources. To present,
describe and interpret such data in the present research report, an empirical
research is made and is considered the most appropriate for the study. Various
tools are applied to analyze statistically the data collected from the participants of
securities market.

1.6.2 Interview Constituents

The interview constituent was divided into four parts:

In the first part, the personal details of the respondents and investment
profile are recorded primarily. The second part deals with the perceptions of the
study participants with regard to their preferences towards investment avenues.
Pre-investment pattern in terms of the investors’ awareness towards various
securities market products. The third part records their post-investment
behaviour in terms of factors influencing their investment decision and their
behaviour towards various market information and the final part details the profit
booking situations and changes in their life.

1.6.3 Sampling Technique

For the purpose of primary data, survey was undertaken in the study area.
First, a pilot study of the market participants in the six important towns in the
study area were collected through the broking agents. The structured interview
schedule was extensively pre-tested with the support of brokers and financial
advisors from Motilal Oswal Securities Ltd, Karvy Stock broking office, ICICI,
Geojit, Religare, Shriram and Angel broking office.

40
Calculation of Sample Size:

n= N /Ne2 +1

where n- sample size

N-population
e-error of acceptance (0.05)
ଵ଼଼଺
ଵ଼଼଺ (଴.଴ହ)
+ 1 = 330

Hence sample size = 330. The details of the selection of the respondents
in the study area are exhibited in the table 1.6.
TABLE 1.6
Details of Sample Size
No of Demat No of active market
S.No Towns Sample Size (n)
Account holders participants (N)
1. Virudhunagar 3606 437 80
2. Aruppukottai 2434 295 55
3. Sattur 1708 207 30
4. Sivakasi 2923 354 65

5. Srivilliputtur 1485 180 25

6. Rajapalayam 3408 413 75
Total 15564 1886 330

Source: Stock Broking Agencies, Virudhunagar District (Unpublished)

The determined sample size 330 was distributed to the population

through the application of stratified proportionate random sampling. The applied
strata are the town. A specially designed interview schedule for the individual
investors of Virudhunagar district was framed and administered to 330 investors
at various investors meet and investors awareness programs. The respondents of
varying nature based on the important aspects of income, their debut in to the
securities market, investment habit, mode of investment, investment mechanism
adopted and so forth were considered and interviewed. The details from the
individual investors in securities market were collected for the period April
2013 to March 2014. But at the time of data entry it is found that only 300
respondents have provided sufficient information and 30 respondents were
rejected as the data furnished by them were inadequate.

41
B. Secondary Data

The primary data were supplemented by several secondary sources of

data. The secondary data pertaining to the study were gathered from the reports
of SEBI, NSE fact Book Reserve Bank India Bulletin. Books, Journals and News
Paper Reports. Secondary data pertaining to securities market and its
performance was collected from 1979 to 2015.

1.6.4. Statistical Tools Used

Primary data collected was analysed by using SPSS (Statistical Package

for Social Science)

Descriptive statistics is used to analyse the opinion of the respondents of the

study.

Weighted average score tool was used. To get clear insight, that the total
score for each factor is computed by allotting marks as Strongly Agree-5,
Agree-4, undecided -3, Disagree – 2, Strongly Disagree – 1. This tool is used
to analyse the level of awareness towards securities market.

t-test was used to test the difference between two means with dependent
sample. In this study it is used to analyse the difference between the gender
and marital staus and type of the family of the respondents and the various
dimensions of investment in securities market.

ANOVA (DMRT) was used to test analysis of variance of data, to know the
significant relationship between one dependent and several independent
variables. Duncan Multiple Range test is used to understand the significance
relationship between the separate category of the independent variable. It is
used in this study between the demographic profile age and the various
dimensions in securities market.

Factor analysis was used to analyse the factors influencing the respondents
decision in portfolio construction.

42
1.6.5 Research Model for the Current Research

The proposed Research model has been suggested by the investigator

based on the previous studies to analyse the pre-Investment pattern of the
investors and post-Investment behaviour. The pre-investment pattern of the
investors is evaluated with the help of six factors and the post investment
behaiour of the investors is evaluated with the help of seven factors. The
following figures 1. 2 depict the research model adopted by the researcher and
figure 1.3 and 1.4 depicts the pre-investment pattern and post-investment
behaviour of the investors.
FIGURE 1.2
Research Model

FIGURE 1.3 Pre- investment Pattern

43
 FIGURE 1.4
Post -investment behaviour

1.7 SIGNIFICANCE OF THE STUDY

The research is intended to expand the pool of knowledge in the area of

awareness as well as give an insight on the fact that investment or trading can be
driven by behavioral motives as opposed to fundamental motives which will help
conduct further studies through the provided research findings. The outcome of
this study of the rural investors will enable the tech savvy generation to judge the
market wisely. Moreover the research will provide information that will be
useful to the mutual fund managers and financial advisors to frame necessary
policies to attract rural investments and increase stock participation.

44
1.8 HYPOTHESIS OF THE STUDY

Based on the research objectives, the following null hypothesis have been
formulated

Ho1: Demographic profile does not determine the investment profile of the
respondents.

Ho2: Choice of investment avenues do not vary with demographic profile of the
respondents.

Ho3: There is no significant relationship between the demographic profile of the

respondents and their overall attitude towards securities market.

Ho4: Demographic profile and Investment profile of the respondents does not
determine the securities market avenues preferred by them.

Ho5: There is no significant association between the demographic profile of the

respondents and the investment analysis made by them for the portfolio
construction.

Ho6: There is no significant association between the investment profile of the

respondents and the investment analysis made by them for the portfolio
construction does not vary with the demographic profile of the investors.

Ho7: Investment profile of the respondents does not determine their reaction
towards Capital market information.

1.9 OPERATIONAL DEFINITION OF CONCEPTS

1.9.1 Primary Market

Primary market denotes the market for new issues. It has no physical
existence. It is concerned with floatation and issue of new shares and debentures
by new or existing companies.

45
1.9.2 Secondary Market

The secondary market refers to the market where the securities issued in
the primary market are traded. The secondary market depends on the primary
market. More the number of companies make new issues in the primary market;
the greater will be the volume of trade in secondary market.

1.9.3 Securities

A security is a financial instrument that represents an ownership position

in a publicly traded corporation, a creditor relationship with governmental body
or a corporation (bond), or rights to ownership as represented by an option.
A security is a negotiable financial instrument that represents some type of
financial value. The company or entity that issues the security is known as the
issuer.

1.9.4 Securities Market

The securities market has two interdependent and inseparable segments,

the new issues (primary) market and the stock (secondary) market. The primary
market provides the channel for creation and sale of new securities, while the
secondary market deals in securities previously issued. The Stock market, cash
market or equities market is where listed securities are traded in the secondary
market. Currently more than 1300 securities are available for trading on the
Exchange.

1.9.5 Shares

A share is an equity security. Its owner owns one part of the capital of the
company which has issued the shares in question. The shares enable the
shareholder the right to take part in the decision-making in the company. If the
latter operates with profit, the owners of shares may receive dividends. The
amount of the dividend is decided upon by the shareholders at a General Meeting
of the Shareholders.

46
1.9.6 Stock Exchange

The word "stock" means a fraction of the capital of a company and the
word" exchange" means a place for purchasing and selling something. Stock
exchanges deal in securities like shares, debentures or bonds issued by the
companies or corporations in the private as well as public sector and bonds issued
by the central and state governments.

1.9.7 Demat Account

In India, shares and securities are held electronically in a dematerialized

or "Demat" account, instead of the investor taking physical possession of
certificates. A Dematerialized account is opened by the investor while registering
with an investment broker (or sub-broker).

1.9.8 Securities and Exchanges Board of India (SEBI)

For proper development of Indian stock market, the functioning of stock

exchanges must be brought under the control and supervision of an independent
regularatory agency. Central government therefore established SEBI.

1.9.9 Brokers

Brokers are commission agents, who act as intermediaries between buyers

and sellers of securities. They do not purchase or sell securities on their behalf.
They bring together the buyers and sellers and help them in marking a deal.
Brokers charge a commission from both parties for their service.

1.9.10 Investors

The investors buy the securities with a view to invest their savings in
profitable income earning securities. They generally retain the securities for a
considerable length of time. They are assured of a profit in cash.

47
1.9.11 Traders

The Speculators buy securities with a hope to sell them at a profit in

future. They do not retain their holdings for a longer period. They buy the
securities with the object of selling them and not to retain them.

1.9.12 Bombay Online trading system (BOLT)

Bombay Online Trading System is in use at the stock exchange, Mumbai

since March1995. It increases the trading capacity of the stock exchange and
improves transparency and eliminates unmatched trade.

1.9.13 NSE

The National Stock Exchange of India Limited (NSE) is the leading stock
exchange of India, located in Mumbai. NSE was established in 1992 as the first
demutualized electronic exchange in the country.

1.9.14 BSE

The Bombay Stock Exchange (BSE) is Asia's oldest stock exchange.

Based in Mumbai, India, BSE was established in 1875 as the Native Share &
Stock Brokers' Association. Shares of more than 5,000 companies are traded on
BSE. In addition to equity and debt, the Exchange allows for trading of mutual
fund units and derivatives.

1.9.15 SENSEX

SENSEX, also-called the BSE 30 is a free-float market-weighted stock

market index of 30 well-established and financially sound companies listed on
Bombay Stock Exchange.

1.9.16 Nifty

Nifty 50 or simply the Nifty is National Stock Exchange of India's

benchmark stock market index for Indian equity market.

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1.9.17 Blue Chip Companies
ompanies

A nationally recognized, well

well-established
established and financially sound company.
Blue chips generally sell high
high-quality,
quality, widely accepted products and services.
Blue chip companies are known to weather downturns and operate profitably in
the face of adverse economic conditions

1.9.18 Mid cap

Mid cap is an abbreviation for the term "middle capitalization". Mid-cap

stocks are of companies with a market capitalization between 100 crore and
1000 crore.

1.9.19 Small cap

Small cap stocks are companies with a market capitalization of

< 100 crore.

1.9.20 Portfolio

Grouping of financial assets such as stocks, bonds and cash equivalents,

as well as their mutual, exchange
exchange-traded and closed-fund
fund counterparts is called
Portfolio. Portfolios are held directly by investors and/or managed by financial
professionals.

1.9.21 Portfolio Construction

onstruction

Investing in a range of funds that work together to create an investment

solution for investors. Building a portfolio involves understanding the way
various types of investments work, and combining them to address the personal
investment
nvestment objectives and factors such as attitude to risk the investment and the
expected life of the investment.

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1.9.22 Stock Market Cycle

Stock market cycles are visible in price movements that rise, fall, and
return to their point of origin. All markets are cyclical. They go up, peak, go
down and then bottom. When one cycle is finished, the next begin.

1.9.23 Mutual Funds

Mutual Funds collect the savings from small investors, invest the in
government and other corporate securities and earn income through interest and
dividends besides capital gains. The funds collected from investors, is divided
into small fraction called "units" of equal value. Each investor is allotted units in
proportion to the size of his investment.

1.9.24 Futures and options

Futures and options represent two of the most common form of

"Derivatives". 'Future' is a contract to buy or sell the underlying asset for a
specific price at a pre-determined time. Buying a futures contract is promising to
pay the price of the asset at a specified time. To sell a future is making a promise
to transfer the asset to the buyer of the future at a specified price at a particular
time. An Option contracts are instruments that give the holder of the instrument
the right to buy or sell the underlying asset at a predetermined price. An option
can be a 'call' option or a 'put' option.

1.9.25 Gold BeES

Gold BeES offers investors a convenient means to invest in gold without

the hassles of storage and without compromising on the quality. An open ended
scheme, listed on the exchange in the form of an ETF investing in physical gold.

1.9.26 Bull Market

The term "bull market" is most often used to refer to the stock market
where in the prices of the shares is in uptrend. It is typified by a sustained
increase in market share prices.

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1.9.27 Bear Market

Bear market is one that is in decline. Share prices are continuously

dropping, resulting in a downward trend that investors believe will continue in
the long run.

1.10 LIMITATIONS OF THE STUDY

The major limitations of the study are:-

Since personal investment is a very sensitive matter, the sample

respondents were reluctant to disclose information relating to their income,
savings , investments and investment returns , more time and effort had to
be put to collect the data.

As Individual investors’ are at the bottom of the share market pyramid ,

focus is made on the individual investors and Institutional investors are not
dealt in the study.

The study is restricted to the investments and trading in equities arena

which is familiar among the rural investors.

The main limitation of the study relates to the qualitative nature of several
responses which are analysed on the basis of scoring or ranking accorded
by the study participants. The result is limited to the reliability of the
respondents’ rating made by the individual investors in the study area.

1.11 CHAPTERIZATION

Chapter I titled “introduction and design of the study” is virtually introductory in

nature. This chapter gives a basic idea about the meaning of investment,
Investment objectives and the various avenues available for investment. It also
gives an introduction to securities market. It covers the related reviews and
further it explains the need and scope of the study.

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Chapter II entitled “Investments in Securities market-An Overview” is a
theoretical overview in nature. Evolution of Indian securities market and financial
reforms leading to improvement of securities market, role of SEBI towards
regulating the stock market are discussed. This chapter also highlights the
progress in primary and secondary markets and recent trends in Indian securities
market.

Chapter III christened “Analysis on Profile of Investors” deals with the data
collected through interview schedule which are analysed by the application of
statistical tools. In this chapter the data analysis related to the demographical
factors and investment factors are made. In this chapter the investors and their
objectives are explained. This chapter is also devoted for identifying the attitude
of the investors towards Securities market.

Chapter IV named “Perception of Investors on Pre-investment pattern in

Securities market” gives a clear picture about the investors’ perception on pre-
investment pattern. It studies the relationship of demographic profile and
investment profile with that of investment decision making analysis and their
preference towards various securities market products.

Chapter V titled “Perception of Investors on Post-investment behavior in

Securities market” analyses the investors’ perception about post- investment
behaviour. It studies the relationship of demographic profile and investment
profile with that of investment decision in constructing a profitable portfolio.
Further it throws light on the profit booking situation and its impact on their life
style. It also deals with the role of intermediaries in the securities market and
evaluates the services of the intermediaries.

Chapter VI -“Summary of findings, Suggestions and Conclusion “consists of

inferences from data analysis that are consolidated to arrive the findings. Based
on these findings the conclusions and suggestions are derived. The suggestions
for further research have also been outlined.

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