A RESEARCH REPORT ON A STUDY ON INVESTORS DECISION TO CONTINUE INVESTING IN STOCK MARKETS

Submitted in partial fulfillment for the award of the degree Master of Business Administration Chhattisgarh Swami Vivekananda Technical University, Bhilai

Submitted by: Damini Agrawal Vinod Kumar Sahu Simran Jeet Singh MBA-Semester II (Session 2011-13)
Approved By, Dr. Sumita Dave Head of the Department Guided By, Ms. Meenakshee Sharma Assistant Professor

SHRI SHANKARACHARYA GROUP OF INSTITUTIONS Faculty of Management Studies

Approved by AICTE (Managed by Shri Gangajali Education Society, Bhilai) 1

JUNWANI, BHILAI 490020 (C.G.) INDIA

DECLARATION

We the undersigned solemnly declare that the report of the research work entitled A Study on investors decision of continue investing in Stock Market is based on our own work carried out during the course of our study under the supervision of Prof. Meenakshi Sharma, Faculty of MBA Department. We assert that the statement made and conclusions drawn are an outcome of our research work. We further declare that to the best of our knowledge and belief the report does not contain any part of any work which has been submitted for the award of MBA degree or any other degree/diploma/certificate in this University or any other University of India or abroad.

Damini Agrawal Vinod Sahu Simran Jeet Singh MBA II semester

CERTIFICATE

This is to certify that Ms. Damini Agrawal, Mr. Simranjeet Kaur, Mr. Vinod sahu, a student of MBA II semester at Faculty of Management studies shri ShankaracharyaGroup of Institute, Junwani, Bhilai have conducted the project titled A Study on Decision of continue investing in Stock Market. They have conducted their project under my guidance and supervision.

(Prof. Meenakshee Sharma) Assistant Professor FMS SSGI

ACKNOWLEDGEMENT

The project has been made possible through the direct and indirect co-operation of various persons, for whom we wish to express our appreciation and gratitude, but a complete acknowledgement would be encyclopedic. First and foremost we express our profound gratitude to our project guide Prof. Meenakshee Sharma for assigning us an interesting and challenging project. It is only because of her invaluable guidance and encouragement; we have dared to venture this task. If at all we have succeeded, we owe it to her and we are left with a deep sense of gratitude for her. Under whos able guidances had the privilege to work and who guide us at every stage. We express our deep sense of gratitude towards Prof. Meenakshee Sharma, Lecturer of MBA Department, consistence guidance and morale encouragement helped us to complete the project successfully. At last we offer my thanks to all those people and other whose efforts and contribution had made this possible.

Damini Agrawal Vinod Kumar Sahu Simran Jeet Singh MBA II semester
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INDEX
Contents Declaration Certificate Acknowledgement Chapter 1 Introduction to the study About the study Literature review Chapter 2 Objectives Research plan Sampling plan Data collection Descriptive statistics Chapter 3 Data tabulation, analysis and results Type of analysis used and why Results of the analysis Chapter 4 Findings of the study Chapter 5 Recommendations Chapter 6 Conclusions References PageNumber

Chapter 1
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Introduction of the study

a) INTRODUCTION OF THE STUDY

This study is based on investors decision to continue investing in Stock market. We have studied investors behavior. We have used descriptive research types, and used questionnaire techniques. We have selected convenience sampling design.

This study examines the percentage of factors which influence the investors decision which they took into consideration while continue investing in stock market. Through this study we collected data from different people who actually invested in stock market and found the influencing percentage of all the factors.

BEHAVIOUR OF THE STOCK MARKET

From experience we know that investors may 'temporarily' move financial prices away from their long term aggregate price 'trends'. (Positive or up trends are referred to as bull markets; negative or down trends are referred to as bear markets.) Over-reactions may occurso that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. Economists continue to debate whether financial markets are 'generally' efficient. The event demonstrated that share prices can fall dramatically even though, to this day, it is impossible to fix a generally agreed upon definite cause: a thorough search failed to detect any 'reasonable' development that might have accounted for the crash. (But note that such events are predicted to occur strictly by chance, although very rarely.) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur 'randomly') are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this.

STOCK MARKET
A stock market which is also known as equity market is a public body in which a free network of economic transactions occurs. It is not a physical facility or secret body. It is the place for the trading of stock or shares of company and its derivatives at an agreeable price. These shares and derivatives are securities that are listed on a stock exchange.

It was estimated that the worlds stock market size was at around $36.6 trillion at the beginning of October 2008. The entire market of world derivative has been estimated at around $791 trillion face or nominal value which is eleven-fold of the total world economy. Since the value of derivative market is presented in terms of notional values, it cannot be straightly compared to a fixed income security or a stock, which conventionally refers t an actual value. Furthermore, the large majority of derivatives cancels each other out which means that a derivative bet on an event that occurs is counteracted by a comparable derivative bet on an event that does not occur. Many of the securities that are relatively not liquid like that are valued as marked to model, instead of valued as an actual market price.

a) LITERATURE REVIEW INVESTMENT BEHAVIOUR

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Psychological factors can actually explain why different investors behave in different ways which affect their investment decisions. Investors might actually overreact towards some information that they gained and under react towards others. One of the most common investor behaviors is overconfidence in their judgment towards the market. This actually happens when they actually underestimate the risk of the investment. The major mistake of all is when they are overconfidence towards the market; they tend to trade too much which will lead them to high transaction costs. The transaction costs might even exceed the returns that they gained. The second behavior is the investor tends to have biased self- attribution which means that they will take all the credit for the returns that they received and they will blame others for their losses that they encountered. This kind of investors will usually support the information that favor their beliefs and they will underestimate or not considering the information that are against them. They usually see the failure to get the returns as the result of the factors that are beyond their control. The third behavior is known as loss aversion. This behavior often happens to the investors that dislikes the losses much more than the gains. For example, when a person loss $200, the loss that he experience will have a bigger impact on him compare with when he is gaining $200. The investor will usually hang on to the losing stock hoping the price of the stock will bounce back. They will sell the gaining stock rather than the losing stock. The fourth behavior will be representativeness. The investor will usually make strong conclusions from a very small sample. This means that they actually ignore or underestimate the effects of random chance. One of the examples is when a stock broker

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helps the investors to gain from the market for consecutive three months, the investor will assume that the stock broker will maintain his performance and continue to help him to earn the returns. But actually the investor overlooks a few matters in this case. Firstly, the investment period is only three months which is a very short time period. Secondly, the results of the stock broker might just be driven by random chance. The investor should analyze the investment results for a longer time period before making the judgment that they choose the right stock broker and they are investing at the right investment. Another behavior that most investor might have is the belief perseverance. This actually means that the investor will just simply ignore the information that is against their existing belief. They will even avoiding themselves from finding any new information because they afraid that the new information is against their initial opinion. Once the investor has decided that they make the right choice, they will believe it even though there is evidence proving that their choice is wrong. Basically, these are the few of the investor behaviors that explain their actions when dealing with the investment. Some investors might posses one of the behaviors but some of them might posses few of these behaviors at one time. Understand these behaviors will help the investors to react in the market efficiently. Behavioral finance attempts to understand and explain how human emotions influence investors in their decision-making process. You'll be surprised at what they have found.

The facts

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In 2001 Dalbar, a financial-services research firm, released a study entitled "Quantitative Analysis of Investor Behavior", which concluded that average investors fail to achieve market-index returns. It found that in the 17-year period to December 2000, the S&P 500 returned an average of 16.29% per year, while the typical equity investor achieved only 5.32% for the same period - a startling 9% difference! It also found that during the same period, the average fixed-income investor earned only a 6.08% return per year, while the long-term Government Bond Index reaped 11.83%.

Regret theory
Fear of regret, or simply regret, theory deals with the emotional reaction people experience after realizing they've made an error in judgment. Faced with the prospect of selling a stock, investors become emotionally affected by the price at which they purchased the stock. So, they avoid selling it as a way to avoid the regret of having made a bad investment, as well as the embarrassment of reporting a loss.

What investors should really ask them when contemplating selling a stock is, "What are the consequences of repeating the same purchase if this security were already liquidated and would I invest in it again?" If the answer is "no", it's time to sell; otherwise, the result is regret of buying a losing stock and the regret of not selling when it became clear that a poor investment decision was made - and a vicious cycle ensues where avoiding regret leads to more regret.

Mental accounting
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Say, for example, you aim to catch a show at the local theater, and tickets are $20 each. When you get there you realize you've lost a $20 bill. Do you buy a $20 ticket for the show anyway? Behavior finance has found that roughly 88% of people in this situation would do so. Now, let's say you paid for the $20 ticket in advance. When you arrive at the door, you realize your ticket is at home. Would you pay $20 to purchase another? Only 40% of respondents would buy another. Notice, however, that in both scenarios you're out $40: different scenarios, same amount of money, different mental compartments.

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Chapter 2 Research methodology

a) OBJECTIVES OF THE STUDY

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 To understand the factors influencing the investors to take decision of continue investing in stock market. To examine how investors understand and take decision to invest in stock market.

b) RESEARCH PLAN RESEARCH PLAN Research Design Descriptive Research Method Survey Used Research Questionnaire Instrument Data Collection Secondary Source Sampling Design Convenience Sample Size 157 Sample Location Durg and Bhilai Investors of stock Sample Unit market

RESEARCH PLAN

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A research design is a basis of framework, which provides guidelines for the rest of research process. It is the map of blueprint according to which, the research is to be conducted. The research design specifies the method of study. Research design is prepared after formulating the research problem. Descriptive research, also known as statistical research, describes data and characteristics about the population or phenomenon being studied. Descriptive research answers the questions who, what, where, when and how...The description is used for frequencies, averages and other statistical calculations. Often the best approach, prior to writing descriptive research, is to conduct a survey investigation. Qualitative research often has the aim of description and researchers may follow-up with examinations of why the observations exist and what the implications of the findings are. In this research I have conducted Descriptive research to study the Investors decision while investing in stock market. Descriptive includes survey and fact finding analysis of different kinds.

POPULATION
All the investors investing in stock market will constitute the population of the study.

SAMPLE

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It is neither feasible nor desirable for the researcher to go through the population there Sample Method was used and the researcher has taken 157 samples, while adopting Convenience Sampling.

QUESTIONNAIRE
For the purpose of research the researcher has used this particular researcher instrumentQuestionnaire. Keeping in mind the objective of the study questionnaire was prepared. Questionnaire is comprised of two parts, the first part contains the questions related to the topic of the research and second part contains the profile of respondent.

QUESTIONNAIRE DESIGN

In questionnaire, we have used Likerts measurement scale to identify the significant factors influencing the decision of investor which he take into consideration while investing in stock market. Here 1 to 7 scales are used to be marked their satisfaction level, where 1 & 2 stands for strongly disagree, 3, 4 & 5 neutral, and 6, 7 stands for strongly agree.

DATA COLLECTION

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Data are the raw materials in which research works. The task of data collection begins after research problem has been defined and research design chalked out. The data has been collected by the researcher with the help of questionnaire while visiting the respective investor. Data collection is classified into two part, primary data and secondary data. Primary data Secondary data

The data referred to those which gathered for some other purpose and are already available in the firms initial records and commercial, trade or government, publication. On the other hand primary data dont exist in record and publication. The researcher has to gather primary data fresh for the specific study, undertaken by him. In this project primary data were collected by survey methods i.e. Questionnaire.

SAMPLING PLAN
The first step in sampling plan is to decide the population. Once the population is decided the research must concern him to fine: What sampling unit should be? What should be the sampling size? What sampling procedure should be used? What sampling method should be utilized in this project?

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Chapter 3 Data Tabulation, Analysis and Results

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Data Analysis
Data collected during the research with the help of questionnaire is further analyzed and interpreted in the following lines in the same sequential can be understood more clearly with the help of interpretation then followed. The analysis techniques used have been on SPSS and the test was performed to ascertain the factor influencing the decision of investor while investing in stock market. We in our study used pie-chart to know the percentage of factors influencing the decision of investor. D1: I intend to continue investing in Stock Market rather than discontinue its use.
Strongly disagree 1 2 Disagree Somewh at disagree 3 4 neutral Somewh at agree 5 6 Agree Strongly agree 7

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INTERPRETATION: 31% respondent says that they are somewhat agree with I intend

to continue investing in Stock Market rather than discontinue its use. , 23% are neutral, 16%are agree, 12%are strongly agree, 7% are disagree, 6% are strongly disagree and only 5% are somewhat diagree. D2: My intentions are to continue investing in Stock Market than investing anywhere else.
Strongly disagree 1 2 Disagree Somewh at disagree 3 4 neutral Somewh at agree 5 6 Agree Strongly agree 7

INTERPRETATION: 24% of respondent are neutral about My intentions are to continue investing in Stock Market than investing anywhere else, 23% are somewhat agree, 21%are agree, 13% are strongly agree, 10% are somewhat disagree, 7% are disagree and 2% are strongly disagree.

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D3: If I could, I would like to discontinue investing in Stock Market.

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: 20% respondents are disagreeing with If I could, I would like to discontinue investing in Stock Market. And only 2% are agreeing.

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S1: How do you feel about your overall experience of investing in Stock Market?

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: 29% ,Majority of respondents are somewhat agree with How do you feel about your overall experience of investing in Stock Market? and the least 2% are disagree.

U1: Investment in Stock Market improves my overall returns. 23

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: 31% majority of people says that they are somewhat agree with Investment in Stock Market improves my overall returns., and only 2% are disagree.

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U2: Investment in Stock Market increases the liquidity of my investment.

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: 24%are saying that they are neutral about Investment in Stock Market increases the liquidity of my investment. And only 3% are disagreeing.

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U3: Investment in Stock Market makes my investment flexible.

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: 37% respondent the majority says that they are somewhat agree with the Investment in Stock Market makes my investment flexible. , 20% are neutral ,15 % are agree and the least 3% are strongly disagree.

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U4: Investment in Stock Market increases my effectiveness in managing my personal finances.

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: There is a tie in Investment in Stock Market increases my effectiveness in managing my personal finances.24% are somewhat agree and neutral and the least 2% are strongly disagree.

U5: Overall, investment in Stock Market is useful for managing my finances. 27

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: 29% are neutral about Overall, investment in Stock Market is useful for managing my finances. 25% are somewhat agree, 18% are strongly agree and least 4% respondents are strongly disagree and somewhat disagree.

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R1: My experience with investing in Stock Market was better than what I expected

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: 29% respondents are neutral about My experience with investing in Stock Market was better than what I expected and the least 4 % respondents are strongly disagreeing.

R2: The returns provided by Stock Market were better than what I expected. 29

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: Majority of people says that they are somewhat agree with The returns provided by Stock Market were better than what I expected 29% are in the state of somewhat agree and 23% are saying that they are neutral.

R3: Overall, most of my expectations from investing in Stock Market were fulfilled. 30

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION: In overall experience of investing is fulfilled 38% respondents are saying that they are neutral about the statement and 4% are strongly disagree.

E1: I am able to get optimum return while investing in Stock Market.

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Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION:

4% are strongly disagree, 4% are somewhat disagree, 13% are disagree, 25% are neutral, 27% are agree, 15% are somewhat agree and 12% are strongly agree.

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E2: Investing in Stock Market is fulfilling my overall expectation.

Strongly disagree 1

Disagree

Somewh at

neutral

Somewh at agree

Agree

Strongly agree

disagree 3

INTERPRETATION:

4% are strongly disagree, 6% are somewhat agree, 13% are disagree, 32% are neutral, 14% are agree, 22% are somewhat agree and 9% are strongly agree.

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E3: Investment in Stock Market is given overall flexibility (Switching facility) and liquidity.
Strongly disagree 1 2 Disagree Somewh at disagree 3 4 neutral Somewh at agree 5 6 Agree Strongly agree 7

INTERPRETATION:

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7% are strongly disagree, 8% are somewhat disagree, 8% are disagree, 24% are neutral, 25% are agree, 14% are somewhat agree, 14% are strongly agree.

V1: I can reduce the level of risk while investing in Stock Market
Strongly disagree 1 2 Disagree Somewh at disagree 3 4 neutral Somewh at agree 5 6 Agree Strongly agree 7

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Interpretation:

6% are strongly disagree, 6% are somewhat disagree, 14% are disagree, 26% are neutral, 24% are agree, 13% are somewhat agree, 11% are strongly disagree.

V2: I get higher return while investing in stock market.

Strongly disagree 1 2 Disagree Somewh at disagree 3 4 neutral Somewh at agree 5 6 Agree Strongly agree 7

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INTERPRETATION:

19% are strongly disagree, 5% are some what disagree, 16% are disagree, 26% are neutral, 6% are agree, 16% are some what agree and 12% are strongly agree.

V3: Before making investment decision in stock market I am taking suggestion from my financial advisor.
Strongly disagree 1 2 Disagree Somewh at disagree 3 4 neutral Somewh at agree 5 6 Agree Strongly agree 7

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INTERPRETATION:

17% are strongly disagree, 2% are somewhat disagree, 6% are disagree, 18% are neutral, 17% are agree, 27% are some what agree, 4% are strongle disagree.

V4: Before making investment decision in stock market I am taking suggestion from my friends and family members.
Strongly disagree Disagree Somewh at neutral Somewh at agree Agree Strongly agree

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disagree 3

INTERPRETATION:

21% people strongly disagree, 3% people say that somewhat disagree, 9% are disagree, 22% are neutral, 21% are agree, 19% are somewhat agree, 7% are strongly agree.

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CHAPTER 4 FINDINGS OF THE STUDY

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It is found that investors are not ready to continue investing in stock market. Investors consider level of risk while investing. They are not satisfied with the return. Their experience is somewhat neutral investing in stock market.

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Chapter 5 Suggestion

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To provide knowledge to the investors about the market. They should choose optimum position for investing. Their risk and return should be equal. They have to consider both risk market and riskless market.

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Chapter 6 Conclusion

CONCLUSION

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We would like to conclude as most of the investors like to discontinue investing in stock market because of risk factors. It is because they are not getting the same proportion of return as risk. Some people not investing because of lack of knowledge. People of some criteria didnt know about stock market, by providing efficient and proper knowledge risk can be reducing and investor may increase to make them able to invest. Investors not trust the brokers and they not prefer to ask them or to take from advice.

REFERENCES

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http://www.tradingeconomics.com/india/stock-market http://www.meta4forexbroker.com/2011/10/what-is-stock-market/ www.sharekhan-firststep.com/ http://www.articles-finance.info/understanding-investor-behavior-in-stockmarket/

http://www.investopedia.com/articles/05/032905.asp#axzz1r0TCARSr

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