2

CHAPTER I
INTRODUCTION

To invest successfully over a lifetime one does not require a stratospheric

IQ, unusual business insights or seaside information. Whats needed is a
sound intellectual framework for making a decision and the ability to keep
emotions from corroding that frame work - Warren Buffet.

1.1 PROLOGUE
"The more you sweat in peace time; the less you bleed in the war"
This famous quote is applicable for all aspects in the life of an individual. If
an individual does not invest his money and think that there will be no need
of money in his contended life, then one day suddenly he will be in a
pathetic situation where he needs money emergently. Hence, investing is an
important activity to survive in the dynamic and competitive world.
Investment is the employment of funds with the aim of achieving
additional income or growth in value. The essential quality of investment is
that it involves waiting for a reward.

It involves the commitment of

resources which have been saved or put away from current consumption in
1

the hope that some benefits will accrue in future. Therefore, an act of

Preethi Singh (1991), Invest Management. Himalaya publishing house,

Second Revised edition. p1.

investment of any individual involves element of sacrifice, futurity, risk, and

expectation of gains.
1.2 INVESTMENT AND ECONOMIC DEVELOPMENT
In the context of present day conditions, investments are important
both for countrys economic development and investor. With savings
invested in various options available to the people, the capital formed acts as
the driver for growth of the country. Capital is a crucial factor in the
development of an economy. The pace of economic development is
conditioned, among other things by the rate of capital formation. The role of
the financial system is to act as a link between the surplus sectors and deficit
sectors to increase the level of investment. As the income level increases in
all developing nations the savings/investments of the people also increase
gradually. Various studies confirm the fact that there is a correlation
between rate of investment and economic development of a nation.

India

is no exception to this phenomenon. This is evident from the following chart

which shows the role of investments in the growth of Gross Domestic
product.

Sinha, D. (2002), Saving-Investment Relationships for Japan and other

Asian countries, Japan and the World Economy. pp. 1-23.

Figure-1.1 GDP Growth and Investment

The period between 2010 and 2012 was a period of low growth as the
investment was more volatile.

1.3 PREFERENCES OF INVESTORS

3

A survey conducted by Prime Data Base , a private agency in the

year 2007 revealed the following findings related to the investor population
and their preferences.

Prime Data Base, 2007.www.primedatabase.com/about.asp.

Table 1.1
Number of Individual Retail Investors aged 18-59
(in millions)
Type of Investments

Number of Investors
(in Millions)

Banks

141.07

Postal Savings

35.77

Life Insurance

105.35

Mutual fund

5.3

Equal Market

3.54

Gold

18.72

Chit Fund/NBFC

30.05

Source: Prime Data Base, 2007.

As indicated above investment in bank deposits are the most

preferred method of investing. Life insurance policies are preferred by
nearly 105.35 million investors. The preference for equity shares is as low as
3.54 million of the population. Mutual funds have more participation than
the equity shares. The most preferred form of investment is bank deposits
even though it has the lowest rate of interest.
4

A nationwide survey (India Financial Protection Survey) of 60,000

households conducted in 2007 by NCAER (National Council for Applied
Economic Research) and Max New York Life has revealed the investment
preferences of household investors. The main findings of the survey are:
4

NCAER (National Council for Applied Economic Research India

Financial Protection Survey 2007) pp. 43-47.

Most Indians prefer keeping 65 percent of their savings in liquid assets like
bank or post office deposits and cash at home, while investing 23 percent in
physical investments like real estate and gold and only 12 percent in
financial instruments. The survey also reveals that 96 percent of the
households cannot survive beyond a year on their current savings in case of
loss of income due to some eventuality such as death or disability of the
chief earner. However, a majority of those surveyed expressed confidence in
their financial well-being. These surveys highlight the lack of financial
security and awareness about the various modes of savings and their
importance.
1.4 INVESTMENT MEDIA
Many types of investment media or channels are available for making
investments. A sound investment program can be constructed if the investor
familiarizes himself with the various alternative investments available. The
investment alternatives can be classified in to the following categories.
1.4.1 Direct Investment Alternatives
Direct investments are those where the individual makes his own
choice and takes his own investment decisions. It may be
1.4.1.a. Fixed Principal Investments
The principal amount and the maturity amount are known with
certainty. It may be cash, saving bank account, saving certificates,
government bonds, corporate bonds etc.

1.4.1.b. Variable Principal Securities

The maturity value is not known with certainty. It may be equity
shares, preference shares and debentures.
1.4.1.c. Non Security Investments
Investments in Real Estates, commodities, business ventures, art,
antiques and other valuables are non security investments.
1.4.2 Indirect Investment Alternatives
In indirect investments, the individual investors have no control over
the amount invested. The investments are entrusted to the care of particular
organizations which manage the funds on behalf of investors. It may be
pension fund, provident fund, insurance, investment companies, Unit Trust
of India etc.
Investment in all avenues is based upon one or other factual basis
with the ultimate aim of gaining in future. The success of an investor means
5

achieving the rate of return warranted by the level of risk assumed.

Hence, the choice of a rational investor depends upon the risk and return
factors.

BHALLA. V.K (2010), Investment Management, 16th edition, S.Chand &

company limited, p16.

1.5 RISK AND RETURN

Risk means the probability of having adverse or low returns as
compared to the expected returns. Returns are the outcomes or benefit from
the amount invested by the investor. It May be in the form of regular income
like interest, dividend, or capital gain.
1.5.1 Kinds of Risk
Risk can broadly be classified in to two types:
Systematic Risk.
Non-Systematic Risk.
1.5.1.a. Systematic Risk
It is non-diversifiable risk because it can not be avoided; it is inherent
almost in all the investment avenues. Systematic Risk arises due to Market
Risk, Price Risk, Interest Rate Risk, Political Risk and Inflation Risk.
1.5.1.b. Non-systematic Risk
It is created due to industry or company-specific factors. This risk
can either be reduced or eliminated through diversification.

It may be

Business risk, Financial risk and Industrial risk.

1.5.2 Management of Risk
Risk management is the identification, assessment, and prioritization of
risks followed by coordinated and economical application of resources to
minimize, monitors, and controls the probability and/or impact of

unfortunate events or to maximize the realization of opportunities.

Once

risks have been identified and assessed, all techniques to manage the risk fall
into one or more of these four major categories which includes avoidance,
reduction, sharing or transfer and retention.
1.5.2. a. Risk avoidance
It includes not performing an activity that could carry risk, but
avoiding risks also means losing out the potential gain.
1.5.2. b. Risk reduction
It involves reducing the severity of the loss or the likelihood of the
loss from occurring. It means finding a balance between negative risk and
the benefit of the operation or activity.
1.5.2. c. Risk sharing or Risk transfer
It transfer refers to share with another party the burden of loss or the
benefit of gain from a risk.
1.5.2. d. Risk retention
It involves accepting the loss, or benefit of gain, from a risk when it
occurs. It is a viable strategy for small risks where the cost of insuring
against the risk would be greater over time than the total losses sustained.

ISO/IEC 31010:2009 - Risk Management - Risk Assessment Techniques

10

1.5.3 Methods of Risk Transfer

1.5.3. a. Hedging
Hedging means reducing or controlling risk. This is done by taking a
position in the futures market that is opposite to the one in the physical
market with the objective of reducing or limiting risks associated with price
changes.
1.5.3. b. Insuring risk
Insurance is the equitable transfer of the risk of a loss, from one entity to
another in exchange for payment. It is a form of risk management by payment of
premium to the insurance company.
1.5.3. c. Diversifying risk
A diversifying risk technique does not lock in anything and no payment of
premium, but diversifying the investment into some other alternatives.

1.6 DERIVATIVES - A RISK MANAGEMENT TOOL

Derivatives are the instruments to hedge risk arising from investment
made in underlying asset. Derivatives are those instruments, the value of
7

which depends upon the underlying asset on which it is created.

These underlying assets may be a commodity, securities, or index.

Active use of derivative instruments allows the investors risk profile to be

Dhanesh Khatri (2010), Security Analysis and Portfolio Management

Macmillan publishers India Ltd, First edition. p217.

11

modified, thereby providing the potential to improve earnings quality by

undesired risks.
Financial derivatives have changed the face of finance by creating
new ways to understand, measure, and manage financial risks. The
researcher, here makes an attempt to study the investors perception towards
futures and options (derivative Products) in Tanjore district.
1.7 INVESTOR PSYCHOLOGY AND PERCEPTION ON INVESTMENT

Winners think differently... it is not how much we know, though

knowledge is important. It is not how hard we work, though nothing
worthwhile is achieved without hard work. It is not the depth of our
experience, though we cannot become a seasoned operator without it. The
8

real difference is the way winners think . These lines insist the importance
of psychology on the success of investment of an individual. Psychology is
an

academic

and applied

discipline that

involves

the scientific

study of mental functions and behaviors . Psychology has the immediate

goal of understanding individuals and groups by both establishing general
principles and researching specific cases, and by many accounts it ultimately
aims to benefit society. Psychology has the greater influence on investment
decisions of the people especially on shares and its related investments.

Building Wealth in the Stock Market by Colin Nicholson, published by

John Wiley & Sons - 2009)
9

Definition of Psychology, APAS index, p20, December,2011.

12

Making money from stocks is easy enough if one can defeat the main enemy
ourselves. Humans are subject to lots of biases and psychological
quirks that combine to destroy their investing returns. There are eight key
concepts that pioneers in the field of behavioral finance have been identified
as contributing to irrational and often detrimental financial decision making.
They are
Anchoring.
Mental Accounting.
Hindsight biases.
Gamblers Fallacy.
Herd Behavior.
Over Confidence.
Over reaction and availability bias and
Anomalies.

1.7.1 Anchoring
The concept of anchoring draws on the tendency to attach or "anchor"
our thoughts to a reference point - even though it may have no logical
relevance to the decision at hand. Although it may seem an unlikely
phenomenon, anchoring is fairly prevalent in situations where people are
dealing with concepts that are new and novel.

13

1.7.2 Mental Accounting

Mental accounting refers to the tendency of people to separate their
money into separate accounts based on a variety of subjective criteria, like
the source of the money and intent for each account.
1.7.3 Hindsight Biases
Another common perception bias is hindsight bias, which tends to
occur in situations where a person believes (after the fact) that the onset of
some past event was predictable and completely obvious, whereas in fact,
the event could not have been reasonably predicted.
1.7.4 Gamblers Fallacy
It means a lack of understanding which leads to incorrect assumptions
and predictions about the onset of events. One of these incorrect
assumptions is called the gambler's fallacy. In the gambler's fallacy, an
individual erroneously believes that the onset of a certain random event is
less likely to happen following an event or a series of events. This line of
thinking is incorrect because past events do not change the probability that
certain events will occur in the future.
1.7.5 Herd Behavior
It is the tendency of individuals to mimic the actions (rational or
irrational) of a larger group.

14
1.7.6 Over Confidence
Confidence implies realistically trusting in one's abilities, while
overconfidence usually implies an overly optimistic assessment of one's
knowledge or control over a situation.
1.7.7 Over Reaction
Participants in the stock market predictably overreact to new information,
creating a larger-than-appropriate effect on a security's price.
1.7.8 Anomalies
It refers to the irregular or abnormal behavior of the people; that directly
violate modern financial and economic theories, which assume rational and logical
behavior.

For making their investments successful, the investors psychology

may be refined and improved.

Usually to improve psychology the

Psychologists explore concepts such as perception, cognition, attention,

emotion, phenomenology, motivation, brain functioning, personality,
10

behavior and interpersonal relationships.

In behavioral studies, perception plays a predominant role.

Perception refers to a conscious or unconscious state of awareness
or understanding of one's surroundings that exists within the mind and
formed

10

No. 12.

through

sensory signals stimulated

by

current conditions,

Psychology: Six perspectives by LD. Fernald, CA Sage publications, 2008 Page

15

expectations and past memories. The confluence of complex sensory inputs

often creates a perception that is unreliable or unverifiable.

The globalization of financial markets has been increasing the size of

the community of retail investors over the past two decades by providing a
wide variety of market and investment options. Hence, it makes their
investment decisions process more complex. As the market conditions can
be influenced by both fundamental factors of the company and external
factors such as social, political, economic, regulatory, technological,
environmental and legal that have an influence on the values of equity
shares and derivative securities, the perception of retail investors over equity
shares and derivatives is widely varied.

1.8 INDIVIDUAL INVESTORS AND RETAIL INVESTORS IN

INDIAN CAPITAL MARKET
1.8.1 Individual Investors
Investors in the capital market may be institutions or Individuals. In
the capital market the role of individual investors cannot be ignored since
Households savings account for the lions share of the gross savings in the
country. Even though Foreign Financial Institutions play a major role in the
Indian capital market, the participation of Individual investors will be a great
boost for the development of the capital market and for reducing the
volatility in the stock market. The individual investor may be Retail investor
or high net worth individual.

16

1.8.2 Retail Investors

An individual who purchases securities for his/her own personal
account rather than for an organization is a retail investor. SEBI defines a
retail shareholder as presently listed companies making public issues can
make reservation on competitive basis for its existing shareholders who, as
on the record date, are holding shares worth up to Rs. 50,000/-. However, no
limit has been set on the value of the application that can be made by such
shareholders. It has now been decided to define the term Retail Individual
Shareholder to mean a shareholder (i) whose shareholding is of value not
exceeding Rs. 1, 00,000/- as on the day immediately preceding the record
date, and (ii) who makes application or bids in a public issue for value not
exceeding Rs 1, 00,000/-

11

Retail investing activity occurs through any of

the following channels; The investor who directly invests through an agent
or broker, or whose

accounts are managed by his D/P or who joins in an

investment group like friends, colleagues, family members.

A retail investor comes from a middle class family. Retail investing
activity takes place in the shadow of institutional investing activity. There is
every chance that their interest might be affected because of the smaller size
of their holding and the resultant voting power. A typical small investor or a
retail investor in India is not a speculator who does day trading but a pure
investor who buys shares when prices are likely to go up and sells when the

11

(www.sebi.org).

17

prices are likely to come down. Such an investor is a rational investor who
does what is generally expected. His information level is very low and he
mainly relies on the brokers.
In many countries it is common to find all people, and not just those
belonging to the middle class, investing a part of their savings in stock
market. In India the equity culture started only from the 90s. Reliance
Industries Limited in particular wooed the middle class- salaried,
professionals, small business persons and traders and well-off farmers to
subscribe to the companys share issue. Many did and were handsomely
rewarded.
The small investor today seems to disappear slowly from the market
in a phased manner. In spite of the 24 hour channels on business news and
hyped information about IPOs the small investor does not want to take any
risk. The Swarup Committee Report

12

2009 shows that the retail investor

population has shrunk to less than half since 2000-01. In 2003, SEBI and the
National Council of Applied Economic Research (NCAER) estimated that
21 million individuals had invested in equity or debentures while 19 million
had invested in mutual funds. The reference period for this study was 200001. The SEBI-NCAER survey further said that the number of equity investor
households in India had halved from 12.1 million in 1998-99 to 6.1 million

12

Swarup Committee, Consultation Paper on Investor Protection and

Awareness, 2009, p1, www.ncaer.org. Accessed on 12/12/2009.

18

in 2000-01. Now, the Swarup Committee says that the number of individual
retail investors too has shrunk to just eight million. This is clearly a
frightening situation. The first and the foremost reason is that investor has
no confidence in the capital market. It stems from the fact that the
Institutions and Systems in the country are at present heavily loaded in favor
of the FIIs and other large investors.
The capital market regulators should not ignore the individual
investors whether they are retail or high net worth individuals since their
aspirations, attitudes, perceptions and expectations are going to have a long
term effect on the growth of stock market and derivative market in India.
1.9 STATEMENT OF THE PROBLEM
The derivative market performs a number of functions in Indian stock
market. The derivative products like futures and options have, now-a-days
become an important instrument for risk hedging, portfolio diversification
and price discovery in India after its formal commencement in 2001. Even
after a decade of trading activities in derivatives in India, the retail investors
yet to understand the real risk involved in investments in the derivative
markets as this market is frequently affected by the overall stock market
volatility as well as by uncertainty in the global economy.

Moreover,

changes in business environment and increase in movement of interest rate

and exchange rate has resulted into rise in financial risk exposure. These
movements can affect not only earnings from investment but also the

19

survival of retail investors. But today, derivatives become more popular in

India and individual as well as institutional investor highly prefers derivative
contracts to hedge the risk. So, the present study is undertaken to assess the
perception of retail investors towards derivatives with reference to
futures and options in Tanjore Distirict.
1.10 NEED FOR THE STUDY
The present study on derivatives is of much needed for the retail investors
on the grounds that it gives deep insights about the futures and options of the stock
market and provides feasibility for the perfect way of trading in stock markets.
Moreover, the studies of this nature are more useful to academicians and research
scholars in India as well as in other countries to make further insights into the
various facets of derivative futures and options in the organizations similar to BSE
and NSE. Also, the study may give many implications to an investor regarding
commodity trading, helps them to reduce risk and makes them to choose the risk
free stocks for investment.
1.11 OBJECTIVES OF THE STUDY
The following objectives are to be fulfilled in the present research work:

1. To study the awareness about derivative market as well as awareness

about major derivative types such as futures and options among the retail
investors in Tanjore district, Tamil Nadu.
2. To analyse the relationship between respondents socio-economic status
and their extent of awareness on derivative market.

20

3. To evaluate the perceived risk in various investment options and identify

the role of socio-economic status on the perceived risk among retail
investors in the study region.
4. To find out the risk management techniques adopted by retail investors
in the study region.
5. To bring out the investment behaviour of retail investors towards futures
and options in derivative markets.
6. To ascertain the status of derivative trading in India based on the views
of the retail investors in the study region.
1.12 HYPOTHESES
The hypotheses to be tested in the present study are given hereunder:

1. There is no significant relationship between socio-economic status and

level of awareness about derivative market among retail investors in
Tanjore district.
2. The perceived risk in investments in derivative market does not differ
significantly with difference in socio-economic status of the retail
investors.
3. There is no significant difference in the risk management techniques of
retail investors with different socio-economic characteristics.
4. There is no significant relationship between perceived risk and
investment in derivatives among retail investors.

21

5. The behaviour of retail investors towards investing in derivatives is

independent of their socio-economic characteristics.
6. The behaviour of retail investors towards investing in derivatives is
independent of the status of derivative trading in India.
1.13 SCOPE OF THE STUDY
The present study is undertaken to explore the retail investors awareness
about and attitude towards derivative trading with futures and options in Tanjore
district, Tamil Nadu. The study analyzes advantages and disadvantages of the
investment in derivatives, extent of risk inherent in the investment, reasons for
investing and not investing of F & O (Futures and Options), preferred derivative
type for investment based on the views of the retail investors in the study region.
So, scope of this study is to analyze various concepts and myth (pros and cons)
inherent in investing in derivatives empirically based on the perception of retail
investors of stock market in Tanjore district.
1.14 LOCATION OF THE STUDY
The state of Tamil Nadu has been selected by the researcher. The state of
Tamil Nadu has a lot of distinctions with regard to overall development. Tamil
Nadu is the eleventh largest state in India by area and the seventh most populous
state. It is the fifth largest contributor to India's GDP and the most urbanized state
in India. The state has the highest number of business enterprises in India,
compared to the population share of about 6%. Tamil Nadu is also one of the most
literate states of India. Out of 32 districts in Tamil Nadu, Tanjore has been selected
for the study. The district is located at 10.08N 79.16E in Central Tamil Nadu
bounded on the northeast by Nagapattinam District, on the east by Tiruvarur

22
District, on the south by the Palk Strait, of Bay of Bengal on the west
by Pudukkottai District, and on the north by the river Kollidam, across which
lays Tiruchirappalli

and

Perambalur districts.

According

to

the 2011

census Thanjavur district has a population of 2,402,781 and its literacy rate is
82.72%.

1.15 JUSTIFICATION FOR SELECTING THE RESEARCH

LOCATION
The researcher selected Tanjore District for the purpose of the study. In the
first phase, the state of Tamil Nadu was selected because the researcher is located
in Tamil Nadu. With regards to the selection of district, the researcher identified
the district which has large number of stock brokers and investors trading in capital
market. Tanjore District is one of the major districts which have high potential in
capital market investments. In Tanjore, there are 14 registered share broking
companies (including sub brokers) and it has a good record of number of investors
in capital market.

In Tanjore, there are 839 villages. Even though the selected area has
large number of rural households, they are highly exposed with investments
in capital market as perceived by the researcher in the preliminary study of
the research. So the researcher is motivated to study the reasons behind the
phenomenon.
There are 8 Taluks in Tanjore district.
Kumbakonam,

Papanasam,

Pattukottai,

Thiruvidaimaruthur, and Peravurani.

They are Orathanadu,

Tanjore,

Thiruvaiyaru,

Out of these eight taluks, large

23

numbers of stock brokers are available in Tanjore and kumbakonam.

Irrespective of the area of occupation, the rural as well as urban investors in
entire Tanjore district traded through the stock brokers in kumbakonam and
Tanjore. Therefore, the sample respondents are selected from the registered
stock brokers in Kumbakonam and Tanjore.
1.16 RESEARCH METHODOLOGY
1.16.1 Source of Data
This research work is based on both primary and secondary data. While the
primary data are the information gathered from retail investors in stock market in
Tanjore district, Tamil Nadu whereas the secondary data are collected from
publications, books, articles in journals and websites pertaining to derivative
trading and investment. The questionnaire is used to obtain the perception of
sample respondents about various aspects underlying the topic of the study.
1.16.2 Sampling Technique

The selection of the sample respondents for the survey involves two
stages. In the first stage, stock brokers are selected to identify the investors.
On the basis of large number of investors traded in futures and options
segment, the registered stock brokers are selected by applying purposive
sampling method. The purposive sampling is a non-probability sampling
technique where subjects are purposely selected based on the choice of the
researcher.

In the second stage, simple random sampling technique is

applied to select the sample respondents for distributing the questionnaire to

obtain their views on various aspects needed for the study. Before going for

24

data collection using these two sampling techniques, the sample size
required for the study is determined based on following formula which is
widely used when the sample population is large and infinite (or unknown)
13

as quoted by Osisioma et al. (1974) .

Z 2 /2
4e2

Where, n is sample size, Z is standard value corresponding to a given

confidence level (in the present cases CI is 95%), and e is the proportion of
sampling error in a given situation (in this case 0.04 and 0.05, i.e., maximum
allowance of error in sampling is from 4% to 5%).
Thus using the formula, the sample size is 384, if allowance of error
is 5 per cent and 600 if allowance of error is 4 per cent. So, the sample size
anything between 400 (384 rounded off to nearest 100) and 600 would be
appropriate for the study.

13

Osisioma, H.E., Osisioma, B.C., and Chukwuemeka, E.E.O., (2012) in

Developing a Conflict Management Model for the Nigerian Executive,
Singaporean Journal of Business Economics, and Management Studies, Volume:1,
No.1, Pp.1-19

25
1.16.3 Statistical Tools and Techniques
The statistical tools and techniques used for analyzing the data vary from
descriptive to multivariate. The details of the statistical tools adopted in the study
are hereunder.

1)

Descriptive statistics like mean, standard deviation

2)

Cross tabulation analysis with Chi-square test

3)

Mann-Whitney U Test / Kruskall Wallis ANOVA

4)

Friedman ANOVA and Kendalls Coefficient of Concordance

5)

Cluster Analysis

6)

Multiple Regression analysis and

7)

Linear Discriminant analysis

The descriptive statistics is used when the gathered data is in the 5point opinion scale. The relationship between any factors is empirically
ascertained using cross tabulation analysis and chi-square test. As the most
of the data are choice based, and non-parametric in nature, the MannWhitney U test and Kruskall Wallis ANOVA test are adopted to compare
perception of two groups and more than two groups respectively. The cluster
analysis is used to segment the respondents based on the risk awareness
level into mutually exclusive groups. The unique influence of retail
investors socio-economic characteristics on their views about various
aspects pertaining to investments in derivatives is explored by multiple
regression analysis. The difference in investment behaviour between the

26

retail investors with different level of risk awareness towards derivative

trading is explored empirically by linear discriminant analysis.
1.17 LIMITATIONS OF THE STUDY
The present study is limited with the opinion of the retail investors only and
not registered share brokers. Also, views of the institutional investors are not
considered in the present study. The study does not cover the districts other than
Tanjore district.
1.18 CHAPTER SCHEME
The present study consists of seven chapters as detailed hereunder:
Chapter I - Introduction discusses the concept of investment, kinds of
risk associated with investment and investor psychology in investment decisions.
The Statement of problem, Scope of the study, Objectives of the study,
Hypotheses, Methodology, Limitations and Chapter scheme are primary focus of
this chapter

Chapter II - Review of Literature, reviews books, published

articles and publications in other medium relevant for the present study.
Chapter III - Development of Derivative Markets in India
discusses the concept of derivatives, its types, implementation and growth of
derivative trading in India.
Chapter IV - Awareness of Derivative Trading among Retail
Investors is the first analysis part, in which the level of awareness about
derivative market and trading in derivatives is explored based on the opinion
of the respondents in the sample.

27

Chapter V - Perceived Risk and Investment Behaviour of Retail

Investors in Derivative Market, first analyzes the respondents perception
about inherent risk and techniques adopted by retail investors to manage risk
associated with derivative trading.

The investment behaviour of retail

investors in derivate market is also empirically evaluated here.

Chapter VI - Status of Derivative Trading - Retail Investors
Perspective, evaluates the various pros and cons of underlying derivative
trading as perceived by retail investors in the study region.
Final chapter - Summary of Findings, Suggestions and
Conclusion, summarizes findings from the interpretation of the results of
the analysis in previous chapters. The conclusions and necessary suggestions
are also given here based on the findings.