Project Report

On

“STUDY OF RISK PERCEPTION AND PORTFOLIO MANA

GEMENT OF EQUITY INVESTORS”

Submitted in partial fulfillment of Degree of

MASTER OF BUSSINESS ADMINISTRATION

RANI DURGAVATI VISHWAVIDYALAYA, JABALPUR

Under the Supervision of

Mrs. Shweta Shrivastava
GLOBAL NATURE CARE SANGATHAN’S GROUP OF IN
STITUTIONS, JABALPUR

Submitted By
Amol Dubey
MBA 3rd SEMESTER
ROLL NO:-16161066 ENROLL:BG3285
SESSION: 2016 – 2017
GLOBAL NATURE CARE SANGATHAN’S GROUP O
F INSTITUTIONS, JABALPUR

DEPARTMENT OF MANAGEMENT

STUDENT DECLARATION
I Amol Dubey (MBA 3rdsemester) hereby declare that the Project Report entitled “STUDY OF RISK
PERCEPTION AND PORTFOLIO MANAGEMENT OF EQUITY INVESTORS” submitted in partial fu
lfillment of the requirement for the degree of Masters of Business Administration to Rani DurgavatiVishwavid
yalaya, Jabalpur.
This is my original work and that no part of this report has been submitted for the award of any othis De
gree, Diploma, Fellowship or othis similar titles or prizes and that the work has not been published in any journ
als or magazines.

Date : Signature :

Amol Dubey
ROLL NO. : 16161066
EN. NO. : BG3285
GLOBAL NATURE CARE SANGATHAN’S GROUP O
F INSTITUTIONS, JABALPUR

DEPARTMENT OF MANAGEMENT

CERTIFICATE OF HOD
This is to certify that project report titled“STUDY OF RISK PERCEPTION AND PO

RTFOLIO MANAGEMENT OF EQUITY INVESTORS”submitted by Amol Dubeyof

MBA 3rd semester may be accepted towards partial fulfillment of Masters of Business A

dministration.

Prof. Dr ShailendraBasedia
HOD
Date : Faculty of management
GNCSGI, JABALPUR
 CERTIFICATE OF GUIDE
This is to certify that the project report entitled “STUDY OF RISK PE
RCEPTION AND PORTFOLIO MANAGEMENT OF EQUITY INVESTORS” Submitted
by Amol Dubey (MBA 3rd semester Roll No. 16161066 Enrollment No. BG3285) in partial f
ulfillment of the requirement of for the degree of MASTERS OF BUSSINESS ADMINISTRA
TION of RDVV has worked under my supervision and guidance.
The candidate is regular student of our institution. This report is up to the standard both i
n respect of its contents and literacy presentation for being referred to all examiners.

Date : Signature:
Mrs. Shweta Shrivastava
Global Nature Care Sangathan’s Group

of Institutions, Jabalpur
 ACKNOWLEDGEMENT

With immense pleasure, I would like to present this project on “STUDY OF RISK PERCEPTION AND POR

TFOLIO MANAGEMENT OF EQUITY INVESTORS” .It has been an enriching experience for me to unde

rgo my research, which would not have been possible without the goodwill and support of the people around. A

s a student of GLOBAL NATURE CARE SANGATHAN’S GROUP OF INSTITUTIONS, JABALPUR

, I would like to express my sincere thanks to all those who helped me during my research..
I would like to thanks DR. SHAILENDRA BASEDIA my HOD for this project &MRS. SHWETA SHRIVAST
AVA my guide for giving such opportunity.

I thankfully acknowledge the continuous support and inspiration given to me by my Project Guide sparing his
valuable time with me and giving all the guidence in executing the project as per requirement.
I am grateful to my friends for giving support in my project. Lastly, I would like to thank each and every person
who helped me in completing the project especially MY PARENTS.
INDEX

S. No. Content PageNo.

1 EXECUTIVE SUMMARY

2 INTRODUCTION OF TOPIC

3 OBJECTIVES OF STUDY

4 RESEARCH METHODOLOGY

5 DATA ANALYSIS AND INTERPRETA

TION

6 FINDINGS

7 LIMITATIONS

8 SUGGESTIONS

9 CONCLUSIONS

10 BIBLIOGRAPHY
 11 ANNEXTURE

EXECUTIVE SUMMARY
PROJECT UNDERTAKEN BY ME

The project studied by me in capital ways financial services, Indore, was “RISK PERCEPTI
ON AND PORTFOLIO MANAGEMENT OF EQUITY INVESTORS”.Capital ways financ
ial services is India‟s leading capital markets company with All-India Presence and an extensiv
e client base. Capital ways financial services possesses state of the art trading platform, best bro
king practices and is the pioneer in trading product innovations.

HOW IT WAS UNDERTAKEN

A survey was conducted by me among the investors. Many-a-times, stock market investors take
their investment calls based on certain prejudiced views which are often erroneous in nature. H
owever, such investors are reluctant to stop following the myths they traditionally believe in, un
less they‟re explained as to why their views are illogically supported. It is important that invest
ors keep a realistic view of the market terminologies.

An appointment was fixed with the investors of the respected areas in which their view point wa
s studied, certain questions were asked regarding risk perception and portfolio management of e
quity investors; activities are to be included by the company products in regard to these benefits
;; to what extent it effects the level of satisfaction and how far it is beneficial for the investors. T
here views helped me a lot to practically understand my project.
OBJECTIVES OF STUDY
The study has been conducted in the INDORE city the respondents chosen randomly the

sample size has been limited to 100, which may restrict to scope of complexity of the

study. The scope of the project could be broadened if the project duration is extended

and the strength be raised.

To understand the
working of risk perception
and portfolio
management.

To understand how
To understand the
process of portfolio
investors need for
management are
portfolio management.
implemented.

The objective of doing this

To know the importance project is to relate the
of risk perception and bookish theories with the
portfolio management. actual risk perception and
portfolio management.
COMPANY PROFILE
As an Advisory service firm in Equity Market & Commodity Market .The purpose of the firm is to facilitate inv
estment and provide qualified Research Advise to Existing Clients and New Investors who unaware about the E
quity & Commodity market to continue better Returns & profitability. Capital Ways Financial Services providin
g Technical & Financial consultancy services in Stock, Commodities, FOREX and having Corporate Office in I
ndore. The overall business model created keeping in mind that can provide effective Research based advice to
create a complete Investment solution platform of unlimited Trading & wealth creating opportunities. This platf
orm combines certain and enables the investors to provide a wide variety of investment solutions to gain better r
eturns.

Why Choose Capital ways

When you choose Capital Ways Financial Services as your Research services, advising and
Fund Management solutions partner, you will discover what so many global & domestic
enterprises have already discovered. We are a leader in the global marketplace and among the
top 10 Research firms in the world. Our continued rapid growth is a testament to the certainty
our clients experience every day. Building on more than 6 years of experience, we add real
value to global Research organizations through our expertise plus solutions with proven success
in the field and Solid intensified service.

Our Vision
To become one of the top global Research company in 2020 in facilitating uncompetitive
Research solutions for investment in most of the world exchanges. To satisfy Existing clients
and new investors who are unaware about market but want to invest in Equity, Commodity &
FOREX Market and handling with Proper Return. To cater better investment opportunity to
create wealth & multiply hard earned money of investor.

Our Value
Our core values of respect, professionalism and perseverance are reflected not only in our
workplace but also in the business we do with our customers and in our dealings with society.
We believe in treating every individual equally and with fairnes.

The major aim of Research Services is to

 Generate Maximum Returns - to its subscribers and for which Researcher Analysts work
hard day and night .
 Produce Good investment opportunities Do Opportunistic to Investor - it is subscribed by
clients because in this market 90% are looser, they do not have when to Buy/sell/exit.

We think that the fees we are charging against a return which is to be generated in future and
also protect & multiply your capital/hard earned money. It is our duty to return this through
good investment opportunities so as you can realize the fees paid and make good money as
well. Please do give us an opportunity to serve and work for you.

We believe that market opportunities often go unrecognized. However with our structured
advisory services , we can help Investors to get market opportunity. Depending on whether
Investor are an intraday trader or a seasoned investor, we offer them various kinds of advisory
Research that are designed to suit Investors needs.
 While there are thousands of stocks to choose from, it is important that Investors make
informed investment decisions. With our dedicated team of experts covering a wide range of
stocks, our advisory services can help Investors to get better Return.

In market 95 % looser and remaining 5 % who are taking interest in those market and invest &
Earn smartly .we would like to target such 95% Investors which have lose their money but
through our advisory they can regain their money from market.

SERVICE PLAN STRUCTURE

CW BASIC-STOCK CASH CW-MCX Combo CW-Stock Option Premium

STOCK OPTION CW-Stock Future BTST CW-Stock Future Premium

STOC K FUTURE CW - Index Future CW-MCX PREMIUM

CW-Stock Cash Positional CW-NCDEX CW-Stock Cash HNI

CW-Stock Cash BTST CW - Index Option CW-Stock Future HNI

CW-Base Metal CW-Bullion CW-MCX HNI
CW-Energy CW-Stock Future Positional CW-Stock Cash Ultra Dynamic
CW-Inventory CW-Stock Cash Premium CW-Stock Future Ultra Dynamic
CW-Ultra Dynamic MCX CW-Stock Cash MinMax CW-Stock Future MinMax
Review of related Literature In this section, the literature review including three parts. First, behavior finance pe
rspective of individual investor. Second, individual investor’s risk perception, risk tolerance and portfolio choic
e. Third, individual investor’s socio-economic status differential and risk tolerance. The results for gender, educ
ation level and income level are consistent with the earlier literature. Previous literature indicating those factors
on risk-taking and risk tolerance are gender, age, marital status, occupation, income level, education level and e
conomic environments expectations, which might influence an individual investor’s level of risk taking, but the
factor of education level might not. Those studies are classified by three catalogers.

Behavior Finance Perspective of Individual Investor As a result of traditional finance theory appears to play a
limited role in understanding this issues such as (1) why do individual investors trade, (2) how do they perform
the task, (3) how do they choose their portfolios to conform their conditions, and (4) why do returns vary so qui
ckly even across stocks for reasons other than risk. In the new arena of behavior finance or socalledbehavior eco
nomic, we could to interpret about individual investors behave in their invest choice more completely. Most of
behavioral finance researchers often claimed that the reality results presents no unified theory unlike traditional
finance theory appears expected utility

maximizations using rational beliefs. Its means those scholars in this field actually postulate whole investors in f
inancial market are rationales; they can’t influenced through any factors only maximum profit for themselves.
Most authors show behavior finance perspective on individual investor, such as Deaux and Emswiller (1974), L
enney (1977), Maital et al. (1986), Thaler and Johnson (1990) and Beyer and Bowden (1997). Those authors are
to exclaim that individual investor would demonstrate different risk attitude when facing investment alternative
s. Later instruction in our research, we called risk perception and risk tolerance of individual investor. Comparin
g with previously research, current study is to focus on external factors and psychological factors how to affect i
nvestor’s investment decision and portfolio choice. For instance, Annaert et al. (2005), Wang et al. (2006) indic
ate the impact of information asymmetric problem on investor behave, this is another subject in behavioral finan
ce field. Most of these researches are pay close attention to behavioral finance, especially in financial products c
hoices (investment) and behave of individual investor invest related.

Risk Perception, Risk Tolerance and Portfolio Choice Financial risk tolerance is defined as the maximum am
ount of uncertainty that someone is willing to accept when making a financial decision. Although the importanc
e of assessing financial risk tolerance is well documented, in practice the assessment process tends to be very di
fficult due to the subjective nature of risk taking (the risk of investor willing to reveal their risk tolerance) and o
bjective factors such as Grable and Joo (1997), Grable and Lytton (1999), and Grable (2000). Risk tolerance
represents one person’s attitude towards taking risk. This indicated is an important concept that has implications
for both financial service providers (asset management institution or other financial planner) and consumers (in
vestors). For the latter, risk tolerance is one factor which may determine the appropriate composition of many as
sets in a portfolio which is optimal and satisfied investors invest preference in terms of risk and return relative t
o the needs of the individual investors Droms, (1987), Hallahan et al., (2004). There are some empirical evid
ence showing the impact of risk perception; risk tolerance and socio-economic on portfolio choice, for instance,
Carducci and Wong (1998), Grable and Joo (1997), Grable and Lytton (1999), Grable (2000), Hallahan et al., (2
003), Hallahan et al., (2004), Frijns et al., (2008), and Veld and Veld-Merkoulova (2008). In terms of different r
isk perception or risk tolerance level, individual investor may show different reaction base upon their psycholog
y factor and economic situation, which would lead to heterogeneous portfolio choice for individual investors. F
or this reason, it is crucial to recognize and attitudinal how individual investors with different risk perceptions a
nd risk tolerance make their invest products choice on investment plan, in particular socioeconomic status differ
entials may make their choice vary and difference.

Investor’s Socio-Economic Status and Risk Tolerance Some researchers have indicated that the validity of wi
dely used demographics as determinants of risk tolerance is noteworthy as the relationship between socio-econo
mic status differences including gender, age, income level, net assets, marital status, educational level and inves
tment decision or portfolio choice. With regard to the financial risk tolerance literatures, there is much interest i
n the demographic determinants and risk attention (involving three risk types: risk aversion, risk moderate and r
isk seeking) is particularly focused on age, gender, education level, income level, marital status, the number of d
ependents and net assets. Specifically, although debate remains on some issues, a range of common findings are
generally observed. There are five phenomenons in socio-economic status variables differential and portfolio c
hoice as the following: First, risk tolerance decreases with age (e.g., Morin and Suarez 1983; Roszkowski, Snel
becker, and Leimberg 1993). Second, females have a lower preference for risk than males (e.g., Roszkowski, Sn
elbecker, and Leimberg 1993; Grable 2000). Third, risk tolerance increases with education level (e.g., Roszkow
ski, Snelbecker, and Leimberg 1993; Haliassos and Bertaut 1995). Fourth, risk tolerance increases with income
level and net assets (e.g., Cohn et al. 1975; Roszkowski, Snelbecker, and Leimberg 1993; Bernheim, Skinner, a
nd Weinberg 2001). Fifth, single (i.e., unmarried) investors are more risk tolerant than married (e.g., Roszkows
ki, Snelbecker, and Leimberg 1993).
INTRODUCTION OF THE TOPIC

HISTORY OF STOCK EXCHANGE

The only stock exchanges operating in the 19th century were those of Bombay set up in 1875 and Ahmedabad s
et up in 1894. These were Efficient Market Hypothesis organized as voluntary non-profit-making association of
brokers to regulate and protect their interests. Before the control on securities trading became a central subject u
nder the constitution in 1950, it was a state subject and the Bombay securities contracts (control) Act of 1925 us
ed to regulate trading in securities. Under this Act, The Bombay Stock Exchange was recognized in 1927 and A
hmedabad in 1937.
During the war boom, a number of stock exchanges were organized even in Bombay, Ahmedabad and other cen
ters, but they were not recognized. Soon after it became a central subject, central legislation was proposed and a
committee headed by A.D.Gorwala went into the bill for securities regulation. On the basis of the committee's r
ecommendations and public discussion, the securities contracts (regulation) Act became law in 1956.

DEFINITION OF STOCK EXCHANGE

"Stock exchange means any body or individuals whether incorporated or not, constituted for the purpose of assi
sting, regulating or controlling the business of buying, selling or dealing in securities."

It is an association of member brokers for the purpose of self-regulation and protecting the interests of its memb
ers.

It can operate only, if it is recognized by the Government under the securities contracts (regulation) Act, 1956.
The recognition is granted under section 3 of the Act by the central government, Ministry of Finance.

NATURE & FUNCTIONS OF STOCK EXCHANGE

There is an extraordinary amount of ignorance and of prejudice born out of ignorance with regard to nature and
functions of Stock Exchange. As economic development proceeds, the scope for acquisition and ownership of c
apital by private individuals also grow. Along with it, the opportunity for Stock Exchange to render the service
of stimulating private savings and challenging such savings into productive investment exists on a vastly great s
cale. These are services, which the Stock Exchange alone can render efficiently.

The Stock Exchanges in India have an important role to play in the building of a real shareholders democracy. T
o protect the interest of the investing public, the authorities of the Stock Exchanges have been increasingly subj
ecting not only its members to a high degree of discipline, but also those who use its facilities-Joint Stock Comp
anies and other bodies in whose stocks and shares it deals.
The activities of the Stock Exchange are governed by a recognized code of conduct apart from statutory regulati
ons. Investors both actual and potential are provided, through the daily Stock Exchange quotations. The job of t
he Stock Exchange and its members is to satisfy the need of market for investments to bring the buyers and selle
rs of investments together, and to make the 'Exchange' of Stock between them as simple and fair as possible.

NEED FOR A STOCK EXCHANGE

As the business and industry expanded and economy became more complex in nature, a need for permanent fina
nce arose. Entrepreneurs require money for long term needs, whereas investors demand liquidity. The solution t
o this problem gave way for the origin of 'stock exchange', which is a ready market for investment and liquidity.

As per the Securities Contract Act, 1956, "STOCK EXCHANGE" means any body of individuals whether incor
porated or not constituted for the purpose of regulating or controlling the business of buying, selling or dealing i
n securities".

BY-LAWS

Besides the above act, the securities contracts (regulation) rules were also made in 1957 to regulate certain matt
ers of trading on the stock exchanges. There are also by-laws of exchanges, which are concerned with the follo
wing subjects.

Opening / closing of the stock exchanges, timing of trading, regulation of blank transfers, regulation of badla or
carryover business, control of the settlement and other activities of the stock exchange, fixation of margins, fixa
tion of market prices or making up prices, regulation of taravani business (jobbing), etc., regulation of brokers tr
ading, Brokerage charges, trading rules on the exchange, arbitration and settlement of disputes, Settlement and c
learing of the trading etc.

REGULATION OF STOCK EXCHANGE

The securities contracts (regulation) act is the basis for operations of the stock exchanges in India. No exchange
can operate legally without the government permission or recognition. Stock exchanges are given monopoly in
certain areas under section 19 of the above Act to ensure that the control and regulation are facilitated. Recognit
ion can be granted to a stock exchange provided certain conditions are satisfied and the necessary information is
supplied to the government. Recognitions can also be withdrawn, if necessary. Where there are no stock exchan
ges, the government can license some of the brokers to perform the functions of a stock exchange in its absence.

Securities Contracts (Regulation) Act, 1956:

SC(R)A aims at preventing undesirable transactions in securities by regulating the business of dealing therein b
y providing for certain other matters connected therewith. This is the principal Act, which governs the trading o
f securities in India.

The term "securities" has been defined In the SC(R)A. As per Section 2(h), the 'Securities' include:

1. Shares, scripts, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature
in or of any incorporated company or other body corporate

2. Derivative

3. Units or any other instrument issued by any collective investment scheme to the investors in such schem
es.

4. Government securities

5. Such other instruments as may be declared by the Central Government to be securities.

6. Rights or interests in securities.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

Securities and Exchange Board of India (SEBI) setup as an autonomous regulatory authority by the Government
of India in 1988 "to protect the interests of investors in securities and to promote the development of, and to reg
ulate the securities market and for matters connected therewith or incidental thereto". It is empowered by two ac
ts namely the SEBI Act, 1992 and the securities contract (regulation) Act, 1956 to perform the function of prote
cting investor's rights and regulating the capital markers.

Securities and Exchange Board of India (SEBI) regulatory reach has been extended to more areas and there is a
considerable change in the capital market. SEBI's annual report for 1997-98 has stated that through out its six-y
ear existence as a statutory body, it has sought to balance the twin objectives of investor protection and market d
evelopment. It has formulated new rules and crafted regulations to foster development. Monitoring. and surveill
ance was put in place in the Stock Exchanges in 1996-97 and strengthened in 1997-98.

SEBI was set up as an autonomous regulatory authority by the government of India in 1988 "to protect the inter
ests of investors in securities and to promote the development of, and to regulate the securities market and for m
atters connected therewith or incidental thereto". It is empowered by two acts namely the SEBI Act, 1992 and th
e securities contract (regulation) Act, 1956 to perform the function of protecting investor's rights and regulating
the capital markets.

OBJECTIVES OF SEBI

The promulgation of the SEBI ordinance in the parliament gave statutory status to, SEBI in 1992. According to
the preamble of the SEBI, the three main objectives are:-

• To protect the interests of the investors in securities

• To promote the development of securities market.

• To regulate the securities market.

FEATURES OF SEBI

• The SEBI shall be a body corporate by the name having perpetual succession and a common seal with p
ower to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the s
aid name, sue or by sued.

• The Head Office of the Board shall be at Bombay. The Board may establish offices at other places in Ind
ia. In Bombay, the Board is situated at Mittal Court, B- Wing, 224, Nariman Point, Bombay-400 021.

• The chairman and the Members of the Board are appointed by the Central Government.

• The general superintendence, direction and management of the affairs of the Board are in a Board of Me
mbers, which may exercise all powers and do all acts and things which may be exercised or done by that Board.

• The Government can prescribe terms of office and other conditions of service of the Chairman and Mem
bers of the Board. The members can be removed under section 6 of the SEBI Act under specified circumstances
.

• It is primary duty of the Board to protect the interest of the investor in securities and to promote the deve
lopment of and to regulate the securities market by such measures, as it thinks fit.

FUNCTIONS OF SEBI

• Regulating the business in Stock Exchange and any other securities market. Registering and regulating t
he working of Stock Brokers, Sub-Brokers, Share Transfer Agents, Bankers to the issue, Trustees to trust deeds,
Registrars to an issue, Merchant Bankers, Underwriters,

• Portfolio Managers, Investment Advisers and such other Intermediaries who may be associated with sec
urities market in any manner.

• Registering and regulating the working of collective investment schemes including Mutual Funds.

• Promoting and regulating self-regulatory organizations.

• Prohibiting fraudulent and unfair trade practices in the securities market. Promoting investor's education
and training of intermediaries in securities market. Prohibiting Insiders Trading in securities.

• Regulating substantial acquisition of shares and take-over of companies

• Calling for information, understanding inspection, conducting enquiries and audits of the Stock Exchang
es, Intermediaries and Self-Regulatory organizations in the securities market.
PROFILE OFNATIONAL STOCK EXCHANGE

NATIONAL STOCK EXCHANGE

The NSE was incorporated in November 1992 with an equity capital of Rs.25crs. The Internatio
nal Securities Consultancy (IS C) of Hong Kong helped in setting up NSE. ISC prepared the det
ailed business plans and installation of hardware and software systems. The promotions for NS
E were Financial Institutions, Insurances Companies, Banks and SEBI Capital Market Ltd., Infr
astructure Leasing and Financial Services Ltd. and Stock Holding Corporation Ltd.

It has been set up to strengthen the move towards professionalisation of the capital market as we
ll as provide nation wide securities trading facilities to investors.

NSE is not an exchange in the traditional sense where brokers own and manage the exchange. A
two tier administrative setup involving a company board and a governing board of the exchang
e is envisaged.

NSE is a national market for shares of Public Sector Units Bonds, Debentures and Government
securities, since infrastructure and trading facilities are provided.

NSE-NIFTY:
The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The new Index which re
places the existing NSE-100 Index is expected to serve as an appropriate Index for the new seg
ment of futures and options.

"Nifty" means National Index for Fifty Stocks.

The NSE-50 comprises 50 companies that represent 20 broad Industry groups with an aggregate
market capitalization of around Rs.1,70,000crs. All companies included in the Index have a ma
rket capitalization in excess of Rs.500 crs each and should have traded for 85% of trading days
at an impact cost of less than 1.5%.

The base period for the index is the close of prices on Nov3, 1995 which makes one year of co
mpletion of operation of NSE's capital market segment. The base value of the Index has been se
t at 1000.

NSE-MIDCAP INDEX:

The NSE midcap Index or the Junior Nifty comprises 50 stocks that represents 21 board Industr
y groups and will provide proper representation of the midcap segment of the Indian capital Mar
ket. All stocks in the Index should have market capitalization of greater than Rs.200 crs and sho
uld have traded 85% of the trading days at an impact cost of less 2.5%.

The base period for the index is Nov 4, 1996 which signifies two years for completion of operat
ions of the capital market segment of the operation. The base value of the Index has been set at
1000.
Average daily turn over of the present scenario 2,58,212 (Lacs) and number of average daily tra
des 2,160 (Lacs).

At present, there are 24 stock exchanges recognized under the Securities Contract (Regulation)
Act, 1956. They are:

STOCK EXCHANGES IN INDIA

S.No NAME OF THE STOCK EXCHANGE YEAR

1 Bombay Stock Exchange 1875

2 Hyderabad Stock Exchange 1943

3 Ahmedabad Share and Stock Brokers Association 1957

4 Calcutta Stock Exchange Association Limited 1957

5 Delhi Stock Exchange Association Limited. 1957

6 Madras Stock Exchange Association Limited. 1957

7 Indoor Stock Brokers Association. 1958

8 Bangalore Stock Exchange. 1963

9 Cochin Stock Exchange. 1978

10 Pune Stock Exchange Limited. 1982

11 U.P Stock Exchange Association Limited. 1982

12 Ludhiana Stock Exchange Association Limited. 1983

13 Jaipur Stock Exchange Limited. 1984

14 Gauhathi Stock Exchange Limited. 1984

15 Mangalore Stock Exchange Limited 1985

16 Maghad Stock Exchange Limited, Patna 1986

17 Bhuvaneshwar Stock Exchange Association Limited 1989

18 Over the Stock Exchange Limited. 1989

19 Saurasthra Kutch Stock Exchange Limited. 1990

20 Vadodara Stock Exchange Limited. 1991

21 Coimbatore Stock Exchange Limited. 1991

22 Meerut Stock Exchange Limited. 1991

23 National Stock Exchange Limited 1992

24 Integrated Stock Exchange. 1999

PROFILE OF BOMBAY STOCK EXCHANGE BOMBAY STOCK EXCHANGE

This Stock Exchange, Mumbai, popularly known as "BOMBAY STOCK EXCHANGE (BSE)"
was established in 1875 as ''The Native Share and Stock Brokers Association", as a voluntary n
on-profit making association. It has evolved over the years into its present status as the premiere
Stock Exchange in the country. It may be noted that the Stock Exchange is the oldest one in As
ia, even older than the Tokyo Stock Exchange, which was founded in 1878.

The exchange, while providing an efficient and transparent market for trading in securities, uph
olds the interests of the investors and ensures redressal of their grievances, whether against the c
ompanies or its own member brokers. It also strives to educate and enlighten the investors by m
aking available necessary informative inputs and conducting investor education programmes.

A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public representatives

and an executive director is the apex body, which decides the policies and regulates the affairs
of the exchange.
The Executive director as the chief executive officer is responsible for the day to day administra
tion of the exchange.

BSE INDICES:

In order to enable the market participants, analysts etc., to track the various ups and downs in th
e Indian stock market, the Exchange introduced in 1986 an equity stock index called BSE-SEN
SEX that subsequently became the barometer of the moments of the share prices in the Indian st
ock market. It is a "Market capitalization-weighted" index of 30 component stocks representing
a sample of large, well established and leading companies. The base year of SENSEX is 1978-7
9. The SENSEX is widely reported in both domestic and international markets through print as
well as electronic media.

SENSEX is calculated using a market capitalization weighted method. As per this methodology,
the level of the index reflects the total market value of all 30 component stocks from different i
ndustries related to particular base period. The total market value of a company is determined b
y multiplying the price of its stock by the number of shares outstanding. Statisticians call an ind
ex of a set of combined variables (such as price and number of shares) a composite Index. An In
dexed number is used to represent the results of this calculation in order to make the value easie
r to work with and track over a time. It is much easier to graph a chart based on Indexed values t
han one based on actual values world over majority of the well known Indices are constructed u
sing "Market capitalization weighted method".

In practice, the daily calculation of SENSEX is done by dividing the aggregate market value of t
he 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link
to the original base period value of the SENSEX.

The Divisor keeps the Index comparable over a period of time and it is the reference point for th
e entire Index maintenance adjustments. SENSEX is widely used to describe the mood in the In
dian Stock markets. Base year average is changed as per the formula:

Base year average is changed as per the formula

New base year average = old base year average *(new market value/old market value)
Nowadays, behavioral finance is becoming an integral part of the decision making process, beca
use it greatly affects investors’ behavior regarding decision making. Hence, a better understandi
ng of behavioral finance will assist the investors to select a better investment portfolio. In additi
on, several economic and financial theories assume that investors act rationally; however, they a
re only human. They act according to market sentiments and some even follow their gut feeling
when making financial decisions (Raiz, Hunjra and Azam, 2012 and Abdeldayem b, 2015).

Since the traditional finance theory arises to play a limited role in understanding and interpretin
g certain issues such as: (1) why do individual investors trade in the stock market, (2) how do t
hey perform the task, (3) how do they choose and build their portfolios to conform their conditi
ons, and (4) why do returns differ so quickly even across stocks and portfolios for reasons other
than risk, therefore, the behavioral finance emerged to answer such questions and help to interpr
et why and how individual investors behave in their choice of investment (Prabhakaran and Kar
thika, 2011).

Several studies show behavior finance perspective on individual investor, such as Slovic (1986),
Lopes(1987), Schubertl et al. (1999), and Abdeldayem and Assran (2015). Those authors argue
that individual investor would demonstrate different risk attitude when facing alternative invest
ments. While, the question of what is the impact of investors’ perception of risk on portfolio ma
nagement remains unanswered.

Furthermore, determinants of risk attitudes of individual investors are of great interest in the be
havioral finance. Behavioral finance focuses on the individual attributes, Psychological or other
wise, that shape common financial and investment practices. Unlike traditional assumptions of e
xpected utility maximization with rational investors in efficient markets, behavioral finance ass
umes people are normal. Despite great interest in this area, not much research looks at the under
lying factors that may lead to individual differences and play a significant role in determining p
eople’s financing and investment strategies in emerging markets

When we look at risk, risk is a complex notion, even in the practical finance community where
different measures are utilized such as the Sharpe ratio (or reward-to-variability ratio, Sharpe, 1
975), VaR (mean and variance based) (Coombs, 1975), and many other measures of financial ri
sk exist like, for instance, pure risk based on aspiration criterion and probability of failure (see
Lopes 1987; Sokolowska&Pohorille, 2000). Even finance theorists are not fully clear what the u
nderlying risk dimensions are, and they usually examine risk

Research Journal of Finance and Accounting

www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Onlin
e) Vol.6, No.12, 2015
62

measures for practical application in finance without fundamental connection to the normative d
ecision theories (see Artzner, Delbaen, Eber, & Heath, 1999; Luce, 1980; Sarin, 1987; Szegö 20
02 and Valev, Chater and Stewart, 2009)

Risk perception can be managed if the investors are aware of their level of risk perception (Sing
h and Bhowal, 2008). While making investment decisions, the investors make proper tradeoffs
between risks and return (Fischer and Jordan, 2006). In a specific situation, people who are risk-
seekers and are concerned about high returns are likely to have low risk perception, whereas th
ose who are risk-averse have high risk perception; consequently affecting the investment behavi
or (Rana et al, 2011).

Portfolio management concerns the constructions and maintenance of a collection of investment

. It is investment of funds in different securities in which the total risk of the portfolio is minimi
zed, while expecting maximum return from it. It mainly involves reducing risk rather than incre
asing return. Return is obviously important though, and the ultimate objective of portfolio mana
ger is to accomplish a chosen level of return by bearing the least possible risk.

Moreover, risk can be also considered as a deviation of an expected outcome. In investing we ca

n look at risk as a deviation of expected investment returns. This deviation can be either positiv
e or negative. The probability and magnitude of the deviation is what an investor is concerned a
bout. There are many factors that can affect risk and there are portfolio management tools to me
asure and mitigate the risk factors. Hence, understanding the types of investment risk allows an
investor to manage risk and optimize returns. Accordingly, in this research effort we look at the
different types of investment risk and how a portfolio management can help to improve the prob
ability of positive outcomes instead of negative outcomes.

Although traditional finance theory always assumes that investors’ investment decisions are bas
ed on their objective evaluation of risks and expected returns, psychological factors towards risk
perception may play vital role in investors’ investment decisions. The main idea behind this stu
dy is to identify some core factors which affect investors' behavior under risk and uncertainty an
d to examine and analyze results in meaningful ways that can help the investors in their future i
nvestments. Therefore, the overriding purpose of this study is to examine the impact of investor
s’ perception of risk on portfolio management in the Kingdom of Bahrain. In this study investm
ent decisions of investors (portfolio management decisions) have been taken as a dependent vari
able because to its importance in stock market; while determinants of risk perception, are taken
as independent variables. The study aims also to present and examine a model that evaluates thi
s relationship (the Impact of investors’ perception of risk on portfolio management) in the King
dom of Bahrain.

The Kingdom of Bahrain is situated in the heart of the Gulf. Its strategic geographical position a
nd open market economy, coupled with the government’s dynamic economic policy and a well-
trained national workforce have all helped Bahrain to achieve this status. The Kingdom of Bahr
ain also has the advantage of a modern and wellplanned infrastructure, together with excellent a
ir, sea and road links. A tax-free environment and the ability to freely remit funds abroad gives
Bahrain its unique appeal and considerable advantage in attracting investors from different parti
es of the world to the country (Abdeldayem, 2015 a).

The present study can have significant contribution in the area of behavioral finance through ex
ploring the relationship between various physiological factors that can affect the overall investm
ent decisions of the investors. Furthermore, if the proposed model of the study is validated, it w
ould enable researchers to use the instrument with increased confidence, perhaps in some other
Gulf countries such as Saudi Arabia, UAE, Kuwait, Qatar or Oman, especially for risk perceptio
n and portfolio management. Therefore, this study could serve also as an example for instrumen
t validation.

The rest of the paper is organized as follows: Section (2) includes the literature review to show t
he relation between risk perception and portfolio management; and gives background to the Bah
rain Stock Exchange (BSE). The research methodology, data sources and measures of main vari
ables are in section (3). Section (4) presents the empirical analysis and test results of the relation
between investors’ perception of risk and portfolio management. Section (5) provides a summa
ry and concluding remarks.

SCOPE OF THE STUDY

The Sample Size is Limited, So as to give the accurate information regarding INVESTMENT PERC
EPTION AND PORTFOLIO MANAGEMENT.
The scope is very limited, because attitude & expectations of the people change
according to the time & situation.
The study is conducted only for 45 days.
Consistency was lacking with regard to the information given by few customers.
The study is restricted to the certain area, so it could not give whole picture about
Madhya pradesh or India.
Risk perception and Portfolio management is a continuous process. It is dynamic activity. The follow
ing are the basic operations of a risk perception and portfolio management:
1. Monitoring the performance of portfolio by incorporating the latest market conditions.
2. Identification of the investors objective, constraints and preferences.
3. Making an evaluation of portfolio income (comparison with target and achievements).
4. Making revision in the portfolio.
5. Implementation of strategies in tune with the investment objectives.
What is 'Portfolio Management'

Portfolio management is the art and science of making decisions about investment mix and
policy, matching investments to objectives, asset allocation for individuals and institutions, and
balancing risk against performance. Portfolio management is all about determining strengths,
weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs.
international, growth vs. safety, and many other trade-offs encountered in the attempt to
maximize return at a given appetite for risk.
1. Security of Principal Investment : Investment safety or minimization of risks is one of the
most important objectives of portfolio management. Portfolio management not only involves
keeping the investment intact but also contributes towards the growth of its purchasing power
over the period. The motive of a financial portfolio management is to ensure that the
investment is absolutely safe. Other factors such as income, growth, etc., are considered only
after the safety of investment is ensured.
2. Consistency of Returns : Portfolio management also ensures to provide the stability of
returns by reinvesting the same earned returns in profitable and good portfolios. The portfolio
helps to yield steady returns. The earned returns should compensate the opportunity cost of
the funds invested.
3. Capital Growth : Portfolio management guarantees the growth of capital by reinvesting in
growth securities or by the purchase of the growth securities. A portfolio shall appreciate in
value, in order to safeguard the investor from any erosion in purchasing power due to inflation
and other economic factors. A portfolio must consist of those investments, which tend to
appreciate in real value after adjusting for inflation.
4. Marketability : Portfolio management ensures the flexibility to the investment portfolio. A
portfolio consists of such investment, which can be marketed and traded. Suppose, if your
portfolio contains too many unlisted or inactive shares, then there would be problems to do
trading like switching from one investment to another. It is always recommended to invest
only in those shares and securities which are listed on major stock exchanges, and also, which
are actively traded.
5. Liquidity : Portfolio management is planned in such a way that it facilitates to take maximum
advantage of various good opportunities upcoming in the market. The portfolio should always
ensure that there are enough funds available at short notice to take care of the investor’s
liquidity requirements.
6. Diversification of Portfolio : Portfolio management is purposely designed to reduce the risk
of loss of capital and/or income by investing in different types of securities available in a wide
range of industries. The investors shall be aware of the fact that there is no such thing as a
zero risk investment. More over relatively low risk investment give correspondingly a lower
return to their financial portfolio.
7. Favorable Tax Status : Portfolio management is planned in such a way to increase the
effective yield an investor gets from his surplus invested funds. By minimizing the tax burden,
yield can be effectively improved. A good portfolio should give a favorable tax shelter to the
investors. The portfolio should be evaluated after considering income tax, capital gains tax,
and other taxes.

The objectives of portfolio management are applicable to all financial portfolios. These
objectives, if considered, results in a proper analytical approach towards the growth of the
portfolio. Furthermore, overall risk needs to be maintained at the acceptable level by developing
a balanced and efficient portfolio. Finally, a good portfolio of growth stocks often satisfies all
objectives of portfolio management.
Technique’s of portfolio management:
As of now the under noted technique of portfolio management: are in vogue in our country
1. equity portfolio: is influenced by internal and external factors the internal factors effect the inner
working of the company’s growth plan’s are analyzed with referenced to Balance sheet, profit & loss a/c
(account) of the company.
Among the external factor are changes in the government policies, Trade cycle’s, Political stability etc.
2. equity stock analysis: under this method the probable future value of a share of a company is
determined it can be done by ratio’s of earning per share of the company and price earning ratio

EPS == PROFIT AFTER TAX

NO: OF EQUITY SHARES

PRICE EARNING RATIO= MARKET PRICE

E.P.S (earning’s per share)

One can estimate trend of earning by EPS, which reflects trends of earning quality of company, dividend policy,
and quality of management.
Price earning ratio indicate a confidence of market about the company future, a high rating is preferable.
.
The following points must be considered by portfolio managers while analyzingthe securities.

1. Nature of the industry and its product: long term trends of industries, competition with in, and out side
the industry, Technical changes, labour relations, sensitivity, to Trade cycle.
2. Industrial analysis of prospective earnings, cash flows, working capital, dividends, etc.
 3. Ratio analysis: Ratio such as debt equity ratio’s current ratio’s net worth, profit earning ratio,
return on investment, are worked out to decide the portfolio.

The wise principle of portfolio management suggests that “Buy when themarket is low orBEARISH, and
sell when the market is risingorBULLISH”.

Stock market operation can be analyzed by:

a) Fundamental approach :- based on intrinsic value of share’s
b) Technical approach:-based on Dowjone’s theory, Random walk theory, etc.

Prices are based upon demand and supply of the market.

i. Traditional approach assumes that

ii. Objectives are maximization of wealth and minimization of risk.
iii. Diversification reduces risk and volatility.
iv. Variable returns, high illiquidity; etc.

Capital Assets pricing approach (CAPM) it pay’s more weight age, to risk or portfolio diversification of
portfolio.

Diversification of portfolio reduces risk but it should be based on certain assessment such as:

Trend analysis of past share prices.

Valuation of intrinsic value of company (trend-marker moves are known for their

Uncertainties they are compared to be high, and low prompts of wave market trends are constituted by
these waves it is a pattern of movement based on past).

The following rules must be studied while cautious portfolio manager before decide to invest their funds in
portfolio’s.

1. Compile the financials of the companies in the immediate past 3 years such as turn over, gross profit, net
profit before tax, compare the profit earning of company with that of the industry average nature of product
manufacture service render and it future demand ,know about the promoters and their back ground, dividend
track record, bonus shares in the past 3 to 5 years ,reflects company’s commitment to share holders the
relevant information can be accessed from the RDC(registrant of companies)published financial results
financed quarters, journals and ledgers.

2. Watch out the high’s and lows of the scripts for the past 2 to 3 years and their timing cyclical scripts
have a tendency to repeat their performance ,this hypothesis can be true of all other financial ,

3. The higher the trading volume higher is liquidity and still higher the chance of speculation, it is futile to
invest in such shares who’s daily movements cannot be kept track, if you want to reap rich returns keep
investment over along horizon and it will offset the wild intra day trading fluctuation’s, the minor movement
of scripts may be ignored, we must remember that share market moves in phases and the span of each phase
is 6 months to 5 years.
 a. Long term of the market should be the guiding factor to enable you to invest and quit. The market
is now bullish and the trend is likely to continue for some more time.

b. UN tradable shares must find a last place in portfolio apart from return; even capital invested is eroded
with no way of exit with no way of exit with inside.

How at all one should avoid such scripts in future?

(1) Never invest on the basis of an insider trader tip in a company which is not sound (insider trader is person
who gives tip for trading in securities based on prices sensitive up price sensitive un published information
relating to such security).

(2) Never invest in the so called promoter quota of lesser known company

(3) Never invest in a company about which you do not have appropriate knowledge.

(4) Never at all invest in a company which doesn’t have a stringent financial record your portfolio should not a
stagnate

(4) Shuffle the portfolio and replace the slow moving sector with active ones , investors were shatter when the
technology , media, software , stops have taken a down slight.

(5) Never fall to the magic of the scripts don’t confine to the blue chip company‘s, look out for other portfolio
that ensure regular dividends.

(6) In the same way never react to sudden raise or fall in stock market index such fluctuation is movementary
minor correction’s in stock market held in consolidation of market their by reading out a weak player often taste
on wait for the dust and dim to settle to make your move” .

LITERATURE REVIEW

Various studies on Investment pattern & Investment behavior of investors had been conducted in foreign
countries. However, in Indian context, the number is quite few. Depending on the various issues of investment,
the review has been discussed in brief as follows:

Charles (1999) has analysed that the astonishing growth in Americans' stock portfolios in the 1990s has been a
major force behind the growth of consumer spending. This article reviews the relationship between stock
market movements and consumption. Using various econometric techniques and specifications, the authors find
that the propensity to consume out of aggregate household wealth has exhibited instability over the postwar
period. They also show that the dynamic response of consumption growth to an unexpected change in wealth is
extremely shortlived, implying that forecasts of consumption growth one or more quarters ahead are not
typically improved by accounting for changes in existing wealth.

Bhardwaj (2003) has stated the literature on globalization, He found the pervasiveness of the west‟s perception
of the world affect on Indian investors that affects the trends in investor‟s choice. They are hugely affected by
the west‟s views and so changes in Indian trends occur.

Ranganathan (2003), has stated the investor behavior from the marketing world and financial economics has
brought together to the surface an exciting area for study and research: behavioral finance. The realization that
this is a serious subject is, however, barely dawning. Analysts seem to treat financial markets as an aggregate of
statistical observations, technical and fundamental analysis. A rich view of research waits this sophisticated
understanding of how financial markets are also affected by the „financial behavior‟ of investors. With the
reforms of industrial policy, public sector, financial sector and the many developments in the Indian money
market and capital market, mutual funds that has become an important portal for the small investors, is also
influenced by their financial behavior. Hence, this study has made an attempt to examine the related aspects of
the fund selection behavior of individual investors towards Mutual funds, in the city of Mumbai. From the
researchers and academicians point of view, such a study will help in developing and expanding knowledge in
this field.

32

Shrotriya (2003) conducted a survey on investor preferences in which he depicted the linkage of investment
with the factor so considered while making investment. He says “There are various factors and their linkage
also. These factors help us how to ensure safety, liquidity, capital appreciation and tax benefits along with
returns.”

Dijk (2007) has conducted 25 years of research on the size effect in international equity returns. Since Banz's
(1981) original study, numerous papers have appeared on the empirical regularity that small firms have higher
risk-adjusted stock returns than large firms. A quarter of a century after its discovery, the outlook for the size
effect seems bleak. Yet, empirical asset pricing models that incorporate a factor portfolio mimicking underlying
economic risks proxied by firm size are increasingly used by both academics and practitioners. Applications
range from event studies and mutual fund performance measurement to computing the cost of equity capital.
The aim of this paper is to review the literature on the size effect and synthesize the extensive debate on the
validity and persistence of the size effect as an empirical phenomenon as well as the theoretical explanations for
the effect. We discuss the implications for academic research and corporate finance and suggest a number of
avenues for further research.

Vasudev (2007) analysed the developments in the capital markets and corporate governance in India since the
early 1990s when the government of India adopted the economic liberalization programme. The legislative
changes significantly altered the theme of Indian Companies Act 1956, which is based on the Companies Act
1948 (UK). The amendments, such as the permission for nonvoting shares and buybacks, carried the statute
away from the earlier “business model” and towards the 'financial model' of the Delaware variety.
Simultaneously, the government established the Securities Exchange Board of India (SEBI), patterned on the
Securities and Exchange Commission of US. Through a number of other policy measures, the government
steered greater investments in the stock market and promoted the stock market as a central institution in the
society. The article points out that the reform effort was inspired, at least in part, by the government‟s reliance
on foreign portfolio inflows into the Indian stock market to fund the country‟s trade and current account deficits.

Johnson (2008) has stated that Product quality is probably under-valued by firms because there is little
consensus about appropriate measures and methods to research quality. The authors suggest that published
ratings of a product's quality are a valid source of quality information with important strategic and financial
impact. The authors test this thesis by an event analysis of abnormal returns to stock prices of firms whose new
products are evaluated in the Wall Street Journal. Quality has a strong immediate effect on abnormal returns,
which is substantially higher than that for other marketing events assessed in prior studies. In dollar terms, these

returns translate into an average gain of $500 million for firms that got good reviews and an average loss of
$200 million for firms that got bad reviews. Moreover, there are some important asymmetries. Rewards to small
firms with good reviews of quality are greater than those to large firms with good reviews. On the other hand,
large firms are penalized more by poor reviews of quality than they are rewarded for good reviews. The authors
discuss the research, managerial, investing, and policy implications.

Patnaik and shah (2008) has analysed on the preferences of foreign and domestic institutional investors in
Indian stock markets. Foreign and domestic institutional investors both prefer larger, widely dispersed firms and
do not chase returns. However, we and evidence of strong differences in the behavior of foreign and domestic
institutional investors.

Bhatnagar (2009) has analysed of Corporate Governance and external finance in transition economies like India.
The problem in the Indian corporate sector is that of disciplining the dominant shareholder and protecting the
minority shareholders. Clearly, the problem of corporate governance abuses by the dominant shareholder can be
solved only by forces outside the company itself particularly that of multilateral financial institutions in the
economic development. India has relied heavily on external finance as their domestic saving rates have been
much lower than their investment rates. The less promising prospects for the global supply of external finance
the need for an increase in the multilateral financial institutions. India being a transition economy is changing
from a centrally planned economy to a free market. It is undergoing economic liberalization, macroeconomic
stabilization where immediate high inflation is brought under control, and restructuring and privatization in
order to create a financial sector and move from public to private ownership of resources. These changes often
may lead to increased inequality of incomes and wealth, dramatic inflation and a fall of GDP.

Mayank (2009) has analysed the role of two important forces - the regulator and the capital market as
determinant of external finance in transition economies analyses the changing pattern and future prospectus of
external finance to India and reviews the role of external finance. Under this framework, the study evaluates
current Indian corporate governance practices in light of external finance.

From the above reviews it can be concluded that many researches had been conducted before relating to the
investment patterns and the few researchers studied the literature only on the basis of returns. Analysts treated
financial markets as an aggregate of statistical observations, technical and fundamental analysis but no
researches had been conducted on Impact of global factors on Indian Economy. This gap had been identified so
that in this respect present study had been conducte.
STRENGTHS WEAKNESS SWOT ANAL
YSIS
 experienced business  taxes
units  Inventory investment
 barriers of market entry should be more.
 domestic market  The working of the sales
 high profitability and force is traditional
revenue
 monetary assistance
provided
 high growth rate

OPPORTNITY THREATS
 income level is at a  growing competition
constant increase and lower
 political stability in profitability
india  Financial capacity
 Increasing
 better governance by
competition in
sebi
security market
RESEARCH METHODOLOGY
Data collection is most essential aspect of any research because the whole result of

research depends on the data and information hence, the methodology adopted by me to

collect the data final interpretation were through.

Research Methodology is a way to systematically solve the research problem. The Research Methodology inclu
des the various methods and techniques for conducting a research. Research is an art of scientific investigation.
In other word research is a scientific and systematic search for pertinent information on a specific topic. The log
ic behind taking research methodology into consideration is that one can have knowledge about the method and
procedure adopted for achievement of objective of the project.

RESEARCH DESIGN:Research design is the conceptual structure within which research is conducted. I
t constitutes the blueprint for collection, measurement and analysis of data was a descriptive research. Descripti
ve research involves collecting numerical through self-reports collected, through questionnaires or interviews (p
erson or phone), or through observation. For present study, the research was descriptive and conclusion oriented
.

SAMPLING DESIGN:
Universe: The Universe is most commonly defined as everything that physically exists: the entirety of space and
time, all forms of matter, energy and momentum, and the physical laws and constants that govern them. All tho
se persons who make investment. Theoretical Universe: It included investors make investment in all over world.
Accessible Universe: It included investors make investment in Indian Stock Market.

Sampling unit– The target population must be defined that has to be sampled. The sampling unit of research
included students and professionals residing in Indore city. .

Sample size – This refers to number of respondents to be selected from the universe to constitute a sample.
The sample size of 100 Investors was taken.

Sampling Technique – Convenience Sampling was used to select the sample. Convenient sampling is a n
on probability sampling technique that attempts to obtain a sample of convenient elements .In case of convenien
ce sampling, the selection of sample depends upon the discretion of the interviewer. In this project, Questionnai
re Method was used for the collecting the data. With the help of this method of collecting data, a sample survey
was conducted.

Tools of Presentation & Analysis:To analyze the data obtained with the help of questionnaire, follow
ing tools wereused.

1. Likert scale:These consist of a number of statements which express either a favourable or unfavourable
attitude towards the given object to which the respondents are asked to react. The respondent responds to in ter
ms of several degrees of satisfaction or dissatisfaction.

2. Percentage, Bar Graphs and Pie Charts:These tools were used for analysis of data.
DATA COLLECTION AND ANALYSIS:
Data Collection Information has been collected from both Primary and Secondary Data.

1. Survey Research:
This kind of research finds favour with almost all the social science researches. It is one of

the most popular methods of investigation, because a study of the attributes and variables

in relation to the population (The entire group of people, inhabitants, items etc…under

study) is easier and is more accurate.

Its suffers from a negligible magnitude of error. Now-a-days sample survey has become

an effective method for research. This is possible with the help of personal interviews

which are backed by questionnaires, direct oral observations. Indirect oral observations

andetc…
2. Primary source of Data:
Meaning: Primary sources of data are the data which needs the personal efforts to collect

it and which are not readily available.

Primary sources of data are the other type of sources through which the data was

collected.

Following are few ways in which the data was collected:

a) Questionnaires: Its set of questions on a sheet of paper was being given to the

respondents of fill it, based on which the data was interpreted.

b) Direct Interviewing: Direct interviewing involved the process where I asked the

questions directly to the investors and got the feedback.

3. Secondary Source of Data:

Secondary sources are the other important sources through which the data were collected.

These are the readily available sources of the data where one had need not put much

effort to collect, because it is already been collected and part in an elderly manner by

some researchers, experts and socialites.

The secondary sources helpful for study were:

Text books like FINANCIAL Management, Research Methodology, RISK PERCEPTION and
PORTFOLIO MANAGEMENT.

Internet was made use for the collection of the data.

Newspapers were also referred.

Business Magazines also referred.

Some journals were also referred.

4. Library Survey:
This was also undertaken for the collection of data. This type of research is based on

books like periodical, journals, documentations, and secondary data etc… which are

available in the library.

DATA ANALYSIS AND INTERPRETATION

PERSONAL PROFILE

(A) Name:

(B) Age: Less than 20 years  20 – 40 years  Great

er than 40 years 

(C) Gender: a) Male  b) Female 

(D) Occupation: a) Service  b) Profession  c) Business  d) Student 

(E) Income: Less than Rs 20000  (per month) Rs 20000 – Rs 40000 

Greater than Rs 40000 

(F) Qualification:

a) Matric  b) Under Graduate  c) Post Graduate 

Q1.State the various investments in your portfolio………?

OPTIONS RESPONSE PERCENTAGE

Shares 46 46%
Stock futures and option 24 24%
Mutual funds 12 12%
Others 18 18%
Total 100 100%
 50%
45%
40%
35%
30%
25% 46%
20%
15% 24%
10% 18% PERCENTAGE
5% 12%
0%

INTERPRETATION
As per the interpretation

 Most of the people interested in shares.

 Due to uncertainty mutual funds suggestion is minimum.

Q2.Category of investment……?

OPTIONS RESPONSE PERCENTAGE

Delivery 38 33%
Intraday 51 55%
Both 11 12%
Total 100 100%
 0%
both
12%

delivery
33%

intraday
55%

INTERPRETATION
As per the interpretation

 Most of the people trade in intraday.

 Minimum no. of people invest in both.

Q3.Type of market operated…?

OPTIONS RESPONSE PERCENTAGE

Primary market 18 27%
Secondary market 54 52%
Both 28 18%
TOTAL 100 100%
 3%

both
18% primary
27%

secondary
52%

INTERPRETATION
As per the interpretation

 Most of the people invest in secondary market.

 Minimum no. odf people invest in both.

Q4.Experience in the market…?

OPTIONS RESPONSE PERCENTAGE

Less than 2 years 20 20%

3-5 years 38 38%
5 years & above 42 42%
TOTAL 100 100%
 45
42
40
38
35

30

25

20 20 PERCENTAGE

15

10

0
less than 2 years 3-5 years 5 years & above

INTERPRETATION
As per the interpretation

 Most of the people are experienced.

 Minimum no. of people are new in market.

Q5. . What is your risk appetite……?

OPTIONS RESPONSE PERCENTAGE

Low 18 18%
Moderate 32 32%
High 50 50%
TOTAL 100 100%
 50

40

30

20 RESPONSE
10 PERCENTAGE/
0 PERCENTAGE/
RESPONSE

INTERPRETATION

 Most of the people ready for take risk.

 Minimum no. of people afraid of take risk.

Q6. How often do you monitor your investment……?

OPTIONS RESPONSE PERCENTAGE

Daily 36 36%
Weekly 14 14%
Monthly 28 28%
Occasionally 22 22%
TOTAL 100 100%
 40

35

30

25

20
RESPONSE
15

10

0
daily weekly monthly occasionally

INTERPRETATION
 Most of the people monitor daily.
 Minimum no. of people monitor their investment weekly.

Q7.What factors youn consider while selecting your stock broker……?

OPTIONS RESPONSE PERCENTAGE

Track record 11 11%

Brand name 29 29%
Services 22 22%
Research team 38 38%
TOTAL 100 100%
 40

30

20
10
0

RESPONSE PERCENTAGE

INTERPRETATION
 Most of the people are considered research team.

 Minimum numbers of people ignores track record.

Q8.Whats your purpose of investment…?

OPTIONS RESPONSE PERCENTAGE

Tax saving 22 22%

Return 48 48%
Both taxes saving & return 30 30%
Total 100 100$
 48
return
48

PERCENTAGE
RESPONSE
22
tax saving
22

0 10 20 30 40 50 60

INTERPRETATION

 Most of the people trade for return.

 Minimum numbers of people not trade for only tax saving.

Q9. State the expected rate of return (ROR) ?

Option Response Percentage
Less than 12% 27 27
12-24% 23 23%
24% &above 50 50%
TOTAL 100 100%
 45% less than 12%
45%
55% 12-24%
55%

INTERPRETATION
 Most of the people expect more than 50% of their investment.

 Minimum no. of people expected average income.

Q10.number of companies in which investment is made…?

OPTIONS RESPONSE PERCENTAGE

Less than 10 15 15%
10-20 65 65%
20 & above 20 20%
Total 100 100%
 80
70
60
50
40
RESPONSE
30
PERCENTAGE
20
10
0
less than 10 20-Oct
RESPONSE 15 65
PERCENTAGE 75 25

INTERPRETATION
 Most of the people invests in more than 10 companies.

 Minimum no. of people invests in less than 10 companies.

FINDINGS

1. Maximum investors are aware of all the investment options.

2. Investors do not invest in a single avenue. They prefer different avenues and maximum investors prefe
r to invest in shares, mutual funds & debentures.

3. Maximum investors wants their investment grow at fast rate.

4. The investment decision of investors is influenced by their own decision and through friends & relative
s.

5. Different factors considered by investors while investing are return, risk, tax benefits, capital appreciat
ion and the most prominent factor is the return on any investment avenue.

6. Majority of investors invest 15-20% of their annual income.

7. Maximum investors invest on monthly basis.

8. The investors investing in different avenues are highly satisfied with the return generated by their inve
stment option.

9. Maximum investors have other investment policies.

10. The most important factor is Return which influenced the decision regarding investment.

LIMITATIONS
This report had to work under several constraints and limitations. Some of the key limitat
ions are.

1. Time period of the project was less, which may not be enough to understand the whole market.

2. Convenient sampling was used as the mode of conducting the research.

3. The sample size taken was small, thisefore it can be said that the chosen sample is not the representative
of the whole population and this hindered quantitative research.

4. The psychology and temperament of a respondent play a significant role. Some respondents are more
sensitive as against Othis who are more tolerant. A change in the composition of the respondents can
affect the answers adversely or favorably.

5. Respondents may not have been true in answering various questions and may be biased to certain othis
questions.
6. Out of the whole research and analysis, only major portion could be highlighted, leaving aside the othis
non-popular area.

7. The questionnaire mostly contained multiple choice questions, thisefore many respondents did not give a
proper thought answering the questions, and some even ticked things, which were not applicable.
Thisefore, all this increased the business.
SUGGESTIONS

Most of the respondents are not aware of Portfolio Management. So,proper guidance can be
given to them. This is to create awareness.
A regular investor friendly seminar can be organized to suit the timings of the investing
public. For instance, Such seminars can be interactive sessions, arranged at frequent intervals.
The newsletters published help investors. Hence newsletters / bulletins can be published for
guidance.
Efforts should be taken to popularize Equity through appropriate publicity measures.

CONCLUSION

 The study is made to find out “Risk perception and portfolio management of equity investors”.
The study reveals 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 as they are not aware these factors.

 Hence proper should to be taken in order to improve the awareness level in the minds of the
investors.

 Don't buy too many different securities. Better have only a few investments that can be watched.
 Study your tax position to known when you sell to greatest advantages.
 Always keep a good part of your capital in a cash reserve. Never invest all your funds.
 Failure to understand Mr. Market: Just because the market has put a price on a business does not mean it
is worth it. Only an individual can determine the value of an investment and then determine if the marke
t price is rational.

 Failure to understand the impact of taxes: Also known as the sorrows of compounding, just as compoun
ding works to the investor's long-term advantage, the burden of taxes because pf excessive trading work
s against building wealth
  Too much focus on the market whether or not an individual investment has merit and value has nothing t
o do with that the overall market is doing ...

BIBLIOGRAPHY

Books :-

Alex Kane: (Mar- 1982) Skewness Preferences and Portfolio Choice, Journal of Financial and Quantitative A
nalysis, Vol 17, No.1.

Asai, M. and M. McAleer (2007), Portfolio index GARCH: a class of parsimonious dynamic covariance mod
els, Unpublished Paper, University of Western Australia.

Bollerslev, T. (1990), modeling the coherence in short-run nominal exchange rates: a multivariate generalize
d ARCH model, Review of Economics and Statistics, 72.

Campbell, J.Y. (1987), Stock returns and the term structure, Journal of Financial Economics, 18, 373-399.

Chen, N.F., R. Roll and S.A. Ross (1986), Economic forces and the stock markets, Journal of Business.

Fama, E.F. and K.R. French (1989), Business conditions and expected returns on stocks and bonds, Journal o
f Financial Economics.

F. Modigliani &M.Miller (1958), the Cost of Capital- Corporation Finance and the Theory of Investment, the
American Economic Review, Vol.6.

Freid.DArditti,(Mar, 1967), Risk and the Required on Equity, Journal of Finance,Vol.22.

Harry Markowitz (1992) Portfolio Selection: Efficient Diversification of Investments, New Haven, Yale Uni
versity Press.

Jorion, P. (2000), Value at Risk: The New Benchmark for Managing Financial Risk, McGraw-Hi
ll, New York.

McAleer, M. (2005), Automated Inference and Learning in Modeling Financial Volatility, Econometric Theo
ry.
 PrasanaChandra (2006) Projects-Planing-Analysis-Seelection-Financing-Implementationand Review, Tata M
cGraw Hill.

Website:-

1.www.google.co.in

2.www.wikipedia.com

3.www.learnfinance.com

4.www.capitalways.com

5.www.gurusoftware.com

6.www.managementparadise.com

WWW.BSEINDIA.COM.

WWW.NSEINDIA.COM.

WWW.MONEYCONTROL.COM.

MAGAZINES

Business Today: Customer value, Satisfaction,Perceptual

ANNEXURE
Q1. State the various investments in your portfolio………?
• shares( )
• stock futures and options( )
• mutual funds( )
• others ( )
Q2.Category of investment…?
Delivery ( ) intraday ( ) both( )
Q3.Type of market operated…?
Primary market ( ) secondary market ( ) both ( )
Q4.Experience in the market……?

 Less than 2 years ( )

 3-5 years ( )

 5 years & above ( )

Q5. Number of companies in which investment is made……?

Less than 10( ) 10-20 ( ) 20 & above ( )

Q6. State the expected rate of return (ROR)….?

Less than 12 % ( ) 12-24 % ( ) 24-36 % ( )
36 % & above ( )
Q7.Whats your purpose of investment….?
Tax saving ( )
Return ( )
Only saving ( )
Both taxes saving & return
Q8.What factors you consider while selecting stock broker…?
Track record ( ) brand name ( ) services ( )
Research team ( )
Q9.How often do you monitor your investment….?
Daily ( )weekly ( ) monthly ( )
occasionally ( )
Q10.What is your risk appetite……?
Low ( ) moderate ( ) high ( )