A STUDY ON INVESTORS PERCEPTION ON STOCK MARKET.

- WITH REFERENCE TO HDFC SECURITIES LTD

Dissertation submitted to ALL INDIA MANAGEMENT ASSCIATION In partial fulfillment of the requirements For the award of the Degree of Post Graduate Diploma In Management.

By

ASHIS KUMAR SARANGI

Reg. No. 800421260 Under the Supervision of Prof.Sai Baba

INSTITUE OF BUSINESS MANAGEMENT AND TECHNOLOGY,

#298,4Th Phase, 100 Feet Ring Road. Basashankari 3rd Stage,Bangalore-85.

A REPORT ON

A STUDY ON INVESTORS PERCEPTION ON STOCK MARKET.

- WITH REFERENCE TO HDFC SECURITIES LTD

By

ASHIS KUMAR SARANGI

A report submitted in partial fulfillment of the requirements of PGDM Program of ALL INDIA MANAGEMENT ASSOCIATIO N.

ACKNOWLEDGEMENT

First of all I would like to thank God Almighty for his blessing for completing this project successfully. I express my deep gratitude to Mr. Swaroop Chatterjee, Corporate Relationship Manager, HDFC Bank Ltd, who provided me with valuable source of inspiration, guidance & advice throughout the course of this Project work. I am also thankful to Prof.Sai Baba, IBMT, for providing me all the facilities for carrying out this project successfully. My sincere thanks are due to Mr. P.S.S Chadaga, Branch In charge and all the staff of HDFC Securities Ltd. for their co-operation & useful suggestion at various stages.

STUDENTS DECLARATION FORM

I hereby declare that the project report entitled A Study On Investors Perception On Stock Market submitted in partial fulfillment for the award of Post Graduate Diploma In Management to All India Management Association, New Delhi, is a record of independent research work carried out by me under guidance of Mr.Swaroop Chaterjee.Corporate Relationship Manager, HDFC Bank. Ltd. I also declare that this project report is a result of my own effort and has not been submitted earlier for the award of any degree/ diploma/prize/fellowship or any other similar discipline.

Place: Bangalore
Date:

(Ashis kumar sarangi)

Reg.No-80421260.

Table of Contents Page No. ABSTRACT 1. INTRODUCTION OBJECIVE RESEARCH METHODOLOGY LIMITATIONS 2. OVERVIEW OF STOCK MARKET INDUSTRY OVERVIEW 2.1 INTRODUCTION MARKET SEGMENTS 5 PRODUCTS & PARTICIPATIONS 8 A PROFILE DEPENDENCE ON SECURITIES MARKET 9 INVESTOR POPULATION 11 PRIMARY MARKET SECONDARY MARKET DERIVATIVES MARKET MARKET DESIGN PRIMARY MARKET 18 SECONDARY MARKET 19 DERIVATIVES MARKET 25 REGULATORY FRAMEWORK 27 .30 51 51 3 3 4 1

2.2

2.2 2.3 2.4 2.5

12 15 17

2.6

25

3. PROFILE OF HDFC SECURITIES LTD 4. MAIN STUDY 5. FINDINGS & RECOMMENDATIONS BIBLIOGRAPHY

LIST OF TABLES Table 1: Market Participants in Securities Market Table 2: Distribution of Beneficial Accounts with NSDL at the end of Oct.2006 Table 3: Secondary Market Selected Indicators Table 4: Growth of Turnover on Stock Exchanges Table 5: Contract Specification for Index & Stock Derivatives at NSE

LIST OF FIGURES Page No. Figure 1. Figure 2. Figure 3. Figure 4. Figure 5. Figure 6. Figure 7. Figure 8. Figure 9. Figure 10. Figure 11. Figure 12. Income Expectations of Investors Expense Expectations of Investors Investment Avenues Trading Preference Trading in Derivatives Approximate Transaction per Day Average Investment Period Stop Loss Appreciation Expected Expected Loss Willingness to Risk Investment Decisions 32 33 34 35 36 37 38 39 40 41 41 42 43 43 44 44 45 46 47

Figure 13.1. Average Cost Figure 13.2. Average Cost in Quantity Figure 14. Figure 15. Figure 16. Figure 17. Figure 18. Subscription to Magazines Value Added Services Satisfaction Rating Service Expectations z- Distribution

ABSTRACT

Indian Stock market has undergone tremendous changes over the years. Investment in Stocks has become a major alternative among Investors. The project has been carried out to understand investors perception about stock market in the context of their trading preference, explore investors risk perception & satisfaction of the services obtained. The methodology used was data collection using Schedule. The target customers were Investors who are trading in the stock market. The area of survey was restricted to people residing in Bangalore. The following Hypothesis was assumed, tested and found holding good. More Than 75% of the customers are satisfied More Than 50% of the customers prefer investment advices 40% of the customers are aware of competitor products

INTRODUCTION

Investment in share markets are based on analysis & reasoning, which help to predict market to some extent. Through the years a number of technical & theories for analysis have evolved, these combined with modern technology guides the investor. The big players in the market, like Foreign Institutional Investors, Mutual Funds, etc. have the expertise for various analytical tools & make use of them. The speculator invests for a short period for instant gains & his investment are based on market sentiments, inside information, through grapevine, tips & intuition. The small investors depend on brokers and brokerage house for his investments. In recent years a large number of players have entered into this market. The level of competition is so high that retaining existing customers or getting new customers by good word of mouth from existing customers is very important. This clearly shows the importance of knowing how satisfied our present customers are. It is with this backdrop that the study is being initiated. We are trying to find out how satisfied the existing customers are and also trying to find out what are the crucial factors that customers look for. This will help in improving methods by which the overall performance can be improved and key indicators of customer dissatisfaction shall be documented and supported by objective information.

OBJECTIVE:
1. 2. 3. 4. of To Study the current STOCK market. To understand the various factors attached to the market. To understand the various risks involved in the market. To meet the prospective investors to know their mode and strategy investment.

5. To create an awareness among the prospective customers about the various opportunities available in HDFC Securities. 6. To clear the doubts of the prospective investors.

RESEARCH METHODOLOGY:
Stage-1: Literature Research. A thorough review of the available literature on STOCK Stage-2: Case Study

Stage-3: Evaluation Of Present Scenario Of Stock Market In India This step will help gather various data and information about stock market in India Thus it will help analyze various risk involved in stock market investment Stage-4: Consolidation And Drawing Inferences Collected data will be analyzed as per the point of question taken up.. Stage-5: Documentation This stage involves writing up the content, the desertion and should cover their chapter proposed in the following section.

LIMITATIONS & SUGGESTIONS:

Limitations in regards with the Sample Selection:

The sample under study is relatively small, limited to field research for 180 Investors in the Stock market & conducted only in Bangalore. The responses are subjected to customer bias. A more extended geographical sample may show greater difference in perceptions. It would be interesting, in further research, to correlate perceptions of services in terms of customer satisfaction, or factor analysis on the various services expected by customers. The Sample size may be extended to include other services also. Limited Time for conducting the study. Respondents were not interested to disclose details.

TEST OF HYPOTHESIS: 1. More Than 75% of the customers are satisfied 2. More Than 50% of the customers prefer investment advices 3. 40% of the customers are aware of competitor products

SECURITIES MARKET IN INDIA OVERVIEW

There were a lot of reforms & other market developments in Securities Market in India Overview during 2000-2001& April-June 2001.The origination of the Indian securities market may be traced back to 1875, when 22 enterprising brokers under a Banyan tree established the Bombay Stock Exchange (BSE). Over the last 125 years, the Indian securities market has evolved continuously to become one of the most dynamic, modern and efficient securities markets in Asia. Today, Indian markets conform to international standards both in terms of structure and in terms of operating efficiency. Securities markets provide a channel for allocation of savings to those who have a productive need for them. As a result, the savers and investors are not constrained by their individual abilities, but by the economys abilities to invest and save respectively, which inevitably enhances savings and investment in the economy. MARKET SEGMENTS The securities market has two interdependent and inseparable segments: the primary and the secondary market. The primary market provides the channel for creation of new securities through issuance of financial instruments by public companies as well as Governments and Government agencies and bodies whereas the secondary market helps the holders of these financial instruments to sale for exiting from the investment. The price signals, which subsume all information about the issuer and his business including associated risk, generated in the secondary market, help the primary market in allocation of funds. The

primary market issuance is done either through public issues or private placement. A public issue does not limit any entity in investing while in private placement; the issuance is done to select people. In terms of the Companies Act, 1956, an issue becomes public if it results in allotment to more than 50 persons. This means an issue resulting in allotment to less than 50 persons is private placement. There are two major types of issuers who issue securities. The corporate entities issue mainly debt and equity instruments (shares, debentures, etc.), while the governments (central and state governments) issue debt securities (dated securities, treasury bills). The secondary market enables participants who hold securities to adjust their holdings in response to changes in their assessment of risk and return. They also sell securities for cash to meet their liquidity needs. The exchanges do not provide facility for spot trades in a strict sense. Closest to spot market is the cash market in exchanges where settlement takes place after some time. Trades taking place over a trading cycle (one day under rolling settlement) are settled together after a certain time. All the 23 stock exchanges in the country provide facilities for trading of corporate securities. Trades executed on NSE only are cleared and settled by a clearing corporation which provides novation and settlement guarantee. Nearly 100% of the trades in STOCK market segment are settled through demat delivery. NSE also provides a formal trading platform for trading of a wide range of debt securities including government securities in both retail and wholesale mode. NSE also provides trading in derivatives of equities, interest rate as well indices. In derivatives market (F&O market segment of NSE), standardized contracts are traded for future settlement. These futures can be on a basket of securities like an index or an individual security. In case of options, securities are traded for conditional future delivery. There are two types of options a put option permits the owner to sell a security to the writer of options at a predetermined price while a call option permits the owner to purchase a security from the writer of the

option at a predetermined price. These options can also be on individual stocks or basket of stocks like index. Two exchanges, namely NSE and the Stock Exchange, Mumbai (BSE) provide trading of derivatives of securities. Today the market participants have the flexibility of choosing from a basket of products like: Equities Bonds issued by both Government and Companies Futures on benchmark indices as well as stocks Options on benchmark indices as well as stocks Futures on interest rate products like Notional 91-day T-Bills, 10year notional zero-coupon bond and 6% notional 10-year bond. The past decade in many ways has been remarkable for securities market in India. It has grown exponentially as measured in terms of amount raised from the market, number of stock exchanges and other intermediaries, the number of listed stocks, market capitalization, trading volumes and turnover on stock exchanges, and investor population. Along with this growth, the profiles of the investors, issuers and intermediaries have changed significantly. The market has witnessed several institutional changes resulting in drastic reduction in transaction costs and significant improvements in efficiency, transparency, liquidity and safety. In a short span of time, Indian derivatives market has got a place in list of top global exchanges. In single stock futures category, the Futures Industry Association (FIA) placed NSE in second position in the year 2000. Reforms in the securities market, particularly the establishment and empowerment of SEBI, market determined allocation of resources, screen based nation-wide trading, dematerialization and electronic transfer of securities, rolling settlement and ban on deferral products, sophisticated risk management and derivatives trading, have greatly improved the regulatory framework and efficiency of trading and settlement. Indian

market is now comparable to many developed markets in terms of a number of qualitative parameters.

PRODUCTS AND PARTICIPANTS Financial markets facilitate the reallocation of savings from savers to entrepreneurs. Savings are linked to investments by a variety of intermediaries through a range of complex financial products called securities which is defined in the Securities Contracts (Regulation) Act, 1956 to include shares, bonds, scrips, stocks or other marketable securities of like nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the central government. It is not that the users and suppliers of funds meet each other and exchange funds for securities. It is difficult to accomplish such double coincidence of wants. The amount of funds supplied by the supplier may not be the amount needed by the user. Similarly, the risk, liquidity and maturity characteristics of the securities issued by the issuer may not match preference of the supplier. In such cases, they incur substantial search costs to find each other. Search costs are minimized by the intermediaries who match and bring the suppliers and users of funds together. These intermediaries may act as agents to match the needs of users and suppliers of funds for a commission, help suppliers and users in creation and sale of securities for a fee or buy the securities issued by users and in turn, sell their own securities to suppliers to book profit. It is, thus, a misnomer that securities market disintermediates by establishing a direct relationship between the savers and the users of funds. The market does not work in a vacuum; it requires services of a large variety of intermediaries. The disintermediation in the securities market is in fact an intermediation with a difference; it is a risk-less intermediation, where the ultimate risks are borne by the savers and not the intermediaries. A large variety and number of intermediaries provide intermediation services in the Indian securities market. The securities market has essentially three categories of participants, namely the issuers of securities, investors in securities and the intermediaries and products include equities, bonds and derivatives. The issuers and investors

are the consumers of services rendered by the intermediaries while the investors are consumers (they subscribe for and trade in securities) of securities issued by issuers. In pursuit of providing a product to meet the needs of each investor and issuer, the intermediaries churn out more and more complicated products. They educate and guide them in their dealings and bring them together. Those who receive funds in exchange for securities and those who receive securities in exchange for funds often need the reassurance that it is safe to do so. This reassurance is provided by the law and by custom, often enforced by the regulator. The regulator develops fair market practices and regulates the conduct of issuers of securities and the intermediaries so as to protect the interests of suppliers of funds. The regulator ensures a high standard of service from intermediaries and supply of quality securities and non-manipulated demand for them in the market.

A PROFILE
The past decade in many ways has been remarkable for securities market in India. It has grown exponentially as measured in terms of amount raised from the market, number of stock exchanges and other intermediaries, the number of listed stocks, market capitalization, trading volumes and turnover on stock exchanges, and investor population. Along with this growth, the profiles of the investors, issuers and intermediaries have changed significantly. The market has witnessed fundamental institutional changes resulting in drastic reduction in transaction costs and significant improvements in efficiency, transparency and safety. DEPENDENCE ON SECURITIES MARKET Three main sets of entities depend on securities market. While the corporate and governments raise resources from the securities market to meet their obligations, the households invest their savings in the securities.

Corporate Sector: The 1990s witnessed emergence of the securities market as a major source of finance for trade and industry. A growing number of companies are accessing the securities market rather than depending on loans from FI's/banks. The corporate sector is increasingly depending on external sources for meeting its funding requirements. There appears to be growing preference for direct financing (equity and debt) to indirect financing (bank loan) within the external sources. According to CMIE data, the share of capital market based instruments in resources raised externally increased to 53% in 1993-94, but declined thereafter to 33% by 1999-00 and further to 21% in 2001-02. In the sector-wise shareholding pattern of companies listed on NSE, it is observed that on an average the promoters hold more than 55% of total shares. Though the nonpromoter holding is about 44%, Indian public held only 17% and the public float (holding by FIIs, MFs, Indian public) is at best 25%. There is not much difference in the shareholding pattern of companies in different sectors. Strangely, 63% of shares in companies in media and entertainment sector are held by private corporate bodies though the requirement of public offer was relaxed to 10% for them. The promoter holding is not strikingly high in respect of companies in the IT and telecom sectors where similar relaxation was granted. Governments: Along with increase in fiscal deficits of the governments, the dependence on market borrowings to finance fiscal deficits has increased over the years. During the year 1990-91, the state governments and the central government financed nearly 14% and 18% respectively of their fiscal deficit by market borrowing. In percentage terms, dependence of the state governments on market borrowing did not increase much during the decade 1991-2001. In case of central government, it increased to 77.6% by 2002-03. Households: According to RBI data, household sector accounted for 82.4% of gross domestic savings during 2001-02. They invested 38% of financial savings

in deposits, 33% in insurance/provident funds, 11% on small savings, and 8% in securities, including government securities and units of mutual funds during 200102. Thus the fixed income bearing instruments are the most preferred assets of the household sector. Their share in total financial savings of the household sector witnessed an increasing trend in the recent past and is estimated at 82.4% in 2001- 02. In contrast, the share of financial savings of the household sector in securities (shares, debentures, public sector bonds and units of UTI and other mutual funds and government securities) is estimated to have gone down from 22.9% in 1991-92 to 4.3% in 2000-01, which increased to 8% in 2001-02. Though there was a major shift in the saving pattern of the household sector from physical assets to financial assets and within financial assets, from bank deposits to securities, the trend got reversed in the recent past due to high real interest rates, prolonged subdued conditions in the secondary market, lack of confidence by the issuers in the success of issue process as well as of investors in the credibility of the issuers and the systems and poor performance of mutual funds. The portfolio of household sector remains heavily weighted in favor of physical assets and fixed income bearing instruments.

INVESTOR POPULATION The Society for Capital Market Research and Development carries out periodical surveys of household investors to estimate the number of investors. Their first survey carried out in 1990 placed the total number of shareowners at 90-100 lakh. Their second survey estimated the number of shareowners at around 140-150 lakh as of mid-1993. Their latest survey estimates the number of shareowners at around 2 crore at 1997 end, after which it remained stagnant up to the end of 1990s. The bulk of increase in number of investors took place during 1991-94 and tapered off thereafter. 49% of the shareowners at the end of 2000 had, for the first time, entered the market before the end of 1990, 44% entered during 1991-

94, 6.3% during 1995-96 and 0.8% since 1997. The survey attributes such tapering off to persistent depression in the share market and investors bad experience with many unscrupulous company promoters and managements. Distribution of Investors: The Society for Capital Market Research & Development estimates that 15% of urban households and only 0.5-1.0% of semiurban and rural households own shares. It is estimated that 4% of all households own shares. Table 2 An indirect, but very authentic source of information about distribution of investors is the database of beneficial accounts with the depositories. By February 2003, there were 3 million beneficial accounts with the National Securities Depository Limited (NSDL). The state-wise distribution of beneficial accounts with NSDL is presented in Table 5.2. As expected Maharashtra and Gujarat account for nearly 45% of total beneficial accounts.

PRIMARY MARKET
A total of Rs. 2,520,179 million were raised by the government and corporate sector during 2002-03 as against Rs. 2,269,110 million during the preceding year. Government raised about two third of the total resources, with central government alone raising nearly Rs. 1,511,260 million. CORPORATE SECURITIES Average annual capital mobilization from the primary market, which used to be about Rs.70 crore in the 1960s and about Rs.90 crore in the 1970s, increased manifold during the 1980s, with the amount raised in 1990-91 being Rs. 4,312 crore. It received a further boost during the 1990s with the capital raised by non-government public companies rising sharply to Rs. 26,417 crore in 1994-95. The capital raised which used to be less than 1% of gross domestic saving (GDS) in the 1970s increased to about 13% in 1992-93. In real terms, the

capital raised increased 4 times between 1990-91 and 1994-95. During 1994-95, the amount raised through new issues of securities from the securities market accounted for about four-fifth of the disbursements by FIs. Issuers have shifted focus to other avenues for raising resources like private placement. There is a preference for raising resources in the primary market through private placement of debt instruments. Private placements accounted for about 93% of total resources mobilized through domestic issues by the corporate sector during 2002-03. Rapid dismantling of shackles on institutional investments and deregulation of the economy are driving growth of this segment. There are several inherent advantages of relying on private placement route for raising resources. While it is cost and time effective method of raising funds and can be structured to meet the needs of the entrepreneurs, it does not require detailed compliance with formalities as required in public or rights issues. It is believed in some circles that private placement has crowded out public issues. However, to prevent public issues from being passed on as private placement, the Companies (Amendment) Act, 2001 considers offer of securities to more than 50 persons as made to public. Indian market is getting integrated with the global market though in a limited way through euro issues. Since 1992, when they were permitted access, Indian companies have raised about Rs. 34,264 million through ADRs/GDRs. By the end of March 2003, 502 FIIs were registered with SEBI. They had net cumulative investments over of US $ 15.8 billion by the end of March 2003. Their operations influence the market as they do delivery-based business and their knowledge of market is considered superior. The market is getting institutionalized, as people prefer mutual funds as their investment vehicle, thanks to evolution of a regulatory framework for mutual funds, tax concessions offered by government and preference of investors for passive investing. The net collections by MFs picked up during this decade and increased to Rs. 199,530 million during 1999-00. This declined to Rs. 111,350 million during 2000-01 which may be attributed to increase in rate of tax on

income distributed by debt oriented mutual funds and lackluster secondary market. The total collection of mutual funds for 2002-03 has been Rs. 105,378 million. Starting with an asset base of Rs. 250 million in 1964, the total assets under management at the end of March 2003 was Rs. 794,640 million. The number of households owning units of MFs exceeds the number of households owning equity and debentures. At the end of financial year March 2003, according to a SEBI press release 23 million unit holders had invested in units of MFs, while 16 million individual investors invested in equity and or debentures.

GOVERNMENT SECURITIES The primary issues of the Central Government have increased many-fold during The decade of 1990s from Rs. 89,890 million in 1990-91 to Rs. 1,511,260 million in 2002-03. The issues by state governments increased by about twelve times from Rs. 25,690 million to Rs. 308,530 million during the same period. The Central Government mobilized Rs. 1,250,000 million through issue of dated securities and Rs. 261,260 million through issue of T-bills. After meeting repayment liabilities of Rs. 274,200 million for dated securities, and redemption of T-bills of Rs. 195,880 million, net market borrowing of Central Government amounted to Rs. 1,041,180 million for the year 2002-03. The state governments collectively raised Rs. 305,830 Million during 2002-03 as against Rs. 187,070 million in the preceding year. The net Borrowings of State Governments in 2002-03 amounted to Rs. 290,640 million.Along with growth of the market, the investor base has become very wide. In addition to banks and insurance companies, corporates and

individual investors are investing in government securities. With dismantling of control regime, and gradual lowering of the SLR and CRR, Government is borrowing at nearmarket rates. The coupons across maturities went down recently signifying lower interest rates. The weighted average cost of its borrowing at one stage increased to 13.75% in 1995-96, which declined to 7.34% in 2002-03. The maturity structure of government debt is also changing. In view of bunching of redemption liabilities in the medium term, securities with higher maturities were issued during 2002-03. About 64% of primary issues were raised through securities with maturities above 5 years and up to 10 years. As a result the weighted average maturity of dated securities increased to 13.83 years from 6.6 years in 1997-98.

SECONDARY MARKET
CORPORATE SECURITIES Selected indicators in the secondary market are presented in Table 5.3. The number of stock exchanges increased from 11 in 1990 to 23 now. All the exchanges are fully computerized and offer 100% on-line trading. 9,413 companies were available for trading on stock exchanges at the end of March 2003. The trading platform of the stock exchanges was accessible to 9,519 members from over 358 cities on the same date. The market capitalisation grew ten fold between 1990-91 and 1999-00. It increased by 221% during 1991-92 and by 107% during 1999-00. All India market capitalisation is estimated at Rs. 6,319,212 million at the end of March 2003. The market capitalisation ratio, which indicates the size of the market, increased sharply to 57.4% in 1991-92 following spurt in share prices. The ratio further increased to 85% by March 2000. It, however, declined to 55% at the end of March 2001 and to 29% by end March 2003. The trading volumes on exchanges have been witnessing phenomenal growth during the 1990s. The average daily turnover grew from about Rs.1500 million in 1990 to Rs. 120,000 million in 2000, peaking at over Rs. 200,000 million. One-sided turnover on all stock exchanges exceeded Rs. 10,000,000 million during 1998-99,Rs. 20,000,000 million during 1999-00 and approached Rs. 30,000,000 millionduring 2000-01. However, the trading volume substantially depleted to Rs.9,689,541 million in 2002-03. The turnover ratio, which reflects the volume of trading in relation to the size of the market, has been increasing by leaps and bounds after the advent of screen based trading system by the NSE. The turnover ratio for the year 2002-03 increased to 375 but fell substantially due to bad market conditions to 119 during 2001-02 regaining its position accounted 153.3% in 2002-03.

The relative importance of various stock exchanges in the market has undergone dramatic change during this decade. The increase in turnover took place mostly at the large big exchanges and it was partly at the cost of small exchanges that failed to keep pace with the changes. NSE is the market leader with more 85% of total turnover (volumes on all segments) in 2002-03. Top 5 stock exchanges accounted for 99.88% of turnover, while the rest 18 exchange for less than 0.12% during 2002-03. About ten exchanges reported nil turnover during the year. Table 3: Secondary Market Selected Indicators GOVERNMENT SECURITIES The trading volumes in government securities exceeded the combined trading volumes in equity segments of all the exchanges in the country during 2002-03. The aggregate turnover in central and state government dated securities, including T bills, through SGL transactions increased by manifold between 1994-95 and 2002-03. During 2002-03 it reached a level of Rs. 19,557,313 million, recording about 24.3% growth over Rs.15, 738,930 million in the previous year. Such growing turnover reflects further deepening of the market. The bulk of transactions during 2000-02 were on outright basis. The share of outright transactions in government securities increased from 23.2% in 1995-96 to 71.2% in 2002-03. The share of repo transactions declined correspondingly from 76.8% in 1995-96 to 29% in 2002-03. The share of WDM segment of NSE in total turnover for government securities decreased marginally from 58.9% in 2000-01 to 52% in 2002-03. As compared to the increase in overall turnover of government securities by 24%, the same on WDM grew by 11% during 2002-03. Share of WDM in transactions of dated securities decreased from 61.1% in 2001-02 to 55.6% in 2002-03. Its share in transactions of T-bills decreased from 27.4% in 2001-02 to 21.5% in 2002-03. Government debt, which constitutes about three-fourth of the total outstanding debt, has the highest level of liquidity amongst the fixed income

instruments in the secondary market. The share of dated securities in total turnover of government securities has been increasing over the years. Two-way quotes are available for the active gilt securities from the primary dealers. Though many trades in the gilts take place through telephone, a larger chunk of trades get routed through NSE brokers.

DERIVATIVES MARKET
Trading in derivatives of securities commenced in June 2000 with the enactment of enabling legislation in early 2000. Derivatives are formally defined to include: (a) a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security, and (b) a contract which derives its value from the prices, or index of prices, or underlying securities. Derivatives are legal and valid only if such contracts are traded on a recognised stock exchange, thus precluding OTC derivatives. Derivatives trading commenced in India in June 2000 after SEBI granted the approval to this effect in May 2000. SEBI permitted the derivative segment of two stock exchanges, i.e. NSE and BSE, and their clearing house/corporation to commence trading and settlement in approved derivative contracts. To begin with, SEBI approved trading in index futures contracts based on S&P CNX Nifty Index and BSE-30 (Sensex) Index. This was followed by approval for trading in options based on these two indices and options on individual securities. The trading in index options commenced in June 2001 and trading in options on individual securities would commence in July 2001 while trading in futures of individual stocks started from November 2001. In June 2003, SEBI/RBI approved the trading on interest rate derivative instruments. The total exchange traded derivatives witnessed a volume of Rs.4, 423,333 Million during 2002-03 as against Rs. 1,038,480 million during the preceding year. While

NSE accounted for about 99.5% of total turnover, BSE accounted for less than 1% in 2002-03. The market witnessed higher volumes from June 2001 with introduction of index options, and still higher volumes with the introduction of stock options in July 2001. There was a spurt in volumes in November 2001 when stock futures were introduced. It is believed that India is the largest market in the world for stock futures.

MARKET DESIGN
PRIMARY MARKET 1. Corporate Securities: The Disclosure and Investor Protection (DIP) guidelines prescribe a substantial body of requirements for issuers/intermediaries, the broad intention being to ensure that all concerned observe high standards of integrity and fair dealing, comply with all the requirements with due skill, diligence and care, and disclose the truth, whole truth and nothing but truth. The guidelines aim to secure fuller disclosure of relevant information about the issuer and the nature of the securities to be issued so that investors can take informed decisions. For example, issuers are required to disclose any material risk factors and give justification for pricing in their prospectus. An unlisted company can access the market up to 5 times its pre-issue networth only if it has track record of distributable profits and net worth of Rs. 1 crore in 3 out of last five years. A listed company can access up to 5 times of its pre-issue networth. In case a company does not have track record or wishes to raise beyond 5 times of its pre-issue networth, it can access the market only through book building with minimum offer of 60% to qualified institutional buyers. Infrastructure companies are exempt from the requirement of eligibility norms if their project has been appraised by a public financial institution and not less than 5% of the project cost is financed by any of the institutions, jointly or severally, by way of loan and/or subscription to equity. The debt instruments of maturities more than 18 months require credit rating. If the issue size exceeds Rs. 100 crore, two ratings from different agencies are required. Thus the quality of the issue is demonstrated by track record/appraisal by approved financial institutions/credit rating/subscription by QIBs. The lead merchant banker discharges most of the pre-issue and post-issue obligations. He satisfies himself about all aspects of offering and adequacy of disclosures in the offer document. He issues a due diligence certificate stating that he has examined the prospectus, he finds it in order and that it brings out all the facts and does not contain anything wrong or misleading. He also takes care of allotment, refund and despatch of certificates. The admission to a depository for

dematerialisation of securities is a prerequisite for making a public or rights issue or an offer for sale. The investors, however, have the option of subscribing to securities in either physical form or dematerialised form. All new IPOs are compulsorily traded in dematerialised form. Every public listed company making IPO of any security for Rs. 10 crore or more is required to do so only in dematerialised form. 2. Government Securities: The government securities market has witnessed significant transformation in the 1990s. With giving up of the responsibility of allocating resources from securities market, government stopped expropriating seigniorage and started borrowing at near - market rates. Government securities are now sold at market related coupon rates through a system of auctions instead of earlier practice of issue of securities at very low rates just to reduce the cost of borrowing of the government. Major reforms initiated in the primary market for government securities include auction system (uniform price and multiple price method) for primary issuance of T-bills and central government dated securities, a system of primary dealers and non-competitive bids to widen investor base and promote retail participation, issuance of securities across maturities to develop a yield curve from short to long end and provide benchmarks for rest of the debt market, innovative instruments like, zero coupon bonds, floating rate bonds, bonds with embedded derivatives, availability of full range ( 91-day and 382-day) of T-bills, etc.

SECONDARY MARKET
(a) Corporate Securities: The stock exchanges are the exclusive centres for trading of securities. Though the area of operation/jurisdiction of an exchange is specified at the time of its recognition, they have been allowed recently to set up trading terminals anywhere in the country. The three newly set up exchanges (OTCEI, NSE and ICSE) were permitted since their inception to have nation wide trading.

The trading platforms of a few exchanges are now accessible from many locations. Further, with extensive use of information technology, the trading platforms of a few exchanges are also accessible from anywhere through the Internet and mobile devices. This made a huge difference in a geographically vast country like India. (b) Exchange Management: Most of the stock exchanges in the country are organised as mutuals which was considered beneficial in terms of tax benefits and matters of compliance. The trading members, who provide brokering services, also own, control and manage the exchanges. This is not an effective model for selfregulatory organisations as the regulatory and public interest of the exchange conflicts with private interests. Efforts are on to demutualise the exchanges whereby ownership, management and trading membership would be segregated from one another. Two exchanges viz. OTCEI and NSE are demutualised from inception, where ownership, management and trading are in the hands of three different sets of people. This model eliminates conflict of interest and helps the exchange to pursue market efficiency and investor interest aggressively. (c) Membership: The trading platform of an exchange is accessible only to brokers. The broker enters into trades in exchanges either on his own account or on behalf of clients. No stock broker or sub-broker is allowed to buy, sell or deal in securities, unless he or she holds a certificate of registration granted by SEBI. A broker/sub-broker complies with the code of conduct prescribed by SEBI. Over time, a number of brokers - proprietor firms and partnership firms have converted themselves into corporates. The standards for admission of members stress on factors, such as corporate structure, capital adequacy, track record, education, experience, etc. and reflect a conscious endeavour to ensure quality broking services.

(d) Listing: A company seeking listing satisfies the exchange that at least 10% of the securities, subject to a minimum of 20 lakh securities, were offered to public for subscription, and the size of the net offer to the public (i.e. the offer price multiplied by the number of securities offered to the public, excluding reservations, firm allotment and promoters contribution) was not less than Rs.100 crore, and the issue is made only through book building method with allocation of 60% of the issue size to the qualified institutional buyers. In the alternative, it is required to offer at least 25% of the securities to public. The company is also required to maintain the minimum level of non-promoter holding on a continuous basis. In order to provide an opportunity to investors to invest/trade in the securities of local companies, it is mandatory for the companies, wishing to list their securities, to list on the regional stock exchange nearest to their registered office. If they so wish, they can seek listing on other exchanges as well. Monopoly of the exchanges within their allocated area, regional aspirations of the people and mandatory listing on the regional stock exchange resulted in multiplicity of exchanges. The basic norms for listing of securities on the stock exchanges are uniform for all the exchanges. These norms are specified in the listing agreement entered into between the company and the concerned exchange. The listing agreement prescribes a number of requirements to be continuously complied with by the issuers for continued listing and such compliance is monitored by the exchanges. It also stipulates the disclosures to be made by the companies and the corporate governance practices to be followed by them. SEBI has been issuing guidelines/circulars prescribing certain norms to be included in the listing agreement and to be complied with by the companies. A listed security is available for trading on the exchange. The stock exchanges levy listing fees - initial fees and annual fees - from the listed

companies. It is a major source of income for many exchanges. A security listed on other exchanges is also permitted for trading. A listed company can voluntary delist its securities from non-regional stock exchanges after providing an exit opportunity to holders of securities in the region where the concerned exchange is located. An exchange can, however, delist the securities compulsorily following a very stringent procedure. (e) Trading Mechanism: The exchanges provide an on-line fully-automated screen based trading system (SBTS) where a member can punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching order from a counter party. SBTS electronically matches orders on a strict price/time priority and hence cuts down on time, cost and risk of error, as well as on fraud resulting in improved operational efficiency. It allows faster incorporation of price sensitive information into prevailing prices, thus increasing the informational efficiency of markets. It enables market participants to see the full market on real-time, making the market transparent. It allows a large number of participants, irrespective of their geographical locations, to trade with one another simultaneously, improving the depth and liquidity of the market. It provides full anonymity by accepting orders, big or small, from members without revealing their identity, thus providing equal access to everybody. It also provides a perfect audit trail, which helps to resolve disputes by logging in the trade execution process in entirety. (f) Trading Rules: Regulations have been framed to prevent insider trading as well as unfair trade practices. The acquisitions and takeovers are permitted in a well defined and orderly manner. The companies are permitted to buy back their securities to improve liquidity and enhance the shareholders wealth.

(g) Price Bands: Stock market volatility is generally a cause of concern for both policy makers as well as investors. To curb excessive volatility, SEBI has prescribed a system of price bands. The price bands or circuit breakers bring about a coordinated trading halt in all equity and equity derivatives markets nation-wide. An index-based market-wide circuit breaker system at three stages of the index movement either way at 10%, 15% and 20% has been prescribed. The movement of either S&P CNX Nifty or Sensex, whichever is breached earlier, triggers the breakers. As an additional measure of safety, individual scrip-wise price bands of 20% either way have been imposed for all securities except those available for stock options. (h) Demat Trading: The Depositories Act, 1996 was passed to proved for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed, accuracy and security by (a) making securities of public limited companies freely transferable subject to certain exceptions; (b) dematerialising the securities in the depository mode; and (c) providing for maintenance of ownership records in a book entry form. In order to streamline both the stages of settlement process, the Act envisages transfer of ownership of securities electronically by book entry without making the securities move from person to person. Two depositories, viz. NSDL and CDSL, have come up to provide instantaneous electronic transfer of securities. At the end of March 2002, 4,172 and 4,284 companies were connected to NSDL and CDSL respectively. The number of dematerialised securities increased to 56.5 billion at the end of March 2002. As on the same date, the value of dematerialsied securities was Rs. 4,669 billion and the number of investor accounts was 4,605,588. All actively traded scrips are held, traded and settled in demat form. Demat settlement accounts for over 99% of turnover settled by delivery. This has almost eliminated the bad deliveries and associated problems. To prevent physical certificates from sneaking into circulation, it has been mandatory for all new IPOs to be compulsorily traded in dematerialised form. The admission to a depository for dematerialisation of securities has been made a prerequisite for

making a public or rights issue or an offer for sale. It has also been made compulsory for public listed companies making IPO of any security for Rs. 10 crore or more to do the same only in dematerialised form. (i) Charges: A stock broker is required to pay a registration fee of Rs.5, 000 every financial year, if his annual turnover does not exceed Rs. 1 crore. If the turnover exceeds Rs. 1 crore during any financial year, he has to pay Rs. 5,000 plus onehundredth of 1% of the turnover in excess of Rs.1 crore. After the expiry of five years from the date of initial registration as a broker, he has to pay Rs. 5,000 for a block of five financial years. Besides, the exchanges collect transaction charges from its trading members. NSE levies Rs. 4 per lakh of turnover. The maximum brokerage a trading member can levy in respect of securities transactions is 2.5% of the contract price, exclusive of statutory levies like SEBI turnover fee, service tax and stamp duty. However, brokerage charges as low as 0.15% are also observed in the market. (j) Trading Cycle: Rolling settlement on T+3 basis gave way to T+2 from April 2003. The market has moved close to spot/cash market. (k) Risk Management: To pre-empt market failures and protect investors, the regulator/exchanges have developed a comprehensive risk management system, which is constantly monitored and upgraded. It encompasses capital adequacy of members, adequate margin requirements, limits on exposure and turnover, indemnity insurance, on-line position monitoring and automatic disablement, etc. They also administer an efficient market surveillance system to curb excessive volatility, detect and prevent price manipulations. Exchanges have set up trade/settlement guarantee funds for meeting shortages arising out of nonfulfillment/ partial fulfillment of funds obligations by the members in a settlement. A clearing corporation assures the counterparty risk of each member and guarantees financial settlement in respect of trades executed on NSE.

(l) Government Securities: The reforms in the secondary market include Delivery versus Payment system for settling scripless SGL transactions to reduce settlement risks, SGL Account II with RBI to enable financial intermediaries to open custody (Constituent SGL) accounts and facilitate retail transactions in scripless mode, enforcement of a trade-for-trade regime, settlement period of T+0 or T+1 for all transactions undertaken directly between SGL participants and up to T+5 days for transactions routed through NSE brokers, routing transactions through brokers of NSE, OTCEI and BSE, repos in all government securities with settlement through SGL, liquidity support to PDs to enable them to support primary market and undertake market making, special fund facility for security settlement, etc. As part of the ongoing efforts to build debt market infrastructure, two new systems, the Negotiated Dealing System (NDS) and the Clearing Corporation of India Limited (CCIL) commenced operations on February 15, 2002. NDS, inter-alia, facilitates screen based negotiated dealing for secondary market transactions in government securities and money market instruments, online reporting of transactions in the instruments available on the NDS and dissemination of trade information to the market. Government Securities (including T-bills), call money, notice/term money, repos in eligible securities, Commercial Papers and Certificate of Deposits are available for negotiated dealing through NDS among the members. The CCIL facilitates settlement of transactions in government securities (both outright and repo) on Delivery versus Payment (DvP-II) basis which provides for settlement of securities on gross basis and settlement of funds on net basis simultaneously. It acts as a central counterparty for clearing and settlement of government securities transactions done on NDS. DERIVATIVES MARKET The trading in index futures commenced in June 2000, index options in June 2001, stock options in July 2001 and stock futures in November 2001. The market design for these products traded on NSE is presented in Table 5. Trading

in interest rate derivatives commenced June 2003. Interest Rate Futures Contracts are contracts based on the list of underlying as may be specified by the Exchange and approved by SEBI from time to time. Interest rate futures contracts are available on Notional T- bills , Notional 10 year zero coupon bond and Notional 10 year coupon bearing bond stipulated by the Securities & Exchange Board of India (SEBI). The market design of these products traded on NSE is presented in Table 6.

Regulatory Framework
The four main legislations governing the securities market are: (a) the SEBI Act, 1992 which establishes SEBI to protect investors and develop and regulate securities market; (b) the Companies Act, 1956, which sets out the code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues; (c) the Securities Contracts (Regulation) Act, 1956, which provides for regulation of transactions in securities through control over stock exchanges; and (d) the Depositories Act, 1996 which provides for electronic maintenance and transfer of ownership of demat securities. Government has framed rules under the SCRA, SEBI Act and the Depositories Act. SEBI has framed regulations under the SEBI Act and the Depositories Act for registration and regulation of all market intermediaries, and for prevention of unfair trade practices, insider trading, etc. Under these Acts, Government and SEBI issue notifications, guidelines, and circulars which need to be complied with by market participants. The SROs like stock exchanges have also laid down their rules of game. The responsibility for regulating the securities market is shared by Department of Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India (RBI) and SEBI. The activities of these agencies are coordinated by the High Level Committee on STOCK Markets. Most of the powers under the SCRA are exercisable by DEA while a few others by SEBI. The powers

of the DEA under the SCRA are also con-currently exercised by SEBI. The powers in respect of the contracts for sale and purchase of securities, gold related securities, money market securities and securities derived from these securities and ready forward contracts in debt securities are exercised concurrently by RBI. The SEBI Act and the Depositories Act are mostly administered by SEBI. The rules and regulations under the securities laws are administered by SEBI. The powers under the Companies Act relating to issue and transfer of securities and non-payment of dividend are administered by SEBI in case of listed public companies and public companies proposing to get their securities listed. The SROs ensure compliance with their own rules as well as with the rules.

PROFILE OF HDFC SECURITIES LTD

THE ORGANIZATION

HDFC Securities, a trusted financial service provider promoted by HDFC Bank and JP Morgan Partners and their associates, is a leading stock broking company in the country, serving a diverse customer base of institutional and retail investors. . HDFCsec.com provides investors a robust platform to trade in Equities in NSE and BSE , and derivatives in NSE. Our website will support you with the highest standards of service, convenience and hassle-free trading tools. Our research team tracks the economy, industries and companies to provide you the latest information and analysis. Our content offers financial information, analysis, investment guidance, news & views, and is designed to meet the requirements of everyone from a beginner to a savvy and well-informed trader. HDFC Securities is famous for the followings : Speed : Our state-of-the art technology enables to instantly trade on the BSE and NSE. Convenience : You can trade with us online or on the phone from the convenience of your home or office. Use the 3-in-1 Advantage account to seamlessly move funds and securities across your bank, demat and trading account. This way, you do not have to issue cheques or delivery instructions. Transparency : With our trusted pedigree, you can be assured that you get the best services in a transparent manner. By broking with us, you are in total control of your funds and stocks. Expertise : Our Group has decades of experience in providing financial services to customers in a transparent and trusted manner. We have a dedicated, motivated and experienced team of professionals to provide you top class service. Timely and Relevant Information : We realise the importance of making information available to you as it happens. Empowered with the latest news, developments and research, you will be able to take informed decisions. Your Interest : For us, your interest comes first. We endeavor to provide high quality investment services, in a simple, direct and cost-effective way to help you achieve your financial goals.

Our Offerings Online trading for Resident & NRIs. Cash-n-Carry on both NSE and BSE by taking delivery of shares. Day trading, on both NSE and BSE, wherein all the positions are compulsorily squared up on the same trading day. Trade Futures & Options on the NSE. Online IPOs. Telephone - based trading for both Equities, Derivatives and IPOs.

GROUP

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail

mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

MAIN STUDY
The Study was undertaken to understand the Investor perception about Stock Market, in the context of satisfaction derived by existing customers and to

find out what are the crucial factors that customers look for from the Service providers. Reforms in the Security Market, particularly the establishment & empowerment of SEBI, market determinant allocation of resources, screen based nation-wide trading, dematerialization, electronic transfer of securities, rolling settlement, sophisticated risk management & derivative trading have improved the regulatory framework & efficiency of trading and settlement. Indian stock market is now comparable with any developed market in terms of number of qualitative parameters. There are around 30 Lakhs beneficiary accounts with the National Stock depositary in India. In this context, the study was conducted to know about the perception of investors in the Stock Market. The reduction in the interest rates in small savings, Fixed Deposits, sluggish trend in the real estate market etc. may raise the stock market as an alternative for investments. Research Methodology: Schedule was used for data collection. The sample was selected by Simple Random Sampling. Respondents belong to various demographic parameters as Occupation, Sex etc. Schedule Preparation: Schedule was prepared keeping in mind the expectations & purpose of investments in the Stock Market. Investors were interviewed at various stock brokers premises in and around Bangalore.

The Schedule consisted of the following aspects: Investment Presently Held :

(Stocks/Bonds/Options/Mutual funds/Bullions/Bank Deposits) Trading Preference : Speculation/Investment/Both Average Investment Period Appreciation & Loss Expected Risk willingness Investment Decisions Rating of Service Satisfaction received from Current Broker Sources of Data Collection Primary Data was collected through survey among the investors. The procedure adopted to select sample was simple random sampling. Research Design The research design is analytical in nature. The investors profile was based on the results of the schedule that the Investor completes. The Sample consists of 180 investors from various brokers premises. The following are the premises were interviews was conducted; HDFC Securities Vertex Securities Peninsular Stock Holding JRG Select Group India Bulls India Info line UTI Securities IL & FS Motilal Securities Emkay Securities Cochin Stock Exchange Geojit & Others

The data was analyzed using Hypothesis testing. Hypothesis Assumed:

More Than 75% of the customers are satisfied More Than 50% of the customers prefer investment advices 40% of the customers are aware of competitor products

The responses was collected, coded & tabulated using MS-Excel and the respective options were summed. The identifications of various aspects of the investors are as below;

Expectations of Annual Income & Expense over next 3 to 5 Years: A view of the present income & expense level to their projections determines the amount of investment. The various aspects to be considered are, Percentage of his income to be invested in share market Quality & Return of Investments Profitability Growth of Capital & Earnings

Income
100 90 80 70 60 50 40 30 20 10 0 Increase, 87.01%

% of Resondents

Decrease, 1.94% 1 2

Remain Same, 11.03%

Figure 1. Income Expectations of Investors Annual Income: Respondents % Increase Decrease Remain Same 87.01 1.94 11.03 Average Change % 54.13 28.33

Annual Expense:

Expenses
100 90 80 70 60 50 40 30 20 10 0 Increase, 86.2%

% of Respondents

Decrease, 4.13% 1 2

Remain Same, 9.65%

Figure 2. Expense Expectations of Investors Respondents % Increase Decrease Remain Same 86.2 4.13 9.65 Average Change % 34.19 7

Investment Avenues:

Investment Avenues
BankDeposits , 22% Govt. Securities, 2% Bullion, 1% Mutual funds, 3% Real Estate 51%

Stocks, 15% Bonds, 2% Options, 4%

Figure 3. Investment Avenues Diversification reduces risk by combining asset classes with low correlation. Diversification is a portfolio strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction. The goal of diversification is to reduce the risk by investing in different asset classes that have a low degree of correlation with each other. With proper diversification volatility is reduced by the fact that not all asset classes, industries or individual companies move up and down in value at the same time or at the same rate. Diversification reduces both the upside and downside potential, but allows for more consistent performance under a wide range of economic conditions. The data putout by RBI and the SEBI-NCAER (National Council of Applied Economics) Survey of Indian investors points out the low share of equity investments compared to alternatives like real estate, bank deposits etc. It was

found that a major of the investments was in Real estate, Bank Deposits followed by Stocks with 15% of the investments. Trading Preference:

Trading Preference
Speculation, 10%

Both, 42%

Investment, 48%

Figure 4. Trading Preference

Trading preference can be classified into Investment and Speculation. Investment refers to a longer time horizon. Buying and selling shares in selected companies to make a profit and is linked to a long time. Speculation on the other hand refers to making quick profits by anticipating the changes in the prices of shares. Speculative transactions are carried out in the stock exchanges day in & day out. The preference of trading was found to be 48% in Investment & 10% in speculation.

Trading in Derivatives:

Derivatives
No 69 %

Yes 31 %

Figure 5. Trading in Derivatives

Derivative is a product, whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner.

Financial derivatives came into spotlight in the post-1970 period due to growing instability in the financial markets. However, since their emergence, these products have become very popular and by 1990s, they accounted for about two-thirds of total transactions in derivative products. In recent years, the market for financial derivatives has grown tremendously in terms of variety of instruments available, their complexity and also turnover. In the class of equity derivatives the world over, futures and options on stock indices have gained more popularity than on individual stocks, especially

among institutional investors, who are major users of index-linked derivatives. Even small investors find these useful due to high correlation of the popular indexes with various portfolios and ease of use. It was found that over 31% traded
in derivatives.

Approximate Transaction per day:

Transaction Per Day

More Than 5Lakhs, 4% 2.5~5Lakh, 6% 1~2.5 Lakh, 8%

50,000~1Lakh, 25%

Less Than 50,000, 57%

Figure 6. Approximate Transaction per Day The amount of investment in the stock market varies from investor to investor. There are a various reasons, viz. the returns expected from the past investments, the Dividends obtained, the amount availability, etc. A majority of the transaction done was found to be Rs.50, 000 per day (57%) followed by 50,000 to 1 lakh per day (25%).

Average Investment Period:

Average Investment Period

More Than 1 Year, 16%

Less than 3 Months, 28%

6Months~1Year , 22%

3~6 Months, 34%

Figure 7. Average Investment Period The investment period refers to the period within which the security/share is brought and sold. It relates to the investor behavior towards his expectations & reaction to the change in prices of the share. It was found that 34% of the investor preferred a category of 3 to 6 months. Investors Importance or Order of preference from Service Providers: The various aspects considered by an investor, in the order of their importance are;

1. 2. 3. 4. 5. 6. Stop Loss:

Reliability Promptness in delivery Speed of Transaction Flexibility Courteous Behavior Approach

A certain characteristic of an Investor is to average out the cost of investment in Stock if the market goes down & price of the stock reduces, while certain stop their loss to further increase by selling it at a lesser price than what it was bought, thus incurring a loss. The Below chart gives the investors preference towards stop loss.

Stop Loss
90 80 % of Respondents 70 60 50 40 30 20 10 0 1 2
Figure 8. Stop Loss

No, 46%

Yes, 27%

Sometimes, 27%

Appreciation of Capital: Investors look forward towards increasing their return of investments either through the Dividends paid by the company or through the increase in the share value of the shares held. The below chart gives the percentage of returns an investor expects over his/her investments.

Appreciation

More than 35%, 18%

Upto 15 %, 17%

25~35%, 27% 15~25%, 38%

Figure 9. Appreciation Expected

Loss: Investment in Share market involves risk of loss and the below chart gives the percentage of loss on investments made. The below diagrams represents the loss anticipated by the investors and categorization of risk they are willing to take.

Loss

More than 10%, 20% Less than 5%, 34%

5~10%, 46%

Figure 10. Expected Loss

Risk
High, 17%

Moderate, 57%

Low, 26%

Figure 11. Willingness to Risk

Investment decisions:

Investment Decisions
Others , 1% Financial Magazines, 18% Advice from Broker, 15%

Advice from Friends , 10%

Self Evaluation, 34%

Current New s , 22%

Figure 12. Investment Decisions The source of information related to the Economy, Industry & the Company are a plenty. Investors look into various aspects as P/E multiple, Market Capitalization, Intrinsic value etc., of the companies before investing. The investment decisions made accounted to 34% in Self Evaluation, 22% in Current News, 18% in Financial Magazines and so on.

Average Cost: It refers to averaging the price of the brought shares of a company if the market value reduces. It was found that 43% of the investors averaged their cost.

Average Cost
120 % of Respondents 100 80 60 40 20 0 1 2 Figure 13.1. Average Cost The amount of averaging varies from investor to investor. About 36% of the investors averaged by 50% of the purchased value. Yes, 43% No, 57%

Average cost
Depends, 4% By 25 %, 27% By Equal Quantity, 33%

By 50 % , 36%

Figure 13.2. Average Cost in Quantity Subscription to Financial Magazines:

Magazines
120 % of respondents 100 80 60 40 20 0 1 2 Yes 39 % No 61%

Figure 14. Subscription to Magazines Magazines provide the actual status & various information of the company. Around 39% of the investors subscribed to financial magazines. Value Added services:

Value Added Services

140 % of Respondents 120 100 80 60 40 20 0 1 2 Figure 15. Value Added Services The increase in the investor population has simultaneously increased the number of players providing services. There is a tough competition among the players in the market. It was found that 72% of the players provided Value added services. Rating of Satisfaction: No 28% Yes 72 %

Satisfaction Rating
80 70 60 50 40 30 20 10 0 42% 35%

% of Respondents

13% 2% 1 2 3 4

8%

Figure 16. Satisfaction Rating

The Satisfaction investors obtained from the service offered were rated on a 5 point scale representing the following: 1 2 3 4 5 firms. Poor Satisfactory Good Very Good Excellent 2% 42% 35% 13% 8%

Most of the investors are satisfied with the service offered by the Broking

Expectation of Investors:

Expectations
Definitely, 32%

Not at all, 5%

Somewhat, 63%

Figure 17. Service Expectations Over 32% of the Investors were found to be provided by the services they expected.

Awareness of Portfolio Management Service (PMS) Service Providers %

1 2 3 4 5 6 7 8 9 10 11 12

Bonanza Fortis Securities Anand Rathi Capstocks Franklin Templeton India Infoline UTI Securities IL & FS Motilal Securities Kotak Securities Geojit Financial Services Equity Intelligence

1.35 1.33 1.33 1.33 2.70 4.05 4.05 5.41 14.86 16.22 22.97 24.32

Hypothesis Testing:
Sample size: 180 (Z distribution)

Figure 18. z- Distribution 1. More Than 75% of the customers are satisfied Null Hypothesis: H0 : 0.75 Alternate Hypothesis: H1 : > 0.75 (One Tailed test) Significance Level: 5% (0.05)

= (1-)/n

= 0.75*0.25/180 = 0.0322 z = 0.80-0.75/0.0322 = 1.55

Calculated value = 1.55 Table value= 1.645 (Value corresponding to 0.450 in Normal distribution curve) CV < TV, Hence H0 is accepted. i.e. More Than 75% of the customers are satisfied

2. More Than 50% of the customers prefer investment advices Null Hypothesis: H0: 0.50 Alternate Hypothesis: H1: > 0.50 (One Tailed test) Significance Level: 5% (0.05)

= (1-)/n

= 0.50*0.50/180 = 0.037 z = 0.58-0.50/0.037 = 2.16

Calculated value = 2.16 Table value= 1.645 (Value corresponding to 0.450 in Normal distribution curve) CV > TV, Hence H0 is rejected. * At Significance Level: 1% (0.01) Calculated value = 2.16 Table value= 2.325 (Value corresponding to 0.450 in Normal distribution curve) CV < TV, Hence H0 is accepted. At Significance level of 5 %, H0 is rejected & at 1% H0 is accepted. More Than 50% of the customers prefer investment advices at 1% Significance Level.

3. 40% of the customers are aware of competitor products Null Hypothesis: H0: = 0.40 Alternate Hypothesis: H1: 0.40 (Two Tail test) Significance Level: 10% (0.10)

= (1-)/n

= (0.4*0.6)/180 = 0.0365

z = 0.33-0.4 / 0.0365 = - 1.917

Calculated value = 1.917 Table value= 1.65 (Value corresponding to 0.450 in Normal distribution curve) CV > TV, Hence H0 is rejected. * At Significance Level: 5% (0.01) Calculated value = 1.917 Table value= 1.96 (Value corresponding to 0.475 in Normal distribution curve) CV < TV, Hence H0 is accepted. 40% of the customers are aware of competitor products at 5% significance Level.

FINDINGS & RECOMMENDATIONS

48 % of the investors prefer Investment with respect to 10% Speculation, only 31% trade in Derivatives, Approximate transaction per day in below Rs. 50,000 is 57% with a 34% of average investment period in 3 to 6 months. An appropriate strategy can be developed to suggest investment ideas considering the above mentioned aspects. Order of importance of the investors being Reliability, Promptness in Delivery and Speed of transaction indicates the preference, which would assist in meeting the expectations of the customers.

Investment Decisions made is 34% in Self Evaluation, which indicates that even if the investor is given an investment tip, the investor evaluates before Investment.

72 % of the investors are provided with Value added services, which aids in building customer relationship.

Portfolio Management Service - Only 1.33% of the investor aware of PMS offered by Fortis. The awareness among investors to be increased by advertisements, investment campaigns etc.

BIBLIOGRAPHY
1. C. R. Kothari, Research Methodology Methods & Techniques, Second Edition, New Age Publications.

2. V. A. Avadhani, Capital Market Management, Himalaya Publishing House. 3. Naresh K. Malhotra, Marketing Research An Applied Orientation, Fourth Edition, Pearson Education. 4 Fischer & Jordan ,SAPM

a. www.hdfcsec.com b. www.hdfcbank.com c. www.google.com d. www.bseindia.com e. www.nseindia.com f. www.equitymaster.com g. www.sebi.gov.in h. www.nsdl.co.in