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RESEARCH PROJECT
REPORT
ON
INVESTORS ATTITUDE TOWARDSPRIMARY MARKET
SUBMITTED TO:
KURUKSHETRA UNIVERSITY, KURUKSHETRA
in the fulfillment of the Degree of
Master in Business Administration (Session 2008-10)
PROJECT GUIDE: SUBMITTED BY:
DR. SURESH TURKA BRIJENDER MBA FACULTY UNIV. ROLL NO……..
CLASS ROLL NO.1311
SHRI ATMANAND JAIN INSTITUTE OF MANAGEMENT & TECHNOLOGY
AMBALA CITY
PREFACE
Education becomes more meaningful when its theoretical aspects are combined
with practical experience. These provide an opportunity to the students to improve their
understanding of the studies.
Project report is an integrated part of MBA course. The emphasis in the course is
providing the student an insight into Indian share market Scenario. The project is
designed to enhance the knowledge. The education of future manager would be
incomplete without exposure to working in an organization. Therefore a Project
assignment is essential academic requirement for all the students.
ACKNOWLEDGEMENT
This project comes out to be a great source of learning and experience. Lot of
efforts has been put by various people to make this project a success. This has greatly
enhanced my knowledge about the vast field of Investments in small cap and large cap
companies.
I gratefully acknowledge my indebtedness to Dr. Suresh Turka (Project Guide,
Faculty MBA) for allowing me to undergo a project.
Then I express my sincere gratitude and thanks to Miss. Ekta Aggarwal (HOD-
MBA Deptt., AIMT) for her inspiration and helpful attitude.
Brijender
DECLARATION
I, the undersigned, hereby declare that this report entitled “INVESTORS
ATTITUDE TOWARDS PRIMARY MARKET” is a genuine and bonafied work
prepared by me under the guidance of Dr. Suresh Turka, and is my original work. The
empirical findings in the report are based on the data collected by me. The matter
presented in this report is not copied from any source. This report has not been submitted
for the award of any degree or diploma either in Kurukshetra University or any other
university.
This work is humbly submitted to AIMT, Ambala City, for the award of the
degree of Master of Business Administration.
BRIJENDER GARG
CERTIFICATE
This is to certify that the research work entitled “INVESTORS ATTITUDE
TOWARDS PRIMARY MARKET” undertaken by Mr. Brijender, a student of
Masters of Business Administration, Shri Atmanand Jain Institute of Management and
Technology, Ambala City (Affiliated to Kurukshetra University, Kurukshetra), was
carried out under my guidance and supervision. The research work is candidate’s original
work & this project report has not been submitted to any other university for any course.
Dr. Suresh Turka
INDEX OF CONTENTS
PAGE NO
Chapter –I Introduction
Chapter – II Research Methodology
Objectives of the Study
Research Design
Sample Design
Methods of Data Collection
Analysis and Interpretation
Limitations of the project
Chapter – III Analysis and Interpretation of Data
Chapter – IV Findings, Suggestions and Conclusion
Findings
Suggestions
Conclusion
Bibliography
Annexure
INTRODUCTION
The past twenty five years have witnessed a process of accelerating change in the
world’s financial markets. Driven by an interacting process of liberalization and
innovation, regulations have been removed, New product have emerged and old
boundaries between financial intermediaries have been blurred.
At the same time, growth of capital markets has posed new challenges to
economic and financial stability.
The role of Indian capital market which is to provide long term resources required
by industries for investment has observed buoyancy in share market with the
liberalization of industries and fiscal policies of the government. Finance, the lie blood of
industry is mobilized especially through New Issue Market or Primary Market.
The primary market, also called the new issue market, is the market for issuing
new securities. Many companies, especially small and medium scale, enter the primary
market to raise money from the public to expand their businesses. They sell their
securities to the public through an initial public offering. The securities can be directly
bought from the shareholders, which is not the case for the secondary market. The
primary market is a market for new capitals that will be traded over a longer period.
In the primary market, securities are issued on an exchange basis. The
underwriters, that is, the investment banks, play an important role in this market: they set
the initial price range for a particular share and then supervise the selling of that share.
Investors can obtain news of upcoming shares only on the primary market. The
issuing firm collects money, which is then used to finance its operations or expand
business, by selling its shares. Before selling a security on the primary market, the firm
must fulfill all the requirements regarding the exchange.
After trading in the primary market the security will then enter the secondary
market, where numerous trades happen every day. The primary market accelerates the
process of capital formation in a country's economy.
The primary market categorically excludes several other new long-term finance
sources, such as loans from financial institutions. Many companies have entered the
primary market to earn profit by converting its capital, which is basically a private
capital, into a public one, releasing securities to the public. This phenomena is known as
"public issue" or "going public."
There are three methods though which securities can be issued on the primary
market: rights issue, Initial Public Offer (IPO), and preferential issue. A company's new
offering is placed on the primary market through an initial public offer.
Meaning of Primary Market
New Issues Market is that part of capital market where dealing exchanges takes
the boundaries de-marketing the financial services are fast eroding. Thanks to the
innovations in the financial services, the movement towards made by existing companies
are known as further issues.
The primary market is that part of the capital markets that deals with the issuance
of new securities. Companies, governments or public sector institutions can obtain
funding through the sale of a new stock or bond issue. This is typically done through a
syndicate of securities dealers. The process of selling new issues to investors is called
underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO).
Dealers earn a commission that is built into the price of the security offering, though it
can be found in the prospectus.
Mutual funds are seemingly the easiest and the least stressful way to invest in the
stock market. Quiet a large amount of money has been invested in mutual funds during
the past few years. Any investor would like to invest in a reputed Mutual Fund
organization. UTI is one such organization that provides a better overview of the Mutual
Fund industry. Understanding the attitude of investors on their investment would help the
company to increase their profits. In UTI they believe that the investors attitude would
result in profits.
Features of primary markets are:
This is the market for new long term equity capital. The primary market is the
market where the securities are sold for the first time. Therefore it is also called the
new issue market (NIM).
In a primary issue, the securities are issued by the company directly to investors.
The company receives the money and issues new security certificates to the
investors.
Primary issues are used by companies for the purpose of setting up new business
or for expanding or modernizing the existing business.
The primary market performs the crucial function of facilitating capital formation
in the economy.
The new issue market does not include certain other sources of new long term
external finance, such as loans from financial institutions. Borrowers in the new issue
market may be raising capital for converting private capital into public capital; this is
known as "going public."
The financial assets sold can only be redeemed by the original holder.
Primary market
1. Market in which buyers and sellers negotiate and transact business directly,
without any intermediary such as resellers.
2. Financial market in which newly issued securities are offered to the public.
Market
Actual or conceptual place in commercial world where forces of demand and
supply operate, and where buyers and sellers interact (directly or through intermediaries)
to trade goods, services, or contracts or instruments, for money or barter. Markets include
mechanisms or means for (1) determining price of the traded item, (2) communicating the
price information, (3) facilitating deals and transactions, and (4) effecting distribution.
Market for a particular item is made up of existing and potential customers who need it
and have the ability and willingness to pay for it. All markets, ultimately, consist of
people also called marketplace.
Buyer
1. Party which acquires, or agrees to acquire, ownership (in case of goods), or
benefit or usage (in case of services), in exchange for money or other
consideration under a contract of sale also called purchaser.
2. Professional purchaser specializing in a specific group of materials, goods, or
services, and experienced in market analysis, purchase negotiations, bulk buying,
and delivery coordination.
Seller
Entity that makes, or offers or contracts to make, a sale to an actual or potential
buyer. Also called vendor, particularly the one selling a real property.
Negotiation
1. General: Bargaining (give and take) process between two or more parties (each
with its own aims, needs, and viewpoints) seeking to discover a common ground
and reach an agreement to settle a matter of mutual concern or resolve a conflict.
2. Banking: Accepting or trading a negotiable instrument.
3. Contracting: Use of any method to award a contract other than sealed bidding.
4. Trading: Process by which a negotiable instrument is transferred from one party
(transferor) to another (transferee) by endorsement or delivery. The transferee
takes the instrument in good faith, for value, and without notice of any defect in
the title of the transferor, and obtains an indefeasible title.
Business
Economic system in which goods and services are exchanged for one another or
money, on the basis of their perceived worth. Every business requires some form of
investment and a sufficient number of customers to whom its output can be sold at profit
on a consistent basis.
Intermediary
Firm or person (such as a broker or consultant) who acts as a mediator on a link
between parties to a business deal, investment decision, negotiation, etc. In money
markets, for example, banks act as intermediaries between depositors seeking interest
income and borrowers seeking debt capital. Intermediaries usually specialize in specific
areas, and serve as a conduit for market and other types of information. Also called a
middleman. See also intermediation.
Reseller
One who buys goods from a manufacturer and resells them to customers
unchanged
Primary Market
The primary market, also called the new issue market, is the market for issuing
new securities. Many companies, especially small and medium scale, enter the primary
market to raise money from the public to expand their businesses. They sell their
securities to the public through an initial public offering. The securities can be directly
bought from the shareholders, which is not the case for the secondary market. The
primary market is a market for new capitals that will be traded over a longer period.
In the primary market, securities are issued on an exchange basis. The
underwriters, that is, the investment banks, play an important role in this market: they set
the initial price range for a particular share and then supervise the selling of that share.
Investors can obtain news of upcoming shares only on the primary market. The
issuing firm collects money, which is then used to finance its operations or expand
business, by selling its shares. Before selling a security on the primary market, the firm
must fulfill all the requirements regarding the exchange.
After trading in the primary market the security will then enter the secondary
market, where numerous trades happen every day. The primary market accelerates the
process of capital formation in a country's economy.
The primary market categorically excludes several other new long-term finance
sources, such as loans from financial institutions. Many companies have entered the
primary market to earn profit by converting its capital, which is basically a private
capital, into a public one, releasing securities to the public. This phenomena is known as
"public issue" or "going public."
There are three methods though which securities can be issued on the primary
market: rights issue, Initial Public Offer (IPO), and preferential issue. A company's new
offering is placed on the primary market through an initial public offer.
Recent Developments in Primary Commodity Markets
Since mid-1997 - that is, just before the beginning of the crisis in Thailand s
financial and foreign exchange markets - prices of primary commodities as a group have
fallen by more than 10 percent.(1) These price declines are sufficiently great in
magnitude to have far reaching implications for producers and consumers around the
world.
Effects of the Asian Crisis
To a large degree these price declines are associated with the Asian crisis. During
the early and mid-1990s, consumption of primary commodities in most Asian developing
countries increased at rates much higher than in the rest of the world. Asian developing
countries accounted for about two-thirds of the increase in world consumption of
petroleum products over the period 1992-96, and their share in world consumption
increased from 12 percent to 15 percent. Korea and the ASEAN-4 countries (Indonesia,
Malaysia, the Philippines, and Thailand), in turn, accounted for about one-half of the
increase in consumption of petroleum products in Asian developing countries, and the
share of these five countries in world consumption rose from 5 percent to 6 1/2 percent.
A similar pattern of growth in consumption is observed for base metals, rubber, coarse
grains, oil meals, and fats and oils. For most of these non-fuel commodities, the share of
Asian countries in world consumption in 1996 was much greater than their share in the
world consumption of petroleum products. China's contribution to the growth in the
markets for these commodities, however, has tended to be much greater than that of
Korea plus the ASEAN-4.
In the countries most directly affected, the Asian crisis has brought in its wake
much reduced construction activity, much higher import costs in terms of national
currencies, less available credit to finance imports, and, at a minimum, sharp reductions
in demand. These conditions have led to reductions in the rate of growth of demand, not
only in the ASEAN-4 countries and Korea but also, through the spillover and contagion
effects of the crisis, in many other countries in Asia and elsewhere. Thus certain
commodity markets that as recently as mid-1997 were expected to show a high rate of
growth of demand are now facing a period of considerable uncertainty with regard to
demand prospects. Furthermore, for some non-fuel commodities such as timber, rice,
natural rubber, and vegetable oils, the large depreciations of currencies of the southeast
Asian countries may also have had supply effects insofar as they create incentives to
increase exports from current inventories and to increase current and prospective
production.
Effects of Weather
This year weather conditions generally favorable to crop production have also
been an important factor that has tended to weaken the prices of several agricultural
commodities. This seems true notwithstanding the unusual weather patterns in many parts
of the world that have been attributed to El Nino and have received much press coverage.
At least so far, the adverse consequences of El Nino for commodity production that are
sufficiently great to have discernible effects on world prices for individual commodities
have been limited to the fish catches off the west coast of South America and to palm oil
production in southeast Asia. Elsewhere - for example, in the case of cereal production in
southern Africa - El Nino may have reduced production locally, but the consequence for
world prices is not of great importance. In addition, warmer than usual weather this
winter in the Northern Hemisphere has reduced the demand for heating oil and hence
contributed to the downward trend in the price of petroleum and other energy
commodities.
Developments in Specific Markets
The interplay of the Asian crisis and other factors affecting commodity markets in
recent months comes more into focus in a review of developments in specific primary
commodity markets. Price decreases in excess of 10 percent (with prices measured in
terms of SDRs) over the period June 1997 through January 1998 that were in some way
associated with the effects of weaker demand from Asian countries were recorded for
nearly one-third of the commodities included in the IMF's commodity price index. The
price declines for five commodities - copper, nickel, natural rubber, wool, and hides -
appear to be associated mainly with the Asian crisis. The Asian crisis also played an
important role, but probably not the predominant role, in the price declines of four other
commodities - crude petroleum, timber, zinc, and lead. For certain other commodities,
such as aluminum, iron ore, meat, maize, and soybean meal, ...
Problems of Indian Primary Market
There are several problems of the Indian primary market. But these problems can
be overcome too by mere application of simple rules( end of the article). These remedies
have been suggested by experts. Economists attribute these problems to various factors
some of which are highlighted below.
The function of the primary market with respect to the market for IPO or initial
public offering is to see that various companies are provided with opportunities for the
acquisition of growth capital. The primary market has withstood the tests of time.
Inappropriate allotment of shares:
There are many existing problems of the Indian primary market. Some of the
instances include the inappropriate assignment of shares to the public as was the case of
the ONGC public issues. Due to this there was a lot of confusion among the investors.
Withdrawal of IPOs:
Another problem lies in the fact that these days, IPOs are increasingly being
withdrawn. An expert has rightly said that there is no point expressing disappointment in
the withdrawal of the IPOs because it may be taken not as an indication of failure of the
company and hence the primary market but it may be considered as a disagreement of
price between the seller and the buyer. The primary markets are undulating the world
over. The incidents occurring in the primary markets are reflections of what is actually
happening in the secondary markets. It was fathomed that the IPOs, which were lately
taken back had very "aggressive" price bands. The price bands could have been aligned
as per existing conditions of the market. The lead managers responsible for the IPOs may
also be blamed for the catastrophe. Few are of the opinion that lack of judgment may
have led to the withdrawal. "Investors fatigue" is being accounted for in the withdrawals.
"Cornering" of shares:
Recently, there was an instance when investors "cornered" shares, which were to
be alloted to the public. The investor was actually a big investor who camouflaged as a
small investor cornered many shares.
The most important factor shaping in today's global economy is the process of
globalization. Indian companies are moving in search of low-cast markets, technology is
driving growth in production and competition is becoming more intense. A second factor
is the fastest growth in private capital flows, mainly short-term flows by banks and
financial institutions, portfolio flows by mutual funds and pension funds and foreign
direct investment into India. A third factor is the increasing share of India and other
emerging market economies in world trade.
The outburst in communication technology has led to greater integration of Indian
financial markets across the world. The impact of these changes could be felt from the
extremely buoyant activity in Indian stock markets. A number of foreign financial service
providers have entered into the Indian financial market like Morgan Stanley, Templeton,
and Goldman Sachs. Currently FII investment is at $ 6.5 Billion compared to $ 2 Billion
in 2001. The stock market is booming with Sensex hovering around 16000-17000. SEBI
has put in place appropriate guidelines and controls to regulate the markets in tune with
the changing environment and attendant risks. All this is happening because of large
amounts of investment in the country.
People often invest in various asset classes to:
* To beat Inflation
* To fund future needs
* To meet contingencies
* To maintain same standard of living after retirement
All these factors matters a lot to the investors and the mutual fund route is one way
through which people can meet these needs.
Free economies are generally characterized to have financial markets to serve as
channels through which the savings of the society are made available to business
enterprises. Such financial markets may be classified as (1) Capital market, and (2)
Money market where the former refers to the market mechanism which envisages
institutional arrangements for marketing of long term and equity claims such as equity
shares, preference shares, debentures, bonds, etc., while the latter refers to the market
mechanism which concerns with floating of liquid funds and their short term uses in trade
and industry through the banking system.
The capital market which concerns with demand and supply of long term funds is
again dichotomized as primary or new issue market and secondary or stock market where
the former deals with new securities offered to the investing pubic, while the latter deals
with the existing securities. The joint stock companies raise funds from new issue
markets but such new issue are also listed with stock markets which provide them a
regular market, ensure regular valuation of and stability in prices of such securities,
assure safety in dealings of the securities, channelise funds in the desired direction and
ensure wider ownership of the securities.
The stock exchanges are, thus, primarily concerned with providing marketability
to the existing securities but these also activate the new issue markets which serve as
primary source of funds to the industrial enterprises for their new projects or for
expansion, diversification or modernization of existing ones. Both the primary and the
secondary markets are integral parts of the capital market and are susceptible to common
influences. Public responses are generally encouraging in the new issue market when
there is boom in the stock market and vice versa. Similarly, the secondary market is very
sensitive to the impact of development in the country and the same is transmitted to the
new issue market.
New issues include ‘initial issues’ as well as ‘further issue’ where the former
refers to the securities issued buy the companies for the first time either on incorporation
or on conversion from private to public company while the latter refers to the new issues
floated by existing companies which needed funds for expansion/ diversification/
modernization. The initial and further issues may be combined under new money issue
which refer to the issues for mobilization of new money for the corporate enterprises and
there can be no new money issue which include bonus/capitalization issues and exchange
issues where the former results from the capitalization to retained earnings enabling
existing shareholders get new shares without paying and the latter results from
conversion of private company into public, amalgamation, merger and equity dilution by
FERA companies.
INITIAL PUBLIC OFFERINGS (IPO)
A corporate may raise capital in the primary market by way of an initial public
offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of
securities to the public in the primary market. It is the largest source of funds with long or
indefinite maturity for the company.
IPO Stocks: When the company wants to release their shares into the market for the first
time, they will invite the public to participate in an exercise called the IPO (Initial Public
Offering). This is when you see people filling in application forms and buying bank
drafts to purchase the company's shares (some countries do it electronically). Some call it
"applying for new shares".
Prices when applying for new shares are always much cheaper than what it should
be listed in the market later. However, if it is a very attractive company, there will be
more people who will participate in the IPO exercise and the draw-lots method will be
used to determine who will be allocated the shares.
Then, after the first stage, the company's shares will be listed in the stock market.
That is when if you have managed to purchase the shares during the IPO offering, you
will be able to sell them into the market to buyers who want a part of these shares.
Buying stocks through applying for IPO shares in general is always a safer method of
investing in the stock market as most companies price them attractively.
FUNCTIONARIES OF INITIAL PUBLIC OFFER
The functionaries in IPO are those concerned with the formation of joint stock
companies and the issue of their securities to the public. Public issue is essentially an
exercise involving active participation of a number of agencies. At earlier stages it was
sole effort on the part of the company and its personnel.
However with the growth of the number of public issues and the complexities in
the efforts involved, it has now become necessary to enlist active participation and
support of a number of agencies in making any public issue a success. The promoter, as a
principal representative of the company which is making the public issue, should be clear
in his mind about the number of agencies involved and their respective roles in the entire
exercise so as to be able to coordinate effectively the efforts of these agencies. These
functionaries are:
Promoters
Modern industrial enterprises require large amounts of capital which can only be
raised by resorting to the joint stock company is done by company promoters and
syndicates. It is the promoter who is responsible for conception or discovery of the idea
to exploit the possibility of some industrial proposition. He has to work up details,
formulate the financial plan, which he usually does with the help of an issue house and
finally he has to put his proposition into active operation. The work of the promoter
entails difficulties and risks and sometimes he has to stake his whole fortune and
reputation in order to make the venture a success. Prior to founding the company a lot of
expenditure has to be incurred by the promoter on employment of engineers, technical
and other experts. In case the company is successfully established and investors come
forth to take up its shares, the promoter is duly rewarded, otherwise he stands to lose not
only his money he had sunk in the venture but his reputation as well.
The promoter, if he is well endowed financially, will work alone, but in the case
of projects of large dimensions he usually form a syndicate. All members of the syndicate
work up the possibilities of the proposition and undertake the investigation and
examination of the scheme. It may be turned over to the technical staff employed and on
its favorable report the formulation of the financial plan will be taken up by the financial
experts who are supposed to be well conversant with the conditions in the capital market.
After completing the financial plan, the work of drawing up the prospectus, the
memorandum of association and articles of association for the formal incorporation as a
company is proceeded with. After all the formalities are completed, the new company is
ready to be launched and its issue is to be placed before the public.
Managers to the issue
These persons are actively associated in the selection of various agencies involved
with new issue planning the timing of the issue, strategies to be adopted by way of
publicity and marketing of the issue, etc. they advise the company on selection of the
registrars to the issue, underwriters, brokers and bankers to the issue, advertising agents,
printer etc. and also give a sense of direction to the various agencies involved in the
entire issue. Besides, the other activities mainly performed buy them are drafting of
prospectus, preparing project profiles for underwriters, preparing budget of expenses,
suggesting the appropriate timings for the public issue, assisting in marketing the public
issue successfully, etc. there are a number of agencies specializing in the role of
managers to the issue. These merchant banking divisions of some all India financial
institutions, subsidiaries of commercial banks and also some private agencies where
traditional stock brokers have graduated into providing specialized merchant banking
services.
SEBI has made the registration of merchant bankers compulsory to ensure that
only professionals with requisite qualification and financial background enter into the
job. These MBs are classified into four categories where the first category MBs must
have a minimum net worth of Rs. 100 lacs and can undertake all activities of issue
management (preparation of prospectus, determining financial structure, final allotment
and refund of subscription) portfolio management, underwriting, consultant or advisers in
the issue. The second categories of MBs must have a minimum net worth of Rs. 50 lacs
and can undertake all activities except issue management. The third categories of MBs
must have a minimum net worth of Rs.20 lacs and can undertake works of underwriter,
adviser and consultant while there is no minimum net worth requirement for fourth
category of MBs but they can function as adviser or consultant only.
Registrars
The registrars sometimes, also called the ‘issue house’ are responsible normally
for receiving the share applications from the various collection centers through
controlling branches of bankers to the issue, analyzing them, recommending the basis of
allotment in consultation with the managers to the regional stock exchange for approval
arranging for dispatch of allotment letters and preparing the register of members, etc.
their job normally starts with the opening of the subscription list, and continues till the
share certificates are dispatched, and register of members along with other related
registers/details are handed over to the company. Sometimes, the registrars to issue
continue their association with the company in the role of share transfer agents, even after
the issue is completed.
Underwriters
The underwriters are the people who actually ensure that the company is able to
raise the capital issued by it for a commission charged by them. They make a
commitment to get the issue subscribed either by others or themselves. Usually the
underwriters can be divided into two categories, namely, financial institutions and banks,
on the one hand, and broker underwriters and approved investment companies/trust, on
the other.
Brokers
These are the people who actually bring the prospective investors and the
company together. It may not be an exaggeration to state that the success or failure of a
public issue depends to large extent on the reaction of the brokers. Generally, they are the
members of recognized stock exchanges, with a view to providing better and professional
services to investing public and to promote development of capital market on healthy
lines, the government has since allowed multiple membership to members of stock
exchanges and accorded recognition to corporate entities and the financial institutions
including subsidiaries of the banks.
Bankers
These are the commercial banks, which will receive the application money along
with the share application forms from the prospective investors. Depending upon the size
of the issue, at least 4 or 5 banks are designated as bankers to the issue. Different
branches of these banks are named at various locations where such application money is
accepted. These collecting branches send the application forms and the money received
by them to specified branch, where the details of the application are consolidated. Such
specified branch of the banker to the issue is called ‘controlling branch’/ the controlling
branch is usually selected in the city where the managers to the issue/registrars to the
issue/registered office of the company is situated. However, it is not necessary that
controlling branch should be at a place where the managers to the issue/ registrars to the
issue/registered office of the company is situated.
Publicity and advertising agents
Public issue is an effort to motivate and persuade members of the public to invest
in the shares of the company. It is, therefore, essential that the general public is made
aware of the company, its activities, its plans for future, etc. it is of vital importance that
publicity is given before the public issue by giving newspaper and TV advertisements.
Press releases, press conference, leaflets and brochures, hoardings and posters and even
audio visual shows are the usual media of publicity used for public issue. There are some
advertising agencies, which specialize in financial advertising and publicity campaign for
public issues.
Financial institutions
Term lending financial institutions at the time of sanctioning underwriting support
loans to the company, usually stipulate that the draft of the prospectus and also the
proposed program for public issue is approved by them.
The three principal all India financial institutions are the IDBI, IFCI and ICICI.
Even when all the three institutions jointly finance a project under their participating
finance scheme, one of them is generally chosen as the lead financials institution which
acts on behalf of the other two. Hence, it is generally adequate if the company obtains the
necessary approval from the regional office of the lead institution only. In some cases
where other institutions like the LIC, GIC, UTI, etc. have also given financial assistance,
it might be necessary to seek separate approvals from them, if insisted for. But generally
an advance copy of the draft prospectus is sent to them with a request forward their
comments, if any, direct to lead institution.
Other Agencies
In addition, the company will also have a interaction with other agencies like
auditors, legal advisors, taxation or technical experts whose names or statements are
mentioned or quoted in the prospectus.
Government/Statutory Agencies
Besides the various agencies which are directly connected with a public issue
whose efforts will have to be coordinated by the company, there are some
statutory/government agencies that are connected with public issue. These are: (1) SEBI
which provides guidelines for public issue, (2) registrar of the companies with whom the
prospectus has to the filed and registered before the public issue under section 60 of the
companies act, 1956, (3) reserve bank of India from whom necessary permission has to
be obtained for non resident investment, of any in the company, (4) the stock exchanges
where the company’s share are to be listed (5 industrial licensing authorities for
necessary industrial license to be obtained for the project or other statutory bodies like
DGTD etc. with whom the capacity of the project has to be registered, and (6) pollution
control authorities and other local authorities from whom the clearance may have to be
obtained and such clearance is referred to in the prospectus.
A NEW CONCEPT OF IPO MARKET—BOOK BUILDING
SEBI guidelines defines Book Building as "a process undertaken by which a
demand for the securities proposed to be issued by a body corporate is elicited and built-
up and the price for such securities is assessed for the determination of the quantum of
such securities to be issued by means of a notice, circular, advertisement, document or
information memoranda or offer document".
Book Building is basically a process used in Initial Public Offer (IPO) for
efficient price discovery. It is a mechanism where, during the period for which the IPO is
open, bids are collected from investors at various prices, which are above or equal to the
floor price. The offer price is determined after the bid closing date.
As per SEBI guidelines, an issuer company can issue securities to the public
though prospectus in the following manner:
1. 100% of the net offer to the public through book building process
2. 75% of the net offer to the public through book building process and 25% at the
price determined through book building. The Fixed Price portion is conducted like
a normal public issue after the Book Built portion, during which the issue price is
determined.
The concept of Book Building is relatively new in India. However it is a common
practice in most developed countries.
Difference between Book Building and Public Issue
In Book Building securities are offered at prices above or equal to the floor prices,
whereas securities are offered at a fixed price in case of a public issue. In case of Book
Building, the demand can be known everyday as the book is built. But in case of the
public issue the demand is known at the close of the issue.
The book building process:
The company approaches lead manager for IPO
The company and lead manager suggest a price band at which shares are to be offered
Application are invited
Based on demand for the shares a certain price is established by promoters and the lead manger
The allotment is made on the basis of the market clearance price
Post issue the price stabilization is undertaken by the lead manager.
WHAT SEBI DID TO ENCOURAGE RETAIL INVESTOR
SEBI has announced a series of measures to encourage retail participation in the
primary market. This is perhaps the first instance where the market regulator has got the
timing of reform measures spot on.
Coming close on the heels of the hugely successful Maruti IPO, these measures
should arouse retail interest in some of the big public offers expected in the near future —
BPCL, Idea Cellular, TCS and Nalco. The principle of these changes seems to be that
greater participation of retail investors in the primary market is possible only when they
have a reasonable chance of making gains, certainly not the case earlier. To enable such
participation, Sebi has adopted a two-fold approach. First, the market watchdog has made
sure that retail investors actually get an allotment in book-built IPOs. Hence, the 10%
increase in the allocation for retail investors. But more significant is the change in the
definition of what constitutes retail — from those applying for up to 1,000 shares to
applications for shares worth Rs 50,000 or less. This would ensure that ‘retail’ is truly
retail. Take the i-flex IPO, priced at Rs 530 a share. An application for 1,000 shares
entailing investment of Rs 5.3 lakh would have qualified for the retail category. Second,
to ensure some quality, the regulator has introduced the concept of net tangible asset,
making certain that issuing company has some pre-IPO history. Additionally, to
discourage fancy ideas being sold to public and subsequently abandoned (plantation
schemes), issuers have been asked to tie-up funds for a project before the issue. Of
course, willful defaulters have been barred. Lastly, to fix accountability, the CEOs or the
CFOs of the issuing company would have to certify disclosures in the offer document.
These measures should translate into higher allotment for retail investors and keep
a check on the quality of issuers as well. The decision to disallow withdrawal of bids by
institutional investors and the shift to price band instead of a floor price will prevent
manipulation in pricing and subscription, both inimical to retail interest while the
availability of a ‘green shoe’ option should deliver price stability post listing in the case
of over subscription. Beyond this, there is precious little a regulator can do. The rest is
upto the market and investors.
HOW TO BE WATCH FUL OF IPO BOOM
The Indian capital market is on the verge of an unprecedented IPO boom. Reports
emanating from the office of the Securities and Exchange board of India clearly indicate
that the year 2004 is all set to emerge as a record breaking year for initial public offer as
over 600 companies big, medium as well as small are planning to raise a whopping sum
of Rs. 60,000 crore! Interestingly, it had taken 15 years for over 5,600 companies to raise
this amount! The 2004 performance will, thus, be a historical feat in the realm of the
Indian capital market.
Of course, the IPO market was literally comatose for the last six years after the
previous five-year (1992-96) boom period when about 5,000 companies had raise around
Rs 45,000 crore! At least one third of this amount has vanished into thin air as several
cheaters, unscrupulous businessmen belonging to select industrial groups and fly by night
operators had palmed off worthless scrap papers in the name of share certificates to
millions of hapless investors. The watchdog could not see in which direction the
promoters fled after downing the shutters of their companies and stock exchange
authorities took easiest route to forget about the fraud by de-listing the shares of these
companies. And the poor investors are still burdened with these worthless papers,
originally valued at millions of rupees.
This body blow was enough to disenchant the investing public from the new issue
market which wore a deserted look for the last six years. But now that business activity
has picked up, economy is on the path of rapid growth and wheels of industries have
started running at a fast pace, the new issue market is showing some activity once again.
On the one side, the government is in dire need of funds to meet its budgetary plans and,
for this, disinvestments of PSU offers the easiest route. And on the other hand, with
business activity picking up, there is need for larger production of industrial and
consumer goods, which, in turn, needs funds for expansion and setting up new plants. At
he same time, as interest rates on various instruments of saving have come down
drastically and equities have emerged as more remunerative avenue for investment, the
public is willing to go for equities. The buoyancy in the stock market has further aided
this trend.
Taking advantage of this favorable climate, over 600 companies have planned to
come out with issues to raise over Rs 60,000 crore. It is almost certain that cheaters and
looters among businessmen will once again be at their game mopping up funds through
bad or bogus issues. Lured by hefty fees and heftier out of pocket expanses, merchant
bankers will also try to hard sell these shares. The capital market watchdog, SEBI has
already washed its hands of any say in it by declaring that “SEBI does not take any
responsibility either for the financial soundness of any scheme or the project for which
the issues are proposed to be made or for the correctness of the statements made or
opinion expressed in the offer document”.
The SEBI ‘clarification’ raises a pertinent question: have we moved forward or
backward from the controller of capital issues days in investor protection? By and large,
merchant bankers are more interested in their fees rather than in the quality of the issues.
Can you rely on analysts? Just recall the paeans they had sung on issues which shook the
very foundation of a giant institution like UTI
The best thing for investors to do to ensure that thy are not cheated in this IPO
boom, is to follow the following evaluation process
THE EVALUATION PROCESS
Backed by aggressive merchant bankers, the pink papers, and gung ho TV
channels. Rs. 40,000 crore is hard to resist. But don’t forget that your personal rs 4000
are as valuable to you as it will be with a couple of zeroes more. Before you jump on to
the bandwagon. Do your homework. Its not easy to analyze the performance even of al
listed company that has been around for a while and has a record of market performance;
for a company making an initial public offer, this analysis is rather more difficult. But
some point to be considered are as follows
THE BUSINESS
Make sure you understand the company’s business. The attempt should be to
understand the long-term sustainable advantage of the business and the company’s
position in it. The prospectus has a section dedicated for such information and this is a
must read. A voluminous offer document can seem daunting but if you focus on the key
aspects, it gets less tedious. Study the document to understand product portfolio,
competitive strengths, new business initiatives and strategy, regulations and so on.
THE COMPANY
Next, choose companies with leadership positions. Three successful recent issues
have been Maruti, TV today and Patni computers. Maruti is an industry leader and the
largest passenger car manufacturer in India with a diverse product portfolio, which
includes 10 basic models with over 50 variants. In 2003, Maruti’s share stood at 54.6
percent; the balance was divided among nine other manufacturers. Similarly, TV Today
is India’s leading news broadcaster and Patni computer is India’s largest IT services
company.
THE PROMOTER
An old business adage says, ”it’s better to have an ‘a’ team with a ‘c’ team with
an ‘a’ product, and even better to have an ‘a’ team with a ‘a’ product.” After all it’s
people who run the business. Hence, it’s important to focus on the credentials of the
promoter and key management figures. Invest in companies with a proven management
track record, since it’s the management philosophy and ability that determines attitude
towards minority shareholders and the likely success of a venture. For instance, the
promoters of Indraprastha gas and Maruti have proven management credentials. On the
other hand, there’s a Tips industry, where there were allegations against one to the
promoters in the Gulshan Kumar murder case such issues are best avoided.
THE LOCK IN
During an IPO, the underwriter makes the company’s key shareholders sign a
lock-in agreement. The agreement is legally binding on the promoters and other key
shareholders, prohibiting them from selling their shares for a specified period of time.
The inevitable supply overhang when these previously restricted investors are permitted
to sell shares can put downward pressure on the stock price. For example, in Patni
computers, the lock in period for key promoters is three years, but for general Atlantic, a
foreign venture capital investor holding 28.3 percent of outstanding shares, the lock in
period is 180 days from listing.
THE FINANCES
A good management and a sound business model count, but what matters most is
performance. Check for consistency in revenue and profit growth and margins for at least
three years before the IPO. Also, check if the company has an overly high debt equity
ratio, or carries contingent liabilities, or has disputed tax claims, or faces litigation in
short, factors bearing on the company’s operations and results.
THE RISK
This is the most relevant part of the offer document. Although the offer document
is tailor made to sell the issue, the risk factors help you get a fair idea of the impact of
such risks on the company’s operations. For example, in the case of Bharti Televenture
the biggest risk came from regulations governing Indian telecom. Increased competition
in cellular services, unrestricted competition in fixed line services and the decision to
allow fixed line operators to provide limited mobility using WLL were some of the risks
at the time of the IPO.
THE OBJECTS
In bull markets, price increases defy fundamentals, and companies are prone to
capitalize on this sentiment to raise money. If you study the objects of the issue, you will
be able to weed out the chaff. For example, if the money is being raised to repay loans or
to provide and exit option to existing investors investigate. If the business is doing well,
the company should not need to raise fresh capital to repay its debt.
However, a proceeds of the issue going towards research, marketing, or capacity
expansion paints a better picture. Companies like Bharti and Divi’s have used the funds
raised to create infrastructure, which will drive growth for these companies in future. On
the other hand, BAG films had earmarked 60 percent of he issue proceeds towards
production to feature films, which exposes it to significant risks considering that film
production is not a safe business, especially when the company does not have prior
experience in it.
THE FINE PRINT
Often, the most critical bits of information on a company’s financial health are
buried in the prospectus. Expect the red flags, in particular, to be lost in acres of fine
print. For example, BAG films converted its 14 percent fully convertible debentures and
accumulated interest into equity shares and issued them to UTI and IDBI at a 10 percent
discount to the issue price at Rs. 9 per share.
Rarely, some good news also gets buried and goes unnoticed. The discounts and
royalty waivers by Suzuki to Maruti, for instance, will result in savings of over Rs.80
crore, which will directly flow to the bottom line. This means Maruti’s Rs.146 crore net
profit in 2003 will get a boost of 40 percent by just this little clause.
THE PRICE
The pricing of the issue determines the demand for the stock. Although issues are
usually attractively priced to attract investors, benchmarking it with valuations of
comparable listed companies is a good idea. This will give you a sense o f the relative
attractiveness of the issue and scope for appreciation. For valuation purposes, compare
the company’s profit margins, capital efficiency, price earning ratio and other financial
parameters with that of similar payers. For example, Patni scores high on the valuation
front but low on performances parameters like operating margins.
THE HYPE
Given that there is only one IPO for a company, they are often presented as not to
be missed opportunity and much hype is created by lead managers and brokers to get as
much attention as possible. Remember that it is their business to make clients buy and
sell stocks. Our advice: don’t buy stocks just because they are making a debut in the
market.
THE BROKER
The lead manager’s track record is as important as that of the company’s. History
suggests that the best merchant bankers usually undertake some due diligence before
associating themselves with an issue. Since business fortunes of merchant bankers
depend on their track record, there is more reason for them to handle only quality issues.
Look for known lead managers like Kotak investment, SBI capital markets, DSP Merill
lynch, Enam, JM Morgan. Be wary of smaller investment banks that may be willing to
make any company public.
RESEARCH METHODOLOGY
Research in common parlance refers to the search for knowledge. One can define
research as a scientific and systematic search for pertinent information on a specific topic.
It is the voyage of discovering new facts. This inquisitiveness is the mother of all
knowledge and the method employed in this quest is known as research. Research is thus
an original contribution to the existing stock of knowledge making for its advancement.
Research methodology is an attempt to solve the research problem systematically.
Research methodology plays an important part in any investigation. Unless the
methodology is correct, the analysis and conclusion may not be scientific.
Research methodology is a way to solve the problems sceintifically and
systematically.
RESEARCH PROBLEM
The research problems, in general refers to some difficulty with a researcher experience in the contest of either a particular a theoretical situation and want to obtain a salutation for same, The problem statement are to Investors attitude towards primary market.
RESEARCH DESIGN
Research design is the blue print of conditions for collection and analysis of data
in manner that aims to, combine relevance to the research purpose with economy in
procedure. The research design used in my study is basically analytical in nature.
OBJECTIVES OF THE STUDY
The main objective of investment portfolio management is to maximize the
returns from the investment and to minimize the risk involved in investment.
Moreover, risk in price or inflation erodes the value of money and hence investment must
provide a protection against inflation.
Secondary objectives:
The following are the other ancillary objectives:
To know about the perception of primary market.
To know about the risk of primary market.
To study about the regular return.
To study how to earn more liquidity.
To study the safety of investment.
Portfolio management services helps investors to make a wise choice between
alternative investments with pit any post trading hassle’s this service renders optimum
returns to the investors by proper selection of continuous change of one plan to another
plane with in the same scheme, any portfolio management must specify the objectives
like maximum return’s, and risk capital appreciation, safety etc in their offer.
PRIMARY DATA COLLECTION: - Primary data collection, which is collected
through observation or direct communication with the respondent in one form or another.
These are two methods for primary data collection.
Observation Method
Through Questionnaire
But as the time was limited I used the Questionnaire method for data collection
SECONDARY DATA: - Secondary data is also collected by me from various
documents of the company from the Internet. But two main methods to collect it i.e.
Books and Journals and Official sources.
DATA COLLECTION INSTRUMENTS: -
The data collection instruments used in the study are following: -
QUESTIONNAIRE: - This method of data collection is quiet popular, particularly in
care of inquiries. As we know Questionnaire should be comparatively short and simple in
the size of the questionnaire should be kept to minimum questions should proceed in
logical sequence moving from easy to more difficult. Hence questionnaire made by me is
structured. Structured questionnaire is that in which these are define concrete and
predetermine questions. The questions were presented with exactly with same wording
and in the same order to all respondents. Structured questionnaire are simple to
administer and relatively inexpensive to analyze. The provision of alternatives replies at
times helps to understand the meaning of question clearly but such questionnaire have
limitations too for instance, wide range of data and that too in respondents own words
can’t be obtained with structured questionnaire.
Questions that put too much strain on the memory or intellectual of the respondent.
SAMPLING:
Sampling may be defined as the selection of some part of an aggregate or totality on the
basic of which a judgment or inference about the aggregate and totality is made.
Sampling is used in practice for various reasons. All items in any field of inquiry
constitute a universe or population complete enumeration of all items in the population is
known as census inquiry. It can be presumed that in such an inquiry, when all items are
covered, element of chance is left and highest accuracy is obtain. But in practice this may
be not true. Even the slightest element of bias in such an inquiry will get larger and as the
numbers of observations increased more over there is no way checking the element of
bias or it extend except through a survey or used sample checks besides this type of
inquiry involves a great deal of time, money and energy. Therefore when the field of
inquiry is large this method becomes difficult to adopt because of the resources involve.
SAMPLING UNIT: - Every researcher has to take a decision regarding a sample unit
before selecting sample. Sampling unit may be a geographical one such as district, state
and village etc or a social unit such as family, club, school, etc or it may be an individual.
SAMPLE SIZE: - Size of samples refers to the numbers of items to be selected from the
universe to constitute a sample. This is a major problem before every researcher. The size
of sample should neither be excessively large, nor too small. It should be optimum. An
optimum sample is one, which fulfills the requirements of efficiency representatives,
reliability and flexibility. While deciding the size of sample researcher must determine
the desired precision as also an expectable confidence liable for the estimate, the size of
population variance needs to be consider as in case of large variance usually a bigger
sample is needed. The size of population must be kept in view for this also limits the
sample size. As such budgetary constraints must invariable to taken into consideration
when we decide the sample size looking at the above consideration I have decided the
180 sample size of sample unit i.e. users.
SAMPLING PROCEDURE: - This refers to the procedure by which the respondents
should be chosen. In order to obtain a representative sample, a sample of the population
was drawn non-random sampling can be of following types:
Sample Random Sample
Stratified Random Sample
Cluster (Area) Sample
In this case, random sampling was done.
DATA ANALYSIS
For analysing data, bar diagrams and pie charts have been used. Tables showing
data over past years have also been included.
LIMITATIONS OF THE STUDY
The result must be viewed in a quantitative terms. Findings must be verified and
tested through further conclusive investigations. However, the main drawbacks of the
present study are:-
Less Time Period : As the time period that is given to us for doing training was also
too less. In a short time period that is very difficult that we can get the knowledge
about each and everything related to our project.
Lack of knowledge : Conducting the research makes it very difficult for us to perform
out task without any problem. The lack of experience made the task difficult.
Less Response from respondents: Getting the information’s from the respondents
is also a tedious task. As there are many respondents that are not in a position to tell
us correct information about the project or study and also sometimes they do not
show any interest.
In spite of all the above mentioned limitations and constraints, every sincere efforts has
been made to complete the study and to derive the reliable and viable results for
analyzing.
ANALYSIS AND INTERPRETATION
Q.1 Which age group do you belong?
Age Group No. of Respondents
18-30 14
30-45 89
45-55 58
Above 55 19
14
89
58
19
0
10
20
30
40
50
60
70
80
90
No
. o
f R
es
po
nd
en
ts
18-30 30-45 45-55 Above 55
Age Groups
Analysis:
The above diagram shows that 14 respondents were from 18 to 30 age group, 89
respondents were from 30 to 45 age group, 58 respondents were 45 to 55 age group and 19
respondents were from above 55 age group.
2) Have you ever invested in stock market?
Invested in Stock Market No. of Respondents
Yes 150
No 30
150
30
0
20
40
60
80
100
120
140
160
No
. o
f R
esp
on
de
nts
Yes No
Invested in Stock Market
Analysis:
The above diagram shows that 150 respondents said that they are invested in the stock
market and 30 respondents said that they did not invest in the stock market.
Q3) If yes, in which type of market?
Type of Market No. of Respondents
Primary 100
Secondary 30
Both 20
100
3020
0
10
20
30
40
50
60
70
80
90
100
No
. o
f R
es
po
nd
en
ts
Primary Secondary Both
Type of Market
Analysis:
The above diagram depicts that 100 respondents said that they invest in primary
market, 30 respondents said that they invest in secondary market and 20 respondents said that
they invest in both markets i.e. primary as well as secondary.
Q4) What is the source of information regarding primary market?
Source of Information No. of Respondents
News 16
Broker 89
TV 6
Internet 2
Any Other 7
16
89
62
7
0
10
20
30
40
50
60
70
80
90
No
. o
f R
esp
on
de
nts
News Broker TV Internet Any Other
Source of Information
Analysis:
The above diagram shows that 89 respondents i.e. maximum from total 120
respondents said that they got the knowledge from their brokers, 16 respondents said that
they got knowledge about primary market from News/newspaper, 6 respondents got
information through TV, 2 from Internet and 7 respondents said any other sources for
information.
Q5) In which of the following you would like to invest your money?
Like to Invest No. of Respondents
Private Co. 43
Govt. Co. 18
Semi Govt. 37
Any Other 22
43
18
37
22
0
5
10
15
20
25
30
35
40
45
No
. o
f R
esp
on
de
nts
Private Co. Govt. Co. Semi Govt. Any Other
Like to Invest
Analysis:
The above diagram depicts that 43 respondents said that they like to invest in Private
companies, 18 respondents said Govt. companies, 37 respondents said they like to invest in
Semi-Govt. companies and 22 respondents said they like to invest in any other companies.
Q6) How much % of your income you invest yearly?
%age of Income Invest No.of Respondents
0-20% 49
20-35% 32
35-50% 29
Above 50% 10
49
3229
10
0
5
10
15
20
25
30
35
40
45
50
No
.of
Re
sp
on
de
nts
0-20% 20-35% 35-50% Above 50%
%age of Income Investment
Analysis:
The above diagram shows that 49 respondents said that they invest upto 20% of their
income in primary market, 32 respondents said that they invest upto 20% to 35% of their
income, 29% respondents said they like to invest in 35% to 50% of their income, and 10
respondents said that they invest above 50% of their income in primary market.
Q7) In which sector you like the invest the money?
Investment Sector No. of Respondents
Insurance 16
Infrastructure 48
Telecom 33
IT Sector 23
Any Other 10
16
48
33
23
10
0
5
10
15
20
25
30
35
40
45
50
No
. of
Re
spo
nd
en
ts
Insurance Infrastructure Telecom IT Sector Any Other
Investment Sector
Analysis:
The above diagram shows that 16 respondents said that they invest in insurance
sector, 48 respondents said they invest in Infrastructure sector, 33 respondents said that they
invest in Telecom sector, 23 respondents said that they invest in IT sector and 10 respondents
said that they invest in any other sectors.
Q8) How much is your portfolio?
Portfolio No.of Respondents
Rs.10000 to 50000 41
Rs.50000 to 1 Lac 58
Above Rs.1 Lac 21
41
58
21
0
10
20
30
40
50
60
No
.of
Re
sp
on
de
nts
Rs.10000 to 50000 Rs.50000 to 1 Lac Above Rs.1 Lac
Portfolio
Analysis:
The above diagram shows that 41 respondents said that their yearly portfolio has been
between Rs.10000 to 50000, 58 respondents said that their yearly portfolio has been between
Rs.50000 to 1 Lac and 21 respondents said that their yearly portfolio has been above Rs. 1
Lac.
Q9) For how much period you would prefer to invest?
Investment Time No. of Respondents
Short Term 96
Long Term 24
96
24
0
10
20
30
40
50
60
70
80
90
100
No
. o
f R
esp
on
de
nts
Short Term Long Term
Investment Time
Analysis:
The above diagram shows that 96 respondents said that they invest for short time and
24 respondents said that they invest for long term.
Q10) Investing in primary market is risky or not?
Risky Investment No. of Respondents
Yes 26
No 94
Risk of Investment in Primary Market
Yes22%
No78%
Analysis:
The above diagram shows that 78% respondents i.e. 94 said that primary market
investment is risky and 22% respondents i.e. 26 said that primary market investment is not risky.
Q11) If yes, then how much risky in this?
Risk No. of Respondents
Highly 6
Moderately 2
Lower 18
6
2
18
0
2
4
6
8
10
12
14
16
18
No
. of
Re
spo
nd
en
ts
Highly Moderately Lower
Risk
Analysis:
The above diagram shows that 6 respondents said that primary market is highly risky, 2
respondents said moderately risky and 18 respondents said primary market is risky but not highly
or moderately.
Q12) How much return has been earned from primary market?
%age of Return No. of Respondents
10-50% 63
50-100% 31
100-150% 18
150-200% 8
63
31
18
8
0
10
20
30
40
50
60
70
No
. o
f R
esp
on
de
nts
10-50% 50-100% 100-150% 150-200%
%age of Return
Analysis:
The above diagram shows that 63 respondents said that they earn 10-50% return
from their primary market investments, 31 respondents earn 50-100% return, 18
respondents earn 100 to 150% return and 8 respondents said that they earn between 150
to 200% return from primary market.
Q.13 What criteria you used to invest in any IPO?
Criteria for Invest No. of Respondents
Past Experience 29
Company Results 59
Any Other 32
29
59
32
0
10
20
30
40
50
60
No
. o
f R
es
po
nd
en
ts
Past Experience Company Results Any Other
Criteria for Investment
Analysis:
The above diagram shows that 29 respondents said that they use their past
experience for new investment into primary market, 59 respondents said they watch
current results of companies in which they want to invest and 32 respondents said they
watch other things whenever they go for investment in primary market.
Q.14 From where you get to know about these criteria?
Knowledge about Criteria No. of Respondents
Share Broker 87
Newspaper 25
Magazine 8
87
25
8
0
10
20
30
40
50
60
70
80
90
No
. o
f R
es
po
nd
en
ts
Share Broker Newspaper Magazine
Knowledge about Criteria
Analysis:
The above diagram shows that 87 respondents said that know about their criteria from
their Share brokers, 25 respondents said they got knowledge from Newspapers and 8
respondents said they got knowledge from Magazines.
FINDINGS
Most of respondents said that they are invested in the stock market and few of
them said that they did not invest in the stock market.
Maximum respondents said that they got the knowledge from their brokers, &
some of them said that they got knowledge about primary market from
News/newspaper & very few respondents got information through TV from Internet
and any other sources for information.
Retail investor divert their fund from the banking system to the primary market.
As the interest rate of saving account deposit decreased very much.
Most of respondents said that they invest less portion of their income in primary
market. Very few investors like to invest major portion of their income in primary
market.
Respondents view is that primary market investment is risky. So there is a fear in
the mind of respondents about to invest in primary market.
The study shows that maximum respondents among the sample respondents are
getting information related to the different services from the agents. It implies that
most powerful source of information about services is an agent.
There is a need to bring awareness among the general public about primary
market.
SUGGESTIONS
On the basis of the Market survey conducted has put very interesting findings in the
Market. The very first suggestion to the investor is that the best thing for the investors to
do to ensure that they are not cheated in this IPO boom, is to study the prospectus
themselves, read various comments and take their own decision. Investors have to beware
as all those who are keen to grab a piece of the cake of the impending IPO boom, are
doing so at their cost. Keep in mind three P’s before investing in any IPO & Three P’s are
Promoter
Performance
Price
The next best suggestion to the investor is that they should be steer clear
of IPO’s from lesser known industry and focus on offerings by well known industry
leader with quality management and strong financials.
The investor should not follow the IPO boom blindly as they can get
cheated as they during nineties IPO fiasco.
The companies should make regular contact with his customer through his
marketing executives. This would not only help in strengthening the business relation
but would also help in taking proper feedback of their products.
The majority of customers are price conscious so they should improve or
decrease their price/commission rate.
The companies should concentrate more on the sale promotion activities
through different media.
The market is not well aware of the product line of the companies, so
companies should give full information of there product line to the investors.
In corporate and institutions, people are looking for better service. So by
providing this it can gain the big reach its break even as soon as possible and can earn
profit from there.
Customers get dissatisfied very soon. So they must be supported by a good
customer care unit. They need care and by providing that a long customer-
organization relationship can be built.
CONCLUSION
This project is based on the study of “Investors attitude towards primary market”.
In the today scenario it’s very important to study the customer’s psychological behaviour
regarding the various services provided by them.
In the end, I conclude that investor should not invest their hard earned money
blindly in the IPO’s but they should invest their money by taking different safeguards like
understand the company business, who its promoter are, how is its management, its risk
factor and pricing of the issue etc.
Although there is SEBI to protect the investor but he company which follow the
legal binding of the SEBI is not fool proof that the company is a good one.
It has been concluded that on the one hand the customers are somewhat satisfied
but on the other hand, still some improvements are required. So, the broking companies
segment is flooded with the new schemes from new & existing players and moreover, lot
many schemes are waiting to hit the ramp in the coming years.
The main reason behind people not wanting to have investing of a particular company
is the lack of proper information. Moreover, people don’t want to come out of cocoon
of their seemingly uncomplicated life. They seem satisfied with their old ways and
are wary of modern, new age products.
The most important factor that attracts the people towards investment in primary
market is the communication factor. This is the most important reason and for this,
people feel persuaded to buy it.
BIBLIOGRAPHY
1) M.Y Khan., “Financial Services”, Himalaya publishing house Pvt. Ltd. New
Delhi, 2001, p-10-20.
2) Kothari, C.R, “Research methodology methods & techniques”, 2nd edition, New
age international ltd. Publishers, 2005, P. No. 27-42.
3) Wilkinson & Bhandarkar, “Business Research Methodology”, 6th edition, Tata
McGraw Hill Publications, Delhi, 2005, PP 237-243.
4) Dr. Bansal K Lalit, “Merchant Banking & Financial Services” Vikas
Publications, 2002, (Page 152- 155) (Page 175-185)
JOURNALS and MAGAZINES:-
1) Applied Finance, page no 261-268, volume 5 / Dec.2007.
2) Financial review, edition January 2007, pages no 34-40.
3) Management Accountant, May 2006 P. No.- 359-412.
Websites
1. www.thehindubusinessline.com
2. www.indiainfoline.com
3. www.prowessdatabase.com
4. www.indiatimes.com
QUESTIONNAIRE
Q1) General Information1. Name ____________________________ 2. Age ______________
3. Occupation
a) Businessman b) Serviceman
c) Professional d) Any other
4. Annual Income
a) Rs.50000 to 1 Lac b) Rs.1 Lac to 3 Lacs
c) Above Rs.3 Lacs
Q2) Which age group do you belong?
18 - 30 30 - 45 45 - 55 above 55
Q3) Have you ever invested in stock market?
Yes No
Q4) If yes, in which type of market?
Primary Market Secondary Market
Q5) What is the source of information regarding primary market?
News Broker TV Internet Any other
Q6) In which of the following you would like to invest your money?
Private Co. Govt. Co. Semi Govt. Any other
Q7) How much % of your income you invest yearly?
0-20% 20-35%
35-50% 50% & above
Q8) In which sector you like the invest the money?
Insurance Infrastructure Telecom
IT Sector Any Other
Q9) How much is your portfolio?
Rs.10000 – 50000 Rs.50000 – 1 Lac Above 1 Lac
Q10) For how much period you would prefer to invest?
Short term Long term (5 & above)
Q11) Investing in primary market is risky or not?
Yes No
Q12) If yes, then how much risky in this?
Highly Moderately Lower
Q13) How much return has been earned from primary market?
10% – 50% 50%-100% 100%-150% 150% - 200%
Q.14 What criteria you used to invest in any IPO?
Past Experience Company Result Any Other
Q.15 From where you get to know about these criteria?
Share Broker Newspaper Magazine
