Project ReportOnInvestors attitude towards securities marketSubmitted in partial fulfillment of requirement of Bachelor of Business Administration (B.B.A) General

BBA VIth SEMESTER (B) (E)BATCH 2012-2015

Name of guide: Dr. Ruchi Singhal Name of Student: Abhishek Goel

Designation: Asst. Professor Enrollment no.:12224501712

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL

ACKNOWLEDGEMENT

Success is an effort bounded activity that involves co-operation of all.I hereby take the opportunity to express our profound sense of gratitude and reverence to all those who have helped and encouraged us towards successful completion of the Project Report. I would like to thank my Project Guide Dr. Ruchi Singhal for her immense guidance, valuable help and the opportunity provided to me to complete the project under her guidance. I would liketoconvey myheartfelttomyfacultyforthe trust she showed in me in assigning me an important and interesting project by sparing time for me from her busy schedule to discuss and clarify various issue connected with this project, for her friendly advice and the motivation she provided me in the completion of the project.

Last but not the least, my gratitude to great almighty and my parents without whose concerned and devoted support this project would not have been possible.

Date: Place: New DelhiSubmitted by: Abhishek Goel

STUDENTS UNDERTAKING

I hereby declare that I have carried out project on the topic entitled Investors attitude towards securities market at Jagannath International Management School, New Delhi. I further declare that this project work is based on my original work and no part of this project has been published or submitted to anybody.

(Abhishek Goel)

CERTIFICATE OF COMPLETION

This is to certify that the dissertation/project report entitled Investors attitude towards securities market carried out by Abhishek Goel is an authentic work carried out by him at Jagannath International Management School under my guidance. The matter embodied in this project work has not been submitted earlier for the award of any degree to the best of my knowledge and belief.

Date: Dr. Ruchi Singhal (Assistant Professor)

CONTENTS

DescriptionPage No.

Acknowledgement2

Student Undertaking3

Certificate of Completion4

List of Tables6

Executive Summary7

Introduction to topic

9

Research Methodology55

Findings & Inferences60

Recommendations and Conclusion72

Bibliography78

LIST OF TABLESS.No.DescriptionPage no.

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EXECUTIVE SUMMARY

The project work is pursued as a part of BBA (General) Curriculum at Jagannath International Management School, Delhi. The past twenty five years have witnessed a process of accelerating change in the worlds 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 life 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.Thesecondary market, is also calledaftermarket, is thefinancial marketin which previously issuedfinancial instrumentssuch as stock,bonds,options, andfuturesare bought and sold.Another frequent usage of "secondary market" is to refer to loans which are sold by amortgage banktoinvestorssuch asFannie MaeandFreddie Mac.The term "secondary market" is also used to refer to the market for anyused goodsor assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production).With primary issuances of securities or financial instruments, or theprimary market, investors purchase these securities directly from issuerssuch ascorporationsissuingsharesin anIPOorprivate placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market.The secondary market for a variety of assets can vary fromloansto stocks, from fragmented to centralized, and fromilliquidto very liquid. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as theNew York Stock Exchange,London Stock ExchangeandNASDAQprovide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Most bonds and structured products trade over the counter, or by phoning the bond desk of ones broker-dealer. Loans sometimes trade online using aLoan Exchange.

CHAPTER IINTRODUCTION TO THE TOPIC

The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. While performing their activities, these units are in a surplus /deficit/ balanced budgetary situations. There are areas or people with surplus funds or with a deficit. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit.The financial system or the financial sector of any country consists of specialized and non-specialized financial institutions, of organized and unorganized financial markets, of financial instruments and services which facilitate transfer of funds. The word system, in the term financial system, implies a set of complex and closely connected or interlinked institutions, agents, practices, markets, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance. Money refers to the current medium of exchange or means of payment. Credit or loan is a sum of money to be returned, normally with interest. Finance is monetary resources comprising debt and ownership funds of the state, company or person.Economic growth implies a long-term rise in per capita national output. The basic conditions determining the rate of growth are three- Effort, Capital and Knowledge. In the post Second World War there has been an upsurge in the desire for economic growth following rapid political and other developments and increasing impatience in the countries of Asia, Africa and South America with their existing economic conditions. The keen desire for development has tended to minimize the significance of factors associated with Efforts. As regards Knowledge it is suggested that there already exists a vast amount of knowledge in developed countries. This reasoning has led to emphasis being placed on increasing capital formation as the most crucial factor in economic growth of the underdeveloped countries.The rate of capital formation in the underdeveloped countries has for a long time been hardly adequate to provide even for a rate of growth of national output at par with the rate of population growth. While the developed countries have, with an average rate of population growth of 1.9 percent, been investing 15 % to 18% (gross/net) of their national income, the gross/net rate of investment in underdeveloped countries has been only 6% or 7% in the face of population growth at the rate of 2.9 % per annum. Financial institutions, also called financial intermediaries, provide means and mechanism of transferring command over resources from those who have an excess of income over expenditure to those who can make use of the same for adding to the volume of productive capital. They, on the one hand, create claims in the form of their shares, debentures, deposits, etc., against themselves which they induce the savers to accept in exchange for their savings (claims on society for goods and services in the future). On the other hand, they acquire claims against the investors by investing in their shares and debentures and by granting direct loans to them. It is here that role of financial institutions can be traced. They provide a convenient and effective link between savings and investment. Financial institutions channel existing economic conditions. The keen desire for development has tended to minimize the significance of factors associated with Efforts. As regards Knowledge it is suggested that there already exists a vast amount of knowledge in developed countries. This reasoning has led to emphasis being placed on increasing capital formation as the most crucial factor in economic growth of the underdeveloped countries.

Volatile global markets, risk aversion, Euro zone sovereignty issues, Greek debt, rupee depreciation; these are terms that the investors all over the globe have become accustomed to these days. With equities markets giving negative returns all over the globe and the rupee depreciating by over 12% to the USD, 6% against the Euro and over 15% against the AED, the major question crossing minds of all NRIs, PIOs and OCIs is Is this the best time to invest in India?The Indian stock markets because of several reasons have underperformed the global markets as well as the emerging markets to a certain extend because of which investors are seeing negative returns, but if an investor has medium to long term view then this is the best time to invest in India. The Reserve bank of India has already given signs that interest rates in India have already peaked and if the inflation rate stabilize and start to reduce a bit the Reserve bank of India will start reducing rates which in turn will push the bond prices up. Looking at these scenarios NRIs have lot of investment opportunities depending on their budget and the time frame they can remain invested for. Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of the markets in the world, it has reasonable options for an ordinary man to invest his savings.One needs to invest to and earn return on your idle resources and generate a specified sum of money for a specific goal in life and make a provision for an uncertain future. One of the important reasons why one needs to invest wisely is to meet the cost of inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it cost to buy the goods and services you need to live. Inflation causes money to loss value because it will not buy the same amount of a good or service in the future as it does now or did in the past. The sooner one starts investing, the better. By investing early you allow your investments more time to grow, where by the concept of compounding increases your income, by accumulating the principle and the interest or dividend earned on it, year after year. The three golden rules for all investors are: Invest early Invest regularly Invest for long-term and not for short-termThis survey will also help to understand the investors facets before investing in any of the investment tools and thus to scrutinize the important aspects of the investors before investing that further helped in analyzing the relation between the features of the products and the investors requirements.

Financial & Economic Meaning of InvestmentInvestment is the allocation of monetary resources to assets that are expected to yield some gain or positive return over a given period of time. These assets range from safe investments to risky investments. Investments in this form are also called Financial Investments.From the point of view of people who invest their funds, they are the suppliers of Capital and in their view, investment is a commitment of a persons funds to derive future income in the form of interest, dividends, rent, premiums, pension benefits or the appreciation of the value of their principal capital. To the financial investor, it is not important whether money is invested for a productive use or for the purchase of second hand instruments such as existing shares and stocks listed on the stock exchanges.Most investments are considered transfers of financial assets from one person to another.The nature of investment in the financial sense differs from its use in the economic sense. To the economist, Investment means the net additions to the economys capital stock which consists of goods & service that are used in the production of other goods & services. In this context, the term investment, therefore, implies the formation of new and productive capital in the form of new construction, new producers durable equipment such as plant and equipment. Inventories & human capital are included in the economists definition of investment.The financial & economic meanings of investment are related to each other because investment is a part of savings of individuals which flow into the capital market either directly or through institutions, divided in new and second hand capital financing. Investors as suppliers and investor as user of long term funds find a meeting place in the market.

Why investments are important?Investments are both important and useful in the context of present-day conditions. Some factors that have made investment decisions increasingly important are:

Longer life expectancy or planning for retirementInvestment decisions have become significant as people retire between the age of 55 and 60. Also, the trend shows longer life expectancy. The earnings should, therefore be calculated in such a manner that a portion should be put away as savings. Savings by themselves do not increase wealth; these must be invested in such a way that the principal and income will be adequate for a greater number of retirement years.The importance of investments decisions is further enhanced by the fact that there is increasing number of women working in organizations. These women will be responsible for planning their own investments during their working life so that after retirement they are able to have a stable income.

Increasing Rates of TaxationTaxation is one of crucial factors in any country, which introduces an element of compulsion in a persons savings. There are various forms of savings outlets in our country in the form of investments which help in bringing down the tax level by offering deductions in personal income.

Interest RatesAnother aspect which is necessary for a sound investment plan is the level of interest rates. Interest rates vary between one investment and another. These may vary between risky and safe investments; they may also differ due to different benefit schemes offered by the investments. These aspects must be considered before actually allocating any amount. A high rate of interest may not be the only factor favoring the outlet for investment. The investor has to include in his portfolio several kinds of investments. Stability of interest is as important as receiving a high rate of interest.

InflationInflation has become a continuous problem since the last decade. In these years of rising prices, several problems are associated coupled with a falling standard of living. Before funds are invested erosion of the resources will have to carefully consider in order to make the right choice of investments. The investor will try to search an outlet, which will give him a high rate of return in the form of interest to cover a decrease due to inflation. He will also have to judge whether the interest or return will be continuous or theres a likelihood of irregularity. Coupled with high rates of interest he will have to find an outlet which will ensure safety of principal. Besides high rate of interest & safety of principal, an investor also has to always bear in mind the taxation angel. The interest earned through investment should not unduly increase his taxation burden.

IncomeAnother reason why investment decisions have assumed importance is the general increase in the employment opportunities. The employment opportunities gave rise to both male and female working force. More incomes and more avenues of investment have led to the ability and willingness of working people to save and invest their funds.

Investment ChannelsThe investor in his choice of investment will have to try to achieve a proper mix between high rate of return and stability of return to reap the benefits of both. Some of the instruments available are Corporate Stock, Provident Fund, Life Insurance, Fixed Deposits in the Corporate Sector, Unit Trust Schemes and so on.

Elements of InvestmentThe study of investments is concerned with the purchase and sale of financial assets and the attempt of the investor to make logical decisions about the various alternatives in order to earn returns of them. The returns are further dependent on the varying degrees of risk.A functional definition as defined by Amling is, Investment maybe defined as the purchase by an individual or institutional investor of a financial or real asset that produces a return proportional to the risk assumed over some future investment period.These definitions of investments bring froth three elements of investment, categorized as:a. Returnb. Riskc. Relationship of risk & returnd. Time factor

ReturnInvestors may buy and sell financial assets in order to earn returns on them. The returns, better known as reward from investments, include both current income and capital gains or losses which arise by the increase or decrease of the security prices. The capital gains or the income earned are then treated as a percentage of the beginning investment. Returns, therefore, may be expressed as the total annual income and capital gain as a percentage if investment. Satisfactory returns are different for different people. Two rational investors may be satisfied by different levels of anticipated return and estimated risk. Rational investors like returns but are risk averse. They try to maximize their utility by buying, holding, or adjusting their portfolio to achieve maximum utility.

RiskRisk and uncertainty are an integral part of an investment decision. Risk is composed of the demands that bring in variations in return of income. The main forces contributing to risk are price and interest. Risk is also influenced by external and internal considerations. External risks are uncontrollable and broadly affect investments. These external risks are called systematic risk. Risk due to internal environment of a firm or those affecting a particular industry are referred to as unsystematic risk.

Relationship of Risk & ReturnRisk and return are inseparable. To ignore risk and only expect return is an outdated approach to investments. The investment process must be considered in terms of both aspects risk and return. Return is a precise statistical term; it is not a simple expectation of investors return but is measurable also. Risk is not a precise statistical term but we use statistical terms to quantify it. The investor should keep the risk associated with the return proportional as risk is directly correlated with return. It is generally believed that higher the risk, the greater the reward but seeking excessive risk does not ensure excessive return. At a given level of return, each security has a different degree of risk. The entire process of estimating return and risk for individual securities is called security analysis.

TimeTime is an important factor in investments. Time offers several different courses of action. It may involve from trading to buying and selling at major turning points in the market. It may also consider the time period of investment such as long term, intermediate or short term. Time period depends on the attitude of the investor. As investments are examined over the time period, expected risk and return are measured. The investor usually selects a time period and return that meet expectations of return and risk.

Investors Attitude towards Investments in Securities MarketInvestment and savings attitudes and behavior are influenced by the structure, complexity, transparency and perceived past and future performance of different kinds of investment options; the general lack of independent financial advice; the recent superior performance of property investment; perceptions and personal tolerance of risk; the often low level of financial literacy about products other than property; the nature of the information people use when making financial decisions; the personal or family experience people have with investment; a general wish to have personal control over the investment and trust in the advice of friends and family over unknown professional advisors.Consumer decisions on saving are likely to be influenced by new or proposed changes in the investment environment. The application of lower taxes to earnings in managed funds, and forthcoming regulatory changes aimed at improving disclosure and prudential arrangements applying to financial products, providers and advisors are also likely to have an impact.

Investors Attitude towards RiskThere general consensus among investors is that most of them are unwilling to take much risk with their money. This is the case even over the long term (five years or more).The most common reasons cited for being averse to taking risks included the responsibility of raising a family and taking on large financial commitments such as a mortgage. However, some of the investors were willing to take higher risks with their money to give themselves the chance of making higher returns. These participants tended to be young and single or higher earners.When it came to considering risk as a factor in financial decision-making, views are mixed. Some investors would not consider taking out anything more risky than a savings account; their sole focus, therefore, would be on the level of return available from savings accounts. Other class of investors felt it was important to consider the potential returns whatever the product.

MarketActual 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. Market, basically consists of: Primary Market Secondary Market

Primary MarketNew Issues Market or Primary 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.

Secondary MarketThis is the market wherein the trading of securities is done. Secondary market consists of both equity as well as debt markets.Securities issued by a company for the first time are offered to the public in the primary market. Once the IPO is done and the stock is listed, they are traded in the secondary market. The main difference between the two is that in the primary market, an investor gets securities directly from the company through IPOs, while in the secondary market, one purchases securities from other investors willing to sell the same.

Equity shares, bonds, preference shares, treasury bills, debentures, etc. are some of the key products available in a secondary market. SEBI is the regulator of the same.

Features of Secondary Market:

1. Economic Barometer: A stock exchange is a reliable barometer to measure the economic condition of a country. Every major change in country and economy is reflected in the prices of shares. The rise or fall in the share prices indicates the boom or recession cycle of the economy. Stock exchange is also known as a pulse of economy or economic mirror which reflects the economic conditions of a country.2. Pricing of Securities:The stock market helps to value the securities on the basis of demand and supply factors. The securities of profitable and growth oriented companies are valued higher as there is more demand for such securities. The valuation of securities is useful for investors, government and creditors. The investors can know the value of their investment, the creditors can value the creditworthiness and government can impose taxes on value of securities.3. Safety of Transactions: In stock market only the listed securities are traded and stock exchange authorities include the companies names in the trade list only after verifying the soundness of company. The companies which are listed they also have to operate within the strict rules and regulations. This ensures safety of dealing through stock exchange.4. Contributes to Economic Growth:In stock exchange securities of various companies are bought and sold. This process of disinvestment and reinvestment helps to invest in most productive investment proposal and this leads to capital formation and economic growth.5. Spreading of Equity Cult:Stock exchange encourages people to invest in ownership securities by regulating new issues, better trading practices and by educating public about investment.6. Providing Scope for Speculation:To ensure liquidity and demand of supply of securities the stock exchange permits healthy speculation of securities.7. Liquidity:The main function of stock market is to provide ready market for sale and purchase of securities. The presence of stock exchange market gives assurance to investors that their investment can be converted into cash whenever they want. The investors can invest in long term investment projects without any hesitation, as because of stock exchange they can convert long term investment into short term and medium term.8. Better Allocation of Capital:The shares of profit making companies are quoted at higher prices and are actively traded so such companies can easily raise fresh capital from stock market. The general public hesitates to invest in securities of loss making companies. So stock exchange facilitates allocation of investors fund to profitable channels.

9. Promotes the Habits of Savings and Investment:The stock market offers attractive opportunities of investment in various securities. These attractive opportunities encourage people to save more and invest in securities of corporate sector rather than investing in unproductive assets such as gold, silver, etc.

Buyer1. 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.

SellerEntity 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.

Negotiation1. 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.

BusinessEconomic 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.

IntermediaryFirm 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.

ResellerOne who buys goods from a manufacturer and resells them to customers unchanged.

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.

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 MarketThere 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 OFFERThe 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:

PromotersModern 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 issueThese 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.UnderwritersThe 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 agentsPublic 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 institutionsTerm 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 AgenciesIn 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 AgenciesBesides 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 companys 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 MARKETBOOK 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 IssueIn 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 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 INVESTORSEBI 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 BOOMThe 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 UTIThe 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 PROCESSBacked by aggressive merchant bankers, the pink papers, and gung ho TV channels. Rs. 40,000 crore is hard to resist. But dont 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 businessMake sure you understand the companys business. The attempt should be to understand the long-term sustainable advantage of the business and the companys 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 CompanyNext, 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, Marutis share stood at 54.6 percent; the balance was divided among nine other manufacturers. Similarly, TV Today is Indias leading news broadcaster and Patni computer is Indias largest IT services company.

The promoterAn old business adage says, its 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 its people who run the business. Hence, its important to focus on the credentials of the promoter and key management figures. Invest in companies with a proven management track record, since its 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, theres 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 companys 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 companys operations and results.

The RiskThis 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 companys 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 objectsIn 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 Divis 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 PrintOften, the most critical bits of information on a companys 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 Marutis Rs.146 crore net profit in 2003 will get a boost of 40 percent by just this little clause.

The PriceThe 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 companys 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: dont buy stocks just because they are making a debut in the market.

The brokerThe lead managers track record is as important as that of the companys. 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.

Investors attitude towards risk: what can we learn from options?Market commentators often cite changes in investors attitude towards risk as a possible explanation for swings in asset prices. Indeed, episodes of financial turmoil coincide with anecdotal evidence of abrupt shifts in market sentiment from risk tolerance to risk avoidance. While these shifts may be potentially driven by changes in the fundamental disposition of individual investors towards risk, they are more likely to reflect the effective risk attitude as manifested through the behaviour of currently active investors. In particular, behaviour similar to that induced by shifts in the fundamental preferences of investors over risk and return can also reflect changes in the composition of active market players or tactical trading patterns, induced by the interaction of prevailing market conditions with institutional features. Tools that track the dynamics of investors willingness to take risks can lead to a better understanding of the functioning of financial markets. In particular, they can contribute not only to more effective risk management from the point of view of individual institutions, but also to improve monitoring of market conditions by policymakers. This article constructs an indicator of investors effective aversion to risk. The indicator is obtained by comparing the statistical likelihood of future asset returns, which is estimated on the basis of historical patterns in spot prices, with an assessment of the same likelihood filtered through market participants effective risk preferences, which are derived from option prices. In particular, we argue that the relative size of downside risk, as assessed from the preference-weighted and the statistical vantage points, co-moves with the prevailing effective attitude of market participants towards risk. Remarkably, we find that indicators of risk attitude derived from different equity markets have a significant common component, indicating that investor sentiment transcends national boundaries. In the next two sections we first describe and motivate the methodology and then discuss the time patterns displayed by the indicator of effective risk aversion for three equity market indices. In the last section we analyse the statistical behaviour of asset prices, conditional on whether the indicator signals a high or low investor aversion to risk. The observed patterns are consistent with accounts suggesting that periods of investor retrenchment from risk-taking are also characterised by higher equity price volatility and subdued co-movement between bond and equity markets.

Chapter IIResearch MethodologyResearch 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 scientifically and systematically.

Research ProblemThe 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 securities market.

Research DesignResearch 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 studyThe following are the other ancillary objectives: To know about the perception of investors towards securities market. To know about the risk of primary and secondary market. To study about the regular return. To study how to earn more liquidity. To study the safety of investment. To find out the important factor which do mostly affect to the customer To develop a good strategy and process that improves the business of the organization To be able to compare and analyze the various Financial Products Business development and revenue generation

Portfolio management services helps investors to make a wise choice between alternative investments with pit any post trading hassles 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 returns, 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.

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) SampleIn this case, random sampling was done.Data AnalysisFor analysing data, bar diagrams and pie charts have been used. Tables showing data over past years have also been included.

LIMITATIONS OF THE STUDYThe various limitations of the study are: People were not willing to fill the entire questionnaire due to the less time available to them. Some respondents might be hesitant to divulge personal and financial information which can affect the validity of all responses. There is lack of awareness among people about investing in stock market. So the people who are aware of such things were found in specific areas for survey purposes. Most people are comfortable with traditional system in small towns and like to trade from their respective brokers, hence not providing a true opinion of theirs. Some of the respondents who did not do online trading were able to respond to only few questions. The survey was done in the New Delhi region and may not truly express the opinion of whole country.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.

Chapter 3Analysis & InterpretationQ.1Which age group do you belong?

Age GroupNo. of Respondents

18-3014

30-4589

45-5558

Above 5519

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.

Q.2 What is the Employment Status?

CategoryNo. of RespondentsPer cent

Salaried12964.8

Professional2110.5

Business2613.0

Others2311.5

Total200100

Salaried65%Professional10%Business13%Others12%

Table 3.2 indicates that most of the respondents are from the working or employed class. The respondents were given four options to choose from: Salaried, Professional, Business and Others. Others here represent the retired and the homemakers who are investors.

2) Have you ever invested in stock market?

Invested in Stock MarketNo. of Respondents

Yes150

No30

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 MarketNo. of Respondents

Primary100

Secondary30

Both20

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 InformationNo. of Respondents

News16

Broker89

TV6

Internet2

Any Other7

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 InvestNo. of Respondents

Private Co.43

Govt. Co.18

Semi Govt.37

Any Other22

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 InvestNo.of Respondents

0-20%49

20-35%32

35-50%29

Above 50%10

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 SectorNo. of Respondents

Insurance16

Infrastructure48

Telecom33

IT Sector23

Any Other10

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?

PortfolioNo.of Respondents

Rs.10000 to 5000041

Rs.50000 to 1 Lac58

Above Rs.1 Lac21

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 TimeNo. of Respondents

Short Term96

Long Term24

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 InvestmentNo. of Respondents

Yes26

No94

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?

RiskNo. of Respondents

Highly6

Moderately2

Lower18

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 securities market?

%age of ReturnNo. of Respondents

10-50%63

50-100%31

100-150%18

150-200%8

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.13What criteria you used to invest in any IPO?

Criteria for InvestNo. of Respondents

Past Experience29

Company Results59

Any Other32

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.14From where you get to know about these criteria?

Knowledge about CriteriaNo. of Respondents

Share Broker87

Newspaper25

Magazine8

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.

Q.15. What is your Saving Objective?

OccupationNo. of RespondentsPer cent

Childrens Education126

Growth Plan7236

Retirement Plan4824

Health Care Expenses84

Home Purchases4020

Others2010

TOTAL200100

%0%10%20%30%406%36%24%4%20%10%

ANALYSIS & INTERPRETATION

Analysis is the process of placing the data in the ordered form, combining them with the existing information and extracting the meaning from them. In other words, analysis is an answer to the question what message is conveyed by each group of data . Data, which are otherwise raw facts and are unable to give a meaningful information. The raw data become information only when they are analyzed and when put in a meaningful form.Interpretation is the process of relating various bits of information to other existing information. Interpretation attempts to answer what relationship exists between the findings to the research objectives and hypothesis framed for the study in the beginning 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 Ps before investing in any IPO & Three Ps are Promoter Performance Price The next best suggestion to the investor is that they should be steer clear of IPOs 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 its very important to study the customers 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 IPOs 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 dont 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 mar