A PROJECT REPORT ON

CHALLENGES /PROBLEMS FACED BY INVESTORS IN INDIAN

FINANCIAL MARKET

SUBMITTED BY

Mr . ANKUSH HIMMAT THAKKAR

BAF (Finance) Semester VI

Project Submitted To “University Of Mumbai”

In Partial Fulfilment for the
Award of Graduation Degree in B.Com (Accounting & Finance) /
B.Com (Banking & Insurance) / Bachelor of Management Studies
(B.M.S) Finance
/ Marketing)

UNDER THE GUIDANCE OF

DR HEMAL VORA

GURUKUL COLLEGE OF COMMERCE

AFFILIATED TO UNIVERSITY OF MUMBAI
ISO Certified: 21001/14001/50001
GHATKOPAR (E), MUMBAI- 400077
2022-23
 DECLARATION

I, Mr . ANKUSH HIMMAT THAKKAR student of B.Com (Accounting &

Finance) Semester VI (April 2023) of GURUKUL COLLEGE OF
COMMERCE, MUMBAI-400077 to hereby declare that I have completed the
project work titled “A PROJECT REPORT ON

CHALLENGES /PROBLEMS FACED BY INVESTORS IN INDIAN

FINANCIAL MARKET as a part of academic fulfilment.

THE INFORMATION CONTENT IN THIS PROJECT WORK IS TRUE AND ORIGINAL

TO THE BEST OF MY KNOWLEDGE AND BELIEF.

SIGNATURE OF

MR.ANKUSH HIMMAT THAKKAR

 ACKNOWLEGEMENT

Firstly, I wish to express my sincere and heartfelt thanks to my Project Guide DR.HEMAL
VORA, for her distinctive guidance and encouragement throughout the project work.

I also take this opportunity to express my deep sense of gratitude to our Principal, DR.
NANDITA ROY, B.Com (Accounting & Finance) Co-ordinator Dr. Kripa Thakkar /
B.Com (Banking & Insurance) Co-ordinator Mr. Rishikesh Jawarkar / Bachelor of
Management Studies (B.M.S) Finance / Marketing Co-ordinator Dr. Rajendra Vare and
our college Librarian for their continuous support to complete this project.

Lastly, I wish to express my heartfelt gratitude to my beloved parents And to all my friends
for their encouragement and support in Completing this project work.

Above all I thank Lord Almighty for abundant mercies and infinite Grace which showed
upon me to complete the project work.

SIGNATURE OF

DR.HEMAL VORA
 CERTIFICATE

This is to certify that Mr . ANKUSH HIMMAT THAKKAR the

student of GURUKUL COLLEGE OF COMMERCE Studying in
B.Com (Accounting & Finance) Semester VI, ROLL NO. 55 has
successfully completed the project entitled “A PROJECT REPORT ON
CHALLENGES /PROBLEMS FACED BY INVESTORS IN INDIAN
FINANCIAL MARKET”
as a part of assignment under my supervision during the academic
year 2022-2023

PRINCIPAL EXTERNAL
GUIDE DR. NANDITA ROY

COORDINATOR INTERNAL GUIDE

DR. KRIPA THAKKAR (BMS)
DR. RAJENDRA VARE (BAF)
DR. RISHIKESH JAWARKAR (BBI)
EXECUTIVE SUMMARY

Financial Markets are an important component of a country’s financial system. It is

the infrastructure that connects lender and borrowers. In simple terms, individuals who
have surplus money invest in securities and entities which requires capital issues
securities. The investors earn a return on the security while the entity gets capital for
growing or expanding its business. Let us understand this with the help of an example.
Person A has excess amount and wants to invest it. He can deposit the amount in bank
and earn a fixed interest. However, if he invests in stocks, he can earn higher returns.
The financial market creates an alternative for the individual who has a higher risk
appetite and wants to earn higher returns. Banks also use the money we deposit for
giving loan to companies. In Financial Market, we directly lend money to companies and
get interest or returns. Financial markets are a mechanism for the exchange trading of
financial products within a policy framework. They are characterized by a large volume
of transactions and the speed with which financial resources move from one owner to the
other.
The difficulty of finding the right resource is tied to the challenge of there being too
much information available. As an investor, how do you find the good resources in the
crowd? To be clear, having lots of choices and easy access to free resources is an overall
win for the modern investor. But research can be daunting when there are so many
choices. While investing primarily deals in facts, opinion colors many areas (such as
whether technicals matter more than fundamentals). With time, many investors learn to
filter out information and create a select pool of reliable sources that match their
investing tastes. Until then, however, it is hard to avoid being overwhelmed by the range
and variety of opinions out there.
Even if you have a good handle on quality information, you can still get burned when
inaccurate information or basic uncertainty hits the market. Market reactions have
always been extreme, but the increasingly global reach of information has given
investors more reasons to overreact (literally on a per hour basis). It doesn't take a great
leap of imagination to see good or bad consequences with every headline that pops up in
the feed.

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 1.

INTRODUCTION :-

(1.1) Meaning of Financial Market :-

A financial market is a market in which people trade financial securities and derivatives
at low transaction costs. Some of the securities include stocks and bonds, raw materials
and precious metals, which are known in the financial markets as commodities. A
Financial Market is referred to space, where selling and buying of financial assets and
securities take place. It allocates limited resources in the nation’s economy. It serves as
an agent between the investors and collector by mobilising capital between them.
In a financial market, the stock market allows investors to purchase and trade publicly
companies share. The issue of new stocks are first offered in the primary stock
market, and stock securities trading happens in the secondary market. It provides a brief
description of the mechanism through which finances are mobilised by a business
organisation for both short term and long term requirements. The individuals, financial
institutions, corporations and government trade in this market either directly or indirectly
through brokers and dealers.

Definition of Financial market :-

Financial Market refers to a marketplace, where creation and trading of financial

assets, such as shares, debentures, bonds, derivatives, currencies, etc. take place. It plays
a crucial role in allocating limited resources, in the country’s economy. It is defined as a
market for the exchange of capital and credit, including the money markets and the
capital markets. It acts as an intermediary between the savers and investors by
mobilising funds between them. It provides a platform to the buyers and sellers, to
meet, for trading assets at a price determined by the demand and supply forces.

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 Functions of Financial market :-

The functions of the financial market are explained with the help of points below :

 It facilitates mobilisation of savings and puts it to the most productive uses.

 It helps in determining the price of the securities. The frequent interaction between
investors helps in fixing the price of securities, on the basis of their demand and supply
in the market.
 It provides liquidity to tradable assets, by facilitating the exchange, as the investors can
readily sell their securities and convert assets into cash.
 It saves the time, money and efforts of the parties, as they don’t have to waste resources
to find probable buyers or sellers of securities. Further, it reduces cost by providing
valuable information, regarding the securities traded in the financial market.
 It provides pricing information resulting from the interaction between buyers and sellers
in the market when they trade the financial assets and also provides security to dealings
in financial assets.
 It ensures liquidity by providing a mechanism for an investor to sell the financial assets
and also ensures low cost of transactions and information.

(1.4) Structure of Indian Financial Market :-

The Indian financial market consists of two major segments: (a) Money Market; and
(b) Capital Market. While the money market deals in short-term credit, the capital
market handles the medium term and long-term credit. Let us discuss these two types of
markets in detail.

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(A) Money Market

Money market basically refers to a section of the financial market where financial
instruments with high liquidity and short-term maturities are traded. Money market has
become a component of the financial market for buying and selling of securities of
short-term maturities, of one year or less, such as treasury bills and commercial papers.
Over-the-counter trading is done in the money market and it is a wholesale process. It is
used by the participants as a way of borrowing and lending for the short term.

It is a market for short-term funds, which deals in financial assets whose period of
maturity is upto one year. It should be noted that money market does not deal in cash or
money as such but simply provides a market for credit instruments such as bills of
exchange, promissory notes, commercial paper, treasury bills, etc. These financial
instruments are close substitute of money. These instruments help the business units,
other organisations and the Government to borrow the funds to meet their short-term
requirement.
Money market does not imply to any specific market place. Rather it refers to the whole
networks of financial institutions dealing in short-term funds, which provides an outlet
to lenders and a source of supply for such funds to borrowers. Most of the money market

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 transactions are taken place on telephone, fax or Internet. The Indian money market
consists of Reserve Bank of India, Commercial banks, Co-operative banks, and other
specialised financial institutions. The Reserve Bank of India is the leader of the money
market in India. Some Non-Banking Financial Companies (NBFCs) and financial
institutions like LIC, GIC, UTI, etc. also operate in the Indian money market.
Functions of money market :-

The money market contributes to the economic stability and development of a country
by providing short-term liquidity to governments, commercial banks, and other large
organizations. Investors with excess money that they do not need can invest it in the
money market and earn interest.

Here are the main functions of the money market:

(a) Financing Trade :-

The money market provides financing to local and international traders who are in
urgent need of short-term funds. It provides a facility to discount bills of exchange, and
this provides immediate financing to pay for goods and services. International traders
benefit from the acceptance houses and discount markets. The money market also makes
funds available for other units of the economy, such as agriculture and small-scale
industries.

(b) Central Bank Policies :-

The central bank is responsible for guiding the monetary policy of a country and taking
measures to ensure a healthy financial system. Through the money market, the central
bank can perform its policy-making function efficiently. For example, the short-
term interest rates in the money market represent the prevailing conditions in the
banking industry and can guide the central bank in developing an appropriate interest
rate policy. Also, the integrated money markets help the central bank to influence the
sub-markets and implement its monetary policy objectives.

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(c) Growth of Industries :-

The money market provides an easy avenue where businesses can obtain short-term
loans to finance their working capital needs. Due to the large volume of transactions,
businesses may experience cash shortages related to buying raw materials,
paying,employees, or meeting other short-term expenses. Through commercial paper
and finance bills, they can easily borrow money on a short-term basis. Although money
markets do not provide long-term loans, it influences the capital market and can also
help businesses obtain long-term financing. The capital market benchmarks its interest
rates based on the prevailing interest rate in the money market.

(d)Commercial Banks Self-Sufficiency :-

The money market provides commercial banks with a ready market where they can
invest their excess reserves and earn interest while maintaining liquidity. Short-term
investments, such as bills of exchange, can easily be converted to cash to support
customer withdrawals.

Types of Instruments Traded in the Money Market :-

The money market is a market for short term funds which deals in monetary assets
whose period of maturity is upto one year. These assets are close substitutes for money.
It is a market where low risk, unsecured and short term debt instruments that are highly
liquid are issued and actively traded everyday. It has no physical location, but is an
activity conducted over the telephone and through the internet. It enables the raising of
short-term funds for meeting the temporary shortages of cash and obligations and the
temporary deployment of excess funds for earning returns. The major participants in the
market are the Reserve Bank of India (RBI), Commercial Banks, Non Banking Finance
Companies, State Governments, Large Corporate Houses and Mutual Funds The money
market consists of financial institutions and dealers in money or credit who wish to
either borrow or lend. Examples of eligible assets include auto loans, credit card
receivables, residential/commercial mortgage loans, mortgage-backed securities and
similar financial assets.

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 Several financial instruments are created for short-term lending and borrowing in the
money market. There are two types of money markets instruments i.e organized and
unorganized . Organized money market is regulated by Reserve Bank of India (RBI) and
the Unorganized one are not regulated by any of the bodies in India.

(1) Organized Money Market :-

Since the government started developing the organised money market in India (mid-
1980s), we have seen the arrival of a total of eight instruments designed to be used by
different categories of business and industrial firms; the description of which are as
follows:

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Treasury Bills –

This instrument of the money market though present since Independence got
organised only in 1986. They are used by the Central Government to fulfil its short-term
liquidity requirement up to the period of 364 days. Presently, only the 91-day TBs,
182-day TBs and the 364-day TBs are issued by the government.

(* NOTE :- Here CRR or cash reserve ratio is the minimum proportion / percentage of a
bank's deposits to be held in the form of cash and SLR or statutory liquidity ratio is the
minimum percentage of deposits that a bank has to maintain in form of gold, cash or
other approved securities.)

Certificate of Deposit (CDs) –

The TBs other than providing short-term cushion to the government, also function as
short-term investment avenues for the banks and financial institutions, besides
functioning as requirements of the CRR and SLR of the banking instution. A
certificate of deposit is a savings certificate with a fixed maturity date. Since 1993, the
RBI has allowed the financial institutions such as IFCI, IDBI, IRBI (IIBI since 1999)
Organised in 1989, these are used by banks and issued to the depositors for a
specified period ranging less than one year, and are negotiable and tradable in the
money market. It can be issued by All Scheduled Commercial banks excluding RRBs &
LABs and also by all Indian financial institutions permitted by RBI.

Commercial Papers(CPs) –

Organised in 1990, a CB is issued by the All India Financial Institutions (AIFIs), Non-
Banking Finance Companies (NBFCs), Scheduled Commercial Banks, Merchant
Banks, Co-operative Banks and the Mutual Funds. It replaced the old Bill Market
available since 1952 in the country .It is an unsecured short term debt instrument
issued by a corporation for meeting short term liabilities. Individual, Banking
Companies, Other corporate bodies, Unincorporated bodies, NRIs, FIIs can invest in CP.

Commercial Bill(CB) –

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Organised in 1990, a CB is issued by the All India Financial Institutions (AIFIs), Non-
Banking Finance Companies (NBFCs), Scheduled Commercial Banks, Merchant
Banks, Co-operative Banks and the Mutual Funds. It replaced the old Bill Market
available since 1952 in the country.  Commercial Bills arises out of a genuine trade
transaction.  Bill of exchange is an important commercial bill which is drawn by the
seller or the buyer for the amount due to him.

Call Money Market(CMM) –

This is basically an inter-bank money market where funds are borrowed and
lent, generally, for one day—that is why this is also known as over- night
borrowing market (also called money at call). Fund can be borrowed/raised for a
maximum period up to 14 days (called short notice). Borrowing in this market may
take place against securities or without securities. Rate of interest in this market
‘glides’ with the ‘repo rate’ of the time. Rate of interest in this market ‘glides’ with
the ‘repo rate’ of the time. The scheduled commercial banks, co-operative banks
operate in this market as both the borrowers and lenders while LIC, GIC, Mutual
Funds, IDBI and NABARD are allowed to operate as only lenders in this market.

Money Market Mutual Funds –

Popular as Mutual Funds (MFs) this money market instrument was

introduced/organised in 1992 to provide short-term investment opportunity to
individuals. Since March 2000, MFs have been brought under the preview of SEBI,
besides the RBI. At present, a whole lot of financial institutions and firms are
allowed to set up MFs, viz., commercial banks, public and private financial
institutions and private sector companies.

Repos and Reverse Repos –

Repo allows the banks and other financial institutions to borrow money from
the RBI for short-term (by selling government securities to the RBI. In reverse repo,
the banks and financial institutions purchase government securities from the RBI
(basically here the RBI is borrowing from the banks and the financial institutions).
These instruments have emerged as important tools in the management of the
monetary and credit policy in recent years.
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 Cash Management Bill (CMB) –

This has been introduced since August 2009 to meet the temporary cash flow
mismatches of the government. The Cash Management Bills are non-standard and
discounted instruments issued for maturities less than 91 days. The CMBs have the
generic character of Treasury Bills (issued at discount to the face value); are
tradable and qualify for ready forward facility; investment in it is considered as
an eligible investment in government securities by banks for SLR.

(2)Unorganized Money Market :-

The unorganised sector of the money market is largely made up of indigenous bankers,
money lenders, traders, commission agents etc., some of whom combine money lending
with trade and other activities. In India, the indigenous bankers and
money lenders, traders, are important segment of unorganised money market. They
following types of unorganized money market are as follows:

Indigenous Bankers –

 ccording to Indian Central Banking Enquiry Committee, an Indigenous Banker is

defined as an individual or private firm which receives deposits, individual or private
firm which receives deposits, deals in hundies or engages itself in lending money.
 ndigenous Bankers is divided into three categories :-
Those who deals only in banking business ( e.g., Multani bankers);
Those who combine banking business with trade (e.g., Marwaris & Bengalies ) and
Those who deal mainly in trade and have limited banking business.
These are financial intermediaries that function similar to banks and are mostly limited
to certain social strata.

Money lenders –
 Money lenders mostly operate in the villages and charge high rate of interest
 gricultural labourers, small and marginal farmers, artisans, small traders etc. usually
borrow money from them.
 The loans provided by them are for both, productive and unproductive purpose

 t present, the activities of money lenders have been restricted by RBI on

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account of their tendency to exploit poor borrowers.

Capital Market :-

Capital markets are where savings and investments are channeled between suppliers—
people or institutions with capital to lend or invest—and those in need. Suppliers
typically include banks and investors while those who seek capital are businesses,
governments, and individuals. This markets seek to improve transactional efficiencies.
These markets bring suppliers together with those seeking capital and provide a place
where they can exchange securities.

This market is a broad term used to describe the in-person and digital spaces in
which various entities trade different types of financial instruments. These venues
may include the stock market, the bond market, and the currency and foreign exchange
markets . This markets are used primarily to sell financial products such as equities and
debt securities. Equities are stocks, which are ownership shares in a company. Debt
securities, such as bonds, are interest-bearing IOUs.

Functions of Capital Market :-

While from a broader perspective, Capital Markets is viewed as a market of financial

assets with long or infinite maturity, it actually plays a very important role in mobilizing
resources and allocating them to productive channels. So it can be said that the process
of economic growth of a country is facilitated by the Capital Markets. The important
functions and significance of the markets have been discussed below: –

Economic Growth:

Capital Markets help to accelerate the process of economic growth. It reflects the general
condition of the economy. The capital Market helps in the proper allocation of resources
from the people who have surplus capital to the people who are in need of capital. So,
we can say that it helps in the expansion of industry and trade of both public and private
sectors leading to balanced economic growth in the country.

Promotes Saving Habits:

After the development of Capital Markets, the taxation system, and the banking
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institutions provide facilities and provisions to the investors to save more. In the absence
of Capital Markets, they might have invested in unproductive assets like land or gold or
might have indulged in unnecessary spending. Indians’ love for physical assets has
resulted in diversion of a large chunk of their savings in such investment

Stable and Systematic Security prices:

Apart from the mobilization of funds, Capital Markets help to stabilize the prices of
stocks. Reduction in speculative activities and providing capital to borrowers at a lower
interest rate help in the stabilization of the security prices. The capital market offers
opportunities for those investors who have a surplus amount of money and want to park
their money in some type of investment and also take the benefit of the power of
compounding.

Availability of Funds:

Investments are made in Capital Markets on a continuous basis. Both the buyers and
sellers interact and trade their capital and assets through an online platform. Stock
Exchanges like NSE and BSE provide the platform for this and thus the transactions in
the capital market become easy. It helps the investors to invest their hard-earned money
in long-term investments.

Role of SEBI in Capital market :-

The Securities Exchange Board of India (SEBI) regulates the functions of the Securities
Market in India. It was set up in 1988 but didn’t have any legal status until May 1992,
when it was granted powers to legally enforce its control over the financial market
intermediaries. With the bloom of the scale of actions in the financial markets, there
were a lot of malpractices taking place. Practices like a false issue, delay in delivery,
violation of rules and regulations of stock exchanges are on a rise. In order to curb
these malpractices, the Govt. of India decided to set up a regulatory body known as the
Securities Exchange Board of India (SEBI).

Types of Capital Market :-

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The capital market is mainly categorized into two types :

Primary Market –

The primary market is a part of the capital market. It enables the government,
companies, and other institutions to raise additional funds through the sale of debt and
equity-related securities. The primary market mainly deals with new securities that
are issued in the stock market for the first time. Thus it is also known as the new issue
market.

The main function of the primary market is to facilitate the transfer of the newly issued
shared from the companies to the public. The main investors in this type of market are
financial institutions, banks, HNIs, etc. For example, primary market securities can be
notes, bills, government bonds, corporate bonds, and stocks of companies.

Secondary Market –

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The secondary market, also called the aftermarket and follow on public offering, is
the financial market in which previously issued financial instruments such as stock,
bonds, options, and futures are bought and sold. It is the market where the trading of the
securities actually takes place, thus it is also referred to as the stock market.

Transactions that occur on the secondary market are termed secondary simply because
they are one step removed from the transaction that originally created the securities in
question. Here investors buy and sell securities they already own. It is what most people
typically think of as the "stock market," though stocks are also sold on the primary
market when they are first issued and the buying and selling of securities take place, The
existing investors sell the securities and new investors by the securities

Types of Instruments traded in the Primary Market :-

The primary market deals with the new issue of securities. Any share, bonds, ETF or any
marketable security, is first introduced in the primary market. Unlike the secondary
market, the primary market has no physical existence, which exists in the form of stock
exchanges.

Security is floated on the primary market before going to the secondary market.
Hence it precedes the secondary market. There are different methods of raising capital in
the primary market; namely, IPO, offer for sale, private placement, rights issue, and E-
IPO. They are as follows :

Initial Public Offering (IPO) –

An initial public offering or stock launch is a public offering in which shares of a

company are sold to institutional investors and usually also retail investors. An IPO is
typically underwritten by one or more investment banks, who also arrange for the shares
to be listed on one or more stock exchanges.

Before an IPO, a company is considered private. As a pre-IPO private company, the

business has grown with a relatively small number of shareholders including early

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investors like the founders, family, and friends along with professional investors such as
venture capitalists or angel investors.

Once the IPO price is finalised, the company along with the underwriters will determine
the number of shares to be allotted to each investor. In the case of over- subscription,
partial allotments will be made. The IPO stocks are usually allotted to the bidders within
10 working days of the last bidding date. IPO is a big step for a company as it provides
the company with access to raising a lot of money. This gives the company a greater
ability to grow and expand.

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.

Private Placement –

A private placement is a sale of stock shares or bonds to pre-selected investors and

institutions rather than on the open market. It is an alternative to an initial public offering
(IPO) for a company seeking to raise capital for expansion. Investors invited to
participate in private placement programs include wealthy individual investors, banks
and other financial institutions, mutual funds, insurance companies, and pension
funds.
It refers to the sale of securities to a small number of private investors to raise capital.
... Private placement of equities means funding round of securities which are sold not
through a public offering, but rather through a private offering, mostly to a small number
of chosen investors.

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Types of Instruments traded in the Secondary Market :-

A secondary market is a place where you can buy and sell instruments like fixed
income, variable income, or hybrid securities.The secondary market for securities was
created in order to allow investors to easily sell their holdings and convert them into cash
when they need it.There are many types of markets depending on the type of instrument
that trades in them. Broadly, they are equity (stocks), debt (bonds), and currency
exchange rates between currencies.

Fixed Income Instruments :

Fixed-income assets are primarily debt instruments. They guarantee a regular form of
payment, like interest and principal repayment at maturity. They also include
debentures, bonds, and preference shares. However, Debentures are unsecured debts,
which means the return generated is dependent on an issuer’s credibility. Whereas, they
do not require collateral. If the company goes out of business, it can decide to not pay its
obligations. Unless there’s another agreement in place outside bankruptcy court about
how or when payments will be made.

In their most basic form, bonds are financial instruments a government or company
issues to lenders. They are contracts that allow an issuing entity to secure funds from
investors. The company pays back the amount at predetermined intervals with interest in
the meantime. This is usually done through two parties, i.e., the issuer and the investor.
The person who wants money is the issuer. An investor is an individual wanting a return
on investment without undertaking much risk. This system allows individuals to invest
with the knowledge that it will give them some return.

Investors buy preference shares in order to receive dividends before equity shareholders
do. That means if you own a company’s stock as a preferential investor, you get your
returns first. Even when the company faces bankruptcy, priority goes towards
obligations due to its ownership structure. Therefore, creditors get paid back first, while
bondholders and ordinary shareholders have second and third claims, respectively.

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Variable Income Instruments :

Ever since the first stocks were sold to investors, they have been a major element of
investment portfolios. Variable income instruments generate an effective rate of return
to their owners and certain market factors determine this amount. For example, equity
shares allow companies to raise finance for expansion or other expenses. At the same
time, people get claims over net profits as well as assets if it goes into liquidation.

Derivatives are contracts between two parties where one party agrees with another on
delivering a return within a set period. These securities expose investors better rewards
than more stable investments like bonds, though they are riskier.

Hybrid Instruments :

Convertible debentures are hybrid investment instruments that may be converted to

equity shares after a predetermined period. This type of security is available as either
debt or loan securities and can provide multiple benefits for your portfolio.

Bombay Stock Exchange (BSE) :-

BSE Limited, also known as the Bombay Stock Exchange, is an Indian stock exchange
located on Dalal Street in Mumbai. Established in 1875 by cotton merchant Premchand
Roychand, a Rajasthani Jain businessman, it is the oldest stock exchange in Asia, and
also the tenth oldest in the world.
The Bombay Stock Exchange (BSE) is the first and largest securities market in India and
was established in 1875 as the Native Share and Stock Brokers' Association. Based in
Mumbai, India, the BSE lists close to 6,000 companies and is one of the largest
exchanges in the world, along with the New York Stock Exchange (NYSE), Nasdaq,
London Stock Exchange Group, Japan Exchange Group, and Shanghai Stock
Exchange.
The BSE has helped develop India's capital markets, including the retail debt market,
and has helped grow the Indian corporate sector. The BSE is Asia's first stock exchange
and also includes an equities trading platform for small-and-medium enterprises (SME).
BSE has diversified into providing other capital market services including clearing,
settlement, and risk management.
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In 1995, the BSE switched from an open-floor to an electronic trading system. There are
more than a dozen electronic exchanges in the U.S. alone with the New York Stock
Exchange (NYSE) and Nasdaq being the most widely known.

National Stock Exchange (NSE) :-

National Stock Exchange of India Limited (NSE) is the leading stock exchange of
India, located in Mumbai, Maharashtra. It is world’s largest derivatives exchange in
2021 by number of contracts traded based on the statistics maintained by Futures
Industry Association (FIA), a derivatives trade body. NSE is ranked 4th in the world in
cash equities by number of trades as per the statistics maintained by the World
Federation of Exchanges (WFE) for the calendar year 2021. It is under the ownership of
some leading financial institutions, banks, and insurance companies. [5] NSE was
established in 1992 as the first dematerialized electronic exchange in the country. NSE
was the first exchange in the country to provide a modern, fully automated screen-based
electronic trading system that offered easy trading facilities to investors
spread across the length and breadth of the country. Vikram Limaye is the Managing
Director and Chief Executive Officer of NSE.
National Stock Exchange has a total market capitalization of more than US$3.4 trillion,
making it the world's 10th-largest stock exchange as of August 2021.[4] NSE's flagship
index, the NIFTY 50, a 50 stock index is used extensively by investors in India
and around the world as a barometer of the Indian capital market. The NIFTY 50 index
was launched in 1996 by NSE.[6] However, Vaidyanathan (2016) estimates that only
about 4% of the Indian economy / GDP is actually derived from the stock exchanges in
India.
Unlike countries like the United States where nearly 70% of the country's GDP is
derived from large companies in the corporate sector, the corporate sector in India
accounts for only 12–14% of the national GDP (as of October 2016). Of these only
7,400 companies are listed of which only 4000 trade on the stock exchanges at
BSE and NSE. Hence the stocks trading at the BSE and NSE account for only around
4% of the Indian economy, which derives most of its income-related activity from the
so-called unorganized sector and household spending.

19
20
 CHAPTER 2

REVIEW OF LITERATURE :-

A literature review is the writing process of summarizing, synthesizing and/or critiquing

the literature found as a result of a literature search. It may be used as background or
context for a primary research project. It is an overview of the previously published
works on a specific topic. The term can refer to a full scholarly paper or a section of a
scholarly work such as a book, or an article. Either way, a literature review is supposed
to provide the researcher/author and the audiences with a general image of the existing
knowledge on the topic under question.
A literature review can be a type of review article. In this sense, a literature review is a
scholarly paper that presents the current knowledge including substantive findings as
well as theoretical and methodological contributions to a particular topic. Literature
reviews are secondary sources and do not report new or original experimental work.
Most often associated with academic-oriented literature, such reviews are found in
academic journals and are not to be confused with book reviews, which may also appear
in the same publication. Literature reviews are a basis for research in nearly every
academic field.

Rakesh H.M (2014), A Study On Individual Investors Behavior In Stock Markets

Of India, IJMSS (Vol.02, Issue-02), ISSN:2321-1784:
The paper proposes to study the behavior of individual investors in the stock markets
and the factors that influence their investment decisions, which include awareness level,
investment duration etc. The research was based on the primary data collected from the
city of Mysore of 150 respondents, being stock market investors. The research paper
observes that only 10 % of the respondents intended to stay invested into the stock
market for a period of more than 5 years. In other words, the research paper observed
that people do not want to stay committed for longer period of time into the stock market
despite it giving better returns. The paper analyses that annual income and annual
savings are given importance by investors, but the level of savings are decided by their
level of income. He states that “investors are fully aware about the stock market and
they feel that market movements also affect the investment pattern of investors in the

21
stock market.” The paper however remains silent on its observation about the
uneducated investors who are not aware of the market conditions, with market trends
and the stock price movements. It focuses on the factors influencing savings and
sources of information for decision making. The income level of an individual, also
decide the investment pattern of the investor. The investor’s income level does
determine the type of investment avenues the investor prefers.

Reena Rai (2014), Factors Affecting Investors’ Decision Making Behavior In The
Stock Market: An Analytical Review, Indian Journal of Applied Research
(Vol.4, Issue-9), ISSN - 2249-555X:

The paper under study aims to study the factors influencing an investors decision
making behavior on basis of related studies. It states that the various factors that
influence include various demographic factors such as gender, age, education. It is
known that men are more overconfident than women. Age plays a role on the mindset
of the individual and the propensity to take risk. It also explains sometimes, the
precautious attitude and conservatism. On the firm level the decision of the investors
depend on capital structure average pricing, political and media exposure, trend
analysis, past performance of company’s stocks, expected dividend and EPS etc.
Finally, it concludes that out of the various factors affecting behavior of investors
some factors have a slight role while some majorly impact investor behavior. The
general factors being gender, age, confidence levels, cognitive bias, risk factors,
company’s performance.

Kaushal A. Bhatt (2013), Investment and Trading Pattern of Individuals Dealing in

Stock Market, The SIJ Transactions on Industrial, Financial & Business
Management (IFBM) (Vol.1, Issue-02), ISSN: 2321 – 242X:
The paper aims at studying the literacy and awarenss of capital markets among investors
regarding various investment avenues. To find and identify segments preferred more by
the people and the influencing force behind the decision making, while investing in
currently available options including stock markets. It concludes that investors are
moving to new investment avenues such as equity market, mutual funds, bonds, and
others like gold, land etc. This is due to the decreasing trend of bank rates. This also

22
increases the scope of business for the investment companies. The investors are also risk
sensitive. They want more safety and security. The stock markets have become very
popular due to high rate of return but due to uncertainty and risk many people do not
invest in equity markets. This stands true due to the lack of stability in the current market
scenarios. The risk related to investment also defines the amount invested by people in
the particular stock. The factors like age, occupation and income level are key factors in
investment decision making of people. The other major factors being considered were
market scenario, risk involved and other investment opportunities.

Sanjeet Sharma (2011), Determinants Of Equity Share Prices In India, Journal of

Arts, Science & Commerce (Vol.1, Issue-4), ISSN 2231-4172:
This study aims at studying the relation between the equity share prices and related
variables such as book value of shares, earnings per share (EPS), dividend per share
(DPS) and dividend payout etc. The study reveals that EPS and DPS are the strongest
determinants of market price, and therefore the study suggests a liberal dividend
policy as a good measure of attracting the investors, gaining their confidence and
thereby, increasing the valuations of the company. These factors possess a strong
explanation to provide future forecasts of stock prices. They also have suggested that the
company data and indices be taken care of. The conclusion is statistically explained but
in the current scenario, where prices are volatile EPS does not stand to be a major
indicator. Moreover, this analysis is possible on the basis of past data as the data for
current years are received at the end. The dividend payout shall still be a relevant factor.
But in cases where there are sudden crisis and price shocks, this analysis fails to be
accurate. The paper also observes that in the case of a strong book value per share and a
good dividend declaration policy the investors perceive lesser risk and are more
comfortably placed in investing into the equity shares of those companies.

Gurinder Singh And Navleen Kaur (2015), Investigation of the Determinants to

Augment Investment in the Indian Stock Market, International Journal of
Scientific and Research Publications (Vol.5, Issue-03), ISSN 2250-3153:
States about the perception of investors and non investors towards Indian Stock Market.
Those who are non investors always calculate the insecurity of loss of money in the

23
market and the risk of investing. There are other categories of people who are ready to
invest but they want investor friendly schemes, which are not only simplified but also
have an easy exit option. So government and fund houses need to spread awareness
about investor on a large scale. Initial tax incentive provided by government for first
time investor will also encourage many people to get invested roping in celebrity to
advertise as it affects the mass population. A proper clarity must be given to people
through various means between Trading and Investment. However a SIP (Systematic
Investment Plan) thing would be a great option for low income group.

Kajal Gandhi (2015), Retail Investors Participation in Indian Stock Market- A

Survey, GJRA - Global Journal For Research Analysis (Vol.4, Issue-02), ISSN
No 2277 - 8160 :
Paper findings were based on the survey which has beeen carried out among five cities-
Mumbai, Delhi, Kolkata, Chennai and Ahmedabad. The respondents of the metro cities
are more inclined towards investing in stock market as they consider it as financial tool
but they don't have expertise knowledge or don't prefer to hire a professional to manage
their portfolio due to which they fall prey of losses. However, people at Tier-II cities like
Ahmedabad still consider the traditional investment like gold, property, gold and bank
deposits are their favorite option this is due to narrow minded as their is low saving
habits, low awareness of investment opportunities.

(Preeti, 2009) examines whether or not essential evaluation concerning styles of

strategies like conventional and increase. Fundamentally effective corporations earn
extra imply returns in contrast to basically vulnerable corporations off in opposition to
the chance of incurring the costs.

(Mishra, 2016) stated the extent to which trading applicability using technical analysis
indicators describes the risk premium or “risk compensation” of investing in the stock
market compared to relatively risk-free assets using multiple regression analysis.
Traders, private investors and fund managers are encouraged to rely on technical index -
based trading strategies other than fundamental analysis when valuing their portfolios.

24
(Boobalan, 2014) performed a technical analysis of securities of companies selected
from the industry to support investment decisions in the Indian market. The technical
analysis provided by this study does not provide absolute predictions about the future in
terms of predictions.

(Roy, 2015) conducted a fundamental analysis and found that it was necessary to
investigate the economic environment, industry performance, and corporate performance
before making investment decisions. One of the most active and long - running debates
in securities research is the relative benefits of basic and technical research.

(Bhupesh, 2013) proposes a way for inventory selecting and locating get admission to
factor of funding in shares the use of a hybrid technique inclusive of self- organizing
maps and decided on technical indicators.

(Rao 1985)37 in his paintings entitled „Impact of Debt-Equity Ratio on Profitability- An

Exploratory Study of Engineering Industry‟, observes if the incomes capacity i.e.,
profitability, has any effect at the debt-fairness ratio in engineering companies. The take
a look at primarily based totally at the effect of profitability at the debt-fairness ratio has
found out a bad affiliation i.e., excessive debt-fairness ratios supposed low profitability
because of huge hobby payments, while low debtfairness ratio prompted excessive
profitability due to lo w hobby payments.The running performance of the organization
and affordable fee of go back on owner‟s capital in the long run depend upon the
earnings earned with the aid of using it. Thus, earnings are vital to run the organization
in a wholesome environment of contemporary reduce throat competitions and shield it
from commercial enterprise rivalry.

(Deepak Chawola 1986)38 studied an empirical evaluation of the profitability of the

Indian man-made fibres enterprise. This take a look at examines and explains the
developments withinside the profitability of the Indian man-made fibres enterprise. The
applicable facts for the take a look at is received from 17 companies located in BSE
Official Directory for the length 1963-sixty four to 1977-78. An growth withinside the
excise responsibility of synthetic fibres appears to be related to the decline in
25
profitability of the enterprise. Both attention and vertical integration impact the
profitability. However, their effect differs for cellulose and metro-chemical primarily
based totally institution of fibres.

Panda et al. (2011): He revealed that majority of investors depend on newspapers as the
source of information. Mostly people who invested in shares they were ranked financial
journals and business magazines next to newspapers. Many investors believed they were
not able to get the required information from the company in time. Many investors were
found to face problems while selling securities.

Kasisomayajula (2012): He found that many investors are facing problems for trading
in stock market due to lack of information of stock market. Investors are more founded
to invest their money in post office schemes, banks etc. and they are very confined
towards share trading.

26
27
 CHAPTER 3

RESEARCH METHODOLOGY :-

Research methodology is the specific procedures or techniques used to identify, select,

process, and analyze information about a topic. In a research paper, the methodology
section allows the reader to critically evaluate a study's overall validity and reliability.
According to Kothari (2004), research methodology is a method to analytically explain
the research problem. It may be described as a science of analysis how research is done
systematically. Additionally, “research methods are the tools and techniques for doing
research.

The research methodology for studying the challenges faced by investors in Indian
financial markets would typically involve the following steps:

Define the research problem: The first step in any research project is to define the
problem statement. In this case, the problem statement would be "To identify and
analyze the challenges faced by investors in Indian financial markets."

Develop research objectives: Based on the research problem, the researcher would
develop specific research objectives that need to be achieved. The objectives would
typically include things like identifying the types of challenges faced by investors,
understanding the reasons behind these challenges, and exploring potential solutions to
these challenges.

Conduct a literature review: The next step would be to review existing literature on the
topic. This would involve reading academic journals, books, and other relevant
publications to gain a deeper understanding of the challenges faced by investors in
Indian financial markets.

Develop a research design: The research design outlines the overall approach that will be
used to collect and analyze data. This would typically include the research method (e.g.
28
survey, interviews, focus groups), the sampling strategy, and the data analysis methods.

Collect data: Based on the research design, data would be collected from a sample of
investors in Indian financial markets. This could involve conducting surveys, interviews,
or focus groups.

Analyze data: Once the data has been collected, it needs to be analyzed to identify
patterns and trends. This would involve using statistical analysis techniques to identify
the most common challenges faced by investors and the factors that contribute to these
challenges.

Draw conclusions: Based on the analysis of the data, conclusions would be drawn about
the challenges faced by investors in Indian financial markets. These conclusions would
be used to make recommendations for improving the investment climate in the country.

Write a research report: Finally, a research report would be written summarizing the
research findings, conclusions, and recommendations. The report would typically be
aimed at policy makers, financial institutions, and investors themselves.

It is practical to know ‘how’ the given Research or any specific piece of Research was
done. How a researcher designs a comprehensive study to get a reliable outcome which
justifies the objectives of the course can be figured out by research methodology.

To solve the difficulties coming in the way of Research is the main work of designing a
methodology. It is necessary not just to identify the problem for Research but to
determine the best method to solve that problem as well.

The role of Methodology in solving the problems in the way of Research are:

 It helps in deciding the best method to resolve the difficulties for Research.
 Research describes how efficient the method is in solving the problem
 It aids to know the accuracy of the way decided to apply in Research for a
suitable outcome.
The detailed study of Methodology of Research teaches to select the best method, data or
29
 information, scientific ways and teaches the techniques to solve the problem

Objectives of the study :-

 To study the term Financial Markets.

 To understand various Financial Markets in India.

 To state the nature and types of money market and capital market.

 To determine the problems faced by investors in the financial markets.

 To offer suggestions and recommendations.

Scope of the study :-

The scope of this study is to know the challenges faced by the investors in different
types of Indian financial markets and to identify the risk-taking ability of the investors.
The topics and theories that are covered under this study would be detail study of
financial markets in India , nature and types of such markets and problems faced by
investors in these markets such as price manipulation , insider trading , lack of
transparency, over subscriptions of shares etc . Through this study a better understanding
of the investor’s intention could be identified.

LIMITATION :

As an AI language model, I can provide some limitations that investors might face while
investing in Indian financial markets:

Regulatory framework: Indian financial markets are regulated by various authorities

30
such as the Securities and Exchange Board of India (SEBI), Reserve Bank of India
(RBI), and Ministry of Finance. The regulations may change frequently, and investors
need to stay updated with the latest rules to make informed investment decisions.

Lack of transparency: The lack of transparency in financial reporting and disclosures by

companies can make it difficult for investors to make informed decisions. The quality of
financial reporting is also not consistent across all companies, which can lead to a lack
of trust in the financial markets.

Volatility: Indian financial markets are known for their volatility, and investors may face
significant risks due to sudden market movements. The Indian stock market is
particularly prone to sharp fluctuations due to various domestic and global factors.

Liquidity: The liquidity of some financial instruments such as bonds and derivatives can
be limited in the Indian market. This can make it difficult for investors to exit their
positions or hedge their risks.

Infrastructure: The infrastructure for trading and settlement in the Indian financial
markets is still evolving, and there have been instances of technical glitches that have
disrupted trading. This can affect investor confidence and make it difficult to execute
trades.

Currency risk: India's financial markets are denominated in Indian rupees, which can
expose foreign investors to currency risk. Fluctuations in the exchange rate can impact
the returns of foreign investors.

Limited investment options: The Indian financial markets offer limited investment
options compared to developed markets. This can make it difficult for investors to
diversify their portfolios and manage risks effectively.

These are some of the limitations that investors may face while investing in Indian
financial markets. It is important for investors to consider these factors while making
investment decisions and take appropriate measures to manage risks.

31
 Data Collection Method : -

Data represents information collected in the form of numbers and text. Data Collection
is generally done after the experiment or observation. Data collection is helpful in
planning and estimating. Data collection is either qualitative or quantitative.Data
collection methods are used in businesses and sales organisations to analyse the outcome
of a problem, arrive at a solution, and understand a company’s performance.

Data and Types of Data :

Collecting the information from the numerical fact after observation is known as raw
data. There are two types of data. Below we have provided the types of data:

1. Primary Data

When an investigator collects data himself with a definite plan or design in his/her way,
then the data is known as primary data. Generally, the results derived from the primary
data are accurate as the researcher gathers the information. But, one of the disadvantages
of primary data collection is the expenses associated with it. Primary data research is
very time-consuming and expensive.

2. Secondary Data

Data that the investigator does not initially collect but instead obtains from published or
unpublished sources are secondary data. Secondary data is collected by an individual or
an institution for some purpose and are used by someone else in another context. It is
worth noting that although secondary data is cheaper to obtain, it raises concerns about
accuracy. As the data is second-hand, one cannot fully rely on the information to be
authentic.

32
My research work is mainly based on qualitative type of research and collection of
primary data in my research is done through google forms survey due to the current
situation of pandemic. And secondary data is collected from different websites, journals,
articles, etc.

33
34
 CHAPTER 4
DATA ANALYSIS & INTERPRETATION OF DATA:-

Data analysis is the process of cleaning, changing, and processing raw data, and
extracting actionable, relevant information that helps businesses make informed
decisions. Data analysis has multiple facets and approaches, encompassing diverse
techniques under a variety of names, and is used in different business, science, and social
science domains. In today's business world, data analysis plays a role in making
decisions more scientific and helping businesses operate more effectively. Although
many groups, organizations, and experts have different ways to approach data analysis,
most of them can be distilled into a one-size-fits-all definition. Data Analysis is defined
as: A process of inspecting, cleansing, transforming and modeling data with the goal of
discovering useful information, informing conclusions and supporting
decisionmaking.With its multiple facets and methodologies, and diverse techniques,
Data Analysis is used in many fields — business, science, social science, etc. In this
world where business is thriving under the influence of many technological advances,
data analysis plays a huge role in decision making, making it better and faster, an
efficacious system that minimizes risks and reduces human biases. Data Analysis is the
process of systematically applying statistical and/or logical techniques to describe and
illustrate, condense and recap, and evaluate data. The procedure helps reduce the risks
inherent in decision-making by providing useful insights and statistics, often presented
in charts, images, tables, and graphs

Importance of Data Analysis in Research :-

Companies are wisening up to the benefits of leveraging data. Data analysis can help a
bank to personalize customer interactions, a health care system to predict future health
needs, or an entertainment company to create the next big streaming hit. Here is a list of
reasons why data analysis is such a crucial part of doing business today.

35
  Better Customer Targeting: You don’t want to waste your business’s precious time,
resources, and money putting together advertising campaigns targeted at
demographic groups that have little to no interest in the goods and services you offer.

 You Will Know Your Target Customers Better: Data analysis tracks how well your
products and campaigns are performing within your target demographic. Through data
analysis, your business can get a better idea of your target audience’s spending habits,
disposable income, and most likely areas of interest.

 Reduce Operational Costs: Data analysis shows you which areas in your business need
more resources and money, and which areas are not producing and thus should be scaled
back or eliminated outright.

 Better Problem-Solving Methods: Informed decisions are more likely to be successful

decisions. Data provides businesses with information. You can see where this
progression is leading.

 You Get More Accurate Data: If you want to make informed decisions, you need data,
but there’s more to it. The data in question must be accurate. A huge part of a
researcher’s job is to sift through data. That is literally the definition of research.

Primary data :-
Primary data is information collected through original or first-hand research. For
example, surveys and focus group discussions. On the other hand, secondary data is
information which has been collected in the past by someone else. For example,
researching the internet, newspaper articles and company reports. Surveys conducted by
me through google forms’s data are given below :-

OPTIONS PERCENTAGE NO OF RESPONSES

From Friends/Family 45% 18

From Online Sources 50% 20

From Newspapers 5% 2

36
 Others 0% 0

5%

45%
From Friends/Family
From Online Sources
From Newspapers

50%

Interpretation :-

In the survey question was asked regarding from where did the people get to know about
various financial markets in India. So the responses of the people is given above in the
pie chart that most of them get to know about the various financial markets through
online sources as most of the youth is on social media (i.e Instagram , Facebook,etc) so
from such sources they get to know about various financial markets ( i.e stock market,
debt market, hybrid market, etc) and they also get to know about such markets through
friends, family and newspaper.

OPTIONS PERCENTAGE NO OF RESPONSES

Four 22.5% 9

Two 70% 28

Six 7.5% 3

37
 80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
Four Two Six

What are the types of financial markets you know about?

OPTIONS PERCENTAGE NO OF RESPONSES

Money market 5% 2

Capital market 7.5% 3

Both 85% 34

None 2.5% 1

38
 90%

80%

70%

60%

50%

40%

30%

20%

10%

0%
Money market Capital market Both None

Interpretation:-

I have also asked through questionnaire that how many types of financial markets are
there in India. Majority of them have given the right answer which is two. As there are
only two main financial markets in India i.e Money Market & Capital Market . The
primary function of the money markets is to provide short term liquidity to the economy.
On the other hand, the primary function of the capital markets is to channelize the
savings of the economy in a meaningful way to aid growth and development. While as
you can see some them have given ans as four . It is correct but in types of capital
market because it consists of stock market, debt market , commodity market and
derivative market which I have explain in detail in my introduction . And in the 3rd
question I have asked that how many of them know about these markets and majority of
them know about both the markets .

39
Do you invest in any type of financial markets ?

OPTIONS PERCENTAGE NO OF RESPONSES

Yes 60% 2

No 40% 3

PERCENTAGE

40%

Yes
No

60%

Interpretation:-

So in the next question I asked them that do they invest in such financial markets or not .
The responses was really impressive that 60% of them invest in such markets and 40%
of them not . The reason regarding not investing in these markets are there in further
questionnaire.

40
If you invest, which investment instrument do you use ?

OPTIONS PERCENTAGE NO OF RESPONSES

Stock Market 50% 20

Mutual Funds 22.5% 9

Debt Market 0% 0

Hybrid Market 2.5% 1

Cryptocurrency 5% 2

None 20% 8

PERCENTAGE

50.00%

22.50%
20.00%

5.00%
2.50%
0.00%
Stock Market Mutual Funds Debt Market Hybrid Market Cryptocurrency None

Interpretation:-

I have also asked our respondents that in which investment instrument do they use for
investment purpose. So here 50% of them invest in stock market which is a good number. And
secondly, they invest in mutual funds (i.e 22.5%) which a steady growth in Asset management
companys which help their investors to invest their funds at right place and at right time through
fund managers. And other respondents invest in hybrid market and in cryptocurrency also which
is also good for such markets to increase due to digitalisation in the nation through our recently
41
announced Budget 2022 as a big turning point for such markets.

If no, why don't you invest ?

OPTIONS PERCENTAGE NO OF RESPONSES

No knowledge about 23.3% 7

investment

Investment is risky 20% 6

Prefer to have cash in 3.3% 1

hand

Not interested in 13.3% 4

investment

Other 40% 12

45.00%

40.00% 40%

35.00%

30.00%

25.00%
23%
20.00% 20%

15.00%
13%
10.00%

5.00%
3%
0.00%
No knowledge Investment is Prefer to have Not interested in Other
about investment risky cash in hand investment

Interpretation:-

As I have said before that there are respondents who still do not invest in such markets
theirs reasons are as mention in the pie chart that they do not have proper knowledge of
such markets and some of them also thinks that investment is risky and they lose their
invested money in these markets.

42
How frequently do you invest?

OPTIONS PERCENTAGE NO OF RESPONSES

Once in a month 40.5% 15

Quaterly 8.1% 3

Half yearly 5.4% 2

Yearly 8.1% 3

Not at all 37.8% 14

PERCENTAGE
45.00%

40.00% 40.50%
37.80%
35.00%

30.00%

25.00%

20.00%

15.00%

10.00%
8.10% 8.10%
5.00% 5.40%

0.00%
Once in a month Quaterly Half yearly Yearly Not at all

Interpretation:-

Here in this questionnaire I have asked our respondents that how frequently they invest
in these markets so almost investors invest once in a month so they can get some
benefits through their investment . Monthly investment are mostly in SIP ( Systematic
Investment Plan) which is a type of mutual fund so they can benefit from it by
investing it at right place through fund managers. And our some respondents also invest
quarterly , half yearly and yearly also.

43
Through which platform do you invest?

OPTIONS PERCENTAGE NO OF RESPONSES

Angel broking 5.4% 2

Groww 18.9% 7

Upstox 10.8% 4

Motilal oswal 0% 0

Other 24.3% 9

None 40.5% 15

PERCENTAGE
None 40.50%

Other 24.30%

Motilal oswal0.00%

Upstox 10.80%

Groww 18.90%

Angel broking 5.40%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%

PERCENTAGE

Interpretation:-

Today anybody can invest online through various platforms they are preferable so as our
respondents also invest online through different platforms . Most preferable for them is
Angel broking which is used for invest by almost 40.5% of our respondent and others
also invest through Groww and Upstox which are also preferable after Angel broking .

44
Why do you feel there is a need for investment ?

OPTIONS PERCENTAGE NO OF RESPONSES

As a precaution in the 18.4% 7

future

For known needs in the 36.8% 14

future

Social norms 7.9% 3

Future enterprises 15.8% 6

Other 7.9% 3

None 13.2% 5

13% 18%
8%

16%

37%
8%

As a precaution in the future For known needs in the future Social norms
Future enterprises Other None

Interpretation:-

In questionnaire I have also asked our respondent that as an investor why do they feel
there is a need for investment . So here most of them respondent that for future’s
needs they think it is better to invest in such markets and others think that this will
help as a precaution for their future.

45
Which kind of risk pattern do you prefer?

OPTIONS PERCENTAGE NO OF RESPONSES

High risk High returns 12.8% 5

Moderate risk 33.3% 13

Safe and Low risk 43.6% 17

Unaware of risk-return 2.6% 1

None 7.7% 3

43.60%
45.00%
40.00%
33.30%
35.00%
30.00%
25.00%
20.00%
12.80%
15.00%
7.70%
10.00%
2.60%
5.00%
0.00%

Interpretation:-

In questionnaire regarding to the kind of risk our respondents prefer is mostly safe and
low risk as most of the people think that such markets are very risky and unpredictable.
And secondly, ,most of them prefer moderate type risk for their investment . But some
of them prefer high risk to earn high returns.

46
What is the timeframe considered while investing ?

OPTIONS PERCENTAGE NO OF RESPONSES

Intra-day 13.2% 5

A few months 18.4% 7

6 months – 1 year 18.4% 7

Longer than a year 26.3% 10

Other 23.7% 9

None 0% 0

30.00%

26.30%
25.00%
23.70%

20.00%
18.40% 18.40%

15.00%
13.20%

10.00%

5.00%

0.00% 0.00%
Intra-day A few 6 months – 1 Longer than Other None
months year a year

Interpretation:-

So in survey I have also asked our respondents that what timeframe they considered
while investing . Most of the investors prefer to keep their investment for more than one
year as in the hope to earn high returns on them, Some of them prefer to keep their
investment for half year to a year or just for few months.

What problems do you face as an investor ?

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 OPTIONS PERCENTAGE NO OF RESPONSES

Inadequate disclosure 5% 2

Insider Trading 10% 4

Over Subscription of 7.5% 3

Shares

Lack of Transparency 25% 10

Price Manipulation 22.5% 9

None 30% 12

5%
10%
30%
8%

25%
23%

Inadequate disclosure Insider Trading Over Subscription of Shares

Lack of Transparency Price Manipulation None

Interpretation:-

In the questionnaire I have also asked our respondents that as an investor what type of
problems they face then the responses are like this that they think that inadequate
disclosure by company is the main problem for them as an investor followed by price
manipulation and lack of transperancy by the company.

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What are your suggestions to such problems ?

And the suggestions suggested by our respondents to solve such probems is that there
should be proper disclosure regarding the company, financial statements and balance
sheet and transparency about it and all movements of the company should be under
observation of the investors and there should be stict rules and proper watch by the SEBI
about such operations of the company .

Secondary data :-

A Financial Market is a term meant for a Business setup where different types of bonds
and securities trade are done at lower rates of transaction. It includes different kinds of
Financial securities like bonds, shares, derivatives, and forex Markets, to name a few. To
ensure that a capitalist economy functions well, the Financial Market is very necessary
as it helps in resource allocation and creates liquidity for Businesses.
The Financial Market ensures that the flow of capital between investing and collecting
parties is mobilized properly.Financial Markets help in smooth functioning of economies
by allocating resources while also creating liquidity for Business enterprises. Different
types of Financial holdings can be traded in these Markets. A vital importance of
Financial Markets is that it enforces informational transparency to set efficient and
appropriate Market prices.

Notably, macroeconomic factors like tax and other aspects often influence the Market
values of Financial holdings which are not indicative of their intrinsic value. There are
various types of Financial Markets, the New York Stock Exchange is one of the biggest
stock Markets on this globe and this Financial Market records trade worth trillions of
dollars everyday.

For a perspective, in 2012, it was 20 million and in December 2020 it was 50 million.
New investor demat account additions, at more than 14 million in 2020-21, compares
with less than 5 million in 2019-20. In the first half of FY22, the number of new

49
demat accounts at approximately 15 million, is already more than the entire FY21.The
sheer numbers are a pointer to the extent of retail participation. And that is not all, we
will now look the participation of retail in NSE’s cash market turnover. What we just
referred to as retail, in the turnover data, has been defined as individual investors i.e.
domestic investors, NRIs, sole proprietorship firms and HUFs. This segment is the
biggest contributor to traded volumes in the cash market. In 2015-16, the contribution of
this sector to market traded turnover was 33%. In 2020-21, it increased to 45%. The
other major contributors to traded volume are proprietary traders with 25%, FIIs with
11.5% and domestic institutions with 7.5%. In 2021-22, the share of retail trades was
slightly muted at 43.2%, but still much higher than 27% of prop trades and 11% of
FIIs.
Kundar Kishore about stock market in India :-

Looking at the current situation where active investments are less than two crores in the
equity market, this figure appears to be hypothetical only. If at fortnight, some magic
things happen and 78 crores people join the stock market with a magic wand. It’s
hard to predict what will happen to the stock market. The volatility may increase, as
there will be more buyers and sellers at the same time on a sudden note. High market
volatility levels carry huge risks as well as great rewards.Sensex and Nifty may cross-
unimaginable figures like in millions or fall miserably. The market may not be able to
handle such amount of data and may crash or gain a rally. The small-cap will become
large-cap and the large-cap will become jumbo cap in terms of market capitalization.
Almost all major companies across the world would want to list their company on the
Indian stock exchange. The stock market is a substitute for the economy, the idea of
capitalism will be promoted. Businesses will flourish, and small Indian companies will
go globally and become giant companies. Again, in the end, all these statements are
imaginary only.However, this would not be an appropriate picture to explain and hence
it is not a fair representation.
Located in Mumbai, the National Stock Exchange (NSE) established in India in 1992 is
the largest stock exchange in the country and has more than 1,750 + listed companies
whereas BSE established in 1875 has more than 5700 companies. NSE has rapidly
developed to become one of the top three stock exchanges by transaction

50
volume in the world. Around the same time [in 1992], the Securities and Exchange
Board of India (SEBI) came into the picture.The evolution of the regulatory climate was
central to the progress of the NSE. Markets will only expand if the economy is growing,
and LPG Liberalization, Privatization and Globalization model [introduced in 1991] has
helped grow the Indian economy, as well as companies that have gone public in order to
raise money. In addition, liberalization allowed international flows.
Transparency and the fact that well-regulated markets definitely boost confidence in
markets, both at domestic and as well as international markets. It is necessary, too, to
develop new markets. The fixed income market or commodity market, for example, is at
a nascent stage.To promote understanding of markets and market-linked goods, the
exchanges and SEBI have taken several steps. Moreover, recent government measures to
expand the bondmarket, such as retail investment in government bonds, are a significant
development. Earlier the retail investors try to time the market, but regulatory bodies
have brought a structural change in the asset industry hence it is a much-needed
welcome step.
ТЬе SEBI is expected to play а pivotal role in the capital market sо far it relates tо
issue of securities, prospectus, disclosure of information, listing, takeover etc. SEBI has
issued а number of guidelines to regulate the malpractices in the Indian capital market
and provide protection to the investors.

Indians in the financial market. Here are some of them:

Lack of financial literacy: Financial literacy is the knowledge and skills required to make
informed decisions about personal finances. In India, many people lack financial
literacy, which makes it difficult for them to understand complex financial products,
such as mutual funds, insurance, and stocks.

Limited access to financial products: Many Indians do not have access to financial
products, such as credit cards, loans, and insurance, due to various factors such as lack of
credit history, low income, or living in rural areas.

High fees and charges: Financial products such as mutual funds, insurance, and credit
cards can come with high fees and charges, which can make it difficult for people with
lower incomes to access them.
51
Market volatility: The Indian financial market can be volatile, which can result in losses
for investors. This can discourage people from investing in the market, and may also
cause some to lose money.

Scams and frauds: There have been instances of scams and frauds in the Indian financial
market, such as Ponzi schemes and fake investment schemes, which have resulted in
people losing their money.

Lack of regulatory oversight: The Indian financial market is regulated by several bodies,
including the Securities and Exchange Board of India (SEBI) and the Reserve Bank of
India (RBI). However, there are still instances where fraudulent practices go unnoticed
due to inadequate regulatory oversight.

Overall, these problems highlight the need for greater financial literacy, increased access
to financial products, and improved regulatory oversight to ensure a safe and stable
financial market for all Indians.

Problems faced by Investors in Indian Capital Market

The investors in the capital market face а number of problems. Some of these problems
are discussed below:

 Inadequate Disclosure

Availability of complete and correct information is required for developing an investor

protection system. But the disclosures required under the Securities Contracts
(Regulation) Act, 1956, leave а lot of loopholes regarding the disclosures to be made in
the prospectus. Therefore, some companies give false or misleading statements in their
prospectus so as to attract and cheat innocent investors.

52
 Insider Trading

Insider trading means sale or purchase of securities by persons who possess price
sensitive information about the company on account of their fiduciary capacity. For
instance, information about the declaration of high rate of dividend, issue of bonus
shares, rights shares etc., information relating to financial results of the company,
amalgamations, mergers and takeovers, disposal of the undertaking and such other
information.

 Price Manipulation

It is а common practice that prices of shares of companies proposing to соmе out with а
public issue or right issue are artificially pushed up in the market. This is usually done
by way of giving large employment advertisements in the newspapers just before the
public or right issue. So that some form of respectability may be created and thereby
the market price of shares of that company may be pushed up.

 Over Subscription of Shares

Usually when the companies make public issues, they are over subscribed many
times. А large number of investors lose interest in the money locked with the company.

 Lack of Transparency

Lack of transparency is another shortcoming of the stock market. The investor does not
know the actual rate of the transaction. The investor should be informed about the rate
and brokerage by noting them on the contract.

 Investor’s Grievance

Thousands of complaints are received from the investors against companies and brokers.

53
 The complaints include non-receipt of refund orders, letters of allotment, dividends,
brokerage, underwriting commission etc.

 Takeovers and Mergers

In а closely held company, the shareholders are adequately protected against takeover as
the number of shareholders is few and the shareholders’ agreements impose restrictions
on transfer. But in the case of а publicly listed company such protection is not included
in the agreement to protect the minority shareholders.

 Problems related to Settlement Mechanism

The settlement mechanism calls for physical movement of share certificates in order to
record ownership changes in the company’s books. Some serious risks such as bad
deliveries, delays in transfer and registration, mutilation, loss, forgery and theft of
certificates have been attached to the settlement mechanism. These problems were
repeatedly raised in several investor forums.

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 CHAPTER 5

FINDINGS, CONCLUSION & SUGGESTIONS :-

(5.1) Findings:-

As per the research and data collection, it can be said that many people invest in such
financial markets and they face problems such as inadequate disclosure, insider trading
and many more. Here are some of the interesting findings from the research :-

1. About 50% people get to know about Financial markets through online sources and
other 45% get to know about it through theirs family and friends.

2. Many respondents know about both the types of financial markets in detail and have
proper knowledge about it.

3. In my survey I find out that about 60% of people invest in such financial markets.

4. Through survey , I also find out that about 50% of investors invest in stock market and
secondly people invest in mutual funds followed by cryptocurrency and hybrid market.

5. Many people don’t invest as they don’t have proper knowledge about investment and
they think it is risky.

6. Mostly 41% investors invest once in a month and some quarterly in such financial
markets.

7. As nowadays, many investors invest their money through online mode through various
online apps most of them invest through Groww and Upstox followed by Angel broking.

8. During survey, I also find out that many people invest as they think there is a need of it
for their needs in future and as a precaution for the future.

9. About 44% investors think during investment they prefer safe and low risk , 33 % of
them think moderate risk is better and some prefer high risk and high returns.

10. According to timeframe of investment , most of them think that they prefer to keep
their investment for more than one year and some of them think that few months to half
year timeframe is preferable. As many problems are faced by such investors during their
investment it is find out that most of them think lack of transparency by company and
price manipulation are the biggest problems faced by investors.

55
56
Conclusion;-

The past two decades have witnessed important policy reforms aimed at liberalisation
and globalisation of the Indian economy. To achieve an efficient, transparent and vibrant
financial sector in general and stock market in particular, several financial sector
reforms, changes in market microstructure and trading practices were introduced. The
Capital Issues (Control) Act 1947 was repealed and pricing of financial assets was
liberalized. As a part of market reforms, new stock exchange was established, and the
existing stock exchanges were demutualized and exchanges adopted screen-based
automated trading.

The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) launched
several new financial products and SEBI was set up as the regulator of capital market.
As results of these reforms, Indian stock market has registered a notable growth in terms
of listed companies, trading volume and emerged as one of the favourite destination of
investment. Against the back backdrop of these reforms and changes, a study of
behaviour of stock returns, particularly, analysis of efficiency of stock market in a
liberalized environment assumes significance.

Various schools of thought have theorized the behaviour of stock returns. The Neo-
classical School of Finance proposes a theory of efficient market or efficient market
hypothesis (EMH) based on rational expectation and no-trade argument. Eugene Fama,
one of the main architects and advocates of the theory, provided strong theoretical
foundations and a framework to test the EMH empirically. In an informationally
efficient market, prices quickly absorb new information and reflect all the available
information instantly in such a way that such price processing mechanism does not
provide extra normal returns. In other words, there is no possibility of predictability of
returns by using the history of returns and a simple buy and hold strategy would do well
in such an informationally efficient market. The vital functions of stock market such as
optimal allocation of capital and facilitation of climate conducive to investment would
have adverse effects if market were inefficient. Therefore, the study of efficiency
assumes importance.

57
The large body of research conducted in the last three decades itself reflects the
importance of the informational efficiency of stock market. Various methods are
employed in empirical studies to test different forms of market efficiency. Random walk
hypothesis is considered one of the effective and convenient ways to test weak form of
efficiency. In an efficient market, returns are expected to respond randomly to new
information and therefore it is not possible to predict future returns based on past
memory of prices.

The parametric test results suggest significant rejection of random walk hypothesis in
case of smaller stock indices with lower market capitalization and liquidity. The
evidence of rejection of random walk behaviour in stock returns of large cap and high
liquid indices are weaker as the investment horizon increases. Non-parametric tests,
which are considered appropriate when returns are non-normal, have shown rejection of
hypothesis that increments are independent and identically distributed for the selected
index returns and these results are not sensitive to the composition of index. The
rejection of random walk at longer horizon implies that the information in short- horizon
is not instantly reflected in returns and thus provides opportunity for excess returns to
those who have access to information.However, the windowed test procedure applied in
the study shows a nonlinear structure that is not consistent throughout the full sample
period but confined to a few sub-periods thus suggesting episodic nonlinear dependence
surrounded by long periods of pure noise. Furthermore, it is found that both negative
and positive events were associated with these nonlinear dependence periods, but
negative events had a significant effect. The episodic presence of nonlinear dependence
implies that certain events induce such nonlinear dependence.

The major events identified were uncertainties in international oil prices, volatile
exchange rates, turbulent world markets, sub-prime crisis, global economic meltdown
and political uncertainties, especially border tensions. Though the nonlinear dependence
found in stock returns indicates predictability of stock returns, investors find it difficult
to exploit such dependence to forecast, because it is not present throughout the sample
period but just confined to a few periods. The episodic dependence in returns indicates
that investors take time to learn about shock and adjust their trading strategies.

75
48
 Suggestions & Recommendations:-
Here are some of the suggestions to solve the investors problems. They are as follows:-

 There is a need to teach investors how to rectify the mistakes and avoid the
repetition of previous mistakes.
 Companies should educate their employees on equity investments.
 Severe punishments be prescribed for wrong doers.
 The advantages of equity investments, knowledge about investor friendly products need
to be disseminated with a greater focus.
 To fetch the investment, procedure and processes for investments in financial
products are required to be made simpler.
 Government need to focus on small investors with introduction of new,
innovative and alternative financial products.
 Technology can help in a big way in creating investor awareness and rebuilding
investor confidence.
 To build the investor confidence, there is need to strictly implement the best
corporate governance practices.

One of the biggest challenges faced by investors in the Indian financial markets is the
high volatility of the market. The stock market in India is known to be highly volatile,
and it is not uncommon to see significant fluctuations in stock prices in a single trading
day. This volatility can make it difficult for investors to make informed investment
decisions and can lead to significant losses if investments are not carefully managed.

Another challenge that investors in the Indian financial markets face is the complex
regulatory environment. The Indian financial markets are subject to a complex set of
regulations, and navigating these regulations can be challenging for investors. In
addition, regulatory changes can occur frequently, which can further complicate the
investment process.

Another challenge that investors face is the lack of transparency in the Indian financial
markets. There are often concerns about insider trading and market manipulation, and it
can be difficult for investors to get accurate and timely information about companies and
49
their financial performance.

Finally, investors in the Indian financial markets may face challenges related to currency
risk and geopolitical risk. Fluctuations in the value of the Indian rupee can impact
investment returns, and geopolitical tensions can lead to market instability.

Overall, while the Indian financial markets offer significant investment opportunities,
investors should be aware of the challenges and risks associated with investing in these
markets. It is important to carefully research investments, diversify portfolios, and work
with experienced financial advisors to manage these risks.

50
 REFERENCES

Bibliography :-

 Rakesh H.M (2014), A Study On Individual Investors Behavior In Stock Markets Of

India, IJMSS (Vol.02, Issue-02), ISSN:2321-1784:

 Reena Rai (2014), Factors Affecting Investors’ Decision Making Behavior In The
Stock Market: An Analytical Review, Indian Journal of Applied Research (Vol.4, Issue-
9), ISSN - 2249-555X:

 Kaushal A. Bhatt (2013), Investment and Trading Pattern of Individuals Dealing in

Stock Market, The SIJ Transactions on Industrial, Financial & Business Management
(IFBM) (Vol.1, Issue-02), ISSN: 2321 – 242X:

 Sanjeet Sharma (2011), Determinants Of Equity Share Prices In India, Journal of Arts,
Science & Commerce (Vol.1, Issue-4), ISSN 2231-4172:

 Gurinder Singh And Navleen Kaur (2015), Investigation of the Determinants to

Augment Investment in the Indian Stock Market, International Journal of Scientific and
Research Publications (Vol.5, Issue-03), ISSN 2250-3153:

 Kajal Gandhi (2015), Retail Investors Participation in Indian Stock Market- A Survey,
GJRA - Global Journal For Research Analysis (Vol.4, Issue-02), ISSN No 2277 - 8160 :

 Bhole, L. M. and J. Mahakud. (2009), Financial Institutions and Markets, 5th edn. New
Delhi: Tata McGraw Hill Education Private Limited, pp. 219–220.

 Chakraborty, T. (2007), “Foreign Institutional Investment Flows and Indian Stock

Market Returns—A Cause and Effect Relationship Study,” Indian Accounting Review,
Vol. 11, No. 1, pp. 35–48.

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 Garg, A. and B. S. Bodla. (2011), “Impact of the Foreign Institutional Investments on
Stock Market: Evidence from India,” Indian Economic Review, Vol. 46, No. 2, pp. 303–
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 Jain, M., P. L. Meena, and T. N. Mathur. (2012), “Impact of Foreign Institutional

Investment on Stock Market with Special Reference to BSE- A Study of Last one
Decade,” Asian Journal of Research in Banking and Finance, Vol. 2, No. 4, pp. 31–47.

Investing in the Indian financial markets can present a number of challenges for
investors. Here are some references to the challenges faced by investors in Indian
financial markets:

Volatility: The Indian stock market can be highly volatile due to a variety of factors such
as economic uncertainty, political instability, global events, and corporate governance
issues. This can make it difficult for investors to predict market movements and make
informed investment decisions.
(Reference: https://economictimes.indiatimes.com/markets/stocks/news/why-indian-
stock-market-is-highly-volatile/articleshow/66794263.cms)

Regulatory environment: The regulatory environment in India can be complex and

difficult to navigate for investors. This can be especially true for foreign investors, who
may face additional restrictions and regulations.
(Reference: https://www.livemint.com/market/stock-market-news/why-the-indian-stock-
market-is-a-minefield-for-investors-1554413321891.html)

Lack of transparency: The lack of transparency in the Indian financial markets can make
it difficult for investors to make informed decisions. This can be particularly true for
small and mid-cap companies, where information is often not readily available.
(Reference: https://www.businesstoday.in/moneytoday/investment/the-challenges-of-
investing-in-indian-stock-market/story/223578.html)

52
High valuations: The Indian stock market is currently trading at high valuations, which
can make it difficult for investors to find value in the market. This can also increase the
risk of a market correction or crash.
(Reference: https://economictimes.indiatimes.com/markets/stocks/news/why-indian-
stock-market-valuations-are-on-a-high/articleshow/80123217.cms)

Currency risk: For foreign investors, investing in the Indian financial markets involves
currency risk. Fluctuations in the value of the Indian rupee can impact the returns of
foreign investors, and currency hedging can be expensive.
(Reference: https://www.investindia.gov.in/team-india-blogs/currency-risk-indian-stock-
market)

These are just a few of the challenges that investors may face when investing in the
Indian financial markets. It is important for investors to do their research and seek the
advice of financial experts to mitigate these risks and make informed investment
decisions

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Webliography :-

https://www.nseindia.com/
https://www.investopedia.com/
https://efinancemanagement.com/
https://www.analyticssteps.com/
https://tradebrains.in/
https://www.insightsonindia.com/
https://www.elearnmarkets.com/
https://www.oreilly.com/ https://www.ijrar.org/
https://economictimes.indiatimes.com/
https://www.nios.ac.in/ https://www.ibef.org/
https://accountlearning.com/
https://www.tsbank.com/ https://groww.in/

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