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To Analyze Perception of Investor’s for Investing in Capital Market Especially in Gujarat Essay Sample

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To Analyze Perception of Investor’s for Investing in Capital Market Especially in Gujarat Essay Sample

The Indian capital market is an ―emerging stock market‖. This implies that market is in the process of transformation, growing in size and sophistication. The capital market is further of two types: Primary Market. It is also referred to as the new issue market since it deals with new securities. The securities issued in new issue market (NIM) are then traded in secondary market. There are three ways by which securities can be issued in a primary market: – initial public offer, rights issue (for existing companies) and preferential issue. Secondary Market. It is also referred to as the stock market.

The level of activities in stock market is measured through stock indices, major ones being BSE SENSEX and NIFTY in India. Moreover, on other hand, Investor is someone who allocates capital with the expectation of a financial return. The types of investments include, — equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc. Secondly, in order to determine perception of investors, the researcher will prepare the questionnaire and find out their perception of investing and influencing factors that which led to formulate that perception to invest. Thereafter, the researcher also determines role of marketing through primary and secondary data that makes the investor to invest in different forms. Keywords: Indian Capital Market, Perceptions of Investors, Influencing factors, Role of Marketing

Introduction:
The Indian capital market is an ―emerging stock market‖. This implies that market is in the process of transformation, growing in size and sophistication. Several liberalization measures announced by the Indian government and securities market watchdog, SEBI, over the last few years have created free environment. The capital market today is sophisticated and swift to discount the micro and macroeconomic changes. In the last two decades, the pace of growth in capital market has almost been unparalleled in the history of any nation. These two decades have truly been the age of shares and bonds for the middle class investors in India, where millions of them have their first experienced of investing in securities. The Securities and Exchange Board of India (SEBI) governs and regulates the Indian capital market. The capital market of India is among the top ten biggest capital markets of the world, and provides a variety of capital market instruments. There are 25 well-organized Stock Markets in India among which the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) hold the dominant positions. Both the stock and bond markets are parts of the capital markets.

For example, when a company conducts an IPO, it is tapping the investing public for capital and is therefore using the capital markets. This is also true when a country’s government issues Treasury bonds in the bond market to fund its spending initiatives. The capital market is further of two types:(A) PRIMARY MARKET It is also referred to as the new issue market since it deals with new securities i.e. which have not been previously traded and are offered to the public for the first time. The market therefore derives its name from the fact that it makes available new block of securities for the public subscription. The stock of the company that is issued to the public for the first time is called initial public offerings in the capital market parlance. The securities issued in new issue market (NIM) are then traded in secondary market. There are three ways by which securities can be issued in a primary market: – initial public offer, rights issue (for existing companies) and preferential issue.

(B) SECONDARY MARKET It is also referred to as the stock market. Indian stock market stands among the top three stock markets of the world with respect to number of listed companies, market capitalization and magnitude of participating investors. The level of activities in stock market is measured through stock indices, major ones being BSE SENSEX and NIFTY in India.

Perception:
Perception is defined as the process by which an individual selects, organizes and interprets stimuli into a meaningful and coherent picture of the world. It can be described as ―how we see the world around us‖. Two individual may be exposed to the same stimuli under the same apparent conditions, but how each person recognizes selects, organizes, and interprets these stimuli is a highly individual process based on each person’s own needs values and expectations. The influence of perception of the investor to invest in capital market especially in Gujarat will explored in the research paper, Moreover it is investigated role of marketing and impact on investor to invest in Capital market especially from Gujarat.

Literature review:
Brad M. Barber, Terrance Odean ( 2008 ) confirmed that individual investors are net buyers of attention-grabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one-day returns. They hypothesize that many investors consider purchasing only stocks that have first caught their attention. Thus, preferences determine choices after attention has determined the choice set. Wee-Kheng Tan, Yu-Jie Tan (2012) investigated the information search behavior of individual investors, particularly the roles played by online and offline social networks, and from the perspective of social capital and technology readiness. Lei Feng, Mark S. Seasholes ( 2008) studied the investment behavior of men and women in an emerging stock market. Unlike developed markets, men and women in the People’s Republic of China are equally represented. Men have larger average portfolios than women and place slightly larger trades. The behavioral finance literature suggests four main factors that influence investment behaviour: overconfidence, risk tolerance, self-monitoring and social influence.

The major finding of the analysis shows that the higher the investors’ profile, the higher the performance of these investors on stock trading. The results will expand investors knowledge about the financial decision-making process and trading behaviour. Kavitha Ranganathan (2006) tested the understanding of how financial markets are also affected by the ‘financial behaviour of investors. With the reforms of industrial policy, public sector, financial sector and the many developments in the Indian money market and capital market, Mutual Funds which has become an important portal for the small investors, is also influenced by their financial behaviour. L.C Gupta for the first time presented the finding based on all India- Survey of Indian shareholder by interviewing of about 6000 households. It provided factual data on investors profile, attitude, preference, intention, problems and complaints regarding the trading system and practices of Indian stock exchange were indentified. Rajarajan (1994) classified investors on the basis of their demographics.

He found that the size of investment in the financial asset provides significant insight in the likely preference of individuals for particular class of financial instruments and investment approaches. The percentage of risky assets to total financial investment declined as the investor moves up through various stages in life cycle and it was found that life cycle characteristic as segmentation variable provides an opportunity for segmentation of investors and blurs some differences between individual investors and their financial service need. The third All-India survey of household Investor explored the household investor’s preference, future intention and experiences, as also their perception of problems and opinions about corporate management, credit rating agencies, auditors and regulation.

Hodge (2003) analyzed investor’s perception of earnings quality, auditor independence and the usefulness of audited financial information. He concluded that lower perception of earning quality are associated with greater reliance on a firm’s audited financial statements and fundamental analysis of those statements when making investment decision. Krishna and Booker (2002) analyzed the factor influencing the decisions of investor who use analysis’ recommendation to arrive at a short term decision to hold or to sell a stock. The result indicate that a strong form of the analyst summary recommendation report, i.e. , one with additional information supporting the analysts position further reduce the disposition error for gains and also reduce the disposition error for looses

Research Methodology
Objectives of research paper: To understand and evaluate about Indian capital Market. To determine perception of investors to invest in the capital Market. To find out influencing factors from investors to invest in the capital Market. To determine the role of marketing that make investor for investing in capital market

Data Collection:
A Questionnaire was used to analysis the perception of investor’s for investing in Capital Market especially in Gujarat. Moreover, researcher finds out perception of investor’s and influencing factors from investors to invest in the capital market. Secondary data was taken into consideration to fulfill other objectives like understand and evaluate about Indian capital Market and to determine the role of marketing that make investor for investing in capital market.

Scope of the study:
This study carried out with help of primary research through a well designed and structured questionnaire. The data was collected from investors spread over Gujarat by on-line. The data of 200 investors were used for analysis. A simple questionnaire using five point rating scale was administered by using convenience sampling approach Research Finding: Variables Not at all Important Not import ant Quick return High return Fall in interest rate of other instruments Risk taker Self-importance of ownership Hassle free investment Investment surplus Company Grading Grey Market Demand and Supply News Market Cap Earnings per Share Price/Earnings Ratio Market trends Govt Holding Stock Marketability Dividend paid Economic condition of industry Affordable share price Reputation of firm Statement from govt official Reputation of firm shareholders

Research finding and interpretation:
In order to explore objectives, Researcher took primary research from 200 respondents through questionnaire to find out perception of investor’s and influencing factors from investors to invest the capital market. The response is as follows:  The 90 respondent are considered Quick return as important attribute for investing in Stock Market. While 75 respondents are considered as very important attribute. The 6|Page

quick return means how the investor can quickly get return from investment that made in the stock market.  The 115 respondent are considered High return as very important attribute for investing in stock market. While 75 of them are considered as important attribute. This indicates the majority of respondents are investing in the stock market is by expecting high return.  The 80 and 60 respondents are considered the attribute like fall in the interest of other instruments has important and very important factor to invest in the stock market. The other instruments include like bank interest, mutual fund, insurance etc. This indicates respondents to explore the stock market in such situation .  The 180 respondents have given the attribute of risk taking ability of the investor has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 180 respondents are in favour of having the characteristic like risk taking ability to invest in the stock market.

The 187 respondents have given the attribute of Self importance of holding the share of the big company has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 187 respondents are in favour of having the characteristic like Self importance of holding the share of the companies to invest in the stock market. The majority of these respondents is considered this attribute has one of the important influencing factors to have pride of becoming the owner of the company by possessing of the share.  The 176 respondents have given the attribute of Hassle free investment has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 176 respondents are in favour of having the characteristic like hassle free investment to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. This lead the investor to easily enter and exit environment.

The 184 respondents have given the attribute of investment surplus has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 184 respondents are in favour of having the characteristic like surplus investment in hand to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. In order to park their surplus money, they would like invest in the stock market.  The 193 respondents have given the attribute of company grading has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 193 respondents are in favour of having the characteristic like Company grading to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. The company grading helps the investor increase confidence to invest the money for particular company.

The grade assign to any invidual company represent and assessment of the ―fundamental‖ of the company in relation to universe of other listed equity securities in India.  The 187 respondents have given the attribute of positive news of the company has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 187 respondents are in favour of having the characteristic like positive news of the company to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. The company positive news helps the investor to boost confidence to invest the money for particular company. The News is undoubtedly huge factor when it comes to stock price, positive news about the company can increase buying interest in the market, while negative press release can ruin prospect of the stock.  The 190 respondents have given the attribute of Earning per share of the company has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 190 respondents are in favour of having the characteristic like Earning per share of the company to invest in the stock market.

The company earning per share helps the investor to boost confidence to invest the money for particular company. This is perhaps most important determining factor for deciding health of any company and they influence buying tendency in the market resulting in the increase of price of that particular stock.  The merely 28 respondents have given the attribute of Govt holding of the share in the company has important and very important factor to invest in the stock market. Moreover it justify our conclusion that investor who has have considered risk taking ability and speculation have least bother to have attribute of govt Holding of the share in the particular company.  The 171 respondents have given the attribute of Stock Marketability of the company has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 171 respondents are in favour of having the characteristic like Stock Marketability of the company to invest in the stock market.

The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. The company Stock Marketability led the investor to boost confidence to invest the money for particular company.  The 180 respondents have given the attribute of positive Market trend of the company has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 180 respondents are in favour of having the characteristic like Market trend of the company to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. The company Market trend particular in the long run lead the investor to boost confidence to invest the money for particular company .  The 183 respondents have given the attribute of Dividend paid by the company in many previous occasion has important and very important factor to invest in the stock market.

The majority from 200 respondents, i.e. 183 respondents are in favour of having the characteristic like Dividend which is paid regularly by the company to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. The investor will influence by the pattern of the distributing the dividends out of the profit from the company.  The 165 respondents have given the attribute of Economic condition of the industry has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 165 respondents are in favour of having the Economic condition of industry by the company to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market.  The 126 respondents have given importance and very importance to the affordable share price of the company to determine investment in the company.

The good number of respondents has considered this attribute for investment in the company.  The 184 respondents have given the attribute of Reputation of firm in many previous occasion has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 184 respondents are in favour of having the Reputation of firms of the company to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. The reputation of firm really helps to sustain high market price in the stock market.  The 143 respondents have given the attribute of Statement from govt official in many previous occasion has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 143 respondents are in favour of having the Statement from govt official of the company to invest in the stock market. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market. The less controversy and more positive declaration from the government will help to build overall image of the company that will led investor to invest more in that particular company.

The merely 21 respondents have given the attribute of Reputation of firm shareholders in many previous occasion has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 21 respondents are in favour of having the Reputation of firm’s shareholders of the company to invest in the stock market. This indicates that investor has given less attention to reputation of other shareholder of the firm.  The 9 respondents have given the attribute of Grey Market has important factor to invest in the stock market. From 200 respondents, i.e. 9 respondents are in favour of having the characteristic like Grey Market to invest in the stock market. Various types of players constitute the grey market. Certain investors may want to hold the shares, but may not expect to get allotment of these shares through the IPO route. Hence, they may agree to buy the shares in the grey market. Grey market is the unofficial trading in a company’s share before it starts trading on the stock exchange after an IPO.

The 152 respondents have given the attribute of Demand and supply has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 152 respondents are in favour of having the Demand and supply factor of the company to invest in the stock market. This fundamental rule of economics holds good for the equity market as well. The price is directly affected by the trend of stock market trading. When more people are buying a certain stock, the price of that stock increases and when more people are selling he stock, the price of that particular stock falls. The majority of this respondent is considered this attribute has one of the important influencing factors for trading the share in the market.  The 108 respondents have given the attribute of Market Cap has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 108 respondents are in favour of having the Market Cap of the company to invest in the stock market.

If you are trying to guess the worth of a company from the price of the stock, you are making a huge mistake. It is the market capitalization of the company, rather than the stock, that is more important when it comes to determining the worth of the company.  The 161 respondents have given the attribute of Price/Earnings Ratio has important and very important factor to invest in the stock market. The majority from 200 respondents, i.e. 161 respondents are in favour of having the Price/Earnings Ratio by the company to invest in the stock market. Price/Earnings ratio or the P/E ratio gives you fair idea of how a company’s share price compares to its earnings. If the price of the share is too much lower than the earning of the company, the stock is undervalued and it has the potential to rise in the near future. On the other hand, if the price is way too much higher than the actual earning of the company and then the stock is said to overvalued and the price can fall at any point.

In order to explore fourth objective, researcher carried out research from the secondary sources, it is learnt that Traditional marketing practices are increasingly viewed with skepticism. In many organizations, marketers struggle to document the return on investment for marketing expenditures; as a result, the marketing function is poorly aligned with the strategic goals of the company, marketing has less influence in the boardroom — and the marketing budget allocation is viewed as a questionable cost rather than a worthy investment. To negate such criticisms, marketers need to realign their role and redefine the scope of marketing so that it can directly relate to strategic outcomes for the company.

One way to achieve this goal is through extensive application of predictive analytics, in both the formulation of marketing strategies and customer management. Along these lines, that certain types of marketing efforts — those developed by using analytics to identify customers’ lifetime value to a company — can create shareholder value and influence stock prices in a predictable fashion. Marketing remains a company expense that is questioned by many a CEOs and MDs. While this is not always justified, it is true that few marketing departments are definitive about the results of their activities. As marketers, we prefer to call marketing expenses an investment there is sufficient empirical evidence to support that – yet many non-marketing executives see it as an expense. This makes marketing expenses easy to cut down during an economic decline.

Focusing on results means marketers becomes more business-focused. Too often marketing budgets “get a life of their own”, with activities purely based upon historic spend, rather than activities being questioned for their contribution to business growth. While most marketers will endorse the fact that marketing works in building brands, improving brand image and driving sales, the relationship between marketing and investor value is not always that clear. Although as marketers will anecdotally believe it, isolating the effect of marketing is complex. For a CEO, shareholder value is the most important objective: most will stand and fall by their ability to grow the investment value of their companies. If one can indeed prove that marketing can create shareholder value, it will mean that marketing will be seen as a business tool rather than an expense.

Research Conclusion and Limitation:
Large Number of Investors invests in Capital Market with the reason to get higher returns and Quick return. Large Number of investor investing in the capital market by considering the company grading, overall company reputation in the industry, company earning and market condition at particular point of time. Further, Researcher also vindicated that there is greater role of Marketing to determine investment in the capital market. As a result one can indeed prove that marketing can create shareholder value, it means that marketing will be seen as a business tool rather than an expense. Like virtually any study in the tradition form, our findings are subject to various limitations and caveats. Even in the case of this research, they might well differ in other countries or at other times. Future research should address the generalizability of our findings across time periods and geographical settings. Future research can be take more variables in to account. Even sample size of 200 may not totally reasonable representative of the given population. Stock markets are highly volatile in nature and thus they get affected even by the minutest of happenings.

Reference:

Barber, M. Brad, Odean, Terrance (2008), ―All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors‖, the Review of. Financial Studies, Volume 21, Issue 2, pp 785-818.

M.G. Lipe (1998), ―Individual investors’ risk judgments and investment decisions: The impact of accounting and market data‖, Accounting, Organizations and Society, Volume 23, Issue 7, pp 625-640. Rajarajan.V (1997) ―Investment size based segmentation of Individual Investors‖, Management Researcher, Vol.3, No. 3 & 4, January – June 1997, pp.27-36. Rajarajan.V (2003) ―Investors’ Demographics and Risk Bearing Capacity‖, Finance India, Vol. XVII, No. 2, June 2003, pp.565-576. Tan Wee-Kheng, Tan
Yu-Jie (2012), ―An exploratory investigation of the investment information search behavior of individual domestic investors”, Telematics and Informatics, Volume 29, Issue 2, May 2012, pp 187-203 Feng Lei, Seasholes Mark S.(2008) , ―Individual investors and gender similarities in an emerging stock market‖ , Pacific-Basin Finance Journal, Volume 16, Issues 1–2, pp 4460 . Ranganathan Kavitha (2006), ―A Study of Fund Selection Behavior of Individual Investors towards Mutual Funds – with Reference to Mumbai City, Indian Institute of Capital Markets 9th Capital Markets Conference Paper. Iyer S Balaji, Bhaskar R Kumar, Investors’ Psychology ―A Study of investors, behavior in the Capital Market‖, Finance India. Hodge, F.D. (2003) , Investors’ perception of earnings quality, auditor independence , and the usefulness of audited financial information , Accounting Horizons , 17 , 37-48. Krishnan, R. and Booker, D.M. (2002). Investors’ use of Analysts’ recommendation, Behavioral Research in Accounting, 14, 129-158. 14 | P a g e

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