Affiliated to

University of Mumbai

Revised Syllabus for

Programme:
B.Com
Accounting & Finance
Semester VI
Under Choice Based Credit System
Academic Year 2022-2023

PROJECT/INTERNSHIP
ON
(EQUITY INVESTMENT STRATEGIES: A STUDY ON
RETAIL INVESTORS IN MUMBAI)

1
 PROJECT REPORT
ON
[EQUITY INVESTMENT STRATEGIES: A STUDY ON RETAIL
INVESTORS IN MUMBAI]
SUBMITTED BY
TYBCom (Accounting & Finance)
(SEMESTER VI)
UNDER THE GUIDANCE OF
Dr. ROSHANI BHATU

ACADEMIC YEAR
2022 - 2023

2
 DECLARATION

1, _Gautam S. Yadav_the student of T.Y.BCom (Accounting & finance)

Semester VI (2022 - 2023) hereby declare that I have completed the
Project Equity Investment strategies: A Study on Retail Investors in
Mumbai.
I also declare that this report which is the partial fulfilment of the
requirement for the degree of T.Y.BCom (Accounting & Finance) of
KES SHROFF COLLEGE OF ARTS AND COMMERCE, is the result
of my own efforts with the help of experts.

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 CERTIFICATE

This is to certify that Mr. Gautam S. Yadav of Third Year

B.Com (Accounting & Finance) Semester VI (2022 - 2023) has
successfully completed the Project on Equity Investment
Strategies: A study on Retail investors in Mumbai as per the
guidelines of KES’ Shroff College of Arts and Commerce,
Kandivali(W), Mumbai-400067.

Head of Department Guide

Dr. Vaibhav R. Ashar Dr.Roshani Bhatu

Principal External Examiner

Dr L Bhushan

4
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels
and fresh dimensions in the completion of this internship.
I take this opportunity to thank the KES SHROFF COLLEGE OF
ARTS AND COMMERCE (AUTONOMOUS) for giving me chance
to present this report.
I am thankful to KES SHROFF COLLEGE OF ARTS AND
COMMERCE (AUTONOMOUS) Dr. Vaibhav Ashar and Dr.
Roshani Bhatu for providing me opportunity to work on the Project
(Equity Investment strategies: A study on Retail Investors in Mumbai)
with their company and gaining work experience.
I would like to thank my Principal, Dr. Lily Bhushan for providing the
support required for the Project.
I take this opportunity to thank our Guide Dr. Roshani Bhatu, for her
moral support and guidance.
Lastly, I would like to thank each and every person who directly or
indirectly helped me specially my parents and peers who supported me
throughout my project.

5
 LIBRARY ATTENDANCE CERTIFICATE

This is to certify that Mr. Gautam .S. Yadav of third year B.Com
Accounting & Finance having Roll No. 71, division D has successfully
completed his /her minimum hours of attendance in the library to
complete the 100 marks project on the topic titled Equity Investment
strategies: A study on Retail Investors in Mumbai

Sign Sign Sign

Librarian Project Guide Head of Department

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 ABSTRACT
This paper discussed the strategies adopted by retail investors for taking a decision regarding
investment in equity securities. In the process, the theoretical aspects of investment decision
making, investor preferences and perception are presented as a prelude to the empirical analysis.
It is found from the study that information on several aspects required for trading in equity
investments can be obtained from various resources. Retail investors lack of expertise and
competency to employ sophisticated analytical tools to take their investment decisions. They
adopt very simple and less time consuming strategies for arriving at a decision of investment in
equity securities.

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 Introduction
Retail investors require general information about the financial developments taking place in the
economy, securities market behavior and specific information about the companies whose
securities are under consideration for investment. They also require information relating to the
new issues of the companies, investment advice and recommendation regarding the buying,
holding and selling of certain security information about dividend, bonus, rights issues, record
dates/book closures of their holdings etc. The information required is obtained from Financial
Press, Stockbrokers‟ literature, Companies‟ publications and Advice and counseling by
Investment advisers Investors have to analyze and interpret the information provided in the
financial press, stockbrokers‟ literature and companies‟ publications for taking a wise decision.
All the investors do not possess the requisite knowledge and expertise to understand the
information made available to them. Investors may burn their fingers when the investment
information contained is misleading. Unscrupulous promoters and stockbrokers distort the facts
and use flowery language to inspire the investors. As such, the investors have to observe caution
before they take a decision, otherwise, they fall a prey for the tricks played by the vested
interests.
Introduction to Indian Stock Market
The BSE and NSE
Most of the trading in the Indian stock market takes place on its two stock exchanges:
the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been
in existence since 1875. The NSE, on the other hand, was founded in 1992 and started trading in
1994. However, both exchanges follow the same trading mechanism, trading hours, and
settlement process.
As of January 2023, the BSE had 5,311 listed firms, whereas the rival NSE had 2,113 as of Dec.
31, 2022.
Almost all the significant firms of India are listed on both the exchanges. The BSE is the older
stock market but the NSE is the largest stock market, in terms of volume. Both exchanges
compete for the order flow that leads to reduced costs, market efficiency, and innovation. The
presence of arbitrageurs keeps the prices on the two stock exchanges within a very tight range.

Trading Mechanism

Trading at both the exchanges takes place through an open electronic limit order book in which
order matching is done by the trading computer. There are no market makers and the entire
process is order-driven, which means that market orders placed by investors are automatically
matched with the best limit orders. As a result, buyers and sellers remain anonymous.

The advantage of an order-driven market is that it brings more transparency by displaying all
buy and sell orders in the trading system. However, in the absence of market makers, there is no
guarantee that orders will be executed.

8
All orders in the trading system need to be placed through brokers, many of which provide an
online trading facility to retail customers. Institutional investors can also take advantage of
the direct market access (DMA) option in which they use trading terminals provided by brokers
for placing orders directly into the stock market trading system.

Settlement and Trading Hours

Equity spot markets follow a T+1 rolling settlement. This means that any trade taking place on
Monday gets settled by Tuesday. All trading on stock exchanges takes place between 9:15
a.m. and 3:30 p.m., Indian Standard Time (+ 5.5 hours GMT), Monday through Friday.
Delivery of shares must be made in dematerialized form, and each exchange has its
own clearing house, which assumes all settlement risk by serving as a central counterparty.

Market Indexes

The two prominent Indian market indexes are Sensex and Nifty. Sensex is the oldest market
index for equities; it includes shares of 30 firms listed on the BSE. It was created in 1986 and
provides time series data from April 1979, onward.

Another index is the Standard and Poor's CNX Nifty; it includes 50 shares listed on the NSE. It
was created in 1996 and provides time series data from July 1990, onward.

Market Regulation

The overall responsibility of development, regulation, and supervision of the stock market rests
with the Securities and Exchange Board of India (SEBI), which was formed in 1992 as an
independent authority. Since then, SEBI has consistently tried to lay down market rules in line
with the best market practices. It enjoys vast powers of imposing penalties on market
participants, in case of a breach.

Who Can Invest in India?

India started permitting outside investments only in the 1990s. Foreign investments are
classified into two categories: foreign direct investment (FDI) and foreign portfolio
investment (FPI). All investments in which an investor takes part in the day-to-day management
and operations of the company are treated as FDI, whereas investments in shares without any
control over management and operations are treated as FPI.

For making portfolio investments in India, one should be registered either as a foreign
institutional investor (FII) or as one of the sub-accounts of one of the registered FIIs. Both
registrations are granted by the market regulator, SEBI.

Foreign institutional investors mainly consist of mutual funds, pension funds, endowments,
sovereign wealth funds, insurance companies, banks, and asset management companies. At
present, India does not allow foreign individuals to invest directly in its stock

9
market. However, high-net-worth individuals (those with a net worth of at least $50 million)
can be registered as sub-accounts of an FII.

Foreign institutional investors and their sub-accounts can invest directly into any of the stocks
listed on any of the stock exchanges. Most portfolio investments consist of investment in
securities in the primary and secondary markets, including shares, debentures, and warrants of
companies listed or to be listed on a recognized stock exchange in India.

FIIs can also invest in unlisted securities outside stock exchanges, subject to the approval of the
price by the Reserve Bank of India. Finally, they can invest in units of mutual funds and
derivatives traded on any stock exchange.

An FII registered as a debt-only FII can invest 100% of its investment into debt instruments.
Other FIIs must invest a minimum of 70% of their investments in equity. The balance of 30%
can be invested in debt. FIIs must use special non-resident rupee bank accounts in order to
move money in and out of India. The balances held in such an account can be fully repatriated.

Restrictions and Investment Ceilings

The government of India prescribes the FDI limit, and different ceilings have been prescribed
for different sectors. Over a period of time, the government has been progressively increasing
the ceilings. FDI ceilings mostly fall in the range of 26% to 74%.

By default, the maximum limit for portfolio investment in a particular listed firm is decided by
the FDI limit prescribed for the sector to which the firm belongs. However, there are two
additional restrictions on portfolio investment. First, the aggregate limit of investment by all
FIIs, inclusive of their sub-accounts in any particular firm, has been fixed at 24% of the paid-up
capital. However, the same can be raised up to the sector cap, with the approval of the
company's boards and shareholders.

Secondly, investment by any single FII in any particular firm should not exceed 10% of the paid-
up capital of the company. Regulations permit a separate 10% ceiling on investment for each
of the sub-accounts of an FII, in any particular firm. However, in the case of foreign corporations
or individuals investing as a sub-account, the same ceiling is only 5%. Regulations also impose
limits for investment in equity-based derivatives trading on stock exchanges.

Investments for Foreign Entities

Foreign entities and individuals can gain exposure to Indian stocks through institutional
investors. Many India-focused mutual funds are becoming popular among retail investors.
Investments could also be made through some of the offshore instruments, like participatory
notes (PNs), depositary receipts, such as American depositary receipts (ADRs) and global
depositary receipts (GDRs), exchange traded funds (ETFs), and exchange traded notes (ETNs).

As per Indian regulations, participatory notes representing underlying Indian stocks can be
issued offshore by FIIs, only to regulated entities. However, even small investors can invest in

10
American depositary receipts representing the underlying stocks of some of the well-known
Indian firms, listed on the New York Stock Exchange and Nasdaq. ADRs are denominated in
dollars and subject to the regulations of the U.S. Securities and Exchange Commission (SEC).
Likewise, global depositary receipts are listed on European stock exchanges. However, many
promising Indian firms are not yet using ADRs or GDRs to access offshore investors.

Retail investors also have the option of investing in ETFs and ETNs, based on Indian stocks.
India-focused ETFs mostly make investments in indexes made up of Indian stocks. Most of the
stocks included in the index are the ones already listed on the NYSE and Nasdaq.

As of Jan 2023, two of the most prominent ETFs based on Indian stocks are the Motilal Oswal
NASDAQ 100 ETF and the HDFC Sensex ETF. The most prominent ETN is the iPath MSCI
India Index Exchange Traded Note (INPTF). Both ETFs and ETNs provide a good investment
opportunity for outside investors.

What are Equity Shares?

In a company form of organization, the total capital of the business is divided into smaller units
known as equity share. When an investor subscribes to the equity share of a company,
contributes to the total capital of the business and he becomes a shareholder. For the company,
such a contribution is like a liability on which it needs to give returns to the shareholder.
Investors earn returns in equity investing by way of dividends and capital appreciation. Along
with monetary benefits, the holders of such shares also get voting rights in critical matters of the
company. Basically, they are treated as owners of the company wherein the ownership is limited
to the extent of the shares held by them.
A business issues shares primarily when it is in need of funds for growth and expansion. It
approaches the investors by means of an Initial Public Offering (IPO). IPO is treated as a
primary market wherein the equity shares of the company are offered to the general public for
subscription for the first time. Afterwards, the shares get listed on a particular stock exchange
and exchange hands through frequent trading.
You can subscribe to the IPO and these shares can be sold on a stock exchange like NSE once
you are allotted shares. After you subscribe to shares of the company, the record is maintained at
depositories like NSDL and CDSL. When the company needs to distribute dividends or bonus
shares, it will get the shareholders’ list from these depositories and credit the dividends directly
into your bank account.
In the context of stock market investments, equity refers to the shares in a company’s ownership.
In simpler terms, it is the total amount of money that a shareholder is eligible to receive if all of a
company’s debts are paid off and its assets liquidated. When an individual invests in a
company’s equities, he/she becomes its partial owner.
On investment in a company’s stocks, he/she can earn profit via capital gains or stock price
appreciation. Further, investing in a company’s shares also bestows an individual with a right to
vote in matters pertaining to the Board of Directors.

11
 Investing in equity shares is popular among individuals because they are high-return investment
options. However, despite their potential to bear high returns, they also expose an individual’s
investment portfolio to a certain degree of risk. For this reason, it is pertinent for individuals to
gauge their risk appetite before deciding to invest in equity stock.
Why should you invest in Equity?
Individuals have financial goals which motivate them to invest in specific havens. However, the
choice of Investment Avenue can make or break the realization of financial dreams. It is because
of the forces of inflation and taxes. These tend to reduce the purchasing power of your money
and impede faster wealth accumulation.
If you have been restricting you investments to only bank fixed deposits (FDs), then you might
face difficulties in protecting your wealth. We can understand this with the help of an example.
Imagine that the average annual returns earned on a bank FD is 8%. Assuming an individual falls
in the highest tax bracket i.e. 30%, his returns on the FD after tax would be around 5.6%. It
means that his wealth is losing 2.4% every year. In other words, if he begins with Rs 100, then at
the end of a period of 10 years the purchasing power of his wealth reduces to Rs 76.
Hence, inflation and taxes are always going to stay but your choices of investing can bring about
a lot of difference in your rate of return.
Conversely, if you consider equities, these have delivered average returns of around 12%
annually. With equities, you can think of protecting your wealth from getting lost to rising
inflation and simultaneously earn a higher real rate of return. Suppose if you purchase an equity
share of a company at Rs 200 and its price increases to Rs 250, then you can sell the share on the
stock exchange to earn a profit of Rs 50.
Investors make huge profits when the shares are way above the price at which you bought them
initially. If the price of an equity share an increase to Rs 200 after five years from the time when
you bought it at Rs 100, it shows that you have doubled your money. On top of it, you receive
dividends, bonus or rights shares, which further maximizes your returns.
How do prices of Equity Shares move?
Stocks are volatile instruments whose prices change every day. There are numerous reasons
which explain the behavior of stock prices. To start with, you can think of market forces i.e.
theory of demand and supply. If the number of people who want to buy a stock are more than
those who want to sell it, then the price of stock rises.
Conversely, if the number of people who want to sell a stock are more than those who want to
buy it, then the price of stock falls. At this juncture it becomes important to know that what
affects the demand and supply of stocks; which in turn causes investors to like/dislike a stock.
You might have noticed headlines flashing on the news channels throughout the stock trading
session. Basically, if the investors come across a positive news about a company like
growth/expansion plans, projects approval by the government, the stock prices rise.

12
On the contrary, any negative news like legal suits filed against a company or rejection of a
project makes its stock prices fall. Even the equity analyst’s estimate about the future value of a
company is based on company’s earnings projection. Ultimately, anything which increases the
earnings and value of a company causes its stock prices to rise and vice-versa. Apart from this,
you may use financial ratios to know the intrinsic worth of the company.
How are Equity Shares taxed?
When you invest in shares, you make capital gains on the sale of shares which are taxable.
Capital gains is the difference between the selling price and purchase price of the equity share.
The rate of taxation on capital gains depends on how long you stayed invested in the stocks.
When you sell an equity share, listed on a recognized stock exchange, within one year from the
date of purchase, you earn short-term capital gains. These will be taxed at the rate of 15%.
Conversely, if you sell a listed equity share after one year from the date of purchase, you
earn long-term capital gains (LTCG). LTCG in excess of Rs 1lac are taxable at the rate of 10%
without the benefit of indexation.
Are Equity Shares better than Equity Funds?
If you are investing directly in shares, there are a lot of complexities that you need to take care
of. To start with, you have to examine a stock and assess if valuations are attractive. Investing in
stocks tends to be a dynamic process because the business prospects change every day due to
immense competition. On top of this, one should also understand how the stock exchanges like
Sensex and Nifty functions does.
Moreover, you would require relatively higher initial capital to build a portfolio. If you take the
case of equity funds, it is a more convenient way to enter stock markets. There’s an experienced
fund manager who would take care of your portfolio. You need not worry about the market
movements and other decisions related to portfolio management.
More importantly, you can start systematic investment plan (SIP) in mutual funds with as low as
Rs 500 every month. In short, you can achieve similar level of diversification at a smaller
amount.
Types of Equity
Equities are market-linked investments that do not come with an assurance of bearing fixed
returns. Returns on equity thus depend on the underlying asset’s performance.
Equity investments can be broadly divided into several categories, each bearing its own set of
risks and rewards.
Following is a broad categorization of equity investments –
Shares
The units of partial ownership in a company are commonly known as shares. They are traded via
designated stock exchanges like the Bombay Stock Exchange or National Stock Exchange

13
(provided that they are BSE or NSE equity shares of a listed company). The potential returns
from investing in shares can be quite substantial, with their risks being equally high.
Equity Mutual Fund Investments Mutual funds are investment options wherein capital from
various investors is collected, pooled in and invested in various equity and debt instruments.
Equity mutual funds are those options whereby at least 60% of the total assets are invested in the
equity shares of different companies.
Based on their market capitalization, equity mutual funds can be divided into the following
categories.
i. Large-cap equity funds these are funds with investment only in well-established
large-cap companies and have the potential to provide stable returns at comparatively
low risk.
ii. ii. Mid-cap equity funds these equity mutual funds are invested in the stocks of mid-
cap companies. They make for the most beneficial investment options as the risk-
reward ratio is well balanced with these funds.
iii. iii. Small-cap equity funds these are mutual funds invested in the shares of companies
that have small market capitalization and are comparatively more volatile than other
categories of diversified funds.
iv. IV Multi-cap funds Looking to Invest? Open an account with Grow and start
investing for free INVEST NOW Stocks National Stock Exchange Bombay Stock
Exchange What is SENSEX Stock Exchange Multiage Stocks Penny Stocks Stock
Broker Stock Trading Nifty Mid Cap Stocks Small Cap Stocks Large Cap Stocks
Blue Chip Stocks or Companies Stock Market Timings NSE Holidays BSE Holidays
Intraday Trading Equity Share Capital Growth Stocks Stock Market Indices S&P
BSE SENSEX S&P BSE 100 NIFTY 100 NIFTY 50 NIFTY MIDCAP 100 NIFTY
BANK NIFTY NEXT 50 SHARE iv. Multi cap funds these mutual funds come with
the liberty to invest in different sectors and market capitalizations.
Equity Futures
These are investment instruments where the investors have an obligation of purchasing or
selling the underlying assets at a predetermined price and a predetermined rate. Equity
futures generally come with an expiry period of three months and the settlement day is
usually the last Thursday of the 3rd month.
Equity Options
Equity options are akin to the futures where parties involved are not legally obliged to follow
up on their agreement.
Arbitrage Schemes
Arbitrage, with regards to the stock market, refers to the process of buying and selling
securities in different exchanges simultaneously to profit from the difference in market price.

14
Individuals can invest in arbitrage funds which are equity-oriented funds with primary
investment in equities, debt or money market instruments and equity derivatives.
Alternative Investment Funds Individuals can choose to invest in equity instruments through
alternative funds which comprise different pooled in investment funds that primarily invest
in hedge funds, venture capital, managed future, private equity, etc.
Features of Equity
The characteristics of equities or equity shares can be tabulated as follows.
Maturity period
As per the Companies Act 1956, a company as an entity is not eligible to purchase its own
shares. The equity shares can provide capital to the company, which cannot be regained for
as long as the company is functional. Individuals who have invested in the company’s shares
can only redeem their capital at the time of the company’s liquidation; after all other claims
have been fulfilled.
Shareholders’ Voting Rights
When an individual purchases the equity shares of a company, he/she becomes a real
stakeholder of the organization. The power to participate in the company’s meetings is
bestowed upon such participants, and they have the right to voice their opinions on a
company’s executive decisions. However, this right is exercised indirectly through a
company’s Board of Directors, elected by the shareholders.
Income from Equity Shares
When an individual invests in a company’s shares, he/she acquires the right to claim on a
company’s income. These investors can claim on the company’s residual income which is
left after a preference shareholders’ dividend has been paid. If a company has insufficient
profits, equity shareholders might not earn any gains from their shares. On the other hand,
they also stand a chance of earning higher dividends through capital appreciation.
Claim on Company’s Asset
Every individual who has invested in a company’s equity shares gains an ownership claim on
the company’s assets. For instance, if a company is liquidated, the equity assets are first used
to fulfil the claims of preference shareholders and creditors while whatever is left belongs to
the equity shareholders.
Limited Liability
Even though shareholders are a company’s real owners, they enjoy the Liability advantage
of limited liability. It means that their liabilities are limited only to the value of shares they
have invested in. If an investor has paid the price of the share in its entirety, he/she will not
be affected by the losses that the company suffers, even at the time of its liquidation.
What are Capital Gains and Dividends?

15
Equity holders’ value of holdings increases when the price of the shares increases way more than
what was paid for them. But that’s not the only way to gain profits by owning equities.
For instance, companies pay out dividends from their own profits to their shareholders. These
periodic payments are, however, not guaranteed, but can provide major benefits when available.
As an investor, you can either make the decision of reinvesting your dividends or take them as
income.
Therefore it’s imperative to understand the difference between capital gains and dividends
especially if you own equities. A capital gain is the difference between the prices at the shares
were purchased and the price for which they are sold. There are two types of capital gains, viz.
longhand short-term capital gains and each have their own tax rate
Who Should Consider Investing in Equities?
Equities are more suitable for investors who are willing to take a risk with their investments.
Those who are constrained by the limitations in time or experience in the money-market can also
lean towards equity mutual fund investments for moderate to high returns.
It is, however, crucial for investors to gauge their risk appetite before investing in the equity
market to ensure that they make sound financial decisions.
What is an Equity Market?
An equity market is a hub in which shares of companies are issued and traded. The market comes
in the form of an exchange – which facilitates the trade between buyers and sellers – or over-the-
counter (OTC) in which buyers and sellers find each other.
The equity market is also referred to as the stock market and is one of the most important leading
indicators of the market economy. It also plays a pivotal role in supporting a market-based
economy since it is the bridge between providing capitals to companies who require it and
providing investments for investors who are seeking a return on their investment.
Understanding Equity Markets
As mentioned, equity markets are the hub that connects buyers and sellers of equities. Equity
securities are initially listed on the markets through an initial public offering (IPO) and are
subsequently traded among people on the secondary market.
The trading can be done either publicly – which are listed on public exchanges – or privately,
where the issuances and trades are initiated through dealers instead of a centralized exchange.
The use of dealers in the private market is the defining feature of OTC markets.
History of Equity Markets
Equity markets come with long-entrenched histories, with debt issuances dating back to the
1300s. The first stock market was established in Belgium in 1531. The exchange dealt primarily
with promissory notes and bonds, but not with actual stocks.

16
Throughout the 1600s, the British, Dutch, and French governments gave charters to companies
that included ‘East India’ in their monikers. The countries would take stakes in the profits from
India and Asia by funding sea voyages that would bring back goods – although it was risky due
to the abundance of pirates, poor weather, and faulty navigation.
Instead of bearing all the risk for themselves, ship owners would seek out investors to help fund
voyages, and in return, provide investors with a percentage of the profits should the voyage be
successful.
They were the earliest forms of limited liability companies (LLCs) that would last a single
voyage. Ship-owners could send their ships without bearing the risk for themselves, and
investors could diversify their risk by investing in multiple different ships and voyages.
The East India companies eventually began paying dividends from the proceeds collected from
multiple voyages instead of creating single-time LLCs for each voyage. It was the first form of
joint-stock companies in which the companies could demand more capital, build larger fleets,
and provide larger returns for investors.
Top Equity Exchanges
Some of the most well-known and largest equity markets are:
New York Stock Exchange (NYSE) – United States
NASDAQ (NASDAQ) – United States
Japan Exchange Group (JPX) – Japan
London Stock Exchange (LSE) – United Kingdom
Shanghai Stock Exchange (SSE) – China
Hong Kong Stock Exchange (HKEX) – Hong Kong
Euronext – European Union
Toronto Stock Exchange – Canada
Bombay Stock Exchange – India
Importance of Equity Markets
Equity markets play an important role in a market-based economy. They provide capital raising,
liquidity, and investment options.
These important functions allow our economy to grow continuously, and they are the hallmark of
capitalism.
1. Capital Raising
Equity markets facilitate the raising of equity capital. This is important for entrepreneurs who
have a business idea but do not have the capital on-hand to start the business themselves.

17
 Banks are debt investors who are unlikely to provide a loan to these businesses without collateral
or an abnormally high return. Therefore, it is effective for these entrepreneurs to give up a stake
in their business in exchange for the capital provided.
Equity markets allow these businesses to access the deepest pools of capital since they do not
have to seek out individual investors – the investors are brought to them through the network of
investment banks and financial exchanges.
2. Liquidity
Equity markets also provide liquidity for the markets. Liquidity refers to the ease of which an
asset can be turned into cash. For example, checking accounts are the most liquid, and a painting
will be illiquid.
Since equity markets are a centralized hub for buyers and sellers, it is easy to find someone who
is willing to buy or sell your equity securities, and you can readily convert your securities to
cash.
Equity markets are powerful pricing mechanisms since they reflect the immediate underlying
supply and demand from millions of buyers and sellers across the globe. High demand and
increased buying activity for stocks cause prices to rise, while low demand and increased selling
activity for stocks cause prices to decline.
3. Investment Options
Equity markets provide a slew of investment options for investors. Investors can customize their
risk profile and get exposure to different companies and industries by having the option to pick
different equity securities.
Equity markets also provide the main alternative to debt investments, which is beneficial for
investors with higher risk tolerance.
IMPORTANT QUESTIONS TO BE KNOWN
Why should I consider equities?

Equity investors purchase shares of a company with the expectation that they’ll rise in value in
the form of capital gains, and/or generate capital dividends. If an equity investment rises in
value, the investor would receive the monetary difference if they sold their shares, or if the
company's assets are liquidated and all its obligations are met. Equities can strengthen a
portfolio’s asset allocation by adding diversification.

What are the potential benefits of equity investments?

 The main benefit from an equity investment is the possibility to increase the value of the
principal amount invested. This comes in the form of capital gains and dividends.

18
 An equity fund offers investors a diversified investment option typically for a minimum initial
investment amount.
 If an investor wanted to achieve the same level of diversification as an equity fund, it would
require much more – and much more manual – capital investment.
 Investors may also be able to increase investment through rights shares, should a company
wish to raise additional capital in equity markets.

How Is Equity Market In India ?

Equities are mostly traded on the stock exchanges in India. In the Indian stock market, equities
are available for trading at the National Stock Exchange (NSE) , the Bombay Stock Exchange
(BSE) and the latest entrant, Metropolitan Stock Exchange of India (MSE). Shares of stock
market listed companies are bought/sold.
Equity share trading is roughly in two forms - spot/cash market and futures market. These are the
different types of equity market in India. The spot market or cash market is a public financial
market in which stocks are traded for immediate delivery. The futures market is a place where
the shares' delivery is due at a later date. With the help of an equity trading account, a
trustworthy broker like Nirmal Bang and online equity trading systems, investors can utilize
the indian equity market..
What is 'Growth' in Equity Market ?
Shares/stocks traded in the equity market belong to companies that show growth. Investors
typically invest in 'growth' stocks, which belong to small companies showing potential for high
growth rates. The growth stocks are those where investors are ready to make big bids in the live
equity market, be it in India or global equity market. With the help of online equity trading,
investors aim to accumulate growth stocks today so that they can them off after incredibly low
prices.
What Are the Timings of Equity Market ?
There is no 24 hour stock trading system yet. The normal trading time for equity market is
between 9:15 am to 03:30 pm, Monday to Friday. On Saturday and Sunday, trading does not
happen unless there are special circumstances.
What Are Equity Trading Holidays ?
Apart from weekends and non-business days, trading does not stop. You can check equity
trading holidays 2023 on NSE or BSE website
What Is Difference Between Stock And Equity ?
There is virtually no difference between stock and equity. These two words are commonly used
to mean shares. Stock and equity are just synonyms. Equity share trading is done via online
equity trading systems.

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What Is Equity in NSE ?
Equity in NSE refers to stock market. The securities market has two segments, the new issues
(primary) market and the stock (secondary) market. Currently more than 1300 securities or
stocks are available for trading on the NSE.
The stock exchange's automated screen based trading allows investors across the length and
breadth of India to trade and invest. The NSE trading system is called 'National Exchange for
Automated Trading' (NEAT). The equity space in NSE comprises of cash/spot trading and also
trading in equity derivatives.
How Can I Trade In Equity ?
To trade in equity share market, you will need to have the proper tools - open a demat and
trading account, have funds to buy stocks and a good broker platform to execute the trades.
Thanks to technological advancements, you can do online equity trading, at your home, office or
even while on the move.
To begin trading, you need to select the right stocks. Follow the live equity market to some
worthy stock ideas and do some research. This will help you fine-tune equity market growth
& investment strategies
How To Do Online Equity Trading ?
Today, carrying out online equity trading in India is an easy process. Every user with an online
account has a user/customer ID and password. These credentials will help you do equity share
trading on the equity market live.
Do always remember that brokers take professional-grade IT security, thus ensuring high quality
online equity trading that is completely safe. Here is a step by step process. Don't forget to open
a free demat account to begin investing.
Login to the online broker platform.
Enter the ID and password to access your account.
Your customized page opens and thus the opportunity to trade is open. Ensure you access the
online platform during market/trading hours.
Select the stock to trade and buy/sell them on the stock exchange at your preferred rate. Once the
order goes through, your trade is completed.
In the evening, you will get an SMS notification of the trade order specifics, along with
confirmation of the ledger balance.
What Are The Things To Know Before You Trade In Equity ?
The equity share market, be it the equity market in india or asian equity market, is full of traders
and investors wanting to make a profitable deal. It can sometimes be a lot of information to

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process. Also, there are different types of equity market. Hence, it is always good to have some
ground rules before you trade in equity.
Never go against the sentiment of the equity market today - The trend is your friend. Unless you
are 100% sure, do not try to take totally contrarian bets. When you go against the tide, the risk
factor increases.
Buy low, sell high - You should try to buy stocks that are trading at historically low prices and
cheap valuations. When you buy such stocks, you can gain when the equity makes the next up
move.
Think long term - In the short term, nobody can predict what the equity market live will see next.
So, it's important to have a long term view on trades that you do.
Know-how about intraday trading - Before you jump into the stock market bandwagon by
listening to random tips, it would be better to know how to do intraday trading for better results
with your trades and investments.
A Rs 1000 stock is not expensive and a Rs 5 stock is not cheap - Some investors approach equity
investing in the same way they buy clothes or vegetables. They seem to think if a stock is priced
at Rs 1000 is it costly than a stock that is Rs 100. Use valuations to understand exactly what is
cheap and what is expensive.
Equity markets are the meeting point for buyers and sellers of stocks.
The securities traded in the equity market can either be public stocks, which are those listed on
the stock exchange, or privately traded stocks. Often, private stocks are traded through dealers,
which is the definition of an over-the-counter market.When companies are born they are private
companies, and after a certain time, they go through an initial public offering (IPO), which is a
process that turns them into public companies traded on a stock exchange. Private stocks operate
slightly differently as they are only offered to employees and certain investors.Some of the
largest equity markets, or stock markets, in the world are the New York Stock Exchange,
Nasdaq, Tokyo Stock Exchange, Shanghai Stock Exchange, and Euronext Europe.
Companies list their stocks on an exchange as a way to obtain capital to grow their business. An
equity market is a form of equity financing, in which a company gives up a certain percentage of
ownership in exchange for capital. That capital is then used for a variety of business needs.
Equity financing is the opposite of debt financing, which utilizes loans and other forms of
borrowing to obtain capital.
After the listing of the shares, these are traded on the secondary market. This platform offers the
initial investors an option to exit their investments. In addition, investors who failed to procure
shares during the can purchase these from the secondary market. Trading in the Indian stock
market is commonly done through brokers. The brokers act as intermediaries between the stock
exchanges and the investors.

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Pros of Equity Market

Great The biggest benefit of the equity market is the opportunity to

wealth make huge profit. Many investors have experienced big
creation returns that can never be given by any other financial
investment.

Enter and In case of equity market, you can easily enter and exit a stock.
exit easily This should be compared to when you want to sell a house,
where you cannot sell it on your own will always.

Lower taxes When an equity is sold for profit after holding for more than 1
year, the profit attracts 10% tax. In case of fixed deposits, the
tax rate is as per the individual's tax rate i.e up to 30%.

Pros and Cons of Equity market

Cons of Equity Market

Lack of If you do not properly do research or invest in bad

understanding can stocks, your chances of making losses are high in a
be costly equity market live type situation. So, be careful.

Equity market be Equity investment return does not move in a straight

volatile line. There are upswings and downswings in
the Live equity market

There is risk of Equity share trading involves a chance of capital

capital erosion erosion.

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Types of Stocks

Investing in the stock market has historically been one of the most important pathways to
financial success. As you dive into researching stocks, you'll often hear them discussed with
reference to different categories of stocks and different classifications. Here are the major types
of stocks you should know.
Common stock
Preferred stock
Large-cap stocks
Mid-cap stocks
Small-cap stocks
Domestic stock
International stocks
Growth stocks
Value stocks
IPO stocks
Dividend stocks
Non-dividend stocks
Income stocks
Cyclical stocks
Non-cyclical stocks
Safe stocks
ESG stocks
Blue chip stocks
Penny stocks
Common stock and preferred stock
Most stock that people invest in is common stock. Common stock represents partial ownership in
a company, with shareholders getting the right to receive a proportional share of the value of any
remaining assets if the company gets dissolved. Common stock gives shareholders theoretically
unlimited upside potential, but they also risk losing everything if the company fails without
having any assets left over.

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Preferred stock works differently, as it gives shareholders a preference over common
shareholders to get back a certain amount of money if the company dissolves. Preferred
shareholders also have the right to receive dividend payments before common shareholders do.
The net result is that preferred stock as an investment often more closely resembles fixed-income
bond investments than regular common stock. Often, a company will offer only common stock.
This makes sense, as that is what shareholders most often seek to buy.
Large-cap, mid-cap, and small-cap stocks
Stocks also get categorized by the total worth of all their shares, which is called market
capitalization. Companies with the biggest market capitalizations are called large-cap stocks,
with mid-cap and small-cap stocks representing successively smaller companies.
There's no precise line that separates these categories from each other. However, one often-used
rule is that stocks with market capitalizations of $10 billion or more are treated as large-caps,
with stocks having market caps between $2 billion and $10 billion qualifying as mid-caps and
stocks with market caps below $2 billion getting treated as small-cap stocks.
Large-cap stocks are generally considered safer and more conservative as investments, while mid
caps and small caps have greater capacity for future growth but are riskier. However, just
because two companies fall into the same category here doesn't mean they have anything else in
common as investments or that they'll perform in similar ways in the future.
Domestic stocks and international stocks
You can categorize stocks by where they're located. For purposes of distinguishing domestic
U.S. stocks from international stocks, most investors look at the location of the company's
official headquarters.
However, it's important to understand that a stock's geographical category doesn't necessarily
correspond to where the company gets its sales. Philip Morris International (NYSE:PM) is a
great example, as its headquarters are in the U.S., but it sells its tobacco and other products
exclusively outside the country. Especially among large multinational corporations, it can be
hard to tell from business operations and financial metrics whether a company is truly domestic
or international.
Growth stocks and value stocks
Another categorization method distinguishes between two popular investment methods. Growth
investors tend to look for companies that are seeing their sales and profits rise quickly. Value
investors look for companies whose shares are inexpensive, whether relative to their peers or to
their own past stock price.
Growth stocks tend to have higher risk levels, but the potential returns can be extremely
attractive. Successful growth stocks have businesses that tap into strong and rising demand
among customers, especially in connection with longer-term trends throughout society that
support the use of their products and services. Competition can be fierce, though, and if rivals
disrupt a growth stock's business, it can fall from favor quickly. Sometimes, even just a growth

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slowdown is enough to send prices sharply lower, as investors fear that long-term growth
potential is waning.
Value stocks, on the other hand, are seen as being more conservative investments. They're often
mature, well-known companies that have already grown into industry leaders and therefore don't
have as much room left to expand further. Yet with reliable business models that have stood the
test of time, they can be good choices for those seeking more price stability while still getting
some of the positives of exposure to stocks.
IPO stocks
IPO stocks are stocks of companies that have recently gone public through an initial public
offering. IPOs often generate a lot of excitement among investors looking to get in on the ground
floor of a promising business concept. But they can also be volatile, especially when there's
disagreement within the investment community about their prospects for growth and profit. A
stock generally retains its status as an IPO stock for at least a year and for as long as two to four
years after it becomes public.
Dividend stocks and non-dividend stocks
Many stocks make dividend payments to their shareholders on a regular basis. Dividends provide
valuable income for investors, and that makes dividend stocks highly sought after among certain
investment circles. Technically, paying even $0.01 per share qualifies a company as a dividend
stock.
However, stocks do not have to pay dividends. Non-dividend stocks can still be strong
investments if their prices rise over time. Some of the biggest companies in the world don't pay
dividends, although the trend in recent years has been toward more stocks making dividend
payouts to their shareholders.
Income stocks
Income stocks are another name for dividend stocks, as the income that most stocks pay out
comes in the form of dividends. However, income stocks also refer to shares of companies that
have more mature business models and have relatively fewer long-term opportunities for growth.
Ideal for conservative investors who need to draw cash from their investment portfolios right
now, income stocks are a favorite among those in or nearing retirement.
Cyclical stocks and non-cyclical stocks
National economies tend to follow cycles of expansion and contraction, with periods of
prosperity and recession. Certain businesses have greater exposure to broad business cycles, and
investors therefore refer to them as cyclical stocks.
Cyclical stocks include shares of companies in industries like manufacturing, travel, and luxury
goods, because an economic downturn can take away customers' ability to make major
purchases quickly. When economies are strong, however, a rush of demand can make these
companies rebound sharply.

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By contrast, non-cyclical stocks, also known as secular or defensive stocks, don't have those big
swings in demand. An example would be grocery store chains, because no matter how good or
bad the economy is, people still have to eat. Non-cyclical stocks tend to perform better during
market downturns, while cyclical stocks often outperform during strong bull markets.
Safe stocks
Safe stocks are stocks whose share prices make relatively small movements up and down
compared with the overall stock market. Also known as low-volatility stocks, safe
stocks typically operate in industries that aren't as sensitive to changing economic conditions.
They often pay dividends as well, and that income can offset falling share prices during tough
times.
Stock market sectors
You'll often see stocks broken down by the type of business they're in. The basic categories most
often used include stock market sectors:
Communication Services -- telephone, internet, media, and entertainment companies
Consumer Discretionary -- retailers, automakers, and hotel and restaurant companies
Consumer Staples -- food, beverage, tobacco, and household and personal products companies
Energy -- oil and gas exploration and production companies, pipeline providers, and gas station
operators
Financial -- banks, mortgage finance specialists, and insurance and brokerage companies
Healthcare -- health insurers, drug and biotech companies, and medical device makers
Industrial -- airline, aerospace and defense, construction, logistics, machinery, and railroad
companies
Materials -- mining, forest products, construction materials, packaging, and chemical companies
Real Estate -- real estate investment trusts and real estate management and development
companies
Technology -- hardware, software, semiconductor, communications equipment, and IT services
companies
Utilities -- electric, natural gas, water, renewable energy, and multi-product utility companies
Investing in equity shares helps to beat the inflationary pressure by delivering a higher rate of
return as compared to other havens. However, you need to consider other complexities before
investing.
Investing Strategies:
What are Investment Strategies?

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Investment strategies are strategies that help investors chose where and how to invest as per their
expected return, risk appetite, corpus amount, long-term, short-term holdings, retirement age,
choice of industry, etc. Investors can strategies their investment plans as per the objectives and
goals they want to achieve.

Top Types of Investment

Strategies 1 – Passive and Active

Strategies

The passive strategy involves buying and holding stocks and not frequently deals in them to
avoid higher transaction costs. They believe they cannot outperform the market due to its
volatility; hence passive strategies tend to be less risky. On the other hand, active strategies
involve frequent buying and selling. They believe they can outperform the market and can gain
more returns than an average investor would.

2 – Growth Investing (Short-Term and Long-Term Investments)

Investors chose the holding period based on the value they want to create in their portfolio. If
investors believe that a company will grow in the coming years and the intrinsic value of a stock
will go up, they will invest in such companies to build their corpus value. This is also known
as growth investing. On the other hand, if investors believe that a company will deliver good
value in a year or two, they will go for short term holding. The holding period also depends upon
the preference of investors. For example, how soon they want money to say to buy a house,
school education of kids, retirement plans, etc.

3 – Value Investing

Value investing strategy involves investing in the company by looking at its intrinsic value
because such companies are undervalued by the stock market. The idea behind investing in such
companies is that when the market goes for correction, it will correct the value for such
undervalued companies, and the price will then shoot up, leaving investors with high returns
when they sell. This strategy is used by the very famous Warren Buffet.

4 – Income Investing

This type of strategy focuses on generating cash income from stocks rather than investing in
stocks that only increase the value of your portfolio. There are two types of cash income which
an investor can earn – (1) Dividend and (2) Fixed interest income from bonds. Investors who are
looking for steady income from investments opt for such a strategy.

5 – Dividend Growth Investing

In this type of investment strategy, the investor looks out for companies that consistently paid a
dividend every year. Companies that have a track record of paying dividends consistently are
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stable and less volatile compared to other companies and aim to increase their dividend payout

28
every year. The investors reinvest such dividends and benefit from compounding over the long
term.

6 – Contrarian Investing

This types of strategy allow investors to buy stocks of companies at the time of the down market.
This strategy focusses on buying at low and selling at high. The downtime in the stock market is
usually at the time of recession, wartime, calamity, etc. However, investors shouldn’t just buy
stocks of any company during downtime. They should look out for companies that have the
capacity to build up value and have a branding that prevents access to their competition.

7 – Indexing

This type of investment strategy allows investors to invest a small portion of stocks in a market
index. These can be S&P 500, mutual funds, exchange-traded funds.

8. Buy and Hold Investing

The simplest long-term investment strategy is buy and hold investing. Individual stocks are
simply bought and held indefinitely. How well a buy and hold portfolio performs will obviously
depend on the companies that are held. Although buy and holding is the simplest of investment
strategies, it can be more effective than one might assume. Investors are often their own worst
enemies and frequently sell their investments at the wrong time. This approach removes that
problem for the equation.

There are two ways you can vastly improve the probability of success for a buy and hold
portfolio. Firstly, look for stocks that are likely to be around for a long time. Stocks with a strong
brand that are not likely to be disrupted are a good option. Secondly, keep your positions small.
That way the picks you get wrong won’t do too much damage to your portfolio. And, the stocks
that do very well will grow into substantial positions in your portfolio.

9. Momentum Investing

Momentum investing is similar to growth investing but considers the stock’s price momentum
rather than earnings or revenue growth. Evidence suggests that the top performing stocks during
a given period have a high probability of outperforming during subsequent periods.

Buying and selling decisions are therefore made using price action alone, though it helps to avoid
small and illiquid companies. A very simple momentum strategy would invest in 10 to 20 top
performing stocks and hold them for 12 months. At this point all stocks are sold and the process
is repeated. More complex variations of the strategy will continuously rotate capital into stock
with the highest momentum on a monthly or quarterly basis.

Momentum investing tends to generate good returns most of the time, but occasional losses can
be considerable. It is best to include other methods alongside momentum investment strategies

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10. Small Cap Investing

There are two advantages to focussing on smaller companies. Firstly, it easier for a small
company to grow its profits. Doubling revenue from a base level of $100 million is a lot easier
than it is from a base level of $10 billion. Secondly, smaller companies are more likely to be
overlooked by investors and therefore trading at a discount. As the company grows, other
investors take notice and the discount will narrow. This can provide an additional return if you
are an early investor.

There are a few challenges to investing in small cap stocks. Information is harder to find, and
you will need to spend more time on research. Small companies are also less liquid and their
share prices are more volatile. You will need to manage risk carefully and avoid situations where
liquidity evaporates before you can exit.

11. ESG Investing

ESG investing considers the effect of environmental, social and governance factors on the long-
term value of a company. The rationale is that companies that take governance and their
environment seriously, are more likely to succeed. ESG investing is similar to SRI (socially
responsible investing), impact investing and ethical investment strategies. However, these
approaches seek to restrict the way capital is used. ESG investing looks at the way similar issues
affect returns.

Individual investors can invest in ESG funds or use ESG rating services to do their own stock
picking. The field is still new, and the effectiveness of these strategies has not been proven. It’s
advisable to do some due diligence before investing in a fund or subscribing to a ratings service.

12. Factor Investing

Factor investing is an evidence-based approach to selecting stocks. Investment factors are

characteristics of stocks that have been proven to outperform over long periods. Many of the
most commonly used factors are those covered above – value, growth, market value and
momentum. Other commonly cited factors include volatility and quality. In the case of factor
investing, these concepts are reduced to metrics that can be quantified.

Several quantitative investing firms have launched ETFs (exchange traded funds) that use factors
to index stocks. These products allow advisors, and even individual investors, to construct
portfolios based on empirical evidence rather than theory.

13. Core/ Satellite Approach

The core satellite approach to investing combines passive and active investing. A core portfolio
of exchange traded funds is held along with a handful of actively managed investments. This
allows a fund manager, or investor, to take advantage of occasional opportunities that will be
missed by index funds. For example, individual stocks can be bought or sold when valuations are
extreme, and investment can be made in exceptional, smaller companies.

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Core satellite / portfolios typically allocate about 70% to passive funds with the remainder being
allocated to active strategies. The active portion of the fund can be allocated according to any of
the strategies discussed above.

14. Long/ Short Strategies

Short selling is one of the only ways to capture downside returns. This doesn’t only allow one to
profit from a stock market crash. Combining long and short positions reduces market risk in a
portfolio. Returns can be generated from the relative performance of two instruments, regardless
of the direction they are moving.
Market neutral hedge funds use long / short strategies to do just this. They generate returns with
little correlation to the market and can be used to reduce the volatility of a larger portfolio.
LEHNER INVESTMENTS Data Intelligence Fund uses long / short investment strategies based
on market sentiment. User generated data is gathered from hundreds of sources. Artificial
intelligence is then used to measure market sentiment and find tradeable patterns using this data.
15. Multi Assets Investing
Stocks typically generate the highest returns over the long term. However, they are also the most
volatile asset class. Superior risk adjusted returns can be generated by combining several asset
classes. The more asset classes there are in an investment portfolio, the lower the volatility and
portfolio risk will be. A very diversified portfolio may include stocks, bonds, cash, commodities,
real estate, hedge funds and private equity funds. Diversification can be increased further by
spreading the stock portfolio across several of the investing strategies listed above.

Benefits of equity share investment are dividend entitlement, capital gains, limited liability,
control, claim over income and assets, right shares, bonus shares, liquidity, etc. Disadvantages
are dividend uncertainty, high risk, fluctuation in market price, limited control, residual claim,
etc. Let us see more in-depth the advantages and disadvantages of equity share investment.
Equity share is looked at from different perspectives by different stakeholders. There are two
major angles of looking at it – the Company and Investor Angle. So, any statement about equity
capital would have a different meaning for a company and an investor. We will look at the
investor angle of equity share investment.

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Advantages and Disadvantages of Investment in Equity Share Capital

ADVANTAGES
Dividend
An investor is entitled to receive a dividend from the company. It is one of the two primary
sources of return on his investment.

Capital Gain
The other source of return on investment apart from dividends is capital gains. Gains arise due to
a rise in the market price of the share.

Limited liability
The liability of a shareholder or investor is limited to the extent of the investment made. If the
company goes into losses, the share of loss over and above the capital investment would not be
borne by the investor.

Exercise control
By investing in the company, the shareholder gets ownership in the company, and thereby he can
exercise control. In official terms, he gets voting rights in the company.

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Claim over Assets and Income
An investor of an equity share is the owner of the company, and so is the owner of the assets of
that company. He enjoys a share of the income of the company. He will receive some part of that
income in cash in dividends, and the remaining capital is reinvested in the company.

Rights Shares
Whenever companies require additional capital for expansion, they tend to issue ‘rights shares.’
By issuing such shares, ownership and control of existing shareholders are preserved, and the
investor receives investment priority over other general investors. Right Shares are issued at a
price lower than the current market price of the equity share. So, an existing investor can take
that advantage or renounce right in someone’s favor to get the value of right.

Bonus Shares
At times, companies decide to issue bonus shares to their shareholders. It is also a type of
dividend. Bonus shares are free shares given to existing shareholders, and they are often given in
place of dividends.

Liquidity
The shares of the company which is listed on stock exchanges have the benefit of any time
liquidity. The shares can very easily transfer ownership.

Stock Split
Stock split means splitting a share into parts. How should an investor benefit from this? By
splitting shares, the per-share price reduces in the market, which eventually increases share
readability. At the end, a stock split results in higher volumes with several investors leading to
the high liquidity of the share.

High returns
Investing in equity shares provides high returns to investors. Shareholders have an opportunity to
enjoy wealth creation, not just through dividend earnings but also through capital appreciation.
Provides a cushion against inflation
When an individual invests in equity shares, he/she has the potential to earn high returns. The
rate of returns earned is often higher than the rate of wearing down of the investor’s purchasing
power due to inflation. Thus, investing in equity shares acts as a hedge against inflation.
Ease of investment

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Investing in shares is simple. Investors can avail the services of a stockbroker or financial
planner to invest through various stock exchanges in a country. If an individual has set up a
Demat account, he/she can buy the stocks in a few minutes. So, irrespective of whether an
investor chooses to invest via NSE or BSE equity or the likes, he/she can enjoy the ease of
investment.
Diversification of investment portfolio
Investors mostly choose to stick to debt instruments since they are low-risk investment options
owing to lower volatility. However, debt instruments may not always generate high returns,
which is why individuals can diversify their investment portfolio by investing in equities for
higher returns

Disadvantages
Dividend
The dividend which a shareholder receives is neither fixed nor controllable by the investor. The
management of the company decides how much dividend should be given. If there is a loss, there
is no question of dividend. If there is a profit, investors will not receive the dividend unless the
Board of Directors proposes a dividend.

High Risk
Equity share investment is a risky investment compared to any other investment like debts etc.
The money is invested based on an investor’s faith in the company. There is no collateral
security attached to it.

Fluctuation in Market Price

The market price of any equity share has a wide variation. It is always very difficult to book
profits from the market. On the contrary, there are equal chances of losses.

Residual Claim
An equity shareholder has a residual claim over both the assets and the income. Income which is
available to equity shareholders is after the payment of all other stakeholders’ viz., debenture
holders, etc.

Performance-related risks
Equity investments are market-related instruments, and as a result, might not perform according
to an investor’s expectations. This is known as performance-related risk and can affect individual
stocks as well as stocks across a sector or sectors
Risk of inflation

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A company’s worth can get diluted due to rising inflation and subsequently, its shares might not
generate potential returns.
Liquidity risk
Due to liquidity risk, investors might have to sell their shares at a much lower price than its fair
market value. Liquidity risk arises when a company is unable to meet its debt obligations in the
short-term.
Risks arising out of social and political changes
On-going social and political issues in a country can hamper the growth of a business. For
example, if a government decides to promote indigenous businesses, it might restrict the entry of
foreign business in the country. If an investor has invested in home-grown businesses, he/she in
this scenario will profit from better performance of his/her investments.
Stock Market Sectors

A stock market sector is a group of stocks that have a lot in common with each other, usually
because they are in similar industries. There are 11 different stock market sectors, according to
the most commonly used classification system: the Global Industry Classification Standard
(GICS).
We categorize stocks into sectors to make it easy to compare companies that have similar
business models. When investing, you can choose from stocks within the sectors that interest
you. Sectors also make it easier to compare which stocks are making the most money. This helps
you make decisions about what your next investments will be.
1. Energy Sector
The energy sector covers companies that do business in the oil and natural gas industry. It
includes oil and gas exploration and production companies, as well as producers of other
consumable fuels like coal and ethanol. The energy sector also includes the related businesses
that provide equipment, materials, and services to oil and gas producers. Oddly enough, though,
it doesn't include many renewable energy companies, which instead are considered utilities.
2. Materials Sector
The materials sector includes companies that provide various goods for use in manufacturing and
other applications. You'll find makers of chemicals, construction materials, and containers and
packaging within the materials sector, along with mining stocks and companies specializing in
making paper and forest products.
3. Industrials Sector
The industrials sector encompasses a wide range of different businesses that generally involve
the use of heavy equipment. Transportation stocks such as airlines, railroads, and logistics
companies are found within the industrials sector, as are companies in the aerospace, defense,
construction,
35
and engineering industries. Companies making building products, electrical equipment, and
machinery also fall into this sector, as do many conglomerates.
4. Utilities Sector
The utilities sector encompasses just about every different type of utility company you can think
of. Within the sector, you'll find utilities specializing in making electrical power available to
residential and commercial customers, as well as specialists in natural gas transmission and
distribution. Other utilities are responsible for delivering water to customers. Some utility
companies engage in more than one of these different subspecialties. In addition, independent
producers of power and renewable electricity also land in the utilities sector, even though they
don't exactly resemble the traditional regulated utility in an era of deregulation.
5. Healthcare Sector
The healthcare sector has two primary components. One component includes companies that
develop pharmaceuticals and treatments based on biotechnology, as well as the analytical tools
and supplies needed for the clinical trials that test those treatments. The other encompasses
healthcare equipment and services, including surgical supplies, medical diagnostic tools, and
health insurance.
6. Financials Sector
The financials sector includes businesses that are primarily related to handling money. Banks are
a key industry group within the sector, but you'll also find insurance companies, brokerage
houses, consumer finance providers, and mortgage-related real estate investment trusts among
financials.
7. Consumer Discretionary Sector
The consumer discretionary sector covers goods and services for which consumer demand
depends upon consumer financial status. For example, if you make $25,000 per year, you
probably buy a different car than someone who makes $25 million per year. The sector includes
companies that sell higher-priced items like automobiles and luxury goods, as well as leisure
products. You'll find both brick-and-mortar and e-commerce-based retail companies in this
category, along with hotel and restaurant stocks.
8. Consumer Staples Sector
The consumer staples sector includes goods and services that consumers need, regardless of their
current financial condition. The category includes companies in the food, beverage, and tobacco
industries, as well as household and personal care products. You'll also find retail companies that
specialize in selling staples, such as supermarkets, in this group.
9. Information Technology Sector
The information technology sector covers companies involved in the different categories of
technological innovation. Some companies in information technology focus on creating software
or providing services related to implementing technological solutions, while others are more

36
involved in building the equipment, components, and hardware that make tech possible.
Information technology also includes makers of semiconductors and the’’ equipment used to
produce semiconductor chips.
10. Communication Services Sector
The communication services sector is the newest of the GICS sectors and includes a couple of
major areas that used to be part of other sectors. Telecommunication services providers,
including both wireless telecom networks and providers of old-style landline services, make up
one wing of the sector. At the other end are media and entertainment companies, including both
older media like television and radio and interactive media via the internet and newer forms of
communication.
11. Real Estate Sector
The real estate sector generally includes two different types of investments related to real estate.
Some stocks in the sector are responsible for developing new real estate projects and then
managing them by obtaining tenants for various spaces within the project property. In addition,
most real estate investment trusts, which are special tax-favored business entities that operate in
various areas of the real estate industry, get counted as within the real estate sector.

37
 Research Methodology

1. Objectives:
 To review the strategies adopted by retail investors for taking a decision regarding
investment in equity securities.
 To study investors goals in respect of their investment in equity securities.
 To study the behavior of investors Risk Tolerance towards the investments.
 To understand the preferences of investors towards various investing options.
 To understand different resources used by investors while making investing decisions.
 To study investors perspective towards different types of Economic sectors and their
preference towards the same.
 To study the relationship between demographic factors like age, income level, gender,
education level and investment Strategies.

2. Hypothesis
HO-There is no significant influence of demographic factors like age, gender, income level,
education level on investment objectives.
H1-There is significant influence of demographic factors like age, gender, income level,
education level on investment objectives.
HO-Pattern of investment is not influenced by demographic factors like age, gender, income
level and education level.
H1- Pattern of investment is influenced by demographic factors like age, gender, income level
and education level.
HO-Period of market experience has no significant influence on investment
pattern. H1-Period of market experience has significant influence on investment
pattern.
HO-There is no significant association between sources of information and investment
pattern. H1-There is significant association between sources of information and investment
pattern.
HO-Retail investors do not prefer equity investment to other investment
avenues. H1-Retail investors prefer equity investment to other investment
avenues.

38
3. SCOPE OF THE STUDY:

The study is confined to the factors considered by individuals by understanding their equity
investment strategies for Investing. The level of awareness about equity investment strategies,
Source of information, factors influencing decision making are studied. The above said factors
are compared with demographic factors such as age and Monthly income of the respondents to
analyses the strategies used by Retail Investors for Investing in equity securities.

4. Limitations of Study:

 The limitation of this study is its scope, i.e., only the investors based at Mumbai
 The Referral Sampling used for the purpose may not represent the universe and hence
generalization of inference on the basis of findings of this research may not be
appropriate.
 Sample size is 71 which is very small that is not enough to study the awareness of
Consumers of the country.
 The decisions and preferences of retail investors may vary according to their capacity to
take risk as well as their experiences.

5. Research Design: The researcher was concerned mainly with descriptive research design.
The study was conducted in order to find out investment strategies used by individuals while
investing in Equities.

6. Source of Data:

a. Primary Data : Survey Method

b. Secondary Data: Internet, Reference books, Research papers.

(This study is based entirely on primary data collected through a well-designed structured
questionnaire. The data was collected from investors in Mumbai suburban, which mostly
includes places like kandivali, Malad, Borivali etc. Borivali is my Residential place; hence I
have selected Borivali as one of the Places to study. Admittedly, the sample does not represent
the country’s entire population but only the universe of potential investors. Secondary data is
also used to supplement the findings drawn from the primary data. The secondary data is
collected from the various sources available like websites mainly SEBI, RBI, BSE and NSE,
Magazines, Journals etc. wherever necessary)

39
7. Instrument of Data Collection: The instrument used to collect the data was a structured
questionnaire. A list of questionnaire was prepared which could give relevant information when
answered by the respondents.

8. Sampling Technique: The sampling technique used in this study was convenience sampling.

9. Sampling plan: One of the main elements in the research design is sampling plan which is
further divided into sampling units, sampling size.

9.1 Sampling Unit: Sampling unit can be defined as the basic unit containing the Individuals
perception towards various Investment strategies regarding equity securities.

9.2 Sampling Size: In this research, the sample size amounts Seventy One Responses, which are
surveyed from Individuals.

10. Area of Research: Mumbai

11. Objectives: The main objective of research is to find equity investment strategies used by
retail investors.

12. Data Representation: Analyzing the collected data and reporting the findings. Finally the
data collected, was thoroughly analyzed and processed to obtain the required information. The
data has been summarized in the form of graphs.

40
 Review of Literature:

The review of earlier studies guides us in the methodologies to be used, estimation Procedures
and interpretation of results. The review of previous studies helps to state the objectives clearly
and concisely. Further review of literature helps to identify the Concepts relating to the research
topic & potential relationship between them. It also helps to identify appropriate methodology,
Research design & techniques used for Analysis of data. In addition to this it helps to identify
data sources used for research & to learn how others structured their reports.

1. The various research papers were studied and to cite a few- as per Dr. Makarand S. Wazal
and Sharma Sudesh in their paper titled “Participation of Retail Investors in Indian Equity”
have estimated that the retail Investors in India are estimated to be 4.45% of the total Indian
Population and if compared with the world India comes among the lowest country having less
number of retail investors. As per the paper the 50% of the Retail Investors are skewed towards
the western Zone of India. Pinto Praksh & Munshi MM in their paper
2. “An Analysis of Selection Behaviour of Retail Investors towards Mutual Funds: A Study with
Reference to Udupi District Karnataka” state that the general retailers in India would prefer to
go for very safe investments. This may be due to their risk adversity factor, and their investment
in the security market may also be determined by the type of knowledge they have they talked
this in their paper.
3. Mark K Y Mak in his paper „An Exploratory Study of Investment Behavior of Investors”
explains that the financial product providers are able to predict the marketability of
their product as in the study it has been concluded that the demographic, sociological and psycho
logical factors influence the choice of investments made by the investors. The planning and
launch of the product is an outcome of the factor analysis.
4. 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 stock market.” The paper however remains silent
on its observation about the uneducated investors who are not aware of the market conditions,

41
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.
5. 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 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.
6. 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.
7. Elankumaran and A. Aananth, Impacting factors on individuals investors behavior towards
commodities market in India, Research Journal of Social Studies and Management, ISSN: 2251-
1571 A study on behavioral finance has been done presuming information structure and
characteristics of capital market. Participants influence their own decisions and also on market
outcomes. The above studies have been conducted by using survey method. The questionnaire
with 5 Point Likert Scale designed with 15 components for measuring behavior and respondents
were selected from Trichy District and the total number respondents were 525. The influence of
resulting factor analysis and descriptive statistics has concluded that multiple factors have greater
influence on behavior of commodity market investors in India. The main factor was information
asymmetry, objective knowledge, high sector and low risk.
8. Sikidar, S. and Singh, A.,(1996), Financial services: Investment in equity and mutual funds –
A behavioral study, In: Bhatia, B. and Batra, G., (Eds), Management of Financial Services,
ISSN: 1741-8062 carried out a survey with an objective to understand the behavioral aspects of

42
the investors of the north eastern region towards mutual funds investment portfolio. The survey
revealed that the salaried and self-employed formed the major investors in mutual fund primarily
due to tax concessions.
9. AjmiJy. A., (2008), “Risk Tolerance of Individual Investors in an Emerging Markets”,
International Research Journal of Finance and Economics, (Issue 17), ISSN, 1450-2887 used a
questionnaire to know determinants of risk tolerance of individual investors and collected
responses from 1500 respondents. He concluded that the men are less risk averse than women,
less educated investors are less likely to take risk and age factor is also important in risk
tolerance and also investors are more risk tolerance than the less wealthy investors.
10. Kabra et al. (2010), Patidar (2010), “Factors influencing investment decision of generations
in India: An econometric study”, Asian Journal of Management Research ISSN 2229 – 3795
concluded that investors’ age and gender predominantly decides the risk taking capacity of
investors. This factor decides the amount of risk an investor is ready to take. Men are more risk
averse whereas, age affects the propensity to take risk, of an individual investor. But there is
variety of good reasons to belief the ratio of future labor income to other assets is large when
investors are young, and eventually it decreases as they approach retirement.
11. Rajeev Jain (2012), Investor’s Attitude towards Secondary Market Equity Investments and
Influence of Behavioral Finance, International Journal on Emerging Technologies (Vol.3, Issue
2) ISSN (Online): 2249-3255 : It’s a fact that only few investors create immense wealth from a
stock market and also manage to keep it for decades. These investors take the right decisions and
for doing this one needs experience. But experience comes from bad decisions too. Investors
who create wealth from equity markets and keep it for decades, at times for generations, do not
panic when a market falls.
12. Gupta (1997) deals with the problem of the prolonged and unprecedented stock market
depression. The important question raised is why the market forces on their own are not able to
correct themselves the Indian Stock Market? The study brings together 40 several aspects of the
problem viz., the features of Indian trading system , the attitudes of retail investors and the long-
term changes in the price-earning ratios ( P/E ratio ). The study revealed that Indian shares were
never so cheap over the last ten years as today. The study also highlights the importance of the
retail investors and the need for their adequate protection.
13. Gupta (1972) in his book has studied the working of stock exchanges in India and has given
a number of suggestions to improve its working. The study highlights the' need to regulate the
volume of speculation so as to serve the needs of liquidity and price continuity. It suggests the
enlistment of corporate securities in more than one stock exchange at the same time to improve
liquidity. The study also wishes the cost of issues to be low, in order to protect small investors.
14. Panda (1980) has studied the role of stock exchanges in India before and after
independence. The study reveals that listed stocks covered four-fifths of the joint stock sector
companies. Investment in securities was no longer the monopoly of any particular class or of a
small group of people. It attracted the attention of a large number of small and middle class

43
individuals. It was observed that a large proportion of savings went in the first instance into
purchase of securities already issued.
15. Gupta (1981) in an extensive study titled `Return on New Equity Issues' states that the
investment performance of new issues of equity shares, especially those of new companies,
deserves separate analysis. The factor significantly influencing the rate of return on new issues to
the original buyers is the `fixed price' at which they are issued. The return on equities includes
dividends and capital appreciation. This study presents sound estimates of rates of return on
equities, and examines the variability of such returns over time.
16. JawaharLal (1992) presents a profile of Indian investors and evaluates their investment
decisions. He made an effort to study their familiarity with, and comprehension of financial
information, and the extent to which this is put to use. The information that the companies
provide generally fails to meet the needs of a variety of individual investors and there is a
general impression that the company's Annual Report and other statements are not well received
by them.
17. Ahuja (2012) has examined the Indian Capital Market. She has observed that how Indian
capital market and its structure has been changed in the last decade i.e. since 2002. Many new
reforms have been introduced and several developments in Indian capital market have made
Indian capital market internationally comparable. Various new innovations have made capital
market more growing like surfacing of private corporate debt, modern market infrastructure and
many more. But during this study market delivered the slow performance due to the global
financial crisis that was originated from US sub-prime mortgage market.
18. Hemant R. Dani (1984) in his article titled, “The Purpose of Investment” has stated that if
investments are to be gainful, one has to assume risk. The investment programmed had to be so
formulated so as to protect against risk or minimized risk. Diversification of funds among
different investment avenues for varying periods was the best method suggested by him for the
investors. Diversification properly applied should embrace difference according to type of risks
and according to the nature of the organization and geographical location. Frequently
diversification between classes of securities would offer a means of hedging against certain risk
or accomplishing certain purpose of the individual investor.
19. Nabhi Kumar Jain(1992) in his book titled, “How to Earn more from Share” has offered
advice on buying, holding and selling shares. He advocates buying shares of a 28 thriving
company to ensure maximum profit. Besides he advises to buy shares by diversifying in a
number of flourishing companies that are operating in different as well as fast growing sectors.
He is of the opinion that selling shares moment the company reaches or almost reached the peak
of its growth is advisible. Moreover, selling shares the moment it is realized that the shares have
erroneously been selected is also favoured. Individual merits and demerits are the factors to be
ascertained to decide as to when to buy or sell the high priced shares.
20. V. Pattabhi Raman(1995) in his article titled, “Wanna Do Equity Research” has remarked
that doing fundamental analysis and equity research is an essential prerequisite for selecting
shares for investment. He has asserted that ascertaining value with a margin of safety in relation

44
to price is also imperative as the factors such as absence of good communication network as well
as free and instantaneous flow of information and existence price rigging and professional
broking mak the Indian stock market an inefficient one. However equity research in such
inefficient market would produce better results as there would be frequent mismatch between
price and value that only through quality equity research, the investment returns could be
augmented in the Indian stock market.
21. V. Rajarajan(1997) in his research work with caption, “Investment Size Based
Segmentation of Individual Investors” has classified investors on the basis of their
demographics. He has also brought out their investors’ characteristics on the basis of their
investment size. He has found that the percentage of risky assets to total financial investment has
declined as the investor moves up through various stages in life cycle. Also investors’ life style
based characteristics has been identified. The above discussion presents a detailed picture about
the various facts of risk studies that have taken place in the past. In the present study, the
findings of many of these studies are verified, updated, and classified investors on the basis of
their demographics. Behavioral finance is a new emerging science that studies the irrational
behavior of the people.
22. Rajnarayan Gupta(2011) in his article titled, “Commodity Derivative Market in India: The
Past, Present and Future” has discussed about the evolution of the commodity derivative market
in India. According to him, the beginning of the modern world wide commodity derivative
market can be traced to Chicago which has emerged as an important agriculture commodity
trading centre in the early 1800’s. In India the first modern futures was established in 1875 for
cotton contracts by the Bombay cotton trade association. The study also discusses about the
commodity futures market in the last decade which has developed significantly in terms of
network and volume. At present, there is a two tier structure for commodity exchanges in India
and they are Regional and country wide. The Regional exchange has only a limited number of
contracts whose membership is local whereas country wide exchanges are multi commodity
electronic exchanges with a demutualised ownership pattern. Currently there are three such
exchanges viz. MCX, NMCE, NCDEX. In India futures contracts are available for over 100
commodities which belong to agriculture and non – agriculture commodities.

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 DATA ANALYSIS AND INTERPRETATION
DATA COLLECTION

CHAPTER NO 4 : DATA ANALYSIS AND INTERPRETATION

QUESTIONNAIRE

1.

The above chart shows the age of the respondents. Out of 73 Respondents 0% are from the age
group of below 18 so no investor below 18yrs of age; 45.2% are from the age group of between
18-25; 50.7% from the age group of between 25-50 ; 4.1% are from the age Group of above 50.

Therefore the above pie chart shows that most of The respondents are from the age group of
between 25-50.

46
2.

The above chart shows the gender of the respondents: Out of 73 respondents 64.4% are males
and 35.6% are females. Others not responding to this Question. It shows that Majority of the
respondents are males in our survey.

47
3.

The above chart shows the Monthly of the respondents. Out of 73 Respondents 11 % are below
15000 INR per Month.; 43.8% are 15000 to 40000 per month; 32.9% are 40000 to 80000
per month; 12.3% are above 80000 per month. It shows that Majority of the respondents have
Monthly income is between 15000 to 40000 per month.

48
4.

The Above chart shows the Percentage of Monthly income Invested in Equity securities
according to their Income. Out of 73 respondents 23.3% of People invest between 5% to 20%;
23.3% of people invest Below 5% of their Monthly Income and 43.8% people invest between
20% to 50% of their monthly income and 9.6% of People invest between 50% to 80% of their
monthly income in equity securities.
It was found that most of the respondents invest between 20% to 50% of their monthly income to
equity securities.

49
5.
Financial Assets (Rank)1 2 3 4 5 6
Equity Shares 43 9 7 10 4 0
Insurance Products 7 29 12 12 4 9
Mutual Fund
Schemes 9 26 31 6 1 0
Bonds Or
Debentures 10 11 16 22 7 7
Gold 10 17 14 17 15 0
Real Estate 12 10 12 19 6 14

The above Graph shows us the Financial Assets preference of retail investors. People tend to
invest in Financial Assets which they are confident and sure about.
This Interprets that The Most 1st Preferred Financial Assets is Equity Shares and The least/ Last
preferred Financial Assets is Real Estate which is because of High capital Requirements and at
low age Investors can’t manage it.

50
6.

The above chart shows the Reasons for investing in Equity Securities. Out of 73 Respondents
28.2% of Investors invest for Capital appreciation and 28.2% of investors invest for the reasons
of Quick and Higher returns; 15.5% of investors invest because of Reasonable rate of return;
11.3% of investors invest because of Diversification; 9.9% of investors invest because of
speculative profits and Other 7% of investors Invest to ensure there liability.
It shows that majority of Retail Investors Invest for the Reasons of Capital appreciation and
Quick and Higher Returns.

51
7.
Stocks Types 1 2 3 4 5
Growth 46 14 10 3 0
Dividend 12 44 12 5 0
blue chip 11 18 39 4 1
Defensive 11 16 11 32 3
International 6 10 15 15 27

The above graph shows us the following stock types which is Preferred by retail investors while
investing in equity Securities.
This interprets that The Most 1st Preferred stock Type is Growth and The least/ Last preferred
type is International

52
8.

The Above chart shows what type of Risk taker Retail Investors are when it’s come to equity
securities. Out of 73 Respondents 57.5% of investors are Moderate risk Taker; 16.4% of
investors takes low risk; 13.7% of investors takes high risk; 5.5% of investors takes very low
risk, 2.7% of investor don’t know their risk tolerance or Appetite and 4.1% of Investors are very
high risk takers.
It is observed that majority of the Investors prefer Moderate risk.

53
9.

The above charts shows which of the investment strategies Retail investors use when it’s come to
Equity Investment. Out of 73 Respondents 23.3% of Investors use Passive and Active
Investment as their strategy; 20.5% of Investors use Value investing strategy; 21.9% of Investors
also use growth investing strategy; 16.4% of Investors use Dividend investing strategy; 9.6% of
Investors use Contrarian strategy; 5.5% of Investors use Rupee Cost Averaging (SIP) as their
investing strategy and 2.7% of people don’t know which investing Strategies they are using.
It shows that majority of retail investors are using Passive and Active Investment as their
strategy for investing in equity securities.

54
10.

The Chart shows the Buying Strategies of Retail investors in respect to Equity investment. Out of
73 Respondents 26% of Investors buying strategy is buying at low and Selling at high; 19.2% of
Investors Use Technical Analysis of stock for the Purpose of Buying; 17.8% of Investors buying
Strategy is Fundaments of the stocks; 16.4% of Investors buying strategy is Averaging the cost
of the Shares;13.7% of Investors buying strategy is Comparison of estimate value with it Current
Market Price; 2.7% of Investors buying strategies is their perception on share prices; and Other
1.4% of Investors use Financial Publications as their Buying Strategies.
It shows that Majority of Retail Investors use buying at low and Selling at high as their Buying
Strategies.

55
11.

This Chart shows the Selling Strategies of Retail Investors in respect of Equity Securities. Out of
73 Respondents 43.8% of Retail Investors use As soon as price reaches their target as a selling
strategy; 28.8% of Investors use to keep rising their target as price rise as their strategy; 15.1% of
Investors use Sell the shares within the same days/week/month/ or in a year strategy; 11% of
Investors use Not interested in selling (Capital Appreciation) as their selling strategy and Other
1.4% don’t know their selling strategy.
It shows that majority of Retail Investors use the Strategy of As soon as price reaches their target
for selling Equity securities.

56
12.

This Chart shows the preference of investor regarding the sector in which they prefer to
invest. 28.8% of Investor prefer investing in FMCG; 24.7% of investor prefer investing in IT;
15.1% of investor prefer investing in Automobile; 15.1% of investor prefer investing in Finance;
Only 2.71% of investor prefer investing in Metals.

The above Pie Chart shows us the sector preference of retail investors while investing in
Equity shares. People tend to invest in sectors which they are confident and sure about.
This Interprets that The Most 1st Preferred sector is FMCG and The least/ Last preferred sector
is Metals.

57
 Conclusions
The present study is a noval attempt to study the Strategies used by retail investors to invest in
equity securities with the help of 71 sample respondents who have been actively engaging in the
equity investments. The study is mainly based on primary data, which were collected through
structured questionnaire. The study will pave the way for future researches in the field of
investment in general and equity investment in particular. The following are the important
factors identified by the research;
The investment in equity is now a days considered as the best way of getting unlimited reward
within very short span of time. As a result, even the people belonging to rural and middle income
category are also actively participating and investing their hard earned money in the capital
market. Since the stock market involves the high level speculations and risk, it is very difficult to
predict the movements of the stock market so easily. The investors should have alertness and
cautions while entering and existing the stock market. For that, this kind of study is very much
helpful to the investors who have been mainly participating in the stock market operations. The
findings of the present study will also be helpful to the Government, Securities Exchange Board
of India (SEBI), Stock Exchanges including Bombay Stock Exchange (BSE) and National Stock
Exchange (NSE), Intermediaries including Merchant Bankers, Registrar of the Issues and Stock
Broking Communities for evaluating their policies towards the investors.
Information on several aspects required for trading in equity investments can be obtained from
various resources. Retail investors lack of expertise and competency to employ sophisticated
analytical tools to take their investment decisions. They adopt very simple and less time
consuming strategies for arriving at a decision of investment in equity securities. All the
investors enquired being educated and aged, their personal judgment is found to be main
inducement for taking an investment decision.
It is very important to have an investment strategy. It will help you rule out poor portfolios and
will increase the chances of success. Ask yourself a few basic questions like how much I want to
invest? How much return do I need? How much is my risk tolerance? What will be my
investment horizon? Why did I need to invest? Etc. The clearer you are with your objectives, the
better decision you will make regarding your investment. Always lookout for good opportunities
and never invest at one go. Building a portfolio is like building a house brick by brick, money by
money.

58
 Suggestions
 The trading time should be revised to the convenience of the investors. It means the time
of trading must be extended till 6 pm with some break in the middle of the trading hours.
 The settlement period must be reduced and daily settlement may be introduced for the
benefit of the investors. (From t2 to T1)
 All the major information and developments relating to the capital market must be widely
published in all kinds of media which enables the investors to update the knowledge of
capital market.
 A periodical programme like seminars, exhibitions, press conferences and training must
be organized by the stock exchanges for the benefit of Retail Investors.
 The government should not change its policies concerned with the capital market
frequently irrespective of the change of the government. It means same policies should be
continued and to be followed at least for a minimum period say 5 years.
 Some shares are highly fluctuating and others remain constant so it is suggested that the
selections of the companies for investment is always based on technical and fundamental
analysis.
 The Retail investors should continuously watch the behavior of the market before making
any investment.
 The time of entry and exit of stock market is very important. If the investor misses the
right opportunity once, he may have to wait for a long time to get the next opportunity.
So it is suggested that the investor should always be alert and act fastly. As investment
strategies need experience and Knowledge investors must be discipline with their
decision.
 The stock market is highly riskier, volatile and unpredictable in nature. So the Retail
investors can get the advice of the professional consultant before deciding their
investment options and Strategies.

59
 Bibliography
1) Www.researchgate.com
2) www.researchadda.com
3) Www.wikipedia.com
4) Www.worldwidejournals.com
5) Www.researchgate.net
6) Www.sebigov.in
7) Www.indiainfoline.com
8) www.investopedia.com
9) www.shodganga.com
10) www.thescholedge.org.com

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