ABSTRACT:
This Project Report is the study on investment in equity market regarding risk and returns. Investment in equity market associated with the risk and returns. The risk/return trade-off could easily be called the "ability-to-sleep-at-night test. Low levels of uncertainty (low risk) are associated with low potential returns. High levels of uncertainty (high risk) are associated with high potential returns. The risk/return trade-off is the balance between the desire for the lowest possible risk and the highest possible return. There are many factors influence the equity market such as inflation and deflation, interest rate, foreign market. In the same way, there are many types of investors in the market. According to the investors, the investment may vary. This research is all about the risk and returns which the investor gets. The decision making of the investor depends of the risk and return of the investment. In equity market, the risk is less when compared to the derivative market. This report has taken in the period of 2013-2014. We have collected 300 samples by issuing structured questionnaire. We concluded that the risk is less when compared to derivative market.
Keywords: Equity Market, Risk and Returns, derivative market.
INTRODUCTION:
Investment means, an asset or item that is purchased with the hope that it will generate income or appreciate in the future. Similarly investment in equity market is to get the benefits from idle resources or surplus cash or else. Stock means a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders’ meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated. Also known as "shares" or "equity."
In India there are two main nationalised stock exchanges. They are,
‘ National stock exchange (NSE)
‘ Bombay stock exchange (BSE)
Before you decide that a stock is too risky or the returns are too low, you should compare its movements to the rest of your portfolio. If a stock rises when your portfolio goes down, it might actually reduce your portfolio’s total risk by offering diversification.
REVIEW OF LITERATURE:
M. TARIQ JAVED and JAVED ANWAR, (2001), say that investment barriers restrict the capital market integration across boundaries. Andrew C. Worthington, Helen Higgs, (2004), examines risk, return and the prospects for portfolio diversification among major painting and financial markets over the period 1976-2001. The financial markets comprise US Treasury bills, corporate and government bonds and small and large company stocks. Gabriele M. Lepori, (2010), examines that positive mood has been repeatedly shown to affect risk attitudes in laboratory settings, where subjects’ exposure to movie clips is among the most widely used and effective mood-induction procedures. Dr. Mohammad S. Ezazi, Mostafa Farrokhi Ostad and Mojtaba Farrokhi Ostad, (2011), addresses that researchers around the world have extensively studied the efficiency of different investment strategies. The main reason is inability to analyze the available information and investor’s lack of expertise in capital markets. Martin Surya Mulyadi, Yunita Anwar, (2012), says that it is important to have a portfolio in investment to diversify the investment to different kinds of instruments. It is concluded that gold is a good portfolio diversifier, a hedge against stock and safe haven in extreme stock market condition
STATEMENT OF THE PROBLEM:
Risk is the chance that an investment won’t give us the outcomes we want. For example, we expect our investment to grow but its value falls. Or we expect regular interest of 10% but interest payments fall to 5%. Or we expect to be able to get our money whenever we need it but we managed fund suddenly freezes withdrawals.
It’s impossible to avoid all risks when we invest. Higher potential returns usually come with higher risks. The important thing is to understand the risks and then keep within a level we are comfortable with.
Successful investors understand the main types of risk that can hit their investments. If we do, we will have a much better chance of avoiding the ‘ouch’ factor from taking too many risks. The investor in stock market is willing to take the risk and return equally.
OBJECTIVES:
The main objectives of this study is,
‘ To get the knowledge of stock market.
‘ To find out the relationship between the risk and return of the investment.
‘ To analyze the impact of risk and return.
‘ To find that where the risk is higher than equity market in stock exchange.
RESEARCH METHODOLOGY:
Sample Size
The sample will be collected from IIFL customers as well as employees to know on the impact of risk and return. The information will be collected in person randomly from the employees and customers and over all 300 samples were collected.
Sampling Method & Techniques
The sampling technique adapted here is random sampling method. A subset of a statistical population in which each member of the subset has an equal probability of being chosen. A simple random sample is meant to be an unbiased representation of a group.
Tools Applied
The techniques adapted for the analysis of results are,
‘ Chi-square test
‘ Frequency analysis.
Sources of Information
Primary data has been collected from customers of IIFL, Sharekhan, Karvy by issuing a structured questionnaire to find out the level of risk taking to get the returns for their investments.
Secondary data has been collected from the research papers, articles and internet for the findings of investment in equity market regarding risk and returns.
FUTURE SCOPE:
Now-a-days everybody comes to know what is stock market. In rural area, awareness of the stock market is less when compared to urban. But, in future the people come to know and expected to invest in stock market more because literacy level is more than before. The Indian industries are growing well now and will grow well in future. The people will have to analyse the risk and return in equity market through experience.
DATA ANALYSIS AND INTERPRETATION:
Table 1: Demographic variables
S.No: Demographic Variables Frequency Percentage
1 Gender Male
Female 195
105 63.72
34.31
2 Age Below 23
24-35
36-45
46-55
Above 56 16
147
97
20
20 5.22
48.03
31.69
6.53
6.53
3 Education 10th standard
12th standard
UG
PG
others 14
42
141
84
19 4.57
13.72
46.07
27.45
6.20
4 Marital status Married
Unmarried 216
84 70.58
27.45
5 Dependents No dependent
1-2
2-3
Above 3 23
100
103
74 7.51
32.6
33.66
24.18
6 Employment Private sector
Public sector
Business
Others 48
64
141
47 15.68
20.91
46.07
15.35
7 Monthly income Lessthan10000
10000-30000
30000-50000
Above 50000 18
115
125
42 5.88
37.58
40.84
13.72
Source: Primary data collected using SPSS 16.0 version
From Table 1, we have found that, there are seven demographic variables.
In gender, the male customers only have invested more than female. Because, men are earning more than women and also most of the women are not working. Most of them are housewives.
The people who are between 24-35 invested more in equity market. Because, these people have more potential income than others. The people who are at the age of below 23 are invested less. Most of them are students, so they haven’t that much income to invest.
Literate people only invested more than the business people. The married persons are investing most because of their future returns. The investors are mostly running their own business. Salaried people are also invested more in equity market.
Table 2
How much money you can save from your income How much would you like to invest in equity market How much your total investment annually Percentage of investment How long you are investing in equity market
Chi-Square 66.160 72.507 75.120 111.067 98.587
Df 3 3 3 3 3
Asymp. Sig. .000 .000 .000 .000 .000
Inference P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected
Source: Primary data collected using SPSS 16.0 version
Table 3
Why do you invest in equity market What attracts you towards equity market Purpose of investment Type of trading in equity Sector you invest most
Chi-Square 43.320 74.160 90.347 16.333 110.240
df 1 3 3 1 5
Asymp. Sig. .000 .000 .000 .000 .000
Inference P<0.05, hypothesis is rejected.
P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected.
P<0.05, hypothesis is rejected.
P<0.05, hypothesis is rejected.
Source: Primary data collected using SPSS 16.0 version
Table 4
Future of equity market in India Investment for large gains but also risk of large losses Reaction towards financial market When you make financial investment Attitude to taking financial risks
Chi-Square 82.160 41.707 47.653 67.520 46.640
df 2 3 3 3 3
Asymp. Sig. .000 .000 .000 .000 .000
Inference
P<0.05, hypothesis is rejected.
P<0.05, hypothesis is rejected.
P<0.05, hypothesis is rejected.
P<0.05, hypothesis is rejected.
P<0.05, hypothesis is rejected.
Source: Primary data collected using SPSS 16.0 version
Table 5
How much would you be willing to invest in equity What amount of risk would you be prepared to take Find it interesting to explore investment opportunities You want your investment money to be safe Have you ever interested a sum of money which you needed
Chi-Square 102.080 87.520 62.107 75.227 61.067
Df 3 3 3 3 3
Asymp. Sig. .000 .000 .000 .000 .000
Inference P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected. P<0.05, hypothesis is rejected.
Source: Primary data collected using SPSS 16.0 version
RESULT:
We concluded that some factor other than chance is operating for the deviation to be so great. For example, p value of 0.00 means that there is no percentage of chance that this deviation is due to chance alone. Therefore, other factors must be involved.
FINDINGS AND CONCLUSION:
In equity market, the risk is less when compared to derivative market. In equity market, we can buy a single share. But, in derivative market we cannot buy a single share. We can buy only in bulk. We can’t avoid the risk in derivative market. Comparatively, the risk is less in equity market. In the same way, the return also high in derivative market, more the risk, more the return.
REFERENCES:
1. Andrew C. Worthington, Helen Higgs (2004), ‘Art as an investment: Risk, return and portfolio diversification in major painting markets’, Accounting and Finance 44(2):pp. 257-272.
2. Gabriele M. Lepori (2010), ‘POSITIVE MOOD, RISK ATTITUDES, AND INVESTMENT DECISIONS: FIELD EVIDENCE FROM COMEDY MOVIE ATTENDANCE IN THE U.S.’.
3. Martin Surya Mulyadi, Yunita Anwar (2012), ‘Gold versus stock investment: An econometric analysis’, International Journal of Development and Sustainability, Volume 1 Number 1, June 2012, Page 1-7, ISDS Article ID: IJDS12031001.
4. Dr. Mohammad S. Ezazi, Mostafa Farrokhi Ostad and Mojtaba Farrokhi Ostad (2011), ‘Survey on Performance of Investment Strategies in Tehran Stock Exchange’, International Conference on Sociality and Economics Development, IPEDR vol.10.
5. M. TARIQ JAVED and JAVED ANWAR (2001), ‘INVESTMENT BARRIERS AND STOCK MARKET PERFORMANCE An Evidence from Emerging Markets’, Pakistan Economic and Social Review, Volume XXXIX, No. 2 , pp. 103-117.