Mrp Final Chapter 1

8/18/2019 Mrp Final Chapter 1

1/26

2

CHAPTER – I

INTRODUCTION

“To invest successfully over a lifetime one does not require a stratospheric

IQ, unusual business insights or seaside information. What’s needed is a

sound intellectual framework for making a decision and the ability to keep

emotions from corroding that frame work” - Warren Buffet.

1.1 PROLOGUE

"The more you sweat in peace time; the less you bleed in the war"

This famous quote is applicable for all aspects in the life of an individual. If

an individual does not invest his money and think that there will be no need

of money in his contended life, then one day suddenly he will be in a

pathetic situation where he needs money emergently. Hence, investing is an

important activity to survive in the dynamic and competitive world.

Investment is the employment of funds with the aim of achieving

additional income or growth in value. The essential quality of investment is

that it involves waiting for a reward. It involves the commitment of

resources which have been saved or put away from current consumption in

the hope that some benefits will accrue in future.1 Therefore, an act of

1Preethi Singh (1991), “Invest Management”. Himalaya publishing house,

Second Revised edition. p1.


2/26

3

investment of any individual involves element of sacrifice, futurity, risk, and

expectation of gains.

1.2 INVESTMENT AND ECONOMIC DEVELOPMENT

In the context of present day conditions, investments are important

both for country’s economic development and investor. With savings

invested in various options available to the people, the capital formed acts as

the driver for growth of the country. Capital is a crucial factor in the

development of an economy. The pace of economic development is

conditioned, among other things by the rate of capital formation. The role of

the financial system is to act as a link between the surplus sectors and deficit

sectors to increase the level of investment. As the income level increases in

all developing nations the savings/investments of the people also increase

gradually. Various studies confirm the fact that there is a correlation

between rate of investment and economic development of a nation.2 India

is no exception to this phenomenon. This is evident from the following chart

which shows the role of investments in the growth of Gross Domestic

product.

2Sinha, D. (2002), Saving-Investment Relationships for Japan and other

Asian countries, Japan and the World Economy. pp. 1-23.


3/26

4

Figure-1.1 GDP Growth and Investment

The period between 2010 and 2012 was a period of low growth as the

investment was more volatile.

1.3 PREFERENCES OF INVESTORS

A survey conducted by Prime Data Base3, a private agency in the

year 2007 revealed the following findings related to the investor population

and their preferences.

3Prime Data Base, 2007.www.primedatabase.com/about.asp.


4/26

5

Table 1.1

Number of Individual Retail Investors aged 18-59

(in millions)

Type of Investments Number of Investors

(in Millions)

Banks 141.07

Postal Savings 35.77

Life Insurance 105.35

Mutual fund 5.3

Equal Market 3.54

Gold 18.72

Chit Fund/NBFC 30.05

Source: Prime Data Base, 2007.

As indicated above investment in bank deposits are the most

preferred method of investing. Life insurance policies are preferred by

nearly 105.35 million investors. The preference for equity shares is as low as

3.54 million of the population. Mutual funds have more participation than

the equity shares. The most preferred form of investment is bank deposits

even though it has the lowest rate of interest.

A nationwide survey (India Financial Protection Survey)4 of 60,000

households conducted in 2007 by NCAER (National Council for Applied

Economic Research) and Max New York Life has revealed the investment

preferences of household investors. The main findings of the survey are:

4 NCAER (National Council for Applied Economic Research – India

Financial Protection Survey 2007) pp. 43-47.


5/26

6

Most Indians prefer keeping 65 percent of their savings in liquid assets like

bank or post office deposits and cash at home, while investing 23 percent in

physical investments like real estate and gold and only 12 percent in

financial instruments. The survey also reveals that 96 percent of the

households cannot survive beyond a year on their current savings in case of

loss of income due to some eventuality such as death or disability of the

chief earner. However, a majority of those surveyed expressed confidence in

their financial well-being. These surveys highlight the lack of financial

security and awareness about the various modes of savings and their

importance.

1.4 INVESTMENT MEDIA

Many types of investment media or channels are available for making

investments. A sound investment program can be constructed if the investor

familiarizes himself with the various alternative investments available. The

investment alternatives can be classified in to the following categories.

1.4.1 Direct Investment Alternatives

Direct investments are those where the individual makes his own

choice and takes his own investment decisions. It may be

1.4.1.a. Fixed Principal Investments

The principal amount and the maturity amount are known with

certainty. It may be cash, saving bank account, saving certificates,

government bonds, corporate bonds etc.


6/26

7

1.4.1.b. Variable Principal Securities

The maturity value is not known with certainty. It may be equity

shares, preference shares and debentures.

1.4.1.c. Non Security Investments

Investments in Real Estates, commodities, business ventures, art,

antiques and other valuables are non security investments.

1.4.2 Indirect Investment Alternatives

In indirect investments, the individual investors have no control over

the amount invested. The investments are entrusted to the care of particular

organizations which manage the funds on behalf of investors. It may be

pension fund, provident fund, insurance, investment companies, Unit Trust

of India etc.

“Investment in all avenues is based upon one or other factual basis

with the ultimate aim of gaining in future. The success of an investor means

achieving the rate of return warranted by the level of risk assumed”.5

Hence, the choice of a rational investor depends upon the risk and return

factors.

5BHALLA. V.K (2010), Investment Management, 16

th edition, S.Chand &

company limited, p16.


7/26

8

1.5 RISK AND RETURN

Risk means the probability of having adverse or low returns as

compared to the expected returns. Returns are the outcomes or benefit from

the amount invested by the investor. It May be in the form of regular income

like interest, dividend, or capital gain.

1.5.1 Kinds of Risk

Risk can broadly be classified in to two types:

Systematic Risk.

Non-Systematic Risk.

1.5.1.a. Systematic Risk

It is non-diversifiable risk because it can not be avoided; it is inherent

almost in all the investment avenues. Systematic Risk arises due to Market

Risk, Price Risk, Interest Rate Risk, Political Risk and Inflation Risk.

1.5.1.b. Non-systematic Risk

It is created due to industry or company-specific factors. This risk

can either be reduced or eliminated through diversification. It may be

Business risk, Financial risk and Industrial risk.

1.5.2 Management of Risk

Risk management is the identification, assessment, and prioritization of

risks followed by coordinated and economical application of resources to

minimize, monitors, and controls the probability and/or impact of


8/26

9

unfortunate events or to maximize the realization of opportunities.6

Once

risks have been identified and assessed, all techniques to manage the risk fall

into one or more of these four major categories which includes avoidance,

reduction, sharing or transfer and retention.

1.5.2. a. Risk avoidance

It includes not performing an activity that could carry risk, but

avoiding risks also means losing out the potential gain.

1.5.2. b. Risk reduction

It involves reducing the severity of the loss or the likelihood of the

loss from occurring. It means finding a balance between negative risk and

the benefit of the operation or activity.

1.5.2. c. Risk sharing or Risk transfer

It transfer refers to share with another party the burden of loss or the

benefit of gain from a risk.

1.5.2. d. Risk retention

It involves accepting the loss, or benefit of gain, from a risk when it

occurs. It is a viable strategy for small risks where the cost of insuring

against the risk would be greater over time than the total losses sustained.

6ISO/IEC 31010:2009 - Risk Management - Risk Assessment Techniques


9/26

10

1.5.3 Methods of Risk Transfer

1.5.3. a. Hedging

Hedging means reducing or controlling risk. This is done by taking a

position in the futures market that is opposite to the one in the physical

market with the objective of reducing or limiting risks associated with price

changes.

1.5.3. b. Insuring risk

Insurance is the equitable transfer of the risk of a loss, from one entity to

another in exchange for payment. It is a form of risk management by payment of

premium to the insurance company.

1.5.3. c. Diversifying risk

A diversifying risk technique does not lock in anything and no payment of

premium, but diversifying the investment into some other alternatives.

1.6 DERIVATIVES - A RISK MANAGEMENT TOOL

Derivatives are the instruments to hedge risk arising from investment

made in underlying asset. Derivatives are those instruments, the value of

which depends upon the underlying asset on which it is created.7

These underlying assets may be a commodity, securities, or index.

Active use of derivative instruments allows the investor’s risk profile to be

7Dhanesh Khatri (2010), “Security Analysis and Portfolio Management”

Macmillan publishers India Ltd, First edition. p217.


10/26

11

modified, thereby providing the potential to improve earnings quality by

undesired risks.

Financial derivatives have changed the face of finance by creating

new ways to understand, measure, and manage financial risks. The

researcher, here makes an attempt to study the investors perception towards

futures and options (derivative Products) in Tanjore district.

1.7 INVESTOR PSYCHOLOGY AND PERCEPTION ON INVESTMENT

“Winners think differently... it is not how much we know, though

knowledge is important. It is not how hard we work, though nothing

worthwhile is achieved without hard work. It is not the depth of our

experience, though we cannot become a seasoned operator without it. The

real difference is the way winners think”8. These lines insist the importance

of psychology on the success of investment of an individual. “Psychology is

an academic and applied discipline that involves the scientific

study of mental functions and behaviors”9. Psychology has the immediate

goal of understanding individuals and groups by both establishing general

principles and researching specific cases, and by many accounts it ultimately

aims to benefit society. Psychology has the greater influence on investment

decisions of the people especially on shares and its related investments.

8Building Wealth in the Stock Market by Colin Nicholson, published by

John Wiley & Sons - 2009)

9Definition of Psychology, APA’S index, p20, December,2011.


11/26

12

Making money from stocks is easy enough if one can defeat the main enemy

– ourselves. Humans are subject to lots of biases and psychological

quirks that combine to destroy their investing returns. There are eight key

concepts that pioneers in the field of behavioral finance have been identified

as contributing to irrational and often detrimental financial decision making.

They are

Anchoring.

Mental Accounting.

Hindsight biases.

Gambler’s Fallacy.

Herd Behavior.

Over Confidence.

Over reaction and availability bias and

Anomalies.

1.7.1

Anchoring

The concept of anchoring draws on the tendency to attach or "anchor"

our thoughts to a reference point - even though it may have no logical

relevance to the decision at hand. Although it may seem an unlikely

phenomenon, anchoring is fairly prevalent in situations where people are

dealing with concepts that are new and novel.


12/26

13

1.7.2 Mental Accounting

Mental accounting refers to the tendency of people to separate their

money into separate accounts based on a variety of subjective criteria, like

the source of the money and intent for each account.

1.7.3

Hindsight Biases

Another common perception bias is hindsight bias, which tends to

occur in situations where a person believes (after the fact) that the onset of

some past event was predictable and completely obvious, whereas in fact,

the event could not have been reasonably predicted.

1.7.4 Gambler’s Fallacy

It means a lack of understanding which leads to incorrect assumptions

and predictions about the onset of events. One of these incorrect

assumptions is called the gambler's fallacy. In the gambler's fallacy, an

individual erroneously believes that the onset of a certain random event is

less likely to happen following an event or a series of events. This line of

thinking is incorrect because past events do not change the probability that

certain events will occur in the future.

1.7.5

Herd Behavior

It is the tendency of individuals to mimic the actions (rational or

irrational) of a larger group.


13/26

14

1.7.6 Over Confidence

Confidence implies realistically trusting in one's abilities, while

overconfidence usually implies an overly optimistic assessment of one's

knowledge or control over a situation.

1.7.7 Over Reaction

Participants in the stock market predictably overreact to new information,

creating a larger-than-appropriate effect on a security's price.

1.7.8 Anomalies

It refers to the irregular or abnormal behavior of the people; that directly

violate modern financial and economic theories, which assume rational and logical

behavior.

For making their investments successful, the investors’ psychology

may be refined and improved. Usually to improve psychology the

Psychologists explore concepts such as perception, cognition, attention,

emotion, phenomenology, motivation, brain functioning, personality,

behavior and interpersonal relationships.”10

In behavioral studies, perception plays a predominant role.

Perception refers to a conscious or unconscious state of awareness

or understanding of one's surroundings that exists within the mind and

formed through sensory signals stimulated by current conditions,

10Psychology: Six perspectives by LD. Fernald, CA Sage publications, 2008 Page

No. 12.


14/26

15

expectations and past memories. The confluence of complex sensory inputs

often creates a perception that is unreliable or unverifiable.

The globalization of financial markets has been increasing the size of

the community of retail investors’ over the past two decades by providing a

wide variety of market and investment options. Hence, it makes their

investment decisions process more complex. As the market conditions can

be influenced by both fundamental factors of the company and external

factors such as social, political, economic, regulatory, technological,

environmental and legal that have an influence on the values of equity

shares and derivative securities, the perception of retail investors over equity

shares and derivatives is widely varied.

1.8 INDIVIDUAL INVESTORS AND RETAIL INVESTORS IN

INDIAN CAPITAL MARKET

1.8.1 Individual Investors

Investors in the capital market may be institutions or Individuals. In

the capital market the role of individual investors cannot be ignored since

Households savings account for the lion’s share of the gross savings in the

country. Even though Foreign Financial Institutions play a major role in the

Indian capital market, the participation of Individual investors will be a great

boost for the development of the capital market and for reducing the

volatility in the stock market. The individual investor may be Retail investor

or high net worth individual.


15/26

16

1.8.2 Retail Investors

An individual who purchases securities for his/her own personal

account rather than for an organization is a retail investor. SEBI defines a

retail shareholder as presently listed companies making public issues can

make reservation on competitive basis for its existing shareholders who, as

on the record date, are holding shares worth up to Rs. 50,000/-. However, no

limit has been set on the value of the application that can be made by such

shareholders. It has now been decided to define the term “Retail Individual

Shareholder” to mean a shareholder (i) whose shareholding is of value not

exceeding Rs. 1, 00,000/- as on the day immediately preceding the record

date, and (ii) who makes application or bids in a public issue for value not

exceeding Rs 1, 00,000/-11

Retail investing activity occurs through any of

the following channels; The investor who directly invests through an agent

or broker, or whose accounts are managed by his D/P or who joins in an

investment group like friends, colleagues, family members.

A retail investor comes from a middle class family. Retail investing

activity takes place in the shadow of institutional investing activity. There is

every chance that their interest might be affected because of the smaller size

of their holding and the resultant voting power. A typical small investor or a

retail investor in India is not a speculator who does day trading but a pure

investor who buys shares when prices are likely to go up and sells when the

11 (www.sebi.org).


16/26

17

prices are likely to come down. Such an investor is a rational investor who

does what is generally expected. His information level is very low and he

mainly relies on the brokers.

In many countries it is common to find all people, and not just those

belonging to the middle class, investing a part of their savings in stock

market. In India the equity culture started only from the 90s. Reliance

Industries Limited in particular wooed the middle class- salaried,

professionals, small business persons and traders and well-off farmers to

subscribe to the company’s share issue. Many did and were handsomely

rewarded.

The small investor today seems to disappear slowly from the market

in a phased manner. In spite of the 24 hour channels on business news and

hyped information about IPOs the small investor does not want to take any

risk. The Swarup Committee Report12

2009 shows that the retail investor

population has shrunk to less than half since 2000-01. In 2003, SEBI and the

National Council of Applied Economic Research (NCAER) estimated that

21 million individuals had invested in equity or debentures while 19 million

had invested in mutual funds. The reference period for this study was 2000-

01. The SEBI-NCAER survey further said that the number of equity investor

‘households’ in India had halved from 12.1 million in 1998-99 to 6.1 million

12Swarup Committee, Consultation Paper on Investor Protection and

Awareness, 2009, p1, www.ncaer.org. Accessed on 12/12/2009.


17/26

18

in 2000-01. Now, the Swarup Committee says that the number of individual

retail investors too has shrunk to just eight million. This is clearly a

frightening situation. The first and the foremost reason is that investor has

no confidence in the capital market. It stems from the fact that the

Institutions and Systems in the country are at present heavily loaded in favor

of the FIIs and other large investors.

The capital market regulators should not ignore the individual

investors whether they are retail or high net worth individuals since their

aspirations, attitudes, perceptions and expectations are going to have a long

term effect on the growth of stock market and derivative market in India.

1.9 STATEMENT OF THE PROBLEM

The derivative market performs a number of functions in Indian stock

market. The derivative products like futures and options have, now-a-days

become an important instrument for risk hedging, portfolio diversification

and price discovery in India after its formal commencement in 2001. Even

after a decade of trading activities in derivatives in India, the retail investors

yet to understand the real risk involved in investments in the derivative

markets as this market is frequently affected by the overall stock market

volatility as well as by uncertainty in the global economy. Moreover,

changes in business environment and increase in movement of interest rate

and exchange rate has resulted into rise in financial risk exposure. These

movements can affect not only earnings from investment but also the


18/26

19

survival of retail investors. But today, derivatives become more popular in

India and individual as well as institutional investor highly prefers derivative

contracts to hedge the risk. So, the present study is undertaken to assess the

perception of retail investors towards derivatives with reference to

futures and options in Tanjore Distirict.

1.10 NEED FOR THE STUDY

The present study on derivatives is of much needed for the retail investors

on the grounds that it gives deep insights about the futures and options of the stock

market and provides feasibility for the perfect way of trading in stock markets.

Moreover, the studies of this nature are more useful to academicians and research

scholars in India as well as in other countries to make further insights into the

various facets of derivative futures and options in the organizations similar to BSE

and NSE. Also, the study may give many implications to an investor regarding

commodity trading, helps them to reduce risk and makes them to choose the risk

free stocks for investment.

1.11 OBJECTIVES OF THE STUDY

The following objectives are to be fulfilled in the present research work:

1. To study the awareness about derivative market as well as awareness

about major derivative types such as futures and options among the retail

investors in Tanjore district, Tamil Nadu.

2. To analyse the relationship between respondents’ socio-economic status

and their extent of awareness on derivative market.


19/26

20

3. To evaluate the perceived risk in various investment options and identify

the role of socio-economic status on the perceived risk among retail

investors in the study region.

4. To find out the risk management techniques adopted by retail investors

in the study region.

5. To bring out the investment behaviour of retail investors towards futures

and options in derivative markets.

6. To ascertain the status of derivative trading in India based on the views

of the retail investors in the study region.

1.12 HYPOTHESES

The hypotheses to be tested in the present study are given hereunder:

1. There is no significant relationship between socio-economic status and

level of awareness about derivative market among retail investors in

Tanjore district.

2. The perceived risk in investments in derivative market does not differ

significantly with difference in socio-economic status of the retail

investors.

3. There is no significant difference in the risk management techniques of

retail investors with different socio-economic characteristics.

4. There is no significant relationship between perceived risk and

investment in derivatives among retail investors.


20/26

21

5. The behaviour of retail investors towards investing in derivatives is

independent of their socio-economic characteristics.

6. The behaviour of retail investors towards investing in derivatives is

independent of the status of derivative trading in India.

1.13 SCOPE OF THE STUDY

The present study is undertaken to explore the retail investors’ awareness

about and attitude towards derivative trading with futures and options in Tanjore

district, Tamil Nadu. The study analyzes advantages and disadvantages of the

investment in derivatives, extent of risk inherent in the investment, reasons for

investing and not investing of F & O (Futures and Options), preferred derivative

type for investment based on the views of the retail investors in the study region.

So, scope of this study is to analyze various concepts and myth (pros and cons)

inherent in investing in derivatives empirically based on the perception of retail

investors of stock market in Tanjore district.

1.14 LOCATION OF THE STUDY

The state of Tamil Nadu has been selected by the researcher. The state of

Tamil Nadu has a lot of distinctions with regard to overall development. Tamil

Nadu is the eleventh largest state in India by area and the seventh most populous

state. It is the fifth largest contributor to India's GDP and the most urbanized state

in India. The state has the highest number of business enterprises in India,

compared to the population share of about 6%. Tamil Nadu is also one of the most

literate states of India. Out of 32 districts in Tamil Nadu, Tanjore has been selected

for the study. The district is located at 10.08°N 79.16°E in Central Tamil Nadu

bounded on the northeast by Nagapattinam District, on the east by Tiruvarur


21/26

22

District, on the south by the Palk Strait, of Bay of Bengal on the west

by Pudukkottai District, and on the north by the river Kollidam, across which

lays Tiruchirappalli and Perambalur districts. According to the 2011

census Thanjavur district has a population of 2,402,781 and its literacy rate is

82.72%.

1.15 JUSTIFICATION FOR SELECTING THE RESEARCH

LOCATION

The researcher selected Tanjore District for the purpose of the study. In the

first phase, the state of Tamil Nadu was selected because the researcher is located

in Tamil Nadu. With regards to the selection of district, the researcher identified

the district which has large number of stock brokers and investors trading in capital

market. Tanjore District is one of the major districts which have high potential in

capital market investments. In Tanjore, there are 14 registered share broking

companies (including sub brokers) and it has a good record of number of investors

in capital market.

In Tanjore, there are 839 villages. Even though the selected area has

large number of rural households, they are highly exposed with investments

in capital market as perceived by the researcher in the preliminary study of

the research. So the researcher is motivated to study the reasons behind the

phenomenon.

There are 8 Taluks in Tanjore district. They are Orathanadu,

Kumbakonam, Papanasam, Pattukottai, Tanjore, Thiruvaiyaru,

Thiruvidaimaruthur, and Peravurani. Out of these eight taluks, large


22/26

23

numbers of stock brokers are available in Tanjore and kumbakonam.

Irrespective of the area of occupation, the rural as well as urban investors in

entire Tanjore district traded through the stock brokers in kumbakonam and

Tanjore. Therefore, the sample respondents are selected from the registered

stock brokers in Kumbakonam and Tanjore.

1.16 RESEARCH METHODOLOGY

1.16.1 Source of Data

This research work is based on both primary and secondary data. While the

primary data are the information gathered from retail investors in stock market in

Tanjore district, Tamil Nadu whereas the secondary data are collected from

publications, books, articles in journals and websites pertaining to derivative

trading and investment. The questionnaire is used to obtain the perception of

sample respondents about various aspects underlying the topic of the study.

1.16.2 Sampling Technique

The selection of the sample respondents for the survey involves two

stages. In the first stage, stock brokers are selected to identify the investors.

On the basis of large number of investors traded in futures and options

segment, the registered stock brokers are selected by applying purposive

sampling method. The purposive sampling is a non-probability sampling

technique where subjects are purposely selected based on the choice of the

researcher. In the second stage, simple random sampling technique is

applied to select the sample respondents for distributing the questionnaire to

obtain their views on various aspects needed for the study. Before going for


23/26

24

data collection using these two sampling techniques, the sample size

required for the study is determined based on following formula which is

widely used when the sample population is large and infinite (or unknown)

as quoted by Osisioma et al. (1974)13

.

2

/22

e4

Zn

Where, n is sample size, Z is standard value corresponding to a given

confidence level (in the present cases CI is 95%), and e is the proportion of

sampling error in a given situation (in this case 0.04 and 0.05, i.e., maximum

allowance of error in sampling is from 4% to 5%).

Thus using the formula, the sample size is 384, if allowance of error

is 5 per cent and 600 if allowance of error is 4 per cent. So, the sample size

anything between 400 (384 rounded off to nearest 100) and 600 would be

appropriate for the study.

13Osisioma, H.E., Osisioma, B.C., and Chukwuemeka, E.E.O., (2012) in

“Developing a Conflict Management Model for the Nigerian Executive”,Singaporean Journal of Business Economics, and Management Studies, Volume:1,

No.1, Pp.1-19


24/26

25

1.16.3 Statistical Tools and Techniques

The statistical tools and techniques used for analyzing the data vary from

descriptive to multivariate. The details of the statistical tools adopted in the study

are hereunder.

1) Descriptive statistics like mean, standard deviation

2) Cross tabulation analysis with Chi-square test

3) Mann-Whitney ‘U’ Test / Kruskall Wallis ANOVA

4) Friedman ANOVA and Kendall’s Coefficient of Concordance

5) Cluster Analysis

6) Multiple Regression analysis and

7) Linear Discriminant analysis

The descriptive statistics is used when the gathered data is in the 5-

point opinion scale. The relationship between any factors is empirically

ascertained using cross tabulation analysis and chi-square test. As the most

of the data are choice based, and non-parametric in nature, the Mann-

Whitney U test and Kruskall Wallis ANOVA test are adopted to compare

perception of two groups and more than two groups respectively. The cluster

analysis is used to segment the respondents based on the risk awareness

level into mutually exclusive groups. The unique influence of retail

investors’ socio-economic characteristics on their views about various

aspects pertaining to investments in derivatives is explored by multiple

regression analysis. The difference in investment behaviour between the


25/26

26

retail investors with different level of risk awareness towards derivative

trading is explored empirically by linear discriminant analysis.

1.17 LIMITATIONS OF THE STUDY

The present study is limited with the opinion of the retail investors only and

not registered share brokers. Also, views of the institutional investors are not

considered in the present study. The study does not cover the districts other than

Tanjore district.

1.18 CHAPTER SCHEME

The present study consists of seven chapters as detailed hereunder:

Chapter I - “Introduction” discusses the concept of investment, kinds of

risk associated with investment and investor psychology in investment decisions.

The Statement of problem, Scope of the study, Objectives of the study,

Hypotheses, Methodology, Limitations and Chapter scheme are primary focus of

this chapter

Chapter II - “Review of Literature”, reviews books, published

articles and publications in other medium relevant for the present study.

Chapter III - “Development of Derivative Markets in India”

discusses the concept of derivatives, its types, implementation and growth of

derivative trading in India.

Chapter IV - “Awareness of Derivative Trading among Retail

Investors” is the first analysis part, in which the level of awareness about

derivative market and trading in derivatives is explored based on the opinion

of the respondents in the sample.


26/26

27

Chapter V - “Perceived Risk and Investment Behaviour of Retail

Investors in Derivative Market”, first analyzes the respondents’ perception

about inherent risk and techniques adopted by retail investors to manage risk

associated with derivative trading. The investment behaviour of retail

investors in derivate market is also empirically evaluated here.

Chapter VI - “Status of Derivative Trading - Retail Investors’

Perspective”, evaluates the various pros and cons of underlying derivative

trading as perceived by retail investors in the study region.

Final chapter - “Summary of Findings, Suggestions and

Conclusion”, summarizes findings from the interpretation of the results of

the analysis in previous chapters. The conclusions and necessary suggestions

are also given here based on the findings.

Documents

Mrp Final Chapter 1