A STUDY ON INVESTORS ATTITUDES TOWARDS STOCK MARKET INVESTMENT

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1 A STUDY ON INVESTORS ATTITUDES TOWARDS STOCK MARKET INVESTMENT N RENUKA Research scholar, S.K.D University ABSTRACT: The investor plays a very important role in the stock market because of their big share of savings in the country.the Regulators of the stock market never can ignore the behaviour of individual investor. This study aims to understand the behaviour of individual investor in stock market, specifically their attitude and perception with respect to the stock market.investment in stock market has become a common phenomenon for all the individuals. The growth of stock market contributes to national economic growth only when this growth translates into increased mobilization of resources, return from investment, and minimizing the risk attached to stock market investment.the investors are selected randomly with the aid of stock broking firms. The analysis is divided into two parts. The profiles of the investors are examined through percentage analysis and in the second part their perception towards the reason for investment in stock market. The scrutiny of the perception exhibits the main reason for investment in stock market is Return on Investment, liquidity and tax benefits. Keywords: Investors Behaviour, Stock Market, Attitude, Perception, Awareness Level 1. INTRODUCTION: The Indian stock market is one of the oldest and largest in the world. The rapid industrialisation in the country since independence has given vitality to the stock market. Stock market helps to channelize household savings to the corporate sector which in turn facilitates the development of industrial and service sectors. An equity share is a part of the ownership capital of the company eligible to share many benefits from the company. When one invests in shares, he keeps it for some time depending upon the stock price. When the rates of shares increase, he sells the securities to another party. Investment is generally done by people in order to meet their future needs and also to protect them from the impact of inflation. Investment in shares will fetch better returns compared to any other form of investment. Whenever the inflation rate is high, the stock market has given higher rates of return to the investors. Share trading helps the corporate to raise additional funds for expansion by creating demand for the securities. The liquidity that an exchange provides gives the investors the ability to quick and easy selling of securities. This is an attractive feature of the stock market investment. 2. LITERATURE REVIEW: Jaaps Prank (216). This paper has presented a descriptive model of individual investor behaviour. It is beingconcluded that investment process is driven by cognitive and affective Page 118

2 process and interplaycontributes to rational behaviour. Under the above model investor is seen as learning, adoptingand evolving entity that perceives environment, processes information, acts and updates itsstates. Finally investor behaviour is influenced by social interactions. Sikidar (213)carried out a survey with an objective to understand the behavioural aspects of 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 mutualfund primarily due to tax concessions. AjmiJy.A. (28)used a questionnaire to know determinants of risk tolerance of individualinvestors and collected responses from 15 respondents. He concluded that the men are less riskaverse than women, less educated investors are less likely to take risk and age factor is alsoimportant in risk tolerance and also investors are more risk tolerance than the less wealthyinvestors Chandra (27) collected the data from survey to know the factors influencing Indian individualinvestor behaviour in stock market. Using univariate and multivariate analysis and found fivemajor factors that affect the investment behaviour of individual investor in stock market namelyprudence, and precautions attitude, conservatism, under confidence, informational asymmetryand financial addition. Finally he concluded that these are the major psychological componentsseem to be influencing individual investor s trading behaviour in Indian stock market. OBJECTIVES: 1. To evaluate the level of satisfaction of the investors in the stock market investment 2. To study the investors behaviours in stock markets of India 3. To identify the investor s perception towards company 4. To ascertain the areas and aspects that make more attractive in order to attract more shareholders Significance of the Study The market return fluctuate according to events and trends, the human mind also have some psychological factor that can be influenced or might directs towards good or bad decision making regarding investment. From this study individual investor can get knowledge how their behaviour that can maximize or minimize their utility in investment plan in market portfolio. They can change their behaviour accordingly. Every Kind of individual like small investor including Man, Women with different status i.e. single or Martial with different age can change their mind set and able to understand how they should make decision to see the market trends or events. 3. THE STATUS AND BEHAVIOR OF INVESTORS The general behaviour of investors have been studied and analyzed. The analysis is divided into general background Investment pattern decision making, perception of market and finally the correlates and determinants of investment. To make generalization general frequency tables are constructed and described. Correlation regression coefficients are calculated to find the degree and direction of factors related to investments.to analyze and Page 119

3 interpret the data collected in meaningful terms primarily descriptive statistics have been computed. Frequencies are being computed to understand the degree of responses of the respondents towards the individual parameter covered as a research segment. 4. METHODOLOGY: The primary data were used for the study. Data have been collected through questionnaire method and survey method. 18 responses have been collected from the stock market investors.secondary data have also been used for the study. These data were collected from newspapers, magazines and various research articles. Percentage method is used for analyzing the gathered data. Table 1: Age wise distribution of Respondents Age No of respondents Percentage No of respondents Percentage Below Between Above Total Below 3 Between 31 5 Above 5 Percentage No of respondents Table 1 shows the age wise distribution of respondents. Majority of respondents belongs to age group of 31-5 years because the economic freedom and decision making capacity of individual is high during this middle age group. Only 16.7 percent of the investors are young as they do not have good understanding of the stock market investment and its operations during the early years of their career. Generally, the first investment by young people takes the form of bank deposits and insurance policies which need no prior understanding. Younger generations restrict themselves from making investment in share market since basic knowledge and continuous monitoring is necessary for successful investment. Organizing more number of awareness camps and suitable educational programs will attract the youth to invest more in the stock market. Above 5 years age group has risk aversion due to market fluctuation which cautions them to invest only a minimum amount in the stock market Page 12

4 Table 2: Distribution of Investors based on the Occupation Occupation No of Respondents Percentage Employed Professional Business & Others Total Percentage No of Respondents Employed Professional Business & Others The table 2 depicts the fact that majority of the investors are employed either from government and private sectors. Investors who are employed opt for investment in share market. This may be due to the pressure from their peer groups who inspire and encourages them to invest in the stock market. Approximately 21 per cent of the investors belong to the professions like lawyers, auditors, engineers and doctors. Twenty six per cent of the investors belong to business and others categories which include retired persons, students and housewives. Making profit is not the only motive to invest in stock market but also it enables the investor to be a part of the management and allows them to take part in decision making. Hence, more number of awareness programs and subject expert s dissemination about the stock market investment can be propagated through mass media. This will increase participation in the share market. Table 3: Income wise distribution of Sample Investors Income No of Respondents Percentage Below Rs. 2, Rs. 2, Rs. 3, Above Rs. 3, Total 18 Page 121

5 No of Respondents 15 5 No of Respondents Below Rs. 2, Rs. 2, Rs. 3, Above Rs. 3, Table 3 exhibits the distribution of investors based on their income. The investment in the stock market is significantly affected by the income earned by the investors. A close scrutiny of the table reveals the fact that 61.1 per cent of investors belong to the middle income earning group. The predominant participation of wealthy people alone in the stock market has been changed by the entry of the middle class investors after the policy changes of the Government. The investment avenue for a higher earning income groups are more and their preference of investment into the stock market is comparatively lesser than others. Only 3 per cent of the investors belong to the lower income earning group i.e. monthly incomes below Rs. 2,. This income group spends more on their basic needs and comforts than investing in stock market. Table 4: Percentage of Income invested in the share market by the Investors Percentage of Income invested in the share market No ofpercentage Respondents Up to 1% % - 2% Above 2% 6 4 Total 18 Page 122

6 Percentage of Income invested in the share market Percentage Percentage of Income invested in the share market No of Respondents Up to 1% 11% - 2% Above 2% The table 4 displays the investors percentage of income invested in the share market. A predominant percentage of investors i.e per cent of them invest their 1 per cent income in the share market. Investors are ready to invest a small percentage of their income to earn good return, without taking high risk. Only 24.4 per cent of the investors have the risk taking ability to invest more than 1 per cent of their income in the stock market who may be aware of the techniques and movement of stock market to fetch good return of their investment. Meager percentages of investors alone were interested to invest more than 2 per cent of their income into the stock market. Stock market investment widely attracts the investors as an alternative source to bank deposits and Government savings schemes which yields a low rate of return. Table 5: Objectives of Stock Market Investment Income invested in the share market No of Respondents Percentage Regular Dividend Liquidity Tax benefits Capital Investment Total 18 Page 123

7 Income invested in the share market Percentage Income invested in the share market No of Respondents Table 5 exhibits the objective of investing in the stock market. Among the listed objectives, capital appreciation is the most important one which is followed by liquidity and dividend income for investing in the share market. Short term investment in the share market provides the twin benefits of capital appreciation and liquidity. Regular dividend payment is one of the main criterions for fundamental analysis which is not considered as the prime motive for investing in a particular stock. Only 13.9 per cent of investors prefer to invest in share market mainly for tax benefits. The holding of an investment for a long time attracts both capital appreciation and a good return in the form of dividend. Table No: 6 Showing The Correlation Relationship Between Attitudes, Level Of Awareness/Confidence, Environment, And Investment Investor Level Stock market ofawareness/ Investor Attitude correlation 1 Sig.(1-tailed) N 56 Investor Level correlation ofawareness/ Investor Sig.(1-tailed).1 N 56 Environment correlation Sig.(1-tailed) N 56 Stock market correlation investments Page 124

8 Sig.(1-tailed).1 N *Correlationis significantatthe.1level(1-tailed). *.Correlationis significantatthe.5level(1-tailed). The results given in above represent the relationships between independent variable, intervening variable, moderating variable, extraneous variables and the dependent variable (stock market investments). The results are thus interpreted as under: The relationship between investor attitudes and stockmarket investments Results from the same table above revealed that there is a significant positive relationship between Investor s attitudes of Stock Market and stock market investments (r=.344,p<.1). This means that if investor attitudes are made better local investors will be enticed to increase the ir participation on National stock market The relationship between Investor Level of Awareness/ confidence and stockmarket investments The results further show a positive and significant relationship between investor level of awareness /confidence and stockmarket investments (r=.41,p<.1).this implies that increased investor s level of awareness/confidence is associated with increased intent and ability to invest in the stockmarket. Table 7: Behavioural profile of each segment cluster 4 cluster 1 risk intolerant (n=1) cluster 2 confidence traders (n=31) cluster 3 Lossaverage Young traders (n=24) Conservative Long-Term (n = 25) characteristics Control 4.68a bc b ac -.7 Confidence ab a b -.8 Personalization 3.5a a a a -.83 of Loss Stable/Long a a -.95 Risk 2.85a a a a -.63 # of Stocks 5 8.1a a Owned # of Mutual Funds Owned Note: abc Denotes significant difference at p.5 with the means with the same letter. Rating categories:1= Low,7= High. Standard deviations are given in parentheses. 5. CONCLUSION: The growth of stock market contributes to national economic growth only when this growth translates into increased mobilization of resources, return from investment, and minimizing the risk attached to stock market investment.the scrutiny of the perception brings to the fore the fact that the main reason for investment in stock market is Return on Investment, liquidity and tax benefits. The technological development, the ease of marketing and trading are not Page 125

9 under the main purview of their decisions. Salaried and business persons look for better returns in less time and hence go for the investments in different avenues. Although there are quite a good number of investors in the stock market, yet their percentage of investment in stock market is very less. Most of the stock market investors know more about equity market than any other options in stock market Many investors who don t like to invest in stock market believe risk to be themajor cause for their non-investment in stock market. Investment pattern depend on the education level, income and savings level.the more positive attitude enhancement strategies are introduced, the more it iseasy for local investors to invest in the stock market. REFERENCES: 1. BhatnagarVinod K &Srivastava Shiv K, Investment Behaviour of Businessmen-A Study with Special reference to Gwalior,Journal of Banking,Information Technology and management Jaipur vol.9 No.2, July-december 212 p R. Dhivya and C. S. (21). Investor's Preference Towards Financial Investments- Some Survey Evidence. Indian Journal Of Finance,Vol 4,No.7,pp Chandra Prasanna (27), Investment Analysis and Portfolio Management, Tata McGraw-Hill,Second edition, pp Suliman D Mohammad, Adnan Ali. (29), Impact of Macroeconomic Variables On stock Market Prices: Empirical Evidence in case of Karachi Stock Exchange. European Journal of Scientific Research. Vol. 38 No. 1, pp Raghavendra Prasad (216), A Study on Investors Perception and Attitude Towards Investment in Indian Stock Market with special reference to Chittoor District, Asia Pacific Journal of Research. Vol. 1 No. 42, pp GaganKukreja (212), Investors Perception for Stock Market: Evidences from National Capital Region of India, Interdisciplinary Journal of Contemporary Research in Business. Vol. 4 No. 8, pp Humpe, A.andMacmillan,P(27), Can macroeconomic variables explain long term stock market movements? A comparison of the US and Japan, Centre for dynamic macro economic analysis working paper series, (on line) Available at http;// economics/cmda/papers/wp72.pdf 8. Les Coleman. (27), "Risk and decision making by finance executives: a survey study", International Journal of Managerial Finance, Vol. 3 No. 1, pp Nareshkumar. (21) Estimation of market capitalization and economic growth in India. Kumar.pdf Page 126