The document reviews literature on the Indian secondary securities market. It summarizes several studies that have examined topics like the role of foreign institutional investors, disclosure requirements, investor protection, and regulatory reforms. The studies found that periodic and timely disclosure of information is important to protect investors. Foreign investment was found to influence stock returns and attract more investment to companies with better governance and liquidity. Overall the literature suggests that continued reforms are needed to strengthen enforcement and ensure fair and transparent markets.

1. 23
CHAPTER - 2
REVIEW OF LITERATURE
Review of literature is mainly framed to gain insight on theoretical background
knowledge of the research problem. It helps the researcher to increase strong
theoretical basis of the problem under study and also help to see the sights any one
has done research on the related issue. So it can be said that review of literature helps
one to find the path of problem solving.
Eysell (1995) investigated the impact of suitable and timely disclosures of
information on protecting the interests of investors. The study was found that
Information should be disclosed when it is valuable to the market. The companies
should, therefore, be made to disclose routine information on a periodic basis and
price sensitive information on a permanent basis. It was found that the secondary
market regulator and stock exchanges have played a significant role to play in
ensuring that such information is accessible by all market participants rather than a
few selected market players. The study further found that the use of modern
technology, internet, and computers, should be enabled to enhance the efficiency of
the disclosure process. It should be possible to submit and propagate financial and
non-financial information by electronic means. The law should ensure a revelation
regime that compels companies to disclose substantial information on a continuous
and timely basis.
Sarkar and Bhole (1996) examined that the working of stock markets in India is
characterized by unethical practices of diverse forms on the part of existing
companies, new companies and entrepreneurs, brokers and other operators on the
markets. The mergers and acquisitions through malpractices entering into unofficial
transactions even before issues open up for subscription rigging up of premium on
new issues, presenting excessively rosy picture about new ventures, insider trading,
are some of the examples of unethical practices on stock markets. As a result of it,

2. 24
almost complete lack of protection to the interest of the genuine and small investors is
the worst part of the function of the secondary markets.
Gokarn (1996) assessed the contribution of SEBI to the growth and development of
secondary market institutions in the securities markets in India during the 1992-96
periods. It develops a theory of regulation which may be summarized as follows
regulation is required to ensure that securities markets achieve the four main
dimensions of efficiency. The working of the securities markets in predicated on the
activity of three broad sets of stakeholders, namely, investors, issuers and
intermediaries. The study was found that the regulation is essential to concentrate on
three potential sources of market failure namely information asymmetry, transaction
costs and imperfect competition.
Shah (1999) focuses on how four key developments relating to trading have changed
the Indian secondary securities markets into being one of the largest and the most
competitive in the world in terms of expenditure and have enhanced the informational
efficiency of the market. The institutional developments it focuses on are the
electronic limit order book, matching system, rolling settlement, dematerialized
trading and innovation through a clearing corporation. The study further takes the
view that with these developments the Indian secondary securities market mainly the
equity market, has achieved nearly all the institutional development that is required
for the scope of further development in the areas of investigation and enforcement.
Chakraborty (2001) studied in his research paper that since the beginning of
liberalization FIIs flow to India has steadily grown its importance. The study analyzed
foreign institutional investors flow and their relationship with other variables. The
study further revealed that FIIs are the major players in the Indian stock market and
their impact on the domestic market are increasing. Trading activities of FIIs and the
domestic stock market turnover indicates that FIIs‟ are becoming more important
source of finance.
Machiraju (2002) studied the role of retail investors in the Indian secondary
securities market and found that retail investors are not only the backbone of

3. 25
securities market but also determine the level of economic activity in the economy.
Increase in the number of retail investors in the economy enhances the scope of
secondary market. The study suggested that the growth in the number of retail
investors in secondary market should be encouraged for the growth and development
of investment environment in the country.
Mukherjee (2002) examined the various feasible determinants of FIIs and the study
found that Foreign investment flows to the Indian markets tend to be caused by return
in the domestic market; returns in the Indian secondary market is an important factor
that has an impact on FIIs flows; whereas FIIs sale and FIIs net inflow are
considerably affected by the performance of the Indian secondary market, FIIs
purchase show no such affect to this market performance; FIIs investors do not
probably use Indian secondary market for the purpose of prove to be strong enough
diversification of their investment; returns from the exchange rate variation and the
fundamentals of the economy may have an impact on FIIs decisions.
Gordon and Gupta, (2003) investigated through their study the causes behind the FII
inflows and return in BSE and NSE. The study observed that FIIs act as market
makers and book profits by investing when prices are low and selling when they are
high meaning thereby that they are market manipulators and hence, there are
contradictory findings by various researchers regarding the causal relationship
between FII net inflows, market capitalization and returns of BSE and NSE.
Consequently, there is a need to investigate whether FIIs are the cause or effect of
secondary market fluctuations in the country or they effect the volatility of the market.
Kumar (2005) examined the role of institutional investors, foreign institutional
investors and mutual funds in Indian secondary market. The main findings of the
study shows that the Indian stock market had improved from last 25 years as so many
developments takes place which make Indian secondary market at par with developed
economies of world. Indian secondary market consist investments of institutional
investors, foreign institutional investors and mutual funds. Though foreign
institutional investors and mutual funds affect the market but now institutional
investors also start playing an active role in the market movements.

4. 26
Bose (2005) examined the scope of Indian secondary securities market laws, which
have gradually evolved over time, they are now quite pervasive and the problem lies
mostly in enforcing compliance particularly for crimes such as price manipulation and
illegal insider trading. The study also suggests that there remains a need to ensure that
laws or regulations should be streamlined completely to empower SEBI to carry out
its functions as the principal regulator, while SEBI in turn needs to drastically upgrade
its surveillance process enabling it to produce evidence that is trustworthy enough to
secure confidence.
Rui and Gian (2006) asserted through their study that better investor protection
implies better risk sharing and because of entrepreneurs‟ risk aversion, it results into a
larger demand for capital which is known as the demand and supply effect follows
from general equilibrium restrictions i.e. better protection and higher demand which
increases the interest rate and lowers the income of entrepreneurs, decreasing current
savings and next period‟s supply of capital. The supply effect is stronger the tighter
are the restrictions on capital flows. The study concluded that the (positive) effect of
investor protection on growth is stronger for countries with lower restrictions.
Uchida (2006) analyzed the role of futures and options in stock market. The study
found that the majority of Indian retail investors are like to trade in equities than in
future or options. People mainly invest their money in share market followed by
mutual funds and fixed deposits. This shows there is a need to create education and
awareness among investors regarding profitability of investment in futures and
options of stock market.
Barua and Raghunathan (2006) examined that Indians prefer to save money in 'in-
house savings' rather than 'in banks or investment.' They save money for emergency
and any miss happening. The reason behind this is because unlike in the western and
developed countries, which have the system of social security that prevents the poor
households from starvation and ill-social society by giving social protection and
economic support, there is no social security in the country (India) for the citizens of
the nation. The study suggested that to improve the investment environment in the

5. 27
country government should provide social security benefits to the citizens of the
country so that they can invest freely in the secondary market.
Douma, Kabir and Rejie (2006) investigated the impact of foreign institutional
investment on the performance of emerging market firms and found that there is
positive effect of foreign ownership on firm's performance. The study also found the
impact of foreign investment on the business group affiliation of firms. The study also
found that foreign investors preferred the companies with better corporate
governance. Foreign Institutional investors are regarded as the trend setters. Rolling
settlement in India is possible only because of them as they are not comfortable with
Badla system.
Poshakwale and Thapa (2007) compared the influence of foreign institutional
investments in the long and short run on Indian equity market with the main
developed equity markets of the US and the UK by using daily return series and
portfolio investments made by foreign institutional investors. The study found that
Indian stock returns are significantly influenced by the short and long term
innovations in the US and UK stock market. The study further suggests that before
initiating with any policies in Indian secondary market its implications in developed
economies of the world should be considered and then only they should be
implemented in Indian economy.
Dhamija (2007) described that the increase in the volume of foreign institutional
investment (FII) inflows in recent years has led to concerns regarding the volatility of
these flows, threat of capital flight, its impact on the stock markets and influence of
changes in regulatory regimes. The study suggested that as the pace of foreign
investment began to accelerate, regulatory policies have changed to keep up with
changed domestic scenarios.
Singh (2007) attempted to explain the use of participatory notes (PNs) by foreign
investors, as a medium of portfolio flows into Indian capital markets for more than a
decade. The expansion of India's foreign investor base, in recent years, has a prejudice
towards hedge funds/unregistered foreign investors who invest primarily through

6. 28
participatory notes (PNs). Foreign institutional investors (FIIs) are keenly interested
in the Indian equity market and have been overweight the MSCI index since 2003,
while market capitalization of the large Indian stock exchanges is presently about 100
percent of GDP (around $1.3 trillion) and tax arbitrage through capital gains tax has
almost disappeared since July 2004.
Walia and Kumar (2007) examined the investor‟s preference for traditional trading
and online trading. The major findings of the study showed that Indian investors are
more conservative, they do not change easily and Indian traditional traders still
choose brokers for trading. But Internet traders are more comfortable with online
trading because of its transparency and complete control over the terminal.
Srivastav and Yadav (2008) asserted that high net worth individuals and proprietary
traders contribute to the major proportion of trading volumes in the derivative
segment. The survey also revealed investors are using these securities for risk
management, profit enhancement, speculation and arbitrage. The study also
emphasized to popularize option instruments because they may prove to be a useful
medium for enhancing retail participation.
Prasanna (2008) found that countries and firms are interested in attracting foreign
capital because it helps to create liquidity for both the firm‟s stock and the stock
market in general. This leads to lower cost of capital for the firm and allows firm to
compete more effectively in the global market place. This directly benefits the
economy and the country and availability of foreign capital depends on many firm
specific factors like management, profitability, technology and competition other than
economic development of the country.
Bhole (2008) discussed the role of FIIs in Indian Capital market and examined the
contribution of foreign institutional investment particularly among companies
included in sensitivity index (Sensex) of Bombay Stock Exchange. The study found
that higher Sensex indices and high price earnings ratio are the country level factors
attracting more foreign investment in India and the foreign investment is more in the

7. 29
companies with higher volume of publically held shares. The promoter‟s holdings and
the foreign investments are inversely related.
Reddy (2008) analyzed the performance of the sensex and FIIs in the Indian stock
market. The study revealed that the liquidity as well as the volatility was highly
influenced by FII inflows in BSE sensex so the foreign institutional investment is the
significant factor for determining the liquidity and volatility in the stock market
prices. The study concluded that the FIIs who have been so bullish in India for the last
so many years might start looking at other cheaper emerging markets for better
returns. So, it is very tough to predict that whether the sensex will sustain the
momentum in future or not.
Sethi (2008) evaluated the impact of international capital flow on economic growth,
trends and composition and suggested the policy implication thereof. The study
further observed that the foreign institutional investors (FIIs) have negative impact on
growth, but it is very negligible. The study concluded that India should move to
influence both the size and composition of capital flows, strengthened their banking
system rather than promoting financial market, banks can provide the surest vehicle
for promoting long term growth and industrialization.
Saha (2009) investigated the participation of foreign institutional investors and the
other financial institutions in India and the performance of the Indian stock markets
and she concluded that Indian stock market is regarded at par with the developed
markets Moreover, it had a very unique economic model and is based on strong
economic growth with huge liquidity and it is not depended on the US economy for
its GDP growth.
Singh (2009) revealed that the size of net capital inflows to India increased from US
$ 7.1 billion in 1990-91 to US $ 108.0 billion in 2007-08. India has one of the highest
net capital inflows among the EMEs of Asia. Capital inflows, however, not an
unmitigated blessing, the main danger posed by large and volatile capital inflows is
that they may destabilize macroeconomic management. The study concluded that the

8. 30
intensified pressures due to large and volatile capital flow in India in the recent period
in an atmosphere of global uncertainties
Sethi and Sucharita (2009) attempted a study to explain the effects of private foreign
capital inflows (FINV) on some macroeconomic variables in India by using the time
series data between April 1995 to Dec 2007. The findings revealed that Foreign Direct
Investment (FDI) is positively affecting the economic growth, while Foreign
Institutional Investment (FII) is negatively affecting the economic growth.
Aggarwal and Chaturvedi (2010) found that with growth in the dealing of stock
markets lot of malpractices also started in the stock markets such as price rigging,
unofficial premium on new issue, delay in delivery of shares, violation of rules and
regulations of stock exchange and listing requirements. Due to these malpractices the
customer are losing confidence and faith in stock markets. The study suggests that
SEBI should implement tight measures so that such type of unethical practices should
be stopped and investors‟ faith and confidence can be regained in the secondary
market.
Kumar (2010) examined that an investor while operating in corporate securities has
to face various types of risks associated with secondary market. An investor has to
identify and manage these risks properly to maximize his returns. A clear perception
of risk is necessary to have a control over them. Risk is the potential loss a portfolio is
likely to suffer. As most losses proceed from ignorance, they could be avoided by
understanding them properly. Risk management aims at identifying and understanding
the various risks an investor has to face. Future return is an expected return and may
or may not be actually realized. Risk management measures the various probabilities
that may arise in a particular investment. It can show the strengths and weaknesses of
an investment. The study found that to reduce the risk in the market an investor
should strictly follow the Stop-Loss method.
Kaur and Dhillon (2010) focused on the determinants of Foreign Institutional
investment in India. Market capitalization and stock market turnover of India have
significant positive influence only in short-run but Stock market risk has negative

9. 31
influence on FIIs inflows to India. Among macroeconomic determinants, economic
growth of India has positive impact on FIIs investment in both long run and short run
but all other macroeconomic factors have significant influence only in long run like
inflation. The study concluded that host country stock market returns (returns on
Sensex) have positive and significant impact whereas home country returns (returns
on S&P 500 Index) have negative but insignificant influence on FIIs investment
inflows in long-run as well as in short-run.
Khan (2010) investigated in his study that SEBI's activities are to provide a regulator
structure which would simplification an effective mobilization and allotment of
wealth through the securities market a structure which would encourage effective
market so that it could manage the essential services of business and commerce and
personal investors in the most effective economic route which encourage competition
and promote innovation, that is responsible for international growth a system which is
flexible and cost effective so that it has clarity to guide and not cramp the changes,
and finally in breath trust on the part of the investors and other users of the market by
ensuring the market place clean, fair and transparent in an efficient manner. The SEBI
is a regulatory body which is twenty five years old and the capital market system is
more than 100 years old. There should be cross border cooperation among all
regulators and between regulators and profession.
Bohra, Singh and Dutt (2011) studied the behavioral pattern of FII in India and
figure out the reasons for indifferent responses of BSE and NSE index due to FII
inflows. The study found the correlation between FII investment and turnover of
different individual groups at BSE and NSE index. The study concluded that there is a
positive correlation between FII investment and stock market but in year 2005 and
2008, it was also observed that positive or negative movement of FII‟s investment
leads to a major shift in the sentiments of domestic or retail investors in market.
Shukla et al. (2011) investigated the impact of foreign institutional investors on
Indian stock indices. The study revealed that India, after United States hosts the
largest number of listed companies and Global investors now enthusiastically seek
India as their preferred destination for investment. Many Indians working in foreign

10. 32
countries now divert their savings to stocks. The study further concluded that FIIs
have significant impact on the share prices of the Midcap & Small-cap companies but
small and a periodic shift in their behavior leads to market volatility.
Pandey (2011) emphasized that it is very difficult and herculean task for the entire
regulator to prevent the scams in the markets due to the difficulty in regulating and
monitoring each and every segment of the financial markets. The responsibilities of
the regulator to set the system right. Once the scam has taken place it is the
responsibility of SEBI to redress the grievances of the investors so that their
confidence is restored. The redressal of investors‟ grievances after the scam is the
most challenging task before the regulator that is SEBI.
Dharmishta (2011) found that the SEBI has been operating now as the securities
markets regulator for a decade and a half, and has appeared to have done a
commendable task in upholding the mandate it was charged with, in a period of high
growth and reasonably heightened levels of economic volatility. The credibility of
SEBI as a regulator also appears to have been facilitated hugely by the creation of
specialised courts with specialised domain knowledge that can rapidly review
regulatory actions. In the process of ensuring that the markets develop in such a way
that the objective of securities markets continue to be met, the legal processes at SEBI
have also continued to evolve along the lines of higher levels of transparency of
processes, clarity of actions and credibility of legal action.
Ramchandaran and Chinnathambi (2011) assessed the emphasis on risk
management is increasing with globalization and the economic liberalization process
altering the way risks are perceived. The competitive market scenario and the
progressive opening up of the economy leading to global linkages point to multiplicity
of risks and risk management processes. The spread of the equity cult and the
dawning of the information age have also contributed to the increasing dimensions of
risk management. The study further founds that the investors now have to explicitly
identify and deal with all the risk components, as investors have to be accountable to
themselves in terms of the risk-return implications of their behavior.

11. 33
Gomathi et al. (2011) investigated that nearly 70 per cent of investors has lost their
money in secondary market by trying guessing stock price movements. In order to
make money from secondary market one should carefully understand the movements
of stocks and strategically follow it. The study suggested that the investors should not
blindly follow the advice of brokers, newspapers, television channels, magazines,
fundamental analysis. Investors should carefully devote their time in understanding
the stock price movements and then invest in the market that is too up to safety level.
Abraham (2012) concluded that the regulatory institution is under duress and under
severe attack from powerful corporate interests operating concertedly to undermine
SEBI. He specially said that Finance Minister‟s office, and especially his advisor
Omita Paul, were trying to influence many cases before SEBI, including those relating
to Sahara Group, Reliance, Bank of Rajasthan and MCX.
Babu and Naidu (2012) through their study revealed that SEBI surmounted with
several obstacles on the way to development of capital market with due care for
investors‟ interests and greater transparency in the affairs of organizations and live
stock exchanges, though not to the extent of hundred per cent. As the study found that
via different guidelines, it had made it sure that no stone remains unturned in the path
of the mission of development of Indian stock market. Investor education campaigns
have been yielding positive results to some extent, still lot more needs to be done.
Indian investors have been steadily fleeing the market, despite the apparent spread of
„equity cult‟, which calls for immediate attention of the apex body to frame and
effectively implement the measures to protect the interests of investors, and restore
their confidence in the stock market.
Sahoo (2012) investigated the reasons behind the investors‟ behavior. The study
revealed that India‟s GDP has raised from 414 billion dollar in 2001 to 1.3 trillion
dollar in 2012. This growth in size of economy has been complemented by 8 fold
increase in market capitalization of the Indian companies it means people are
investing in secondary market to increase their value of money. The study further
founds that the motive behind secondary market investments is high returns so
brokers should suggest those profitable stocks to the customers which give them more

12. 34
than 30 per cent return. Research revealed that investors generally prefer their own
research work or brokers advice to decide whether to buy or sell shares which means
that brokers should be more reliable and authentic while giving their advice on
selection of shares and broking firms should also concentrated more on customer
service.
Gupta (2012) investigated that Security Exchange Board of India (SEBI) has enjoyed
success as a regulator by pushing systematic reforms aggressively and respectively.
Security Exchange Board of India did out with corporate example that were prone to
postal delays, robbery and product, separate from making the solution action slow and
carking by passing Depositories Act, 1996. Security Exchange Board of India has also
been instrumental in taking fast and useful steps in light of the universal meltdown
and the Satyam fiasco. In October 2011, it increased the region and stock of
disclosures to be made by Indian corporate promoters. In light of the universal
meltdown, it liberalized the takeover code to straighten investments by removing
regulatory structures. In one such move, Security Exchange Board of India has in-
creased the application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at
present.
Jain (2012) focused on the reasons of volatility of secondary market and why
investors behave so irrationally, their study found the reasons responsible for unusual
movements in the secondary market which was not fully explained by the theories of
traditional finances so a new area of financial research has been developed that is
behavioral finance which draws inputs from the field of psychology and finance in
which an attempt is made in the direction of understand and explain the unscientific
and irrational behavior of secondary market and investors behavior.
Shrikanth and Kishore (2012) investigated a cause and effect relationship between
FII and Indian capital market. The study observed that FIIs carried the institutional
flavor in terms of market expertise and fund management by way of pooling small
savings from retail investors. The main objective of FIIs is maximizing returns and
minimizing risk while keeping liquidity of the investments intact. The study

13. 35
concluded that net FII inflows had a positive impact on the Indian stock market and
foreign exchange reserves.
Loomba (2012) studied the behavior of FII trading and its effect on Indian stock
market. Through the study it was observed that in the course of capital market
liberalization, foreign capital has become increasingly significant source of finance
and institutional investors are raising their influence in developing markets. The study
also found that the Indian stock markets have come in age where there were
significant developments in the last 22 years make the markets at similar with the
developed markets.
Pathak (2013) asserted that Indian stock market has a history of more than 125 years.
It has undergone a sea change in the last decade. Technology has changed the face of
secondary market, new trading system, new stock exchanges; new players, new
market instruments and new markets have come into existence. Today the Indian
secondary market is one of the most technologically developed in the world and it is
on par with other developed markets abroad. The introduction of online trading
system, dematerialization, ban of the badla system and introduction of rolling
settlement have facilitated quick trading and settlements which need to larger volume.
The setting up of the National Stock Exchange of India limited has revolutionalized
face of the secondary market. With globalization secondary market is facing tough
competition globally. They will have to gear up themselves to face the competition.
Following steps should be taken to be there in the international market increase
transparency, strictly in force corporate governance norms provide more value added
services to investors and take steps to increase investors‟ confidence. They will have
to plan strategic tie ups with their foreign counter parts to get an international
platform. A developed and vibrant secondary market can be an engine for the revival
and growth and development of an investment environment in the economy.
Kulshrestha (2014) the study focuses on FII investment pattern in the Indian capital
market. It examines the factors expected to affect the investment decisions of FIIs.
The study further found that due to economic liberalization FII flows to India have
steadily grown its importance and it acknowledged as one of the important sources of

14. 36
funds for developing economies that would grow at a rate higher than what domestic
savings can support. The study further resulted in the integration of global financial
markets. As a result of it capital started flowing freely across national borders seeking
out the highest rate of return. India is considered as one of the best investment
destinations for foreign institutional investors in spite of political differences and lack
of infrastructure facility etc. Since Indian market have vast potential, so it attracts and
encouraging foreign investors continuously but on January 21 2008, BSE Sensex saw
the largest ever fall in record, BSE shed down by 2000 points intra-day due to global
economic meltdown (Subprime lending crises in US). This made everyone very
cautious whether the FII positions have kept Indian capital market in such a miserable
condition. Foreign portfolio inflows through FIIs, in India, are important from the
policy perspective, especially when the country has emerged as one of the most
attractive investment destinations in Asia. The Foreign Institutional Investors (FIIs)
have emerged as important players in the Indian equity market in the recent past.
Business line (Sept 1, 2014) an article published in business line dated on Sept.1,
2015 concluded that the financial need of Indian economy are not confined to cheap
agricultural loans and bank overdraft. Savers in small towns are just like city folks
who desperately seek savings products that deliver inflation-beating return.
Harshesh (2014) analyzed the role of self regulatory organizations in the growth and
development of investment environment in the country. The study further examined
that SEBI‟s efforts are to create effective surveillance mechanism for the securities
market, and encourage responsible and accountable autonomy on the part of all
players of the market, who should discipline themselves and observes the rules of the
game. This would be possible, if the intermediaries set themselves up as effective
self-regulatory bodies. Self-regulation is therefore the cornerstone of the regulatory
framework advocated by SEBI, which like management by exception would result in
regulation by exception. However, self regulation can work only if there is an
effective regulatory body overseeing activities of self-regulatory organizations.
Shallu (2014) revealed that with a population of over one billion, India has a huge
edge over smaller emerging markets because it has the critical mass to withstand

15. 37
minor shocks to the system. India is not reliant on a huge export market for the bulk
of its growth. It has a huge, educated middle class. In fact, India's middle class
population is larger than that of the entire United States. Of course, this middle class
earns less on average than poverty line families in America, but it has the capacity to
spend enough money to buy products that were once considered luxuries
(washers/dryers, TVs, cars, etc). This generates tremendous economic activity without
the issues of trade balance. Because of India's protectionist business nature,
companies tend to thrive without the threat of multinational competition.
Gopalswamy (2014) concluded in his paper that Indian Secondary Market helps in
promoting the savings of the economy - helping to adopt an effective channel to
transmit various financial policies. The Indian Secondary market is well-developed,
competitive, efficient and integrated to face all shocks. In Secondary market there are
various types of financial products whose prices are determined by the numerous
buyers and sellers in the market. The other determinant factor of the prices of the
financial products is the market forces of demand and supply. The various other types
of Indian markets help in the functioning of the wide India financial sector. Having
fallen along with other world markets during last year's crash, it actually bucked the
global trend and was nowhere near testing its multi-year lows. This year Indian
market hit a 25-month high. India's stock market returns over the past couple of years
have actually beaten most other global markets.
Economic Times (Jan. 5, 2015) small savers seem to be lack in the basic financial
knowledge to assess the risk and rewards of the financial products that are peddled to
them so sophisticated seminars that create investors awareness in the cities about
mutual funds insurance and derivatives, can probably wait. Basic financial literacy,
ideally integrated into the school or college curriculum is imperative for the investor
protection.
Business line (March 8, 2015) Investors generally does not follow the basic rules of
investment like thorough study of securities, their future growth prospects, their
fundamental and technical knowledge of charts but their investments are based on
perceptions and are generally motivated by „ hear and say‟.

16. 38
Business today (October, 2015) found that sales were largely as a result of the
overweight positions in India by foreign investors, who have been heavy buyers since
2012. Foreign institutional investors sold a record amount of shares in August 2015,
offloading even more than in the midst of the global financial crisis, as turbulent
markets in China led many funds to reduce their holdings in riskier emerging markets.
The sales helped push the Nifty down 6.6 per cent in August its worst monthly
performance since November 2011.
Research Gap
As is clear from the review of the related literature a lot of studies have been
attempted to examine the various aspects of secondary market institutions in the
growth and development of investment environment in the country and role of SEBI
in measuring risk, return and protection, impact of FIIs‟ on Indian retail investors. Out
of them a few descriptive and exploratory studies measured the impact of SEBI on
Indian economy. But no systematic study has yet been endeavored to measure the
perception of retail investors and brokers on role of secondary market on Indian
economy.
Statement of the Problem
The investment patterns and capital formation are the barometers for measuring the
economic growth and development of a country. There are various possible avenues
of making investments and getting returns thereof. The secondary market is one of the
possible avenues where a large number of investors invest their funds in hope of
getting good returns. Since, the Indian secondary market has been volatile signaling
threats to the investors in the form of losses. The volatility of secondary market is
caused by a number of factors including foreign market moments. The government of
India constituted SEBI in 1992 to regulate and control the investment environment of
the country by the safeguarding the interest of investors. The present study, after
assuming the gap through the review of literature is going to find out the level of risk,
return and safety of the funds invested by the retail investors in the secondary market.
Besides that the strong and weak points of the secondary securities market will be

17. 39
exposed and role of market institution (share brokers) will be accessed. The study will
also be focusing on observing the impact of FIIs on retail investors.
Objectives of the study are
1. To analyze the role of secondary market institutions in the growth and
development of the investment environment in India.
2. To study the secondary market with regard to risk return and protection.
3. To study the impact of foreign institutional investors on Indian retail investors.
4. To study the causes and impacts of volatility in the secondary market.
5. To study the role of genuine investors and pure speculator in the secondary
securities market.
Limitation of the study
The study was completed under certain limitation. Since, the scope of the research is
limited due to shortage of time, efforts and funds available to the researcher and
hence, the number of questions and statement were restricted to the main issues only
and several related areas were left out which may be studied further. So, the study was
limited to 500 respondents and NCR Delhi only.