Investor behavior in the stock market – Rational and Irrational perspectives

INVESTOR BEHAVIOR IN THE STOCK MARKET – RATIONAL AND IRRATIONAL
PERSPECTIVES
Submitted to:
Dr. Hitesh Arora
By:
Rohit Bedi
FMG 20
201132
FORE School of Management, New Delhi
April – May, 2012

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CERTIFICATE
This is to certify that Mr. Rohit Bedi, Roll No. 201132, has completed his summer internship at
Sharekhan Ltd (New Delhi) and has submitted this project report entitled Investor Behavior in the
Stock Market – Rational and Irrational Perspectives towards part fulfillment of the requirements for
the award of the Post Graduate Diploma in Management (FMG--20) 2011-2013.
This Report is the result of his own work and to the best of my knowledge no part of it has earlier
comprised any other report, monograph, dissertation or book. This project was carried out under
my supervision.
Date:
Place:
————————————-
Internal Faculty Guide

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TABLE OF CONTENTS
S.No. TOPIC Page. No.
ACKNOWLEDGEMENTS 6
EXECUTIVE SUMMARY 7
I INTRODUCTION 8
II LITERATURE REVIEW 11
III RESEARCH METHODOLOGY 13
IV ANALYSIS AND INTERPRETATION 16
V CONCLUSIONS AND RECOMMENDATIONS 40
VI LIMITATIONS 42
APPENDIX I – REFERENCES 43
APPENDIX II – COMPANY PROFILE 45
APPENDIX III – QUESTIONNAIRE 51

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LIST OF FIGURES
S.No. NAME Page. No.
1 National Stock Exchange 8
2 Bombay Stock Exchange 8
3 Steps involved in market research 13
4 Gender of respondents 16
5 Education Level 16
6 Investors and Non-investors 17
7 Percentage of income invested 17
8 Risk Appetite 18
9 Investment Experience 18
10 Investment Objectives 19
11 Other investment options 19
12 Reasons for not investing 20
13 Average score per influence group 22
14 Scree Plot 31
15 Cluster Analysis: Gender and Influence Groups 37
16 Cluster Analysis: Education Level and Influence Groups 38
17 Cluster Analysis: Investor Experience and Influence Groups 39

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LIST OF TABLES
S.No. NAME Page. No.
1 Average score per factor 20
2 Average score per influence group 22
3 Gender v/s Risk Appetite 23
4 Investment Experience and Risk Appetite: Cross-tabulation 23
5 Chi-Square Test 1 24
6 Risk Appetite and Income Level: Cross-tabulation 24
7 Chi-Square Test 2 25
8 Correlation matrix for influence groups 26
9 Correlation matrix for influence groups 28
10 KMO and Barlett’s Test 28
11 Communalities 28
12 Total Variance Explained 29
13 Component Matrix 31
14 Rotated Component Matrix 33
15 Rotation Sums of Squared Loadings 34
16 Extracted Factors 34

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ACKNOWLEDGEMENTS
First and foremost, I would like to thank and express my gratitude to Sharekhan Ltd. which is a
leading organization in the Indian financial services market, for giving me an opportunity to work in
their esteemed organization. During my tenure, I undertook market research & selling and gained
hands on knowledge about the actual stock market scenario.
I would like to thank my faculty guide, Dr. Hitesh Arora, without whose guidance & support it would
not have been possible to complete the project.
I would also like to thank Mr. Vijay (Branch Manager) and Mr. Jaipal Singh (Assistant Manager) of
Sharekhan Ltd. for helping me and providing me useful & necessary information related to the
project. I would take this opportunity to thank all senior executives and associates of
Sharekhan Ltd. without whose cooperation I would not have been able to complete this project.
I am indebted to FORE School of Management and Sharekhan Ltd. for providing me this great
opportunity to gain exposure to corporate world.

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EXECUTIVE SUMMARY
An understanding of investor behavior in the stock market is important for the investing individual,
the companies listed in the stock market and the government of the country. For individual
investors, identifying the factors affecting investment decisions is important as it would affect their
future financial plans. Also, financial planners can benefit from it as they would be able to profile
their clients and create financial plans for them accordingly. For companies, it is important as it
would affect their future policies and strategies. Finally, for the government it is important as it would
affect the policies, legislations and additional procedures needed to satisfy the investors’ desires
and to support market efficiency.
Classical finance theory is based on the assumption that investors behave rationally i.e. their
investment decisions are based solely on market fundamentals. In such a case, two organizations
having similar financial profiles should have similar patterns of stock trading. But the actual manner
in which the market behaves cannot be completely explained by the rational investor model.
Behavioral Finance is a discipline which believes that while taking investment decisions, investors’
irrationality factors in. Therefore, they commit mistakes because of their perceptions and beliefs.
Much of the enthusiasm for developing a behavioral theory of finance is based on the observation
that extreme market movements occasionally deviate from “fair values,” and that such deviations
are the result of some investors, not all, making irrational choices. This may explain why markets
occasionally seem to overreact in both directions, up and down.
Investors might show irrational behavior because of a gamut of reasons. There is no all-
encompassing theory which accounts for all of these. On a broad basis, investors may be
influenced by two types of factors – Internal and External. Internal factors are related to the
emotions, sentiments and psychological biases which exist in the mind of the investors. External
factors exist in the society or environment which they are part of and with which they interact. To
date, most of the behavioral finance research on investor decision making has focused on investors’
emotions and psychology. But these emotions are the result of many social interactions which may
also directly affect investment decisions.
In this research I would be studying the buying and selling behavior of the Indian investor from both
rational and irrational perspectives. The research involves collection of primary data through a
questionnaire. The questionnaire has general questions related to investors’ preferences regarding
their investment decisions and questions related to the influence groups which affect their
investment behavior. These influence groups are covered in four parts as shown:
1. Social Incentive (Product affinity, ethics of the company, CSR activities by the company,
charisma of the leader and regional proximity)
2. Public Information (News about company stocks, comments of market analysts, frequency of
advertisements, government policy/regulation announcements and prevailing market
sentiments)
3. Social Interaction (Broker, parents, spouse, peers and friends)
4. Company Fundamentals (Revenue or profit earned by the company, dividend policy,
earnings per share, PE Ratio and future projects of the company)

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1. INTRODUCTION
1.1Background
In general terms, investment means the use of money in the hope of making more money. In
finance, investment is defined as the purchase of a financial product or other item of value with the
expectation of earning favorable returns in the future. These returns may be used by the investors
as per their needs like wealth accrual, liquidity, safety in times of emergency, portfolio
diversification, retirement planning etc. There are many investment options available to the Indian
investor. Some of these are bank fixed deposits, public provident funds, real estate, insurance
policies, national savings certificate, mutual funds etc. One such investment option is investment in
the stock market.
The Stock Market
A stock market is a public market (a virtual environment, not a physical facility) for the trading of
company stocks and derivatives. These include securities listed on a stock exchange as well as
those only traded privately. A stock exchange is an organized market which provides services
for stock brokers and traders to trade stocks, bonds, and other securities. Market participants
include individual retail investors, institutional investors such as mutual funds, banks, insurance
companies and hedge funds, and also publicly traded corporations trading in their own shares. In
this research, we would be focusing on individual investors.
Indian Stock Exchanges
Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay
Stock Exchange (BSE) and the National Stock Exchange (NSE). BSE is the oldest stock exchange
in Asia. The equity market capitalization of the companies listed on the BSE was US$1 trillion as of
December 2011, making it the 6th largest stock exchange in Asia and the 14th largest in the world.
It has the largest number of listed companies in the world. As of March 2012, there were over 5,133
listed Indian companies and over 8,196 scrips on the BSE. NSE is the 16th largest stock
exchange in the world by market capitalization and largest in India by daily turnover and number of
trades, for both equities and derivative trading. It has a market capitalization of
around US$985 billion and over 1,646 listings as of December 2011. Though many other
exchanges exist, BSE and the National Stock Exchange of India account for the majority of
the equity trading in India.
Fig 1 – National Stock Exchange Fig 2 – Bombay Stock Exchange
Unpredictability of the Stock Market

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The Indian stock market is unpredictable. Fluctuations in the stock prices can occur because of
many reasons. A smart portfolio positioned for long-term growth should include strong stocks from
different industries. Before investing in the stock market, one should be prepared to assume risk
equivalent to the sum invested in the market. Influenced by unanticipated turn of market events,
stock market to some extent cannot be considered as the safest investment options. However, to
accrue higher gains, an investor must update himself on the recent stock market news and events.
Efficient Market Hypothesis and Market Efficiency
Much economic theory is based on the belief that individuals behave in a rational manner and that
all existing information is embedded in the investment process. According to one interpretation of
the efficient-market hypothesis (EMH), only changes in fundamental factors, such as the outlook for
margins, profits or dividends, ought to affect share prices beyond the short term,
where random 'noise' in the system may prevail. But from experience we know that investors may
'temporarily' move financial prices away from their long term aggregate price 'trends'. Overreactions
may occur so that excessive optimism (euphoria) may drive prices unduly high or excessive
pessimism may drive prices unduly low. Economists continue to debate whether financial markets
are 'generally' efficient. This is where behavioral finance comes in.
Behavioral Finance
Behavioral Finance is the study of the influence of psychology on the behavior of financial analysts/
investors and the subsequent impact on the markets. This subject is of great importance and
interest as it helps us explain why and how the markets might be inefficient.
Noise Trader
A noise trader also known informally as idiot trader is described in the literature of financial research
as a stock trader whose decisions to buy, sell, or hold are irrational and erratic. The presence of
noise traders in financial markets can then cause prices and risk levels to diverge from expected
levels even if all other traders are rational.
What this research is about
This research is an attempt to understand the factors affecting the Indian Investor’s behavior in the
stock market and to estimate the relative importance of rational and irrational behavior. This study is
important for individual investors, investment advisors/financial planners, the government and the
companies listed on stock exchanges (NSE & BSE). This is because, till date, research in
behavioral finance has been limited. An understanding of investors’ behavioral processes is
essential for the individual investors as it would affect their future plans; for financial planners as
they would be better equipped to devise investment strategies for their clients; for listed companies
as they would plan their future policies & strategies accordingly and for the government as it would
be able to develop policies & legislations that would satisfy the needs of the investors.
1.2Objectives of the Study
 To estimate the relative importance of fundamental and non-fundamental factors affecting
investor behavior in the stock market.

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 To study how rationality or irrationality varies with parameters like gender, education level
and investment experience.
 To study the relationships between different general attributes of investors like risk appetite,
gender, investment experience etc.
1.3Importance of the Study
Identifying the factors affecting investor behavior is important for the individual investors, financial
planners, companies participating in the stock market and the government in the following way:
 For individual investors - It would affect their future financial plans.
 For financial planners - They would be able to profile their clients and create financial plans
for them accordingly.
 For companies - It would affect their future policies and strategies.
 For the government - It would affect the policies, legislations and additional procedures
needed to satisfy the investors’ desires and to support market efficiency.

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2. LITERATURE REVIEW
There are a large no. of studies conducted in the past on the relationship between individual
investor behavior and various aspects of the stock market. This study is my attempt at examining
this relationship between individual investor trading decisions and returns. In this literature review, I
would be highlighting the empirical results of some studies conducted on individual investors’
behavior in the recent past.
Abhijeet Chandra and Ravinder Kumar (2011) carried out Univariate and Multivariate Analysis of the
data collected through their survey. Principal Components Analysis was primarily used for
multivariate analysis of the data. The results of the principal components reveal the five underlying
psychological axes that appear to drive the Indian individual investor behaviour. These five pertinent
axes on the basis of the underlying variables are named as prudence and precautious attitude,
conservatism, under confidence, informational asymmetry and financial addiction. The study
revealed that certain behavioural axes reported by the multivariate analysis such as prudence &
precautious attitude and informational asymmetry seem to be influencing individual investors’
trading behaviour in Indian stock market. These were not considered in any prior literature.
E. Bennet, Dr. M. Selvan (2011) in their study say that retail investors consider their investment
needs, goals, objectives and constraints in making investment decisions, but it is not possible to
make a successful investment decision at all times. Their attitude is influenced by various factors
such as dividend, get rich quickly strategy, stories of successful investors, online trading, investor
awareness programme, experience of other successful investors etc. The top five highly influential
factors were found to be investors’ tolerance for risk, strength of the Indian economy, media focus
on the stock market, political stability and finally government policy towards business. There were
four factors which were given the lowest priority namely, stories of successful investors, get rich
quick philosophy, information available on internet and cost cutting by companies.
Nik Maheran Nik Muhammad, Nurazleena Ismail (2008) conducted a study on the investor behavior
in the Malaysian stock market to determine if the investors behave rationally or irrationally. The
basis of the study was that most of the investors buy stocks on a whim or on the recommendation or
conviction of a stranger when they should buy stocks showing fundamental strength. Based on their
research findings, the authors indicate that economic condition and frame of references influence
investors’ decision-making behavior. Therefore, their study found that investors are partially rational
in taking their investment decisions.
John Ameriks, Tanja Wranik and Peter Salovey (2007) in their study evaluate the relationship
between investors’ emotional intelligence and their investment decisions. They conducted a survey
of Vanguard IRA and 401(k) investors, the authors show that we show that emotional intelligence
and other psychological characteristics have noteworthy relationships with various aspects of
financial decision making, including the frequency of transactional activity, the decision to invest in
stocks, and the use of actively managed mutual funds and index funds.
Hussein A. Hassan Al-Tamimi (2005) conducted an empirical study on the financial markets in UAE.
The questionnaire had thirty-four questions divided into five categories – self-image/firm-image

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coincidence, accounting information, neutral information, advocate recommendations and personal
finance needs. This study was unique in that it was the first time such a study was conducted for
UAE financial markets and also because it involved the inclusion of investors’ religious beliefs as a
factor influencing their behavior. This factor was an off-shoot of the nature of UAE’s culture which is
conservative, being primarily Moslem. In the study, the most influencing factors were found to be
expected corporate earnings, get rich quick, stock marketability, past performance of the firm’s
stock, government holdings and creation of organized financial markets. The least influencing
factors were found to be expected losses in other local investments, minimizing risks, expected
losses in international financial markets, family member opinions and gut feeling on the economy.
Massimo Massa, Andrei Simonov (2005) in their study focus on how investors react to previous
gains & losses and in particular to the familiarity bias. They also show the distinction between
behavioral theories and between behavioral & rational hypotheses. They provide evidence that
investors react to prior losses/gains on a yearly basis as postulated by the house-money effect. This
implies that previous gains increase investors’ risk taking and previous losses decrease it. They
also show that investor stock choice is primarily driven by the availability of information.

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3. RESEARCH METHODOLOGY
A Research Methodology defines the purpose of the research, how it proceeds, how to measure
progress and what constitutes success with respect to the objectives determined for carrying out the
research study.
Fig 3 – Steps involved in market research
3.1Research Design
Research design is an arrangement of conditions for the collection and analysis of data in a manner
that aims to combine relevance to the research purpose with economy of procedure.
Types of research designs:
 Descriptive
 Causal
 Exploratory
In this project, descriptive type of research design has been used.
3.2Data Collection Methods
Data collected for the first time for generating fresh information are called primary data.
It is generated by four main methods:
1
• Formulation of objectives of the study.
2
• Designing methods for the data collection
3
• Select the sample size
4
• Collecting the data
5
• Processing and analysis of data
6
• Reporting the finding

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 Observation
 Experimentation
 Interviewing
 Estimation
Data collected for some other purpose, at an earlier point in time, are called secondary data.
The analyses and results in this research are based mainly on primary data. The primary data were
collected using a structured questionnaire for which we got responses through telephonic
interviews, face-to-face interviews, email surveys and by posting the questionnaire link on forums &
blogs. The sources/authors of any secondary data collected for the research have been credited in
the references section.
In the questionnaire, the respondent is asked for general information like name, gender, income
level, occupation and whether the respondent invests in the stock market. Then, the respondent is
presented with questions specific to stock market investments. These were based on time since
investing, objectives of investment, parameters for choosing a brokerage firm, risk appetite and
percentage of income invested. After this, the respondent is presented with questions meant for
judging the impact of their biases on their investment decisions. These are broadly divided into four
categories – personal bias, Public Influence, social bias and Company Fundamentals Influence.
Each bias is measured by five unique aspects. Respondents were asked to indicate their level of
agreement to every question on a Five Point Likert Scale.
3.3Sampling
Sample Unit
The sample consists primarily of salaried professionals since they are capable of investing in the
stock market. It also includes b-school students, businessmen and retired people.
Sample Size
The survey covers 103 respondents out of which 66 said they invest in the stock market and 37 said
they didn’t.
Sample Area
The respondents belong to different parts of NCR.
Sampling Technique
For the survey, I used Quota Sampling Technique which is a form of Non-probability Sampling.
Non-probability Sampling is any sampling method where some elements of the population have no
chance of selection. The assumptions regarding the population of interest form the criteria for
selection of the sample. In Quota Sampling the population is divided into mutually exclusive
subgroups.

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For my survey, I divided the population into 2 parts:
 Those who do invest in the stock market
 Those who do not invest in the stock market
The reason for selecting non-investors was to determine why they don’t invest in the stock market
and which other investment options they prefer, if not the stock market.
3.4Field Work
The field work had two parts:
 Sales
We had to build an understanding about the company and the products & services it offers.
Then we had to identify people who could be potential customers for the company. This
included people who were capable of investing their savings in various instruments and
either had an account with some other brokerage firm or didn’t have a demat account. We
had to contact them on phone or visit them personally and tell them about the functioning of
the stock market, how they could earn money by investing and the benefits of opening a
demat account at Sharekhan. If the person needed more details, we would tell our industry
guide Mr. Jaipal Singh to contact him/her and give deeper details as required. Finally, if the
person concerned opened a demat account at Sharekhan, then this event would be termed a
‘conversion’ and we would get an incentive for it from the company.
 Survey
As mentioned before, for understanding the individual investors’ behavior and their
psychological biases, I conducted a survey. For the questionnaire, I got responses through
telephonic interviews, face-to-face interviews, email surveys and by posting the questionnaire
link on forums & blogs.

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4. ANALYSIS AND INTERPRETATION
4.1Descriptive Statistics
Gender
As shown in the following pie chart, most of the respondents were male:
Fig 4 – Gender of respondents
One of the reasons for this difference could be the general difference in the inclination of the two
sexes towards investment. Another reason could be the difference between the nature of male and
female investors. While male investors are more aggressive, their female counterparts are more
conservative i.e. more risk averse.
What is your education level?
65, 63%
38, 37%
Male
Female
3
35
28
Education Level
Non-graduates
Graduates
Post graduates

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*Responses from 66 respondents who were stock market investors
Fig 5 – Education Level
Do you invest in the stock market?
*Responses by all 103 respondents
Fig 6 – Investors and Non-investors
What percentage of your income do you invest in the stock market?
*Responses by 66 respondents who were stock market investors
Fig 7 – Percentage of income invested
What is your risk appetite?
66
37
Yes
No
38
20
7
1
Percentage of income invested
in stock market
Less than 10%
10-20%
20-30%
More than 30%

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Fig 8 – Risk Appetite
Since when are you investing in the stock market?
Fig 9 – Investment Experience
What objectives do you keep in mind while investing?
20
41
5
Risk Appetite
Low Risk
Medium Risk
High Risk
8
21
14
23
Investment Experience
Less than 3 months
3-6 months
12 months
More than 12 months

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Fig 10 – Investment Objectives
Which other investment options do you prefer?
*Responses by all 103 respondents
*One respondent may answer with more than one option
Fig 11 – Other investment options
Kindly select the reason(s) for not investing in the stock market (for non-investors)
35
36
15
10
2
0 10 20 30 40
Capital Appreciation
Returns
Portfolio Diversification
Safety during emergencies
Others
Investment Objectives
0
10
20
30
40
50
60
70
80
72
21 25
47
33
24
9 6
Other investment options

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*Responses by 37 respondents who were non-traders
*One respondent may answer with more than one option
Fig 12 – Reasons for not investing
Average Score per factor
N Mean Std.
Deviation
News on company
stocks
66 3.48 1.167
Expert comments of
market analysts
66 3.38 1.200
Frequency of
advertisements
66 2.92 1.154
Government
announcements
66 3.80 1.112
Prevailing market
sentiments
66 3.70 1.067
0
5
10
15
20
25
13
10
25
16
2
Reasons for not investing in
the stock market

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Broker 66 3.48 1.180
Parents 66 3.12 1.209
Spouse 66 2.67 1.244
Peers/Colleagues 66 3.38 1.147
Friends 66 3.29 1.064
Product affinity 66 3.03 1.277
Ethics of the company 66 3.38 1.200
CSR activities 66 3.06 1.122
Charisma of the
leader
66 3.62 1.049
Regional Proximity 66 3.11 1.111
Revenue/Profit
earned by the
company
66 3.97 1.081
EPS 66 4.11 1.010
Dividend policy 66 3.48 1.153
PE ratio 66 3.94 .959
Future projects 66 4.15 .864
Valid N (list wise) 66
Table 1 – Average score per factor
Average Score per Influence Group
As mentioned earlier, the questionnaire was divided into four influence groups:
 Public Information
 Social Interaction
 Social Incentive
 Company Fundamentals
Each influence group has 5 component factors which were rated by the respondents on a scale of 1
to 5, 1 for lowest level and 5 for highest level of influence.

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On adding up the individual scores for the components in each influencing factor, we get a single
series of scores for each of the four factors. Following are the average scores per influencing factor:
Fig 13 – Average score per influence group
Mean Std.
Deviation
N
Public Information 17.29 3.898 66
Social Interaction 15.94 3.961 66
Social Incentive 16.20 3.325 66
Company
Fundamentals
19.65 3.519 66
Table 2 – Average score per influence group
From the above data, it is clear that Company Fundamentals (19.65) influence investor behavior the
most followed by Public Information (17.29). Social Incentive (16.20) and Social Interaction (15.94)
come next.
In order to estimate the relative intensity with which these factors influence investors, a comparative
analysis is necessary which follows in the subsequent sections.
4.2Crosstab Analysis
Gender and Risk Appetite
17.29
15.94
16.2
19.65
0 5 10 15 20 25
Public Information
Social Interaction
Social Incentive
Company Fundamentals
Score per Influence Group

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From the table below, we find that a higher percentage of male investors have high or medium risk
appetite and a lower percentage has low risk appetite. But in the case of female investors, the
percentage of investors having low risk appetite is much higher. This shows that female investors
are more risk averse than male investors (or male investors are more aggressive than female
investors).
GENDER
RISK APPETITE
High Risk Medium Risk Low Risk
Male 5
(9.6% of make
investors)
33
(63.5% of male
investors)
14
(26.9% of male
investors)
Female 0 8
(57.1% of female
investors)
6
(42.9% of female
investors)
*This table includes only investors i.e. 66 out of 103 respondents
Table 3 – Gender v/s Risk Appetite
4.3Chi Square Test of Independence
Investment Experience and Risk Appetite
What is your risk appetite? Total
High Risk Low Risk Medium
Risk
Time since first
investment
12 months
Count 2 4 8 14
Expected
Count
1.1 4.2 8.7 14.0
3-6 months
Count 0 6 15 21
Expected
Count
1.6 6.4 13.0 21.0
Less than 3
months
Count 1 3 4 8
Expected
Count
.6 2.4 5.0 8.0
More than 12
months
Count 2 7 14 23
Expected
Count
1.7 7.0 14.3 23.0
Total Count 5 20 41 66

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Expected
Count
5.0 20.0 41.0 66.0
Table 4 - Investment Experience and Risk Appetite: Cross-tabulation
Chi-Square Tests
Value df Asymp. Sig.
(2-sided)
Pearson Chi-
Square
3.432a
6 .753
Likelihood Ratio 4.798 6 .570
N of Valid Cases 66
a. 7 cells (58.3%) have expected count less
than 5. The minimum expected count is .61.
Table 5 – Chi-Square Test 1
Null Hypothesis: Investment Experience and Risk Appetite are independent
Alternative Hypothesis: Investment Experience and Risk Appetite are dependent
Using the above results of the chi square test of independence, we accept the null hypothesis. This
means that gaining more investment experience doesn’t change the risk appetite of investors.
Income Level and Risk Appetite
Income level Total
1,50,000 -
3,00,000
3,00,000 -
6,00,000
Above
6,00,000
Below
1,50,000
What is your risk
appetite?
High Risk
Count 0 2 3 0 5
Expected
Count
.8 1.9 1.1 1.2 5.0
Low Risk Count 6 2 3 9 20

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Expected
Count
3.0 7.6 4.5 4.8 20.0
Medium
Risk
Count 4 21 9 7 41
Expected
Count
6.2 15.5 9.3 9.9 41.0
Total
Count 10 25 15 16 66
Expected
Count
10.0 25.0 15.0 16.0 66.0
Table 6 – Risk Appetite and Income Level: Cross-tabulation
Chi-Square Tests
Value df Asymp. Sig.
(2-sided)
Pearson Chi-
Square
19.721a
6 .003
Likelihood Ratio 21.171 6 .002
N of Valid Cases 66
a. 7 cells (58.3%) have expected count less than 5.
The minimum expected count is .76.
Table 7 – Chi-Square Test 2
Null Hypothesis: Income Level and Risk Appetite are independent
Alternative Hypothesis: Income Level and Risk Appetite are dependent
Using the above results of the chi square test of independence, we reject the null hypothesis. This
means that the risk appetite of investors increases with their income levels. This is probably
because they feel more financially secure with higher income levels and hence, find it more
comfortable to take risks.
4.4Correlation Matrix for Influence Groups
Following is the correlation matrix between the four influence groups:

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Correlations
Public
Information
Social
Interaction
Social
Incentive
Company
Fundamental
s
Public Information
Pearson
Correlation
1 .231 -.022 .129
Sig. (2-tailed) .062 .859 .304
N 66 66 66 66
Social Interaction
Pearson
Correlation
.231 1 .064 -.115
Sig. (2-tailed) .062 .610 .357
N 66 66 66 66
Social Incentive
Pearson
Correlation
-.022 .064 1 .216
Sig. (2-tailed) .859 .610 .081
N 66 66 66 66
Company
Fundamentals
Pearson
Correlation
.129 -.115 .216 1
Sig. (2-tailed) .304 .357 .081
N 66 66 66 66
Table 8 – Correlation matrix for influence groups
From the above correlation matrix, we find that the level of correlation between each pair of
influencing factors is low. This can be judged from the low values of correlation coefficients. This
means that the four influencing factors are not strongly correlated. Also, we find that the correlations
are not significant as p > 0.01. This means that the factors are independent of each other. This
makes it possible for us to apply vari-max rotation under Factor Analysis.
4.5Factor Analysis
Factor analysis is a method of data reduction. It does this by seeking underlying unobservable
(latent) variables that are reflected in the observed variables (manifest variables). Factor analysis
groups variables with similar characteristics together. With factor analysis you can produce a small
number of factors from a large number of variables which is capable of explaining the observed

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variance in the larger number of variables. The reduced factors can also be used for further
analysis.
Steps for using Factor Analysis in Market Research:
 Identify the salient attributes consumers use to evaluate products in this category.
 Use quantitative marketing research techniques (such as surveys) to collect data from a
sample of potential customers concerning their ratings of all the product attributes.
 Input the data into a statistical program and run the factor analysis procedure. The computer
will yield a set of underlying attributes (or factors).
 Use these factors to construct perceptual maps and other product positioning devices.
There are three stages in factor analysis:
1. First, a correlation matrix is generated for all the variables. A correlation matrix is a
rectangular array of the correlation coefficients of the variables with each other.
2. Second, factors are extracted from the correlation matrix based on the correlation coefficients
of the variables.
3. Third, the factors are rotated in order to maximize the relationship between the variables and
some of the factors.
There are many different methods that can be used to conduct a factor analysis (such as principal
components, principal axis factor, maximum likelihood, generalized least squares, un-weighted least
squares etc.), there are also many different types of rotations that can be done after the initial
extraction of factors, including orthogonal rotations, such as vari-max and equi-max, which impose
restriction that the factors cannot be correlated, and oblique rotations, such as pro-max, which allow
the factors to be correlated with one another.
KMO and Barlett’s Test
These tests provide a minimum standard which should be cleared before performing factor analysis.
The Kaiser-Meyer-Olkin test measures the sampling adequacy which should be greater than 0.5 for
a satisfactory factor analysis to proceed. In our case is 0.541 which is acceptable.
Bartlett’s Test of Sphericity tests the null hypothesis that the correlation matrix is an identity matrix.
An identity matrix is a matrix in which all the diagonal elements are 1 and all off diagonal elements
are 0. For the test to be significant, its associated probability should be less than 0.05 which is true
for our case. So, we reject the null hypothesis at 99.99% confidence interval – the correlation matrix
is not an identity matrix.
As both tests have given favorable results, we can safely say that applying factor analysis to the
data would give useful results.

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Kaiser-Meyer-Olkin Measure of Sampling
Adequacy.
.541
Bartlett’s Test of
Sphericity
Approx. Chi-Square 481.795
df 190
Sig. .000
Table 9 – KMO and Barlett’s Test
Communalities
The table given below shows how much of the variance in the variables has been accounted for by
the extracted factors. Variables with high values are well represented in the common factor space,
while variables with low values are not well represented. We find that most of the variables in our
study have got high values of accounted variance. Over 80% of the variation in Ethics of the
company and News on company stocks is accounted for while only about 46.5% of the variance in
Product Affinity is accounted for.
Initial Extraction
News on company stocks 1.000 .820
Expert comments of market
analysts
1.000 .649
Frequency of advertisements
on Internet/TV
1.000 .733
Government policy/regulation
announcements
1.000 .754
Prevailing sentiments in
market
1.000 .690
Broker 1.000 .692
Parents 1.000 .662
Spouse 1.000 .757
Peers/Colleagues 1.000 .790
Friends 1.000 .582
Product affinity 1.000 .465

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Ethics of the company 1.000 .842
CSR activities 1.000 .687
Charisma of the leader 1.000 .780
Regional Proximity 1.000 .793
Revenue/Profit earned by the
company
1.000 .740
EPS 1.000 .688
Dividend policy 1.000 .745
PE ratio 1.000 .748
Future projects 1.000 .563
Extraction Method: Principal Component Analysis.
Table 10 - Communalities
Total Variance Explained
The table below shows all the variables along with their Eigen values and percentage of variance
accountable to them. It shows also shows the retained variables. These are variables which account
for most of the variance. In our case, we have 7 retain/extracted variables.
Compone
nt
Initial Eigenvalues Extraction Sums of Squared
Loadings
Total % of
Variance
Cumulative
%
Total % of Variance Cumulative
%
1 3.229 16.143 16.143 3.229 16.143 16.143
2 2.873 14.366 30.509 2.873 14.366 30.509
3 2.388 11.938 42.447 2.388 11.938 42.447
4 1.830 9.151 51.598 1.830 9.151 51.598
5 1.604 8.019 59.617 1.604 8.019 59.617
6 1.196 5.979 65.596 1.196 5.979 65.596
7 1.058 5.291 70.887 1.058 5.291 70.887
8 .983 4.914 75.800

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9 .826 4.132 79.932
10 .742 3.710 83.643
11 .591 2.953 86.595
12 .581 2.906 89.501
13 .400 1.999 91.500
14 .350 1.749 93.250
15 .316 1.581 94.830
16 .286 1.431 96.261
17 .241 1.203 97.464
18 .215 1.075 98.540
19 .173 .864 99.404
20 .119 .596 100.000
Table 11 – Total Variance Explained
A better representation of the variance attributable to each variable is the Scree Plot which plots the
Eigen values against all the variables. The point of interest is where the curve starts to flatten. It can
be seen that the curve begins to flatten after variable 7. It can also be noted that factor 8 has an
Eigen value less than 1, so only 7 factors have been retained in our case.

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Fig 14 – Scree Plot
Component Matrix
The table below shows the loadings of the eight variables on the extracted variables. The higher the
absolute value of the loading, the more the factor contributes to the variable. The gaps on the table
represent suppressed loadings. In our case, all loadings less than 0.3 have been suppressed. For
example: variable Broker contributes 65.5% to extracted variable 1 and 41.8% to extracted variable
5.
Component
1 2 3 4 5 6 7
News on company
stocks
.721 -.369
Expert comments of
market analysts
.687 -.358
Broker .655 .418

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Frequency of
advertisements on
Internet/TV
.570 .369 -.324
Spouse .519 .506 .319
Friends .513 .498
Peers/Colleagues .509 .499 .474
Parents .450 .322 .432
Dividend policy .779
Revenue/Profit earned
by the company
.775
PE ratio .677 .465
EPS -.377 .555 .376
CSR activities .466 .449 .338 -.359
Future projects .430 .375 .308
Government
Announcements
-.705 .329
Prevailing market
sentiments
.326 -.580 .408
Ethics of the company .419 .382 .504 .316 -.363
Regional Proximity .365 -.686
Charisma of the
leader
.492 -.498 .532
Product affinity -.454
Table 12 – Component Matrix
Rotated Component Matrix
The table below shows the rotated factor loadings. It shows the extracted factors and loadings of all
factors on these extracted factors. This makes easier for us to judge which factors are substantially
loaded on the extracted factors. By grouping together these substantially loading factors, we can
categorize the extracted factors and rank them according to the amount of variance accountable to
them.

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Component
1 2 3 4 5 6 7
Revenue/Profit earned
by the company
.762
EPS .726 -.318
Dividend policy .713 .410
PE ratio .634 .520
Government
Announcements
.841
Frequency of
advertisements
.688 .303
Prevailing market
sentiments
.677 .322
Expert comments of
market analysts
.525 .423 -.319
Peers/Colleagues .866
Spouse .333 .706
Friends .604 .351
Regional Proximity .834
News on company
stocks
.701
Ethics of the company .895
CSR activities .778
Future projects .373 .621
Parents -.340 .434 .572
Broker .429 -.317 .513
Charisma of the
leader
.872

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Product affinity .355 .375
Rotation Method: Varimax with Kaiser Normalization.
Table 13 – Rotated Component Matrix
Rotation Sums of Squared Loadings
The values in this column of the table represent the distribution of the variance after the varimax
rotation. Varimax rotation tries to maximize the variance of each of the factors, so that the total
amount of variance accounted for is redistributed over the seven extracted factors.
Componen
t
Rotation Sums of Squared Loadings
Total % of
Variance
Cumulative
%
1 2.520 12.598 12.598
2 2.310 11.552 24.150
3 2.300 11.499 35.649
4 2.034 10.169 45.818
5 1.972 9.862 55.680
6 1.523 7.616 63.296
7 1.518 7.591 70.887
Extraction Method: Principal Component
Analysis.
Table 14 - Rotation Sums of Squared Loadings
FACTORS SUBSTANTIALLY LOADING FACTORS
1 Revenue/Profit
earned by the
company
EPS Dividend Policy PE Ratio
2 Government Frequency of Prevailing market Expert comments

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Announcements advertisements sentiments of market analysts
3 Peers/Colleagues Spouse Friends Parents
4 Regional
Proximity
News on
company stocks
5 Ethics of the
company
CSR Activities
6 Future projects Parents Broker
7 Charisma of the
leader
PE Ratio
Table 15 – Extracted Factors
The Influence Groups in decreasing order of priority are:
1 Company Fundamentals
Company Fundamentals were found to be the most influencing among the four groups. There are
high chances of investors considering basic information about the companies like revenue or profits
earned, book value, EPS, RE ratio, order book etc. Hence, an investor would most probably give
higher importance to fundamentals of the company over others before taking investment decisions.
2 Public Information
The information investors’ get from their surroundings are the second most important influencing
group according to the result. This means that investors are quite influenced by the information they
get from different sources like comments of market analysts on business news channels,
advertisements on TV or internet, news highlighting company stocks, government announcements
etc. This also includes rumors among stock market investors.
3 Social Interaction
The third most influencing group is concerned with what people around the investor advise him to
do. Just like we may buy items on the advice of others, investors might buy and sell stocks/shares
on the advice of brokers, parents, friends, peers etc. However, this would be more aptly attributable
to new and inexperienced investors.
4 Social Incentive
According to the results, the least influencing group for investors is Social Incentive. This influence
group includes CSR activities and ethical practices of the organization which forms its image in the
mind of investors. Investors who consider the social incentive of companies believe it is essential to
buy stocks of the company with a clean image.
4.6Cluster Analysis

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Cluster analysis classifies a set of observations into two or more mutually
exclusive unknown groups based on combinations of interval variables. The purpose of cluster
analysis is to discover a system of organizing observations, usually people, into groups, where
members of the groups share properties in common. It is cognitively easier for people to predict
behavior or properties of people or objects based on group membership, all of whom share similar
properties. It is generally cognitively difficult to deal with individuals and predict behavior or
properties based on observations of other behaviors or properties.
Use of Cluster Analysis in marketing:
 Segmenting the market and determining target markets
 Product positioning and New Product Development
 Selecting test markets
Gender and Influence Groups
Here, I have applied cluster analysis to 5 inputs – Gender, Company Fundamentals, Social
Interaction, Social Incentive and Public Information for the 66 respondents who were stock market
investors. As we can see, the data is divided into 2 clusters on the basis of gender. There are 14
female investors and 52 male investors among the 66 respondents. We also have the average
scores for the 4 influence groups for both genders.
From the data, we find that women give higher importance to public information than company
fundamentals. Also, scores for social interaction and company fundamentals are comparable. Thus,
according to these results, females show a higher inclination towards irrational behavior. Men, on
the other hand, give the most importance to company fundamentals. Thus, they show a higher
degree of rational behavior. This result may be potentially explained in the framework of
psychological literature, showing that women are, on average, more driven by feelings and
emotions and more willing to follow the ideas suggested by others, while men are more assertive
and independent in their thoughts and actions

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Fig 15 – Cluster Analysis: Gender and Influence Groups
Education Level and Influence Groups
Here, again I’ve applied cluster analysis to 5 inputs – Education Level, Company Fundamentals,
Social Interaction, Social Incentive and Public Information for the 66 respondents who were stock
market investors.
As we can see, the data is divided into 2 clusters for graduates and post graduates. We find that
both graduates and post graduates give the highest importance to company fundamentals and
public information for taking investment decisions. However, one interesting observation is that
graduates give more importance to social interaction than social incentive while the case is opposite
for post graduates. This means that graduates are more influenced by what their parents, friends,
peers, brokers etc. tell them than the post graduates.

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Fig 16 – Cluster Analysis: Education Level and Influence Groups
Investment Experience and Influence Groups
This time I’ve applied cluster analysis to 5 inputs – Time since the person is investing in the stock
market, Company Fundamentals, Social Interaction, Social Incentive and Public Information for the
66 respondents who were stock market investors.
The data is divided into 4 cluster based on investor experience. From the data, we find that
respondents investing since a year or more give the highest importance to company fundamentals
and second highest importance to publicly available information. The scores for respondents
investing since 3-6 months are almost equal for company fundamentals, social interaction & public
information but still, company fundamentals has got the highest score. On the other hand, for new
investors, company fundamentals have a low score whereas public information has got the highest
score. From this we can conclude that as investment experience increases, investors give more
importance to company fundamentals over other influencing factors for taking investment decisions.

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Fig 17 – Cluster Analysis: Investor Experience and Influence Groups

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5. CONCLUSIONS & RECOMMENDATIONS
 Company Fundamentals were found to be the most influencing among the four influence
groups followed by public information, social interaction and social incentive. This means that
rational behavior is prominent among most of the respondents. Companies must take steps
which ensure their sound financial performance provided they keep existing shareholders
satisfied. Strong financial numbers are instrumental in attracting more investors as they form
a logical basis to judge the performance of a company.
 Public Information was found to have a high score, which was close to company
fundamentals and Social Incentive had the third highest score. So, the information a
company discloses or the information related to a company disclosed publicly has significant
impact on the investors’ behavior towards buying and selling the stocks of that company.
Investors not only judge a company by its financial performance. Qualitative data related to
companies also has a huge impact on their investment behavior. Qualitative factors drive
quantitative success when executed efficiently. Fundamentals are important but other
influencing factors cannot be neglected.
 Male investors give most importance to company fundamentals for taking investment
decisions. Hence, they can be said to be more rational in comparison to female investors.
 Female investors give most importance to public information for taking investment decisions.
Also, scores for company fundamentals and social interaction come next and are almost
equal. So, we can say that female investors are more affected by behavioral biases or show
a higher degree of irrational behavior. Thus, it can be inferred that stock market analysts and
financial planners would probably find it easier to manipulate female investors’ behavior and
decisions with respect to the stock market.
 As the investors’ experience in stock market investment increases, they show increasingly
rational behavior. An investor’s past investment performance definitely has an impact on
his/her confidence as an investor. As an investor gains more and more experience, he/she is
able to overcome the behavioral biases which would affect his/her behavior. Thus, by
learning from past mistakes, investors adjust their future stock trading accordingly and
achieve higher investment performance as they gain experience.
 Both graduates and post graduates give the highest priority to company fundamentals and
public information for taking investment decisions. But graduates give higher importance to
social interaction (the advice from parents, friends, peers, brokers etc.) than social incentive.
Post graduates, on the other hand, are less affected by social incentive in comparison to
social interaction.
 Male investors are more aggressive investors in comparison to female investors. This result
can be attributed to the finding that male investors’ decisions are more based on fundamental

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information on the market, while female investors are more affected by behavioral biases
while taking investment decisions. So, we can say that male investors behave more
aggressively probably because their decisions are more logic based in comparison to female
investors.
 As investors’ income levels increase, their risk appetites also increase. This is probably
because they feel more financially secure at higher income levels and hence, are more
comfortable in taking risks.

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6. LIMITATIONS
 The research work was conducted within a period of 2 months which might not be sufficient
enough to do an exhaustive study.
 The sample size is limited to 103 respondents out of which 66 respondents were stock
market investors. This no. of respondents is not sufficient to study investment behavior of the
Indian investor.
 The results obtained may not be accurate keeping in mind the low reliability of the responses.
 The factors shown to affect investors’ behavior may not be sufficient. The usefulness of this
study depends on the ability to collect a sufficient set of influencing factors. If important
factors are excluded or neglected, the value of the procedure is reduced.

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APPENDIX I – REFERENCES
Research Papers:
Al-Tamimi, Hassan H. A., 2005, “Factors Influencing Individual Investor Behavior: An Empirical
Study of the UAE Financial Markets”, University of Sharjah working paper
Ameriks J., Wranik T., Salovey P., 2007, “Emotional Intelligence and Investor Behavior”, Vanguard
Perspectives
Bennet E., Selvan M., 2011, “Factors influencing Retail Investors Attitude towards investing in
equity stocks - A Factor Analysis”, SRM Management Digest 2011, SRM University
Hon-Snir S., Kudryavtsev A., Cohen G., 2012, “Stock Market Investors: Who Is More Rational, and
Who Relies on Intuition?”, International Journal of Economics and Finance
Masa M., Simonov A., 2005, “Behavioural Biases and Investment”, Springer, Review of Finance
Muhammad N. M. N., Ismail N., 2008, “Investment Decision Behavior: Are Investors Rational Or
Irrational?”, ECER Regional Conference 2008, UiTM Kelantan, Faculty of Business Management,
MARA University of Technology, Kelantan, Malaysia
Nicolosi G., Peng L., Zhu N., 2009, “Do Individual Investors Learn from Their Trading Experience?”,
Journal of Financial Markets
Ravinder K. and Chandra A., 2011, “Determinants of Individual Investor Behaviour: An Orthogonal
Linear Transformation Approach”, Jamia Millia Islamia, Central University
Sewell M., 2010, “Behavioral Finance”, University of Cambridge
Books:
Montier J., 2002, “Behavioural Finance: Insights into Irrational Minds and Markets”, Wiley
Shiller R. J., 2006, “Irrational Exuberance”, Princeton University Press
Shleifer A., 2000, “Inefficient Markets: An Introduction to Behavioral Finance”, Oxford University
Press
Websites:
http://www.ats.ucla.edu/stat/spss/output/factor1.htm accessed on 23 May 2012
http://www.billgood.com/resources/research/articleviewer.cfm?&str_publicationID=722 accessed on
16 May 2012
http://www.fa-mag.com/component/content/article/1115.html?issue=56&magazineID=1&Itemid=73
accessed on 18 May 2012
http://www.investopedia.com/articles/05/032905.asp#axzz1x1ibbV7d accessed on 13 May 2012
http://www.investorwords.com/2599/investment.html accessed on 13 May 2012

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http://www.ncl.ac.uk/iss/statistics/docs/factoranalysis.php accessed on 23 May 2012
http://online.wsj.com/article/SB10001424052970203334304574161431391944464.html accessed
on 21 May 2012
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/invfables/investorirrationality.htm
accessed on 18 May 2012
http://www.psychstat.missouristate.edu/multibook/mlt04.htm accessed on 24 May 2012
http://shadesin.blogspot.in/2010/04/tradetiger.html accessed on 19 May 2012
http://www.sharekhan.com/ accessed on 19 May 2012
http://statistics-help-for-
students.com/How_do_I_interpret_data_in_SPSS_for_Pearsons_r_and_scatterplots.htm accessed
on 23 May 2012
http://www.triageinvestingblog.com/the-importance-of-business-fundamentals/ accessed on 3 Jun
2012
http://en.wikipedia.org/wiki/Cluster_analysis_(in_marketing) accessed on 24 May 2012
http://en.wikipedia.org/wiki/Factor_analysis#Factor_analysis_in_marketing accessed on 22 May
2012
http://en.wikipedia.org/wiki/Noise_trader accessed on 3 Jun 2012
http://en.wikipedia.org/wiki/Bombay_Stock_Exchange accessed on 9 May 2012
http://en.wikipedia.org/wiki/National_Stock_Exchange_of_India accessed on 9 May 2012
http://en.wikipedia.org/wiki/Exchange_(organized_market) accessed on 9 May 2012
http://en.wikipedia.org/wiki/Stock_market accessed on 9 May 2012
http://womenadvisorforum.ning.com/profiles/blogs/survey-finds-male-investors-are-mars-females-
venus?xg_source=activity accessed on 21 May 2012

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APPENDIX II – COMPANY PROFILE
About Sharekhan
Sharekhan is one of India’s leading online retail broking firms. It is the retail broking arm of the
Mumbai-based SSKI Group (Shripal Sevantilal Kantilal Ishwarlal Pvt. Ltd), which has more than 88
years of experience in the stock broking business. Launched on February 8, 2000 as an online
trading portal, Sharekhan has today a pan-India presence with over 1,529 outlets serving 950,000
customers across 450 cities. It also has international presence through its branches in the UAE and
Oman.
Sharekhan offers services like portfolio management, trade execution in equities, futures & options,
commodities, and distribution of mutual funds, insurance and structured products. These services
are backed by quality investment advice from an experienced research team which offers
investment and trading ideas based on fundamental and technical research respectively, market
related news, statistical information on equities, commodities, mutual funds, IPOs and much more.
Sharekhan is a member of the Bombay Stock Exchange, the National Stock Exchange and the
country’s two leading commodity exchanges, the NCDEX and MCX. Sharekhan is also registered
as a depository participant with National Securities Depository and Central Depository Services.
Sharekhan has set category leadership through pioneering initiatives like Trade Tiger, an Internet-
based executable application that emulates a broker terminal besides providing information and
tools relevant to day traders. Its second initiative, First Step, is targeted at empowering the first-time
investors. Sharekhan has also set its global footprint through the “India First” initiative, a series of
seminars conducted by Sharekhan to help the non-resident Indians participate and benefit from the
huge investment opportunities in India.
 SSKI named its online division as Sharekhan which provides retail broking services.
 The business of the company overhauled 10 years ago on February 8, 2000.
 It acts as a discount brokerage house to a full service investment solutions provider.
 It has specialized research product for the small investors and day traders.
 Largest chain of 640 shares shops in 280 cities across India.
 The site www.sharekhan.com was launched on February 8, 2000.
 The Tiger Trade account of Sharekhan is the next generation technology product launched
on April 17, 2002.
 It offers its customers with the trade execution facilities on NSE and BSE, for cash as well as
derivatives and depository services.
 Ensures convenience in Trading Experience: Sharekhan’s trading services are designed to
offer an easy, hassle free trading experience, whether trading is done daily or occasionally.
Sharekhan provides the customers with a multichannel access to the stock markets.
 It gives advice based on extensive research to its customers and provides them with relevant
and updated information to help him make informed about his investment decisions.
 Sharekhan offers its customers the convenience of a broker-DP.

46 | P a g e
 It helps the customers meet his pay in obligations on time thereby reducing the possibility of
auctions and execute the instruction immediately on receiving it. Thereafter, the customer
can view his updated account statement on Internet.
 Sharekhan depository services offer Demat services to individual and corporate investors. A
customer can avail Demat, repurchase and transmission facilities at any of the Sharekhan
branches and business partners outlets.
Top Management
Mr. Tarun Shah Mr. Jaideep Arora Mr. Shanker Vailaya
(CEO, Sharekhan) (Director, Product Development) (Director, Operations,
Finance and
Legal Function)
Mission
“To educate and empower the individual investor to make better investment decisions through
quality advices and superior services.”
Vision
“To be the best retail broking brand in retail business of the stock market.”
Types of accounts offered
1. ONLINE
Using an online account, the customer can access services like BSE & NSE executions, currency
trading, mutual funds, commodity trading, portfolio management services etc. through the Internet.
2. OFFLINE

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Using an offline account, the client can place the order through the telephone or by personally
visiting the Sharekhan office.
Products and Services offered by Sharekhan
1. CLASSIC ACCOUNT
This is an user friendly product which allows the client to trade through Sharekhan’s website
www.sharekhan.com and is suitable for the retail investor who is risk-averse and hence prefers to
invest in stocks or does not trade too frequently.
Features of Classic Account:
 Online trading account for investing in Equity and Derivatives via www.sharekhan.com
 Live Terminal and Single terminal for NSE Cash, NSE F&O & BSE.
 Integration of On-line trading, Saving Bank and Demat Account.
 Instant cash transfer facility against purchase & sale of shares.
 Competative transaction charges.

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 Instant order and trade confirmation by E-mail.
 Streaming Quotes (Cash & Derivatives).
 Personlized market watch.
 Single screen interface for Cash and derivatives and more.
 Provision to enter price trigger and view the same online in market watch.
2. TIGER TRADE
With a Trade Tiger account, the customer gets live streaming quotes from the market. He also gets
advanced charting features which enable him to study trends in an advanced manner. The
customer can access all trading calls and create his own technical rules for trading. There is a
single trading screen for all segments
Features of Trade Tiger:
 A single platform for multiple exchange BSE & NSE (Cash & F&O), MCX, NCDEX, Mutual
Funds, IPOs
 Multiple Market Watch available on Single Screen
 Multiple Charts with Tick by Tick Intraday and End of Day Charting powered with various
Studies
 Graph Studies include Average, Band- Bollinger, Know SureThing, MACD, RSI, etc
 Apply studies such as Vertical, Horizontal, Trend, Retracement & Free lines
 User can save his own defined screen as well as graph template, that is, saving the layout for
future use
 User-defined alert settings on an input Stock Price trigger
 Tools available to gauge market such as Tick Query, Ticker, Market Summary, Action Watch,
Option Premium Calculator, Span Calculator
 Shortcut key for FAST access to order placements & reports
 Online fund transfer activated with 12 Banks
3. DIAL-N-TRADE

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This is a facility which comes free with Classic Account and Trade Tiger Account. The customer just
has to dial Sharekhan’s dedicated lines to place orders for buying and selling shares through
telephone.
Features of Dial-n-Trade:
 TWO dedicated numbers for placing your orders with your cell phone or landline. Toll free
number: 1-800-22-7050. For people with difficulty in accessing the toll-free number, we also
have a Reliance number (Your Local STD Code) 30307600 which is charged at as a local
call.
 Simple and Secure Interactive Voice Response based system for authentication
 No waiting time. Enter your TPIN to be transferred to our telebrokers
 You also get the trusted, professional advice of our telebrokers
 After hours order placement facility between 8.30 am and 9.00 am
4. PORTFOLIO MANAGEMENT
Sharekhan’s Portfolio Management Services (PMS) use the expert management skills of their
independent fund managers, backed by the expertise of 35 Financial Research Analysts, to get the
best possible returns for the customer.
5. COMMODITIES TRADING
Sharekhan is a member of 2 Commodity Exchanges and offers trading facility at both these
exchanges:
 Multi Commodity Exchange Of India (MCX)
 National Commodity And Derivative Exchange, Mumbai (NCDEX)
It allows trading in commodities (Bullion: Gold, silver and agricultural commodities) through a wholly
owned subsidiary of SSKI.

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6. FUNDAMENTAL RESEARCH
The customer gets an idea of the happenings in the market from the fundamental research reports.
Everything from macro-economic factors to sector specific moves are covered.
7. TECHNICAL RESEARCH
The customer can use charts and other technical tools to identify market patterns that can
indicate/suggest future activity and help him trade better.
Demat account opening and brokerage charges:
Category of Charges Classic Account Trade Tiger Account
Account Opening
Rs. 750 with Rs. 5000 margin
(Rs. 750 is adjusted as
brokerage for 6 months)
Rs. 1000
Brokerage
Intraday: 0.1%
Delivery: 0.5%
Intraday: 0.1%
Delivery: 0.5%
Annual Maintenance
No charges for the first year
2nd
year onwards – Rs. 400 per annum

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APPENDIX III – THE QUESTIONNAIRE
Your name? *
Your gender? *
Male
Female
Your educational qualification? *
Non-graduate
Graduate
Post-Graduate
Your income level (per annum)? *
Below 1,50,000
1,50,000 - 3,00,000
3,00,000 - 6,00,000
Above 6,00,000
Your current occupation? *
Student
Salaried Professional
Businessman
Retired
Other
Do you invest in the stock market? *
Yes
No
Since how long have you been investing in the stock market? *
Less than 3 months

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3-6 months
12 months
More than 12 months
What is your risk appetite? *
High Risk
Medium Risk
Low Risk
What percentage of your income do you invest in the stock market? *
Less than 10%
10-20%
20-30%
More than 30%
Where else do you prefer to make investments?
Bank Savings Account
Mutual Funds
Public Provident Funds
Fixed Deposits
Gold
Insurance Policies
Bonds
Others
What objectives do you keep in mind while investing? *
Capital Appreciation

53 | P a g e
Returns
Portfolio diversification
Safety during emergencies
Others
SOCIAL INCENTIVE
What influence do the following factors have in your investment decisions? (Social Incentive
Influence) *
Least
Influenced
Not much
influenced
Neutral
Quite
influenced
Most Influenced
Product
affinity
Ethics of the
firm
CSR
activities
Charisma of
the leader
Regional
Proximity
(affinity to
Indian
company
over MNC)
PUBLIC INFORMATION

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What influence do the following factors have in your investment decisions? (Public
Information Influence) *
Least
influenced
Not much
influenced
Neutral
Quite
influenced
Most
influenced
Stocks
highlighted in
News
Expert
comments of
media analysts
Frequency of
advertisements
Government
announcements
Prevailing
market
sentiments
SOCIAL INTERACTION
To what extent advice/recommendations from the following affect your investment
decisions? (Social Interaction Influence) *
No effect Some effect Neutral
Quite a lot of
effect
Highest
effect
Broker
Parents
Spouse

55 | P a g e
No effect Some effect Neutral
Quite a lot of
effect
Highest
effect
Peers/Colleagues
Friends
COMPANY FUNDAMENTALS
To what extent do you consider the following market fundamentals before investing?
(Company Fundamentals Influence) *
Never
consider
Sometimes
consider
Neutral
Mostly
consider
Always
consider
Revenue/Profit
of the firm
EPS
Dividend
policy
PE ratio
Future
projects in
hand
Thank you for your response!!

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