The investors differ in their category based on their pattern
The behaviour of the investor can be easily analysed through the number of years
Do you want to invest in the market? Do you want to have first-hand knowledge of where people invest and how they make decision? Here are 15+ easy reckoners that will help you understand Indian capital market investors better.
1. Type of Investors
There are two types of investors in the share market of India. The hereditary investors develop the investment habit as their character, while some investors are induced by the liberalization and transparency of share market investment. As per a survey conducted in Chennai, it is found that 84.4% of the respondents are new generation investors and they are induced by policies of liberalization and transparency in the Indian capital market and know about the risk and return in equities, whereas, 15.6% of them are hereditary investors.
2. Category of Investors
The investors differ in their category based on their long term investment pattern and daily trading approach in the Indian share market. The respondents around 72% establish themselves as both long term investors and daily traders, and 12.6% of them operate equity investment daily. Besides, 15.4% of the investors also found to have the habit of making long term equity investments.
3. Number of Years of Dealing with Securities Markets Investment
The behavior of the investor can be easily analyzed through the number of years of dealing with securities markets. The wisdom comes only from one’s own experience, and the experience makes a man perfect by dealing in the securities markets that they come to know the changes in securities markets. Still, the fact that a maximum of 54.7% of investors is dealing with less than 5 years of experience in the securities revealed that most of the investors are young and educated persons are now entering into the securities markets.
4. Number of Companies Invested
People have several means to know about the available investment schemes in different companies in different sectors, and these sources are motivating potential investors to make investments in particular companies. Around 74.1% of the respondents in Chennai invested in less than 10 companies, and the remaining 25.9% of them are attracted to more than 10 companies share market investment. This denotes that the maximum number of customers possess updated knowledge about less than 10 companies for their investment.
5. Size of Investment
Individuals interviewed also revealed that the size of investment has an important bearing on their share market investment. Also, the size of investment in their hands will highly influence the investment habits of the individuals. It is found that 10.7 % of the respondents have an investment of less than Rs. 1, 00,000. The investment level of 35.4 % of the respondents or the maximum investors is between Rs. 1, 00,000 and Rs. 2, 00,000. The survey also showed that 23.5 % of investors have an investment size ranging from Rs.2, 00,000 to Rs. 3, 00,000. The annual size of 30.4 % of the sample ranges above Rs. 3, 00,000.
6. Source of Investment
The investors enthusiastically invest their own funds or borrowed funds to derive maximum return within the short span of time. In Chennai, 90.6% of the respondents can invest own funds in equities, whereas 9.4% of them borrow funds to invest in equities. This indicates that the maximum number of investors invest own funds to obtain better returns.
7. Percentage of Savings Invested in Securities Markets
It’s known that investments are made out of surplus income. The behavior of investors can be easily analyzed through the percentage of savings invested in the securities markets. In fact, the surplus income induces investors to participate in the securities market to earn high returns. A maximum of 64% of sample size are investing their fund out of their savings below 25%, followed by 22.8% who invested their savings between 26 – 50%, and 12.6% of the investors are investing their saving between 51 – 75%. Only 0.6% of the sample size is investing their saving between 76 – 100%.
8. Sources of Information
Investors can get transparent information about their dealings in securities market through various avenues like News Paper (77.6%), Journals and Magazines (50.8%), Television Channels (66.4%), Stock Brokers (56.5%), Investment Consultancy (39.4%), friends and Relatives (40%) and Websites (35.3%).
9. Criteria for Investments
It is found that 50% percent of investors are investing their investment after a careful analysis of the company based on their sector in which it belongs. However, only 0.5 percent of investors are considering some other factors like present market conditions and new production strategies.
10.Investors’ Awareness of Varied Factors
Investors’ awareness developed about criteria, forum, malpractices of intermediaries, and mode of trading and financial sector reforms. More than 80% percent of investors is possessing experience in these various factors.
11. Preference of Investments and their Ranks concerning Equity Investment
The most preferred investments are well established, and the investors strongly agree that the investment in the capital market alone gives more returns with minimum market risk. So they prefer the share market as rank 1 followed by fixed deposit, real estate, mutual funds, government bonds, gold and debentures in order. The first preference is because of the appreciable returns besides the maximum risk.
12. Ranking Analysis for Preference of Investments in Industry
There exists different preference of investment in industries such as the banking industry, steel industry, cement industry, IT industry, pharma industry, manufacturing industries, textile industry and automobile industry. They invest their money safely in banks in the form of deposits and give second preference to the IT industry, followed by the cement and pharma industry. This shows their concentration is more on the safety of their investments in banks.
13. Reasons for Investments and their Ranks in Equity Market
Investments return, tax benefits and liquidity are preferred by investors for different reasons. However, investors demand more returns with no risk. So they prefer the share market fabricated with minimal risk.
14. Ranking Analysis for Investment Style in Equity Market
Different styles of investments like conservative, calculative, intuitive, impulsive, risk-taking are verified to identify the most popular investment style of the investors. The investors’ first notion of investment is the strategic calculation regarding safety, return and liquidity.
15. Ranking Analysis for the Preference of Stock Exchange for Investing in Equity market
The different stock exchanges like NSE, BSE and MSE are useful for the investors to deal with the capital market. Investors investing in the secondary market give their first preference to NSE, followed by BSE and MSE, respectively. The NSE is the most popular among the investors of the capital market.
16. Rate of Return
The investors expect different percentages of investment as their returns with safety and security. It is ascertained that a maximum of 59.2% of the investors expects to get return below 12% of their investments followed by 19% investors who prefer to invest 36% and above their investments, 16.2% of the investors prefer only 24 – 36% of their investments to be returned. Only 5.6% of investors prefer to invest between 12 to 24% of their investments as returns. So the percentage analysis revealed that most of the investors expect below 25% of their total investment from the equities market.
17. The Impact of Indices on Investors
The indices help motivate potential investors to make investments in a particular investment avenue. The decision is taken on the basis of the indices of the following, namely Sensex, CNX Nifty, CNX Nifty Junior, CNX midcap and CNX Midcap 200. Most of the investor’s decisions are influenced and taken by the observations of the Sensex index, and then Nifty followed by others mentioned.
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(About Author: Arindom is a professional writer, editor, blogger and a member of the International Association of Professional Writers and Editors, New York. A management postgraduate in finance with extensive industry exposure, he is associated with many reputed global online magazines and publications as a regular contributor. He loves to help his readers writing highly informative and well-researched investment-related content to make informed decisions.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of organization)