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A Project Report

OnStudy of Investor Perspective towards stock

and commodity market

In partial fulfillment of the requirements of Comprehensive project in the Masters in Business

Administration programme of Gujarat Technological University.

Batch: !"#$"%

&u'mitted to :$ Gujarat Technological University

&u'mitted 'y:$

Name EnrolmentNO

!ijay "irani #$%&'(')*('(

+alak Patel #$%&'(')*##$

N R INS,I,-,E O. /-SINESS 0ANA1E0EN,

N R Institute of /usiness 0ana2ement 314S50/A6

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Certifcate

This is to certiy that Mr. Vijay HiraniEnrolment No. 147350592050, &

Mrs. Zalak Patel Enrolment No. 147350592114 student o N. R

Institute o Business Management (!"#MB$% has successully comleted

his Comrehensi'e roect on Investor prospetive to!ar"s stok

an" o##o"ity #arket$ in artial ulfllment o the re)uirements o

MB$ rogramme o uarat Technological *ni'ersity. This is their original

+or and has not -een su-mitted else+here.

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1lace/ 00000000000000000

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2hahar

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Ru arel

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%elaration

I, Mr 4iay 3irani Enrolment No. 56789:9;

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()*+A,*

Our project on 8A study on the effect of monetary policies on Indian economy9 has provided us a 2olden

opportunity for e:plorin2 our knowled2e of classroom teachin2 to real life of corporate It is ri2htly said that

student without practical knowled2e is just like a ;ird without win2s

As a part of this 0/A de2ree< students have to under2o a project< which is desi2ned keepin2 the prero2ative

and preferences of industry in mind ,his particular project allows a student to implement what they have

learned within the class room

,his project has 2uided us in ali2nin2 our career as a techno commercial person Any admira;le works that

you see are due to the efforts made ;y our teachers in the academic =e take sole responsi;ility of any

mistake< fault or misconception< if you may find in this project

,he preparation of this project report is ;ased on the secondary > primary information availa;le on the

we;sites and other additional readin2s

Our work in this project is therefore a hum;le attempt towards the end .=e have put in my ;est efforts in

preparation of this project

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Ac-noledgement

It is not possible to prepare a project report without the assistance & encouragement of other people. This

one is certainly no exception.

On the very outset of this report< I would like to e:tend my sincere > heartfelt o;li2ation towards all thepersona2es who have helped me in this endeavor =ithout their active 2uidance< help< cooperation >

encoura2ement< I would not have made headway in the project =e are e:tremely thankful and pay my

2ratitude to my faculty ,A. /arshana 0ha-har for his valua;le 2uidance and support on completion of this

project in its presently =e e:tend my 2ratitude to 1)IBM for 2ivin2 me this opportunity =e also

acknowled2e with a deep sense of reverence< my 2ratitude towards my parents and mem;er of my family

who has always supported me morally as well as economically

At last ;ut not least 2ratitude 2oes to all of my friends who directly or indirectly helped me to complete this

project report Any omission in this ;rief acknowled2ement does not mean lack of 2ratitude

Than-ing 2ou

3ala- (atel 4

5I6A2 7I)A1I

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*8ecutive &ummary

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Inde8

" )esearch Methodology "

".!" 9iterature )evie

".! (ro'lem &tatement #

".! ;'jectives ;f &tudy #

".!# 7ypothesis #

".!< &ignificance ;f &tudy commodity market is "i2h

*6 "(J5 Return in stock > commodity market is not very hi2h compare to de;t >deposit

"#J5 Return in stock > commodity market is very hi2h compare to de;t >deposit

&6 "(J5 investment is stock market is not hi2h compare to commodity market ;y investors"#J5 investment is stock market is hi2h compare to commodity market ;y investors

$6 "(J5 .luctuation in market do not affects investment pattern of investor

"#J5 .luctuation in market affects investment pattern of investor

'6 "(J5 investor income do not play major role in investment"#J5 investor income play major role in investment

?6 "(J5 "i2h inflation rate prevailin2 in market not have ne2ative impact stock > commodity market"#J5 "i2h inflation rate prevailin2 in market have Ne2ative impact on stock > commodity market

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".< &ignificance ;f &tudy

I "elp student and 2eneral pu;lic to understand Stock > Commodity market

II =ill help investor to know various risk associated in Stock > Commodity market

III "elpful to know reason ;ehind recession and inflation in Stock > Commodity market

I! ,his study will ;e useful to know role of ;roker in Stock > Commodity market

".% )esearch /esign

"ere< the data has ;een taken keepin2 in mind what the topic is and their respective effects

compati;ility and characteristics "ence< the research desi2n would ;e escriptive

".= /ata ,ollection Method:$

,he data collection is from Primary source with the help of Kuestionnaire As well as secondary

source ;y we;sites and journals

".> &ample &i?e 4 &ampling Technique:$ Sample siGe has ;een assumed ;y the num;er of #((

Samplin2 techniue would ;e convenient and jud2mental

".@ 9imitations 4 &tudy:$

,he ;i22est limitation ;y preparin2 this research is the 2eo2raphical limitation as the samples have

;een taken in and from Ahmeda;ad only

"ence< it ;ecomes impossi;le to know the point of views from the different cities of India and

overseas

,ime period was also the limitation for project

Resource availa;le for the project was also limited

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,hapter

9iterature vie

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6osie ,o8C !"

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Bloom'ergC !"

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ChapterJ &

+inancial Mar-ets

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." Introduction $ Types ;f +inancial Mar-ets And Their )oles

A financial market is a ;road term descri;in2 any marketplace where ;uyers and sellers participate in the trade

of assets such as euities< ;onds< currencies and derivatives .inancial markets are typically defined ;y havin2

transparent pricin2< ;asic re2ulations on tradin2< costs and fees< and market forces determinin2 the prices of

securities that trade

.inancial markets can ;e found in nearly every nation in the world Some are very small< with only a few

participants< while others 5 like the New ork Stock E:chan2e 3NSE6 and the fore: markets 5 trade trillions

of dollars daily

Investors have access to a lar2e num;er of financial markets and e:chan2es representin2 a vast array of

financial products Some of these markets have always ;een open to private investorsL others remained the

e:clusive domain of major international ;anks and financial professionals until the very end of the twentieth

century

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,apital Mar-ets

A capital market is one in which individuals and institutions trade financial securities Or2aniGations and

institutions in the pu;lic and private sectors also often sell securities on the capital markets in order to raise

funds ,hus< this type of market is composed of ;oth the primary and secondary markets

Any 2overnment or corporation reuires capital 3funds6 to finance its operations and to en2a2e in its own

lon25term investments ,o do this< a company raises money throu2h the sale of securities 5 stocks and ;onds in

the companyFs name ,hese are ;ou2ht and sold in the capital markets

Stock Markets

Stock markets allow investors to ;uy and sell shares in pu;licly traded companies ,hey are one of the most

vital areas of a market economy as they provide companies with access to capital and investors with a slice of

ownership in the company and the potential of 2ains ;ased on the companyFs future performance

,his market can ;e split into two main sectionsJ the primary market and the secondary market ,he primary

market is where new issues are first offered< with any su;seuent tradin2 2oin2 on in the secondary market

Bond Markets

A;ondis a de;t investment in which an investor loans money to an entity 3corporate or 2overnmental6< which

;orrows the funds for a defined period of time at a fi:ed interest rate /onds are used ;y companies

municipalities< states and -S and forei2n 2overnments to finance a variety of projects and activities /onds

can ;e ;ou2ht and sold ;y investors on credit markets around the world ,his market is alternatively referred

to as the de;t< credit or fi:ed5income market It is much lar2er in nominal terms that the worldFs stock

markets ,he main cate2ories of ;onds are corporate ;onds< municipal ;onds< and -S ,reasury ;onds< notes

and ;ills< which are collectively referred to as simply ,reasuries 3.or more< see theBond Basics Tutorial6

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Money Mar-et

,he money market is a se2ment of the financial market in which financial instruments with hi2h liuidity and

very short maturities are traded ,he money market is used ;y participants as a means for ;orrowin2 and

lendin2 in the short term< from several days to just under a year 0oney market securities consist ofne2otia;le certificates of deposit3Cs6< ;ankerFs acceptances< -S ,reasury ;ills< commercial paper

municipal notes< eurodollars< federal funds and repurchase a2reements 3repos6 0oney market investments are

also called cash investments ;ecause of their short maturities

,he money market is used ;y a wide array of participants< from a company raisin2 money ;y sellin2

commercial paper into the market to an investor purchasin2 Cs as a safe place to park money in the short

term ,he money market is typically seen as a safe place to put money due the hi2hly liuid nature of the

securities and short maturities/ecause they are e:tremely conservative< money market securities offer

si2nificantly lower returns than most other securities "owever< there are risks in the money market that any

investor needs to ;e aware of< includin2 the risk of default on securities such as commercial paper 3,o learn

more< read ourMoney Market Tutorial6

,ash or &pot Mar-et

Investin2 in the cash or spot market is hi2hly sophisticated< with opportunities for ;oth ;i2 losses and ;i2

2ains In the cash market< 2oods are sold for cash and are delivered immediately /y the same token< contracts

;ou2ht and sold on the spot market are immediately effective Prices are settled in cash on the spot at

current market prices ,his is nota;ly different from other markets< in which trades are determined at forward

prices

,he cash market is comple: and delicate< and 2enerally not suita;le for ine:perienced traders ,he cash

markets tend to ;e dominated ;y so5called institutional market players such as hed2e funds< limited

partnerships and corporate investors ,he very nature of the products traded reuires access to far5reachin2

detailed information and a hi2h level of macroeconomic analysis and tradin2 skills

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. /erivatives Mar-ets

,he derivativeis named so for a reasonJ its value is derived from its underlyin2 asset or assets A derivative is

a contract< ;ut in this case the contract price is determined ;y the market price of the core asset If that sounds

complicated< itFs ;ecause it is ,he derivatives market adds yet another layer of comple:ity and is therefore not

ideal for ine:perienced traders lookin2 to speculate "owever< it can ;e used uite effectively as part of a risk

mana2ement pro2ram 3,o 2et to know derivatives< readThe Barnyard Basics Of eri!ati!es6

E:amples of common derivatives areforwards< futures

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.# (rimary Mar-ets vs. &econdary Mar-ets

A primary market issues new securities on an e:chan2e Companies< 2overnments and other 2roups o;tain

financin2 throu2h de;t or euity ;ased securities Primary markets< also known as new issue markets

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.< The ;T, Mar-et

,he over5the5counter3O,C6 market is a type of secondary market also referred to as a dealer market ,he

term over5the5counter refers to stocks that are not tradin2 on a stock e:chan2e such as the Nasda< NSE

or American Stock E:chan2e3A0E6 ,his 2enerally means that the stock trades either on the over5the

counter ;ulletin ;oard3O,C//6 or thepink sheets Neither of these networks is an e:chan2eL in fact< they

descri;e themselves as providers of pricin2 information for securities O,C// and pink sheet companies have

far fewer re2ulations to comply with than those that trade shares on a stock e:chan2e 0ost securities that

trade this way arepenny stocksor are from verysmall companies

Third and +ourth Mar-etsou mi2ht also hear the terms third and fourth markets ,hese donFt concern

individual investors ;ecause they involve si2nificant volumes of shares to ;e transacted per trade ,hese

markets deal with transactions ;etween;roker5dealersand lar2e institutions throu2h over5the5counter

electronic networks ,he third marketcomprises O,C transactions ;etween ;roker5dealers and lar2e

institutions ,he fourth marketis made up of transactions that take place ;etween lar2e institutions ,he main

reason these third and fourth market transactions occur is to avoid placin2 these orders throu2h the main

e:chan2e< which could 2reatly affect the price of the security /ecause access to the third and fourth markets

is limited< their activities have little effect on the avera2e investor

.inancial institutions and financial markets help firms raise money ,hey can do this ;y takin2 out a loan froma ;ank and repayin2 it with interest< issuin2 ;onds to ;orrow money from investors that will ;e repaid at a

fi:ed interest rate< or offerin2 investors partial ownership in the company and a claim on its residual cash

flows in the form of stock

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ChapterJ $

&T;,0 4 ,;MM;/IT2

MA)0*T F A1 ;5*)5I*E

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&toc- mar-et

#." &toc- e8change

A stock e:chan2e is a place or or2aniGation ;y which stock traders3people and companies6 can trade stocks

Companies may want to 2et their stock listed on a stock e:chan2e Other stocks may ;e traded over the

counter< that is< throu2h a dealer A lar2e company will usually have its stock listed on many e:chan2es

across the world

E:chan2es may also cover other types of security such as fi:ed interest securities or interest derivatives

#. 7istory

In #*th century .rance< thecourretiers de changewere concerned with mana2in2 and re2ulatin2 the de;ts ofa2ricultural communities on ;ehalf of the ;anks /ecause these men also traded with de;ts< they could ;e

called the first;rokers

In the middle of the #&th century

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A stoc- mar-etor equity mar-et is the a22re2ation of ;uyers and sellers 3a loose network of economic

transactions< not a physical facility or discrete entity6 ofstocks3also called shares6L these may

include securitieslisted on a stock e:chan2eas well as those only traded privately

#@

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#. Major stoc- e8changes

Ta'le :$Major stoc- e8changes top ! 'y mar-et capitali?ationD of issued shares of domestic companiesC as of

" 6anuary !"< Monthly reportsC Eorld +ederation of *8changesD

Rank E:chan2e Economy "eaduarters Mar-et cap

U&/'nD

# New ork Stock

E:chan2e

-nited States New ork #)

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E:chan2es

#) ,aiwan Stock

E:chan2e

,aiwan ,aipei @?#

*( /0>. /ovespa /raGil So Paulo @*$

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#.# Mar-et participant

0arket participants includeJ5

A. Individual retail investors

/ Institutional investors

Mutual fundsBan-sC

Insurance companies

7edge funds

(u'licly traded corporations.

#.< Importance of stoc- mar-et

+unction and purpose

,he stoc- mar-etis one of the most important ways for companiesto raise money< alon2 with de;tmarkets which are 2enerally more imposin2 ;ut do not trade pu;licly

,his allows ;usinesses to ;e pu;licly traded< and raise additional financial capital for e:pansion ;y

sellin2 shares of ownership of the company in a pu;lic market ,he liuiditythat an e:chan2e affords the investors ena;les their holders to uickly and easily sell

securities ,his is an attractive feature of investin2 in stocks< compared to other less liuid investments

such aspropertyand other immovea;leassets "istory has shown that the price ofstocksand other assets is an important part of the dynamics of

economic activity< and can influence or ;e an indicator of social mood An economy where the stock market is on the rise is considered to ;e an up5and5comin2 economy

In fact< the stock market is often considered the primary indicator of a countryFs economic stren2th and

development Risin2 share prices< for instance< tend to ;e associated with increased ;usiness investment and vice

versa Share prices also affect the wealth of households and their consumption ,herefore< centra

;ankstend to keep an eye on the control and ;ehavior of the stock market and< in 2eneral< on the

smooth operation of financial systemfunctions .inancial sta;ility is theraison dFTtreof central ;anks E:chan2es also act as the clearin2house for each transaction< meanin2 that they collect and deliver the

shares< and 2uarantee payment to the seller of a security ,his eliminates the risk to an individual ;uyer or seller that the counterpartycould default on the

transaction ,he smooth functionin2 of all these activities facilitates economic 2rowthin that lower costs and

enterprise risks promote the production of 2oods and services as well as possi;ly employment

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In this way the financial system is assumed to contri;ute to increased prosperity< althou2h some

controversy e:ists as to whether the optimal financial system is ;ank5;ased or market5;ased Recent events such as the 1lo;al .inancial Crisishave prompted a hei2htened de2ree of scrutiny of

the impact of the structure of stock markets 3called market microstructure6< in particular to the sta;ility

of the financial system and the transmission ofsystemic risk

#.% )elation of the stoc- mar-et to the modern financial system

,he financial system in most western countries has under2one a remarka;le transformation One feature of

this development is disintermediationA portion of the funds involved in savin2 and financin2< flows directly

to the financial markets instead of ;ein2 routed via the traditional ;ank lendin2 and deposit operations ,he

2eneral pu;lic interest in investin2 in the stock market< either directly or throu2h mutual funds< has ;een an

important component of this process

Statistics show that in recent decades< shares have made up an increasin2ly lar2e proportion of householdsF

financial assets in many countries In the #)%(s< in SwedenP< the .,SEand the Eurone:tindices Such indices are

usually market capitaliGationwei2hted< with the wei2hts reflectin2 the contri;ution of the stock to the inde:

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,he constituents of the inde: are reviewed freuently to includee:clude stocks in order to reflect the

chan2in2 ;usiness environment

#.> /erivative instruments

.inancial innovation has ;rou2ht many new financial instruments whose pay5offs or values depend on the

prices of stocks Some e:amples are e:chan2e5traded funds3E,.s6

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the -nited States< the mar2in reuirements have ;een '(V for many years 3that is< if you want to make a

D#((( investment< you need to put up D'((< and there is often a maintenance mar2in ;elow the D'((6

A mar2in call is made if the total value of the investorFs account cannot support the loss of the trade 3-pon a

decline in the value of the mar2ined securities additional funds may ;e reuired to maintain the accountFs

euity< and with or without notice the mar2ined security or any others within the account may ;e sold ;y the;rokera2e to protect its loan position ,he investor is responsi;le for any shortfall followin2 such forced

sales6

#.@ Investment strategies

One of the many thin2s people always want to know a;out the stock market is< "ow do I make money

investin2W ,here are many different approachesL

To 'asic methods are classified:$

+undamental analysis:$

.undamental analysisrefers to analyGin2 companies ;y their financial statementsfound in SEC filin2s

;usiness trends< 2eneral economic conditions< etc

Technical analysisJ5

,echnical analysisstudies price actions in markets throu2h the use of charts and uantitative techniues to

attempt to forecast price trends re2ardless of the companyFs financial prospects

*g.of a technical strate2y is the ,rend followin2method< used ;y Hohn = "enryandEd Seykota< which uses

price patterns< utiliGes strict money mana2ement and is also rooted in risk controlanddiversification

*$

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Inde8 method:$

Additionally< many choose to invest via theinde: method In this method< one holds a wei2hted or

unwei2hted portfolio consistin2 of the entire stock market or some se2ment of the stock market 3such as

the S>P '((or=ilshire '(((6 ,he principal aim of this strate2y is to ma:imiGe diversification< minimiGe

ta:es from too freuent tradin2< and ride the 2eneral trend of the stock market 3which< in the -S< has

avera2ed nearly #(V per year< compounded annually< since =orld =ar II6

#."! I1/IA1 &T;,0 MA)0*T:$

Indian stock market is one of the oldest stock market in asia Its "istory tracked ;ack to nearly *(( years a

a2o ,he earliest records of security dealin2 in India are mea2re and o;scure ,he East Indian Company was

dominatin2 institution in those day and ;usiness in its loan securities used to ;e transacted towards the close

of the #@thcentury/y #@&(Bs ;usiness on cooperate stock and share in ;ank and cotton presses took place in

/om;ay ,hou2h the tradin2 list was ;order in #@&)< there were only half a doGen ;rokers reco2niGed ;y ;ank

and merchants durin2 #@$( and #@'(,he #@'(Bs witnessed a rapid development of commercial enterprise and

;rokera2e ;usiness attracted many men into field and ;y #@?( the num;er of ;roker increases to ?(In #@?(5

?# the American civil war ;roke out and cotton supply from -SA and Europe was stoppedL thus< the XShare

maniaB in India ;e2un ,he num;er of ;roker increased to a;out *(( to *'( "owever< at the end of American

civil war< in #@?'< a disastrous slump ;e2an 3for e:ample< /ank of /om;ay Share which had touched Rs *@'(

could ;e sold at @#6At the end of American civil war< the ;roker who thrived out of civil wee in #@%$< found a

place in a street 3 now appropriately is called dala street6 where they would conveniently assem;le and

transact ;usiness In #@@%< they formally esta;lished in /om;ay< the 8Native Share and stock ;roker

Association9 3which is alternatively known as ,he Stock E:chan2e In #@)'< the stock e:chan2e at /om;ay

was consolidatedIndian Share 0arket started function from #@%' ,he name of the tradin2 asspction in India

was native Share and Stock ;roker Association which later came to ;e known as /om;ay stock e:chan2e

3/SE6 ,his association kicked off with @ mem;ers

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#."" Bom'ay stoc- e8change:$

Commonly referred to as the /SE< 3/om;ay share /aGaar6 is a stock e:chan2ed located on dala street