View of A COMPARATIVE STUDY ON THE PERCEPTUAL DIFFERENCE BETWEEN THE STOCK MARKET INVESTORS OF CENTRAL MADHYA PRADESH AND MAHARASHTRA

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Vol.03, Issue 09, Conference (IC-RASEM) Special Issue 01, September 2018 Available Online: www.ajeee.co.in/index.php/AJEEE

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A COMPARATIVE STUDY ON THE PERCEPTUAL DIFFERENCE BETWEEN THE STOCK MARKET INVESTORS OF CENTRAL MADHYA PRADESH AND MAHARASHTRA

Dr.Shalu Kotwani

Assistant Professor, Shri Vaishnav Institute of Management, Indore

Abstract – Now a days, Stock market is the most common and popular market among the Indian investors. It provides a common floor with professional expertise and guidance for all types of investors. Because of this reason it is the most rapidly growing segment of the Indian financial market. The investors’ choice of investment is affected by many factors like age, gender, income and so on. And these factors affect the perception of individual investors towards many investment avenues. The present research compares the difference in perception of central Madhya Pradesh stock market investors and Maharashtra stock market investors. The study implements both primary and secondary data and the sample size is 160 investors.

Keywords – stock market, investors, perception, 1 INTRODUCTION

In India, investment has been seen as one of the best methods to earn gain in short- run and value addition in the long run.

Investment can be defined as the sacrificing something today to earn something tomorrow. Because of the many sources of the information available in the market, the investors are now becoming more aware and more curious about their investment. The requirement of the investors classified them in two classes; they are risk-taker investors and risk-averse investors. Risk-taker investors are always ready to face more risk in hope of more return while risk-averse investors prefer less risk and constant returns. This combination of risk and return is known as risk-return trade-off.

Because of the volatility feature, stock market is the most famous market among investors. Stock Market is a place where shares are purchased and sold. At this place, the price of the share is determined through bid and offer process.

Here the investors compete with each other for the best price to buy and sell.

When a match is made between the best bid and the best offer a deal is executed.

In automated exchanges high-speed computers do this entire job.

According to The Securities Contracts (Regulation) Act, 1956, “Stock Exchange means anybody of individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities”. In words of Pyle,

“Stock Exchange is the markets places where securities that have been listed thereon, may be bought or sold for either investment or speculation”.

According to Machiraju (2009), stock market is the secondary market where those securities are traded which are already issued in the primary market.

These markets facilitate shareholders to sell their holdings readily, thereby ensuring liquidity. For these investors, fluctuating prices are transformed into gains or losses as change of ownership of stock takes place. Individual trader investing in the market gets the full capital gain or loss after transaction costs.

The market is incomplete without investors. That’s why it is very important to know the meaning of the investor. An investor is a person or an entity that purchases assets with the objective of receiving a financial return. In other words, an investor is a person who compromises money in present and takes risk in anticipation of some return in future. The investor changes the role from risk-averse investor to the risk-taker investor.

2 REVIEW OF LITERATURE

Mane (2016) studied the customer perception with regard to the mutual funds. According to her, mutual fund linked with share market and investors are not taking advice from authority advisor to lead them for their investment in mutual fund so it creates the difficulty to select the mutual fund plan favorable for them.

Awais et al. (2016) studied the factors which influence the decision- making process of investors. According to them, the decisions of the investors depend upon the degree of the risk factors and the increased level of knowledge

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2 about financial information; investor could improve the capacity jump into risky investments for earning high returns by managing investment efficiently.

Shukla (2016) researched about salaried investor’s preference towards investment avenues. He concluded that majority of the respondents invested their money based on education background and they invested in purchasing domestic and long-term investment. Rastogi (2015) analyzed behavioral feature in the investment choice making method. The research proved that behavioral biases not affected by the combined categories of gender and occupation.

Kumar (2015) researched about the main factors that play a vital role in the minds of the investors before decided on investment. According to him the nine factors namely security, risk tolerance, lucrative return, investment duration, periodic return, share preference, long- term investment, futuristic return and investment dynamics influenced the investor’s perception. Thulasipriya (2015) studied investment performance of government employees based on ANOVA Test, t-test and Freidman’s Ranking Analysis. She concluded that employees who educated, salaried and independent preferred investment that tax benefit, security and safety, high return, liquidity and so on but as the government employees prefer to invest their money in private chits, private deposit and equity shares.

Nagtilak et al. (2015) studied behavior of saving and investment in initial public offering. They concluded that IPO is no more risky investment as SEBI is playing very important role in regulating the risk and financial aspects of the investors. Parimalakanthi et al.

(2015) carried out the research over the list of investment avenues available. They found investors assess the risk exposure, factors affecting the Investment decision to find out the risk tolerance level of each investor with respect to demographic variables. They showed that security was also a leading preferred feature in fixed income and investment for safety. The capital approval was the prime favored aspect in long-term investment.

Rahnuma Akhter et al. (2013) researched individual investors for investment in Bangladesh Stock Market.

The study concluded that investors were

often reading the articles published in the daily newspaper, collected information from internet, TV talk show. Individual’s choice was strongly affected by advice of brokers, friends and family, reasonable price, positive movement, ease of obtaining borrowed fund, past performance could also influence investment decision.

Tarakpaul et al. (2012) proved that understanding the level of awareness about equity market and the demographic profile of offered equity investors based on primary data, secondary data and the data analyzed by using SPSS. They showed that the awareness programs should plan to help equity market as an investment opportunity and to make people aware of its long-term benefits.

Gaur et al. (2011) viewed at that Maharashtra investor tend to display with women today are assembly a better share of the choice over whether to invest in stocks, bonds or real estate. They concluded that higher level of knowledge for men than women for different investment avenues and Maharashtra investor’s injustice to display less confidence in their investment choices and as a result cover low-grade satisfaction levels

Bhuvaneswari (2004) studied the major factors that contributed towards investor’s perception in area of equity/

tax saving mutual funds. She concluded that the organization should careful in making investment towards the various financial instruments, which defend the interest of the investors.

3 RATIONALE OF THE STUDY

The present stock market scenario is showing many variations in less time.

These variations are the outcome of the investors' perception towards the stock market. The investor's perception is affected by various factors. Therefore, it is very important to know the factors that affect the investors' perception towards investing in the stock market.

3.1 Objectives Of The Study

1. To study the factors affecting the investors' perception while investing in the stock market.

2. To study the perception difference between the investors on the region basis.

4 RESEARCH METHODOLOGY

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3 The present study is an exploratory study.

The study is an attempt to understand the investing behavior of investors as per different region. The study is carried out in two cities of Madhya Pradesh and Maharashtra. From Madhya Pradesh, Indore and Bhopal cities are taken and Pune and Mumbai are taken from Maharashtra. Various primary and secondary sources of data collection are used to collect the data. Secondary sources like books and websites related to commodity market are referred. The primary data was collected using the questionnaire. The initial part of the questionnaire intended to collect information on the demographic variables such as Name, Gender, Age, City and Occupation. The second part of the questionnaire contained 40 statements to be answered on 5 point Likert scale.

5 RESEARCH DESIGN

The respondents of the study are classied into 2*2 factorial research design:

5.1 Stock Market Investors

The pilot study of 51 statements was conducted on 60 respondents. In this stage, with a view to establish internal consistency, the data generated was subjected to item-total correlation is the process of establishing correlation between each item and all remaining items thereby eliminating those items that do not correlate strongly with the assessed construct.

Eleven items were found insignicant in sample questionnaire and therefore they were deleted from the questionnaire and finally questionnaire

was prepared. Then the final questionnaire contained 40 questions and was distributed among 320 respondents.

Factor Analysis test was done in SPSS 20 on the responses of the investors to find out the factors affecting the stock market and z-test in Excel 2007 was applied to measure the perception difference between MP’s and Maharashtra’s investors on the factors affecting the stock market. The results of the factor analysis have given 13 factors on all the variables of the perception of Investors. {Appendix 1}The factors are Investors Types, Market Variations Criteria, Secondary Information Source, Primary Information Source, Price and Term of the Investment, Future prospects of the Investment, Investment Motive, Sector's Volatility, Sector's Return on Investment, Fundamental and Technical Analysis, Sector's Dispersion, Liquidity and documentation Criteria and Speculation Motive.

6 RESULT OF FACTOR ANALYSIS TEST Problem: Do investors of Madhya Pradesh and Maharashtra differ significantly in their perception of the factors affecting the investment in the Stock Market.

All Madhya Pradesh Investors: EF All Maharashtra Investors: GH

H01: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Investors’ Types affecting the investment in Stock market.

The null hypothesis is accepted [z = 1.66; p = 0.09]

H02: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Market Variations affecting the investment in Stock market.

The null hypothesis is accepted [z = - 0.14; p = 0.88]

H03: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Secondary Information Sources affecting the investment in Stock market.

The null hypothesis is accepted [z

= -0.66; p = 0.50]

H04: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor

MADHYAPRADESH(160)

INDORE (80) BHOPAL

(80)

MAHARASHTRA(160)

PUNE (80) MUMBAI

(80)

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4 Primary Information Sources affecting the investment in Stock market.

The null hypothesis is accepted [z = 0.24;

p = 0.80]

H05: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Price and Term of the Investment affecting the investment in Stock market.

The null hypothesis is rejected [z = - 3.2, p = 0]

The investors of Madhya Pradesh and Maharashtra differ significantly in their perception of the factor Price and Term of the Investment affecting the investment in the Stock market. The investors of Maharashtra perceive the factor Price and Term of the Investment as more significant criteria for investment in the Stock Market than the investors of Madhya Pradesh.

H06: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Future Prospects of Investment affecting the investment in Stock market.

The null hypothesis is rejected [z = 2.15, p= 0.03]

The investors of Madhya Pradesh and Maharashtra differ significantly in their perception of the factor Future Prospects of Investment affecting the investment in the Stock market. The investors of Madhya Pradesh perceive the factor Future Prospects of Investment as more significant criteria for investment in the Stock Market than the investors of Maharashtra.

H07: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Investment Motive affecting the investment in Commodity market.

The null hypothesis is accepted [z = - 1.46; p = 0.14]

H08: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Sector’s Volatility affecting the investment in Stock market.

The null hypothesis is accepted [z = 1.46;

p = 0.14]

H09: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Sector’s Return on Investment affecting the investment in Stock market.

= 0.37; p = 0.70]

H010: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Fundamental and Technical Analysis affecting the investment in Stock market.

The null hypothesis is rejected [z = 3.85; p = 0.00]

The investors of Madhya Pradesh and the Maharashtra differ significantly in their perception of the factor Fundamental and Technical Analysis affecting the investment in the Stock market. The investors of Madhya Pradesh perceive the factor Fundamental and Technical Analysis as more significant criteria for investment in the Stock Market than the investors of Maharashtra.

H011: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Sector’s Dispersion affecting the investment in Stock market.

= 1.93; p = 0.05]

H012: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Liquidity and Documentation affecting the investment in Stock market.

H013: The investors of Madhya Pradesh and Maharashtra do not differ significantly in their perception of factor Speculation Motive affecting the investment in Stock market.

CONCLUSION

The study proves that the Stock market investors' behavior and perception depends mostly on thirteen factors namely Investors Types, Market Variations Criteria, Secondary Information Sources, Primary Information Sources, Price and Term of the Investment, Future prospects of the

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5 Investment, Investment Motive, Sector's Volatility, Sector's Return on Investment, Fundamental and Technical Analysis, Sector's Dispersion, Liquidity and documentation Criteria and Speculation Motive. These factors change the investment decision of the investors. They not only affect the amount of the investment but also the area of the investment.

From the z-test results, it can be concluded that the stock market investors of Madhya Pradesh and Maharashtra differ signicantly in their perception on the factors affecting the stock market.

The investors of Madhya Pradesh perceive factors like Future prospects of the Investment and Fundamental and Technical Analysis as more signicant criteria for investment in the Stock Market than investors of Maharashtra.

Whereas the investors Maharashtra perceive factor like Price and Term of the Investment as more signicant criteria for investment in the Stock Market than investors of Madhya Pradesh

. However, there is no signicant difference between the perception of the investors of Madhya Pradesh and Maharashtra on the factors like Investors Types, Market Variations Criteria, Secondary Information Sources, Primary Information Sources, Investment Motive, Sector's Volatility, Sector's Return on Investment, Sector's Dispersion, Liquidity and documentation Criteria and Speculation Motive.

THE SUGGESTIONS

1. The present study has chosen only two demographic variables. Further work can be extended to incorporate various other socio-demographic variables like age, education level, income level, prior experience in stock market.

2. The research can be enlarged to include other context of perceptual differences of the investors of the developed–developing countries, prot-nonprot organizations, public-private companies and small- large organizations.

3. The study can also be expanded to the classication of investors on the basis of various sectors such as industrial sector, education sector, service sector and so on.

REFERENCES

1. Securities Contracts Regulation Act, 1956.

Definition of Stock Exchange, Section 14 (j).

Retrieved from

http://www.sebi.gov.in/acts/contractact.pdf 2. Machiraju H.R. (2009). The Working of stock

Exchange in India. New Age, International Publisher, New Delhi.

3. Mane P (2016) A Study of Investors Perception towards Mutual Funds in the City of Aurangabad. The SIJ Transactions on Industrial, Financial and Business Management 4: 30-38.

4. Awais M, Laber F, Rasheed N, Khursheed A (2016) Impact of Financial Literacy and Investment Experience on Risk Tolerance and Investment Decisions: Empirical Evidence from Pakistan. International Journal of Economics and Financial 6: 73-79.

5. Shukla N (2016) Investors’ Preference towards Investment Avenues with Special Reference to Salaried Personnel in North Gujarat Region 2:

2395-1052 www.ijsart.com

6. Rastogi S (2015) Differences in Behavioural Biases in Investment Decision Making:

Gender and Occupation Perspective. Journal of International Business and Economy 16:

13-35.

7. Kumar P (2015) A new outlook on investors’

perception towards stock market.

www.shreeprakashan.com

8. Thulasipriya (2015) A study on the Investment Preference of Government Employees on Various Investment Avenues.

International Journal of Management Research and Social Science 2: 9 -16.

9. Nagtilak A, Nileshkulkarni (2015) A study on investor’s perception towards initial public offering in Mumbai. Journal of Research in Commerce and Management 4: 75-86.

10. Parimalakanthi, Ashokkumar (2015) A Study Pertaining to Investment Behaviour of Individual Investors in Coimbatore City.

International Journal of Advance Research in Computer Science and Management Studies 3: 149-157.

11. Rahnumaakhter, Ahmed S (2013) Behavioural aspects of individual investors for investment in Bangladesh stock market.

International journal of ethics in social sciences 1.

12. Tarakpaul, Siteshbajaj (2012) Influence of demographic profile of equity investors on their level of awareness about equity market.

The international journal of management l: 1- 12.

13. Bhuvanneswari (2004) A Study on Investor’s Perception towards Equity/Tax Saving Mutual Funds. CARE Journal of Applied Research 18-21.

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Table : 1 Factor Analysis Rotated Component Matrix^a

Component

1 2 3 4 5 6 7 8 9 10 11 12 13

VAR00025 .822 .126 .149 .070 - .108 .053 .089 .047 -.067 -.018 -.003 .039 .100

VAR00026 .757 .209 .015 - - .098 .087 .182 .147 .046 -.012 .044 .049 .010 .056

VAR00024 .742 - .114 .045 .152 - .045 - - .134 .133 .085 -.012

.046 .078 .020 .012

VAR00022 .365 .090 .114 .209 - .242 .247 .154 - .330 .127 -.064 -.001

.310 .180

VAR00040 .099 .813 .060 .019 - .149 .081 .153 .091 .184 .054 .024 .049 .002

VAR00039 .056 .739 .164 .174 - .111 .133 .106 .057 .113 .022 .013 .059 .042

VAR00038 .224 .572 .214 .190 - .026 .115 - .199 -.264 .175 .141 -.035

.084 .061

VAR00031 .014 .011 .765 .015 .001 .012 .002 .020 .173 .166 -.034 .048 -.018

VAR00032 .199 .221 .700 .042 - - .157 .004 - .036 -.098 .117 -.119

.067 .054 .055

VAR00030 .009 .025 .693 .269 - .282 - .069 .034 .034 .038 .072 .022

.059 .044

VAR00033 .185 .264 .605 .069 .200 - .105 - - -.102 .118 -.079 .187 .045 .002 .098

VAR00028 - .010 .081 .723 - .107 .124 .137 .000 .154 .189 -.008 .128

.106 .027

VAR00029 .035 - .233 .547 .083 .046 .220 .164 .276 .002 -.147 .216 -.028 .038

VAR00027 .193 .391 .061 .528 .066 .042 .189 .136 .054 -.016 .021 .070 -.039

VAR00036 .283 .262 .105 .510 .158 - - - .100 .032 .116 .137 .092 .027 .049 .106

VAR00037 .007 .402 .249 .508 .003 .129 - - - .175 .038 .093 -.161 .195 .098 .018

VAR00035 .195 .256 - .374 .001 .295 .118 - - -.167 -.100 .139 .132

.248 .093 .009

VAR00002 .052 - - .016 .808 .110 .141 .048 .032 .084 .005 .038 -.004 .009 .054

VAR00001 - - .046 .246 .695 .113 .199 - .069 -.065 -.027 -.249 -.031

.036 .051 .061

VAR00020 .174 - - .249 - .382 .157 .087 .247 .062 .056 -.050 -.017 .067 .064 .438

VAR00003 - .101 .080 .010 .094 .653 .151 .162 .107 -.028 -.094 .229 .183 .040

VAR00019 .128 .185 .068 .113 .120 .609 - .033 - .173 .243 -.073 -.005 .018 .019

VAR00034 .088 .136 .276 .189 - .364 .063 .137 .081 -.222 .319 -.211 -.032 .135

VAR00006 .070 .147 .053 .101 .123 - .787 .057 .102 -.005 .004 .075 -.127 .005

VAR00007 .080 .070 .052 .076 .118 .139 .768 - .041 .052 .113 .026 .033 .089

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7 VAR0001

1 .081 .039 .022 .024 - .127 .000 .764 .057 .013 .005 .097 -.039 .070

VAR0001

0 .104 .215 .009 .131 .107 - .064 .538 - .012 .038 .012 .332

.179 .122

VAR0001

2 .159 .072 .081 .075 .021 .291 - .531 .176 .005 .233 .288 -.131 .114

VAR0001

6 .068 .035 .023 .016 - .101 .070 - .672 .128 .150 .120 .110

.060 .005

VAR0001

5 .088 .232 .077 .151 .117 - .042 .065 .667 .053 .151 -.037 .111 .008

VAR0001

7 .031 .121 .203 .068 .095 - .039 - .233 .719 .051 .120 .085 .016 .003

VAR0002

3 .382 .103 - .147 - .242 .016 .025 .188 .471 .023 .022 .025 .133 .358

VAR0002

1 .341 .115 .075 .299 - .113 .025 .329 - .392 .111 -.163 .066

.177 .059

VAR0001

4 .061 .098 - .096 - - .120 - .148 .088 .736 .153 .085 .091 .028 .068 .100

VAR0001

3 .045 .027 .052 .022 - .249 .022 .281 .154 .022 .671 .001 -.034 .005

VAR0000

4 .008 .013 .070 .165 - .074 .008 .190 .223 .045 .050 .696 .007 .139

VAR0000

5 .135 .165 .155 .100 - .003 .378 .117 - .050 .121 .522 .065

.024 .148

VAR0001

8 .124 .189 .019 .151 .108 .339 .082 - - .336 .183 .376 -.013 .187 .281

VAR0000

9 .082 .054 - .014 - .064 - - .042 -.041 .047 .210 .779 .068 .007 .101 .021

VAR0000

8 - - .076 .065 - .080 .014 .046 .229 .167 -.009 -.229 .642

.026 .021 .037

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 14 iterations.

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Table : 2 Showing Means and p-values of the Madhya Pradesh and Maharashtra investors’ perception on thirteen different factors affecting the investment in Stock

Market

Factors p value Mean of investors of M.P. Mean of investors of Maharashtra

Investors Types 0.09 13.06 12.01

Market Variation’s 0.88 5.7 5.75

Secondary 0.50 12.26 12.63

Information Sources

Primary Information 0.80 19 18.81

Sources

Price & Term of the 0.00 8.18 9.41

Investment

Future Prospects of 0.03 9.28 8.43

the Investment

Investment Motive 0.14 5.82 6.33

Sector’s Volatility 0.14 9.17 8.57

Sector’s Return on 0.70 5.7 5.58

Investment

Fundamental and 0.00 9.62 7.87

Technical Analysis

Sector’s Dispersion 0.83 5.75 5.68

Liquidity & 0.05 9.4 8.55

Documentation

Speculation Motive 0.47 5.4 5.17