of Financial Engineering

Retail Investors Behavior and
level of Awareness about

Equity Futures and Options
Introduction
 The Indian financial market has undergone great changes during the last two
decades. One of the most significant changes is the introduction of derivatives in
the year 2000.
 In March 1998, the L.C. Gupta Committee (LCGC) submitted its report
recommending that, the introduction of the derivatives markets. The Committee
strongly favours the introduction of financial derivatives in order to provide the
facility for hedging in the most cost – efficient way against market risk.
 Even after fourteen years from introduction of derivatives, market participants
especially small-retail investors are not familiar with the concept of derivatives.
Contd..
 At present total turnover of derivatives business in India is around Rs. 200, 00,000 crores
p.a. both in National Stock Exchange and Bombay Stock Exchange.
 A financial derivative has an underlying asset, that is, a financial derivative is evolved to
hedge the risk involved in dealing in a particular financial asset such as a share or a
foreign currency, interest rate etc,. Hence, the value of a financial derivative is derived
from the underlying asset, and that is why it known as a derivative security.
 Financial derivatives are designed to provide protection to participants in financial
markets against adverse movements in the prices of the underlying assets. They facilitate
the exchange of financial assets in future at prices determined in the present.
Contd..
 Derivatives can derive profit from:

1. Changes in interest rates and equity markets around the world
2. Currency exchange rate shifts
3. Changes in global supply and demand for commodities such as agricultural
products, precious and industrial metals, and energy products such as oil and
natural gas.
 Adding some of the wide variety of derivative instruments available to a
traditional portfolio of investments can provide global diversification in financial
instruments and currencies, help hedge against inflation and deflation, and
generate returns that are not correlated with more traditional investments
Objectives of the study
 To test level of awareness among retail investors with regard to futures and
options
 To identify the objectives of investments in equity futures and options
 To assess the perception on behavior of investors towards equity futures and

options
Limitations of the study
 The views of respondents will be subjected to their bias and prejudice.
 The research does not cover the entire population of all the branches of ING VYSYA BANK
customers, it only concentrates on the customers of IngVysya Bank of Kuvempu Nagar Branch
Mysore due to the limitation of time and resources.
 The findings of this study would be based on sample size, so they cannot be generalized.
 Study will be made only in Mysore.
 The research period is very short. Therefore, time constraint could be a limiting factor
Research methodology
 Sample source
The research is purely done on the retail investors who have invested their funds in one
or the other financial instrument. So the sample source of the study is Retail Investors.
 Sample size
The sample size is 50 retail investors who have invested in any financial instruments in
Mysore city.
 Sampling Method: Purposive/judgmental Sampling
 Data collection method: The research is based on primary data and the primary data
is collected through Questionnaire method.
Data analysis and Interpretation
Level of Awareness about

Derivatives
The research reveals that out of 50
respondents 30% have awareness about
derivatives, 60% are partly aware and
10% of investors are totally not aware
about the concept of derivatives.
Awareness about Equity Futures and Options
 Out of 50 respondents who were asked

about equity futures and options, 26% are
aware about equity futures and options,64%
are partly aware and 10% are not aware about
that.
Objectives of investment in Equity Futures and
Options
 The analysis proved that out of 50 respondents

16% of investors invest for the purpose of earning
regular income, 6% of the investors invest for the
purpose of achieving their investment goal, 10%
of investors objective is to safe guard their
investment, 16% of investors objective is to earn
capital gain in the long term, 4% of investors are
investing for the purpose of their retirement benefits
and the majority of investors i.e., 48% of investors have
multiple objectives in their investment.
Derivatives are the emerging investment opportunities of
present scenario
 So for the statement, “Derivatives are the

emerging investment opportunities of present
scenario” out of 50 respondents 4% of investors
strongly agree, 10% of investors disagree, 28%
of investors neither agree nor disagree, 48% agree
and 10% strongly agree.
Equity Futures and Options are way to reduce the risk in
investment
 Out of 50 respondents 12% disagree that

equity futures and options are the best
way to reduce the risk of investment.
18% of the respondents neither agree nor
disagree, 62% agreed and 8% strongly
agreed. So, maximum respondents agreed
that equity futures and options are the
best way to reduce risk in investment
Liquidity perception regarding Equity Futures and Options
 Out of 50 respondents 6% said that the

level of liquidity is very high in equity
futures and options, 36% feels that
liquidity is high, 50% believe that
liquidity will be moderate and 8% say
that the level of liquidity is very low in
equity futures and options.
Risk level of investors in Equity Futures and Options
 Out of 50 respondents 18% told that

investors risk level in equity futures and
options is low, 52% told that risk is
moderate and 30% feel that risk is high in
equity futures and options.
Findings of the study
 Majority of retail investors have moderate knowledge about derivatives.

 Majority of the retail investors are partly aware of equity futures and options.
 The retail investors invest their funds not for single objective but for multiple objectives.
 Derivatives are the emerging investment opportunity in present scenario.
 To reduce risk equity futures and options are best alternative.
 Equity Futures and Options are attracted by the risk avoiders.
 Equity Futures and Options are high risk investment.
 The level of liquidity is moderate in Equity Futures and Options.
 Derivative will grow moderately in future.
conclusion
 The investors are partly aware about the equity futures and options and finally
they feel that market movements affect the investment pattern of investor
References
 Analysis of Retail investor‟s Behavior in Belgaum District, Karnataka State, by Dr. ArifurRehman Shaikh, Dr. Anil B
Kalkundarikar on July 2011.
 Retail investors perception on financial derivatives in India, by Dr. Shaik Abdul Majeeb Pasha on 2013
 A study on commodity derivatives: an avenue for investment, by Dr. Giridhar K.V, Mr. Krishna M.M
 Investment perception of small investors - a scientific analysis, by Dr. T. N. Murty and P.V.S.H Sastry
 Investor‟s preference towards mutual fund in comparison to other investment avenues, byGaurav Agrawal and Dr.Mini
Jain.
 The impact of behavioral dimensions of investors in capital market, byShanmngaSundaram V on 2011.
 Individual investor behavior in which investment decision are seen in an interactive process of interactions between the
investor and the investment environment, by Lovric M on 2008.
 Research on futures markets: issues, approaches and empirical findings, by Steven C Blank
 Investment property portfolio management and financial derivatives, byPatrick McAllister, John R.
Mansfield.Management‟s disclosure of hedging activity: an empirical investigation of analysts and investors reactions,
byJennifer Reynolds Moehrle

of Financial Engineering

Uploaded by

Copyright:

Available Formats

of Financial Engineering

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

of Financial Engineering

Uploaded by

Copyright:

Available Formats

Retail Investors Behavior and

level of Awareness about

 Derivatives can derive profit from:

 To identify the objectives of investments in equity futures and options

 To assess the perception on behavior of investors towards equity futures and

 The views of respondents will be subjected to their bias and prejudice.

 Study will be made only in Mysore.

Level of Awareness about

 Out of 50 respondents who were asked

 The analysis proved that out of 50 respondents

 So for the statement, “Derivatives are the

 Out of 50 respondents 12% disagree that

 Out of 50 respondents 6% said that the

 Out of 50 respondents 18% told that

 Majority of retail investors have moderate knowledge about derivatives.

You might also like