Investors’ probable solutions to their problems: a study of Punjab

Abstract

Purpose

Small and ignorant investors have had very unpleasant experiences in the stock market. They should be alert and have proper knowledge and understanding of the various problems that can arise in their dealings and how these can be resolved. This paper aims to analyse the investors’ probable solutions to their investment-related problems by using descriptives and factor analysis technique. Only Securities and Exchange Board of India (SEBI) can ensure a free and fair market and take India into league of major global capital markets in the next round of reforms.

Design/methodology/approach

By personally visiting the offices of the stockbrokers, 1,000 questionnaires have been distributed among retail equity investors of Punjab, i.e. Amritsar, Jalandhar, Ludhiana and Mohali. Stockbrokers have been selected using simple random sampling technique because of their large number. In total, 373 questionnaires have been filled up by the respondents, and 45 questionnaires have been found to be incomplete and thus have been excluded from the analysis. Remaining 328 questionnaires have been used for the analysis. The objective of the research is to study the investors’ probable solutions to their investment-related problems. The collected data have been analysed using descriptives and factor analysis technique.

Findings

It has been found that 24.7 per cent retail equity investors have filed complaints while dealing in the securities market; on the other hand, 75.3 per cent retail equity investors have not filed any complaint neither against the company nor against the intermediaries. It has been found that the authorities have taken 12-90 days and even four-five months in providing first reply to their complainants. Moreover, it has been found that in some of the cases, SEBI has written to the concerned companies to resolve the complaints, and some issues have been still pending with SEBI. It has been revealed that SEBI has taken quite long time to resolve the complaints, and equity investors have not been satisfied with the decisions of the SEBI. This study has further highlighted the importance of variables considered by investors as probable solutions to their problems while dealing with securities. The highest mean score has been found for the variable grievance redressal mechanism has been slow, followed by investors have been exploited by the malpractices of companies, merchant bankers and auditors, stronger regulations have been required to strengthen investor protection, investor has yet not educated enough to discriminate between good and not-so-good scrips, etc. These 22 variables measuring the construct of investors’ probable solutions to their problems have been analysed with the help of factor analysis. Six factors have been identified with the help of factor analysis, i.e. stability measures for stock market, investor awareness and education norms, measures to impart knowledge to investors, measures to protect investor rights, audit of companies and investor grievance redressal, and these factors have together explained 68.441 per cent of the variance in data.

Research limitations/implications

Based on the study done by the researcher, the following suggestions are identified for further research. As the present study is at a state level, it could be extended to national level. The impact of retail investment in capital market may be studied in view of rural investors. The study may further be carried out to analyse the impact of reforms on the functioning of stock exchanges. A study on the awareness of women investors about retail investment pattern could be attempted. Implications of internet stock trading in India can be taken up for study. Impact of technological innovation in capital markets can be studied.

Practical implications

This study would be of great use for investors who make decisions regarding investment. This study will help policymakers in formulating strategies and will also help credit rating agencies in rating the investment instruments.

Social implications

This study is of great help for investors and SEBI. This study guides the investors regarding various laws that have been formulated for their protection and guides the SEBI in making strict regulations for the protection of the investors.

Originality/value

This task is 100 per cent original and some authors have been quoted.

Citation

Kaur, J. (2018), "Investors’ probable solutions to their problems: a study of Punjab", International Journal of Law and Management, Vol. 60 No. 2, pp. 355-372. https://doi.org/10.1108/IJLMA-11-2016-0138