A Study of Risk Analysis Practices of Investors in National Stock Exchange

Abstract

A sound financial system lays down the foundation of economy and financial market, financial assets, financial services and financial institutions are its constituents. The securities markets as a component of financial market along with stock exchanges act as the indicator of the economy to effectively channelize the profits and surpluses to productive uses and facilitate wealth creation in the economy. In securities market, the issuer of securities, investor in securities and the intermediaries are the participants. newlineAn investor entering the securities market does so with an objective to earn returns but his investment behavior is an overall reflection of his perception of risk. All the capital market participants should work towards providing such an investment climate which creates confidence in the minds of individual investors. newlineRisk arises from uncertainty and risk management is the process to minimize or mitigate the level of uncertainty by monitoring of various outcomes. It is essential to know the level of risk on which they are operating and what the theoretical ways of warding off the risk are. If theory provides the hedging techniques, are they really being used by the users, do they have the awareness of these tools and the necessary knowledge to empirically manage this Risk Culture. The culture of a firm can also act as an engine for or as a brake on sensible risk taking. Some firms are clearly much more open to risk taking and its consequences, positive as well as negative. One key factor in risk taking is how the firm deals with failure rather than dissolve themselves. newlineNSE has a multi-tiered risk management system, which is constantly upgraded to pre-empt market failures. Risk containment measures at NSE include capital adequacy requirements for members, monitoring member performance and track record, stringent margin requirements, online monitoring of member positions and automatic disablement from trading when limits are breached.