Here is a compilation of essays on ‘Investors’ for class 11 and 12. Find paragraphs, long and short essays on ‘Investors’ especially written for school and college students.

Essay Contents:

  1. Essay on the Role of Individual Investors in Economic Development
  2. Essay on Individual Investor in Indian Capital Market
  3. Essay on Investor Population in India
  4. Essay on the Impact of Capital Market Reforms on Individual Investors 
  5. Essay on the Developments in Indian Capital Market for Individual Investors

Essay # 1. Role of Individual Investors in Economic Development:

The household sector represented by individuals occupies a strategic place among various economic units in a country as it contributes substantially to the domestic saving efforts. The economic system depends on an adequate supply of capital from private investors. The savings of individual investors is the main source of capital investment for business expansion.


The future of the free enterprise system, it is often implied, depends mainly and almost exclusively on the continued ability and willingness of individuals with large income to provide the capital and funds needed to finance the growth. If the savings of the individuals is not tapped in a proper manner, then it may find its way into unproductive channels.

Financial savings of households play an important role in financing the development and growth of an economy. These financial savings are mobilized through an array of instruments. The choice and preference for investing is determined by various factors such as safety of investment, returns, liquidity, marketability and integrity of the instrument.

Investment in corporate securities provides not only returns but also offer a medium to households to participate directly in the capital formation in the country. The larger the individual investors’ participation in the stock market or in the primary market, the more competitive and deeper the market will be. In fact, households are the economic agents who play a major role in providing their savings to deficit sectors.

As per the RBI’s recent Report on Currency and Finance, the rate of Gross Domestic Saving (GDS), as a proportion to Gross Domestic Product (GDP) at current market prices increased substantially from 26.5 percent in 2002-03 to 28.9 percent in 2003-04 and further to 29.1 percent in 2004-05.


The rate of GDS at 29.1 percent was the highest ever achieved. The household sector continued to be the major contributor to GDS with its saving rate placed at 22.0 percent in 2004-05. This increase in the savings rate implies the availability of more resources for investment. Even though Indian GDS percentage has peaked, still it is comparatively lower than other emerging nations in Asia, which boast of saving rates above 30 percent of GDP.

Over the first four years of economic reforms 1990-91 to 1994-95, the rate of contribution of household sector to the GDP declined first and then increased sharply. Household savings as a percentage of GDP declined from 20 percent in 1990-91 to 15.5 percent in 1992-93, and thereafter it improved to 19 percent in 1994-95.

It remained below 20% up to 1999-2000, and then it climbed up to touch 21.3 percent of Gross Domestic Product. The household savings reached a peak of 23.5 percent of GDP in 2003-04 (Provisional figure) and slide to 22.0 percent in 2004-05 (quick estimates).

Household sector accounted for 86.5 percent of gross domestic savings during 2003-04; 46.8 percent of their savings were in financial assets. The share of financial savings of the household sector in securities (shares, debentures, public sector bonds, units of UTI and other Mutual Funds and government securities) is estimated to have gone down from 22.9 percent in 1991-92 to 1.04 percent in 2004-05.


Since 1999-2000, the rate of household sector saving in the form of physical assets has been higher than that in financial assets. However, the household sector continued to be the major contributor to GDS with its saving rate placed at 22.0 percent of Gross Domestic Product in 2004-05.

During 2003-04, corporate sector and governments together raised a total of Rs. 267,660 crore from the securities market, while the household sector invested Rs. 22,554 crore of their financial savings through the securities market.

Essay # 2. Individual Investor in Indian Capital Market:

Three main sets of entities depend on capital market. While the corporate and governments raise resources from the capital market to meet their needs of investment and/or discharge some obligations, the households invest their savings in the securities. In the capital market, transactions by individuals have always been regarded as essential to both liquidity and the efficiency of the market.


Needless to emphasize that, the country’s capital market has expanded largely due to the individual investors. Even then, less than 1 percent of the potential investors participate in the capital market. They contribute less than 7 percent of their household savings. This is very much less when compared to the contribution of 25 percent as reported in developed countries.

Essay # 3. Investor Population in India:

The growth of the capital market during the last decade increased substantially the investor population in our country. Though no accurate official estimate of the number of investors has been made so far in the country, it would be approximately 30 million. The Society for Capital Market Research and Development (SCMRD&D) carries out periodical surveys of household investors to estimate the number of investors.

Their first survey carried out in 1990 reported that the total number of share owners were 90-100 lakh. Their second survey in 1993 estimated the number of share owners as 140-150 lakh. Their 1997 survey estimates the number of share owners at around 2 crore at 1997 end, after which it remained stagnant up to the end of 1990s.


According to the first SEBI-NCAER survey of Indian investors conducted early in 1999, an estimated 12.8 million or 7.6% of all Indian households representing 19 million individuals had directly invested in equity shares and/or debentures as at the end of the financial year 1998-99.

According to the second SEBI-NCAER survey conducted in late 2000, 13.1 million or 7.4% of all Indian households, representing 21 million individuals directly invested in equity shares and/or debentures during the financial year 2001.

An indirect, but very authentic, source of information about distribution of investors is the data base of beneficial accounts with the depositories. As on 8th August 2006, there were 7.74 million and 1.9 million beneficial accounts with the National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CSDL) respectively.

Of late, the availability of good public issues (particularly PSU disinvestments), with the improved perception about regulatory effectiveness (The Indian Household Investors Survey 2004 by SCMRD has found that there has been great improvement in the general public perception about capital market regulation in India), attracted the attention of investors to public issues.


They seem to have returned to the primary market in 2003-04 as revealed by huge oversubscription to offers for sale of shares. The growing Indian middle class i.e., households earning Rs. 2-10 lakh per annum estimated as 10.7 million at the end of 2001-02, is swelling by an annual growth of 15% and is expected to rise to 28.4 million by 2009-10. This middle class is attracted to the capital market more than ever before.

In the last couple of years, there has been an unprecedented increase in the number of individual investors due to a long bull run and the consequent rise in prices of shares in the stock market. The stock market indices, the BSE Sensex and S&P CNX Nifty touched all time highs in line with the other emerging markets.

Strong macroeconomic fundamentals of the economy, encouraging investment climate, continued FII inflows, robust performance by Indian corporates, good monsoon, decline in domestic inflation rate, surge in Indian ADR prices and support from domestic institutional investors enthused the market sentiment and contributed to the upward trend in the domestic stock markets.

Essay # 4. The Impact of Capital Market Reforms on Individual Investors:


The securities market in India has developed and transformed into a most modern market with its infrastructure and presence throughout the country. As such, it can be safely presumed that stock markets in India are influencing the minds and behaviour of households in each and every city of the country.

The entry of mutual funds in a big way has attracted individual investors to indirectly own equity shares and debentures. The stock markets in India are showing rapid transformation due to policy initiatives of the SEBI and innovations taking place in the stock market itself.

Essay # 5. Developments in Indian Capital Market for Individual Investors:

India chose to reform its economic policies and adopt a market dominance model to the state-run economy. Following this, several reforms were initiated in various sectors of the economy. The capital markets too had its share of reforms, to catch with the developments in the real sector and to act as a catalyst for the growth of the Indian economy.

Indian capital market witnessed several changes in its functioning after liberalisation. Today Indian capital market is one of the most modern, efficient, and safe markets in the world.

Following the widespread reforms, the Indian securities market has shown remarkable growth and diversification in terms of its length and breadth. The number of listed companies on stock exchanges rose to new heights. The market capitalisation has shown enormous growth.


The expansion and growth of securities market is accelerated due to the restructuring of stock exchanges and the establishment of network of stock exchanges as well as market players. The stock markets in India have acquired a number of quantitative and qualitative characteristics comparable to international standards.

Qualitative Aspects of Market Transformation:

The SEBI added a number of institutional features to the capital market in addition to setting up of the Clearing Corporation, depositories, trade guarantee funds, investor protection funds, electronic and screen based trading and internet trading. The market status was further enhanced in order to make it more modern by introducing rolling settlement, derivatives trading, and book building for issue of capital.

Role of Mutual Funds:

The establishment of the mutual funds set up by the public sector banks, financial institutions, private sector sponsors, foreign joint ventures, and venture capital funds, as well as the opening up of the securities market to foreign institutional investors helped to accelerate the process of the institutionalisation of the market towards the end of 1990’s and the beginning of 2000.

These classes of institutional investors exercise an important influence on market behaviour. The mutual funds as an investment vehicle have been spreading the equity cult among the households.


Resource mobilisation by mutual funds (net of redemptions) increased substantially by 419.3 percent during April-January 2005-06 over the corresponding period of the previous year to Rs. 35,555 crore due to increase in resource mobilisation both under income/debt oriented schemes and growth/equity oriented schemes.

UTI Mutual Fund and public sector mutual funds witnessed net inflows of Rs. 545 crore and Rs. 6,646 crore during April-January 2005-06 as against net outflows of Rs. 3,071 crore and Rs. 529 crore, respectively, during the corresponding period of the previous year. The private sector mutual funds recorded a net inflow of Rs. 28,364 crore during April-January 2005-06 compared to a net inflow of Rs. 10,447 crore during April-January 2004-05.

Role of Depositories:

The electronic book entry system and dematerialization of securities has been made possible with the establishment of National Securities and Depository Limited towards the end of 1996 and Central Depositories and Securities Limited later.

This measure has eliminated the risks for the investors arising from bad deliveries in the market, delays in share transfer, fake and forged shares and loss of scrips. This single change has made investors’ life simple and uncomplicated and their investments safer.

Change over to Book Building Process:


The Initial Public Offer issue process has changed from Fixed Price method to Book Building Process method. In the Fixed price method the issuer fixes the price for the shares. Price at which the securities are offered/allotted is known in advance to the investor. The book-building process is a process of securing the optimum price for a company’s share.

The issuing company decides the price of the security by asking investors how many shares and at what price they would be interested in and finalise the price of the shares after applications are received. The shares are allotted and directly credited to investors’ demat account within three weeks from the closure of an issue and the refunds are now directly credited to investors’ bank account as given to the depositories or sent to investors within the same three week period.

Disclosure of Information:

The standards of disclosure in the offer documents for the public and rights issues and the norms for continuous disclosure in the listing agreements of the stock exchanges were raised. The use of modern technology made easier to know the information about the companies traded on the stock exchanges.

Today anyone who wants to access information of any company can easily access the same via Internet or through several other means. Prospectus of any company is available on the SEBI website. This has made the financial analysis of companies simple and has contributed to the improved sentiments on the bourses.

The entry point norms for public issues ensured the quality of paper issued to the market and corrected the aberrations, which came in the wake of free pricing of issues. Further, with strict rules concerning corporate governance in place, the company managements have to follow the rules regarding investor protection. This has reduced the level of external risk for investors in equity.


Automation of Stock Exchanges:

The automation of trading in the stock exchanges helped to improve the level of transparency, reduced spread and lowered transaction costs. It helped in the expansion of stock exchanges through the spread of trading terminals in cities and towns in the country and brought the stock exchanges closer to the investor community.

By the end of June 2006, the BSE and NSE had trading terminals in 416 cities and towns with 13,810 trader work stations and 296 cities and towns with 2,740 Very Small Aperture Terminals across the country respectively. Some of the regional stock exchanges have also opened their terminals in various cities with in their respective States.

The automation of stock exchanges, modernization of infrastructure of the stock exchanges and dematerialization of scrips have shortened the settlement period from two weeks a decade ago to T+2 (Transaction day + 2 days) cycle.

The risk containment measures such as setting up of clearing houses, Trade Guarantee Fund by the stock exchanges, rationalization of margin system, price bands for brokers, setting up of depositories, dematerialization and inter-connectivity significantly improved the safety of the market, safety of settlement and rapid transfer of securities. The absence of any broker default in the last six years is a proof of the advantage of the current system.


Trading Lot:

The scrips of the companies can be traded in the stock exchanges in multiples of fixed quantities called market lots or trading lot. Before the introduction of screen based trading, market lots can be traded during the regular market timings of an exchange. Quantities of securities less than the market lot are called odd lots.

An odd lot can be best defined as an irregular number of shares, which cannot be traded in the regular market timings of an exchange. With the introduction of dematerialization and screen based trading the market lot has been reduced to one share for all dematerialized shares and all physical form of shares i.e., in the form of share certificates are traded as odd lots.

Investors can buy or sell shares in any numbers and there is no odd lot concept. Further keeping with international trends the face value of a company share can be decided by the company’s board of directors and can be of Re. 1 or Rs. 2 or any amount.

Transaction Cost:

Trading system has become highly transparent. The contract issued by the brokers reveals the time and rate at which the transaction took place. Further, the trading system gives details of brokerage, transaction charges, service tax, education cess and securities transaction tax details in the contract note issued to the investor.

The transaction cost, i.e., the sum of all the above charges is much lower when compared to that of pre-reform period. The Indian share market must be one among the world which charges lowest brokerage rates. The phenomenal increase in turnover on the Bourse is partly the result of these lower transaction costs. The brokerage is reduced to as low as 0.15%.

Investor Grievance and Protection:

The number of investor grievances received by SEBI has been sharply declining over the years. It was only 40,485 during 2005-06 as against 5 lakh in 1997-98. The exchanges have settlement guarantee funds which can meet the settlement obligations for 4 or 5 consecutive settlements even if all the trading members default in their obligations.

Other Reforms:

To ensure orderly functioning of domestic stock markets and to bring them at par with international stock markets, several reforms are currently being implemented, which includes demutualisation and corporatisation of stock exchanges, strengthening of surveillance systems, setting up of National Institute of Securities Market and development of the corporate debt market. All these indicate robust health of the securities markets.

The Problem of Investors:

Economic liberlisation envisaged a growing role for the stock market in the economy. However, this vision went awry because its implementation did not pay adequate attention to individual investors’ concern. The stock markets role can be enhanced only if households increasingly participate in the market.

However, we are witnessing an opposite kind of phenomenon i.e., the phenomenon of retail investors gradually withdrawing or staying away from the stock market. They were till recently, the backbone of the market. The RBI Annual Report for 2001-02 brings out that out of household saving in the form of financial assets during 2001-02, only 2.4% was in the form of shares, debentures and UTI and other mutual fund units and that this percentage has been declining since 1994-95.

The literature evidence collected suggests that the share owning population in India has started to shrink during 1996-97. The survey of household investors conducted by the Society for Capital Market Research and Development in 1997 and the survey of Indian Investors conducted jointly by SEBI-NCAER in 2002 also revealed that the households as a whole have been inclined to reduce their investment in equity, i.e., they are withdrawing from the equity market.

How seriously the erosion of investors’ confidence has affected the Indian stock market is indicated by the fact that the percentage of household financial savings going to the stock market has progressively declined. The RBI Annual Report for 2004-05 brings out that out of household savings in the form of financial assets during 2003-04, only 0.1 percent was in the form of shares, debentures and UTI and other mutual fund units and that this percentage has declined since 1994-95. Later it has slightly increased to 1.1 percent in 2004-05.

Erosion of Investor Confidence:

There has been much discussion on the erosion of individual investors’ confidence in the market. A succession of finance ministers of the Government of India attempted to solve this problem for nearly a decade, but none of them succeeded. The basic problem is assuring the investors of fair dealing, orderly and efficient market and protection against frauds.

Globally, there are increased evidences to suggest that investor confidence has assumed important role in the economic development of a country. The Economist indicated that lot of issues need to be addressed to make capital markets safer. The transparency strengthening of financial system and managing crisis are the issues’ which cannot be quickly fixed.

But they add up to a stronger system. Long, stressed the importance of rebuilding investor confidence rebuilding of sound fundamentals, dealing with capital account risks, corporate restructuring, banking sector reforms and improvement of political and social conditions as important.

Joseph J Oliver in his presentation to the Senate standing committee on banking, trade and commerce, suggested that close to half of all Canadians have investments in equities and their confidence is essential for a healthy and dynamic capital market. Robert Carpenter in his testimony before the committee of Financial Services, United States House of Representations observed that integrity of the financial markets and economic well being of the country depend on corporate accountability and investor confidence.

Stock market barometers both BSE Sensex and S&P CNX Nifty have gyrated to unprecedented levels reflecting the movements of international bellwether market indices such as NASDAQ composite and Dow Jones and the developments in the domestic economy.

It may be noted that there was an upswing in the market during 2004-05, which came along with good performance of the economy. This is the period when Union Budget provided certain tax benefits for the mutual funds. Certain additional incentives were extended to infrastructure and export oriented industries.

These developments were expected to impact the behaviour of equity investors. Particularly the calendar year 2005 right from the beginning registered an upward momentum in stock prices.

Households exhibiting reticence at a time when the markets have been booming sounds strange. But it does reflect the reality that, unlike the Sensex, investor confidence in the markets is not satisfactory. Healthy capital markets typically have a large and active individual investor base.

They add to the numbers, leading to better price discovery and serve as a counterweight to large powerful investors such as FIIs who influence the course of the market. It is not that the reasons for the individual investors’ unhappiness are not known. Recurrent scams, price volatility, fraudulent company managements and poor corporate governance have all contributed to the diminishing faith of the individual investor in the stock market.

In India, less than 2% of retail savings enter the market. That is why FIIs dictate terms to our market. If individual retail investors understand the risk involved in the investment and put in, part of their savings in the market, it will get strong.

The future growth and the vibrancy of the Indian stock market very much depend on the continued participation of myriads of retail investors. Hence, their gradual withdrawal from the market is a matter of serious concern.

Need to Revive Investor Confidence:

Revival of confidence of the investors is necessary to make the securities market more efficient means of converting savings into investment. Carolyn Kay Brancato indicated that even though Singapore had stock market scams and corporate scandals, measures have been initiated to restore investor confidence.

Reforms initiated by Government of Singapore, Regulatory authority, associations and media have resulted in regaining investor confidence. The Hindu, Indian National Newspaper’s Online Edition has indicated that the spate of scandals in United States were being addressed by stricter laws and strong actions against culprits to prevent any recurrence of these events and to restore investor confidence.

The depth of the system/capital market is directly proportional to the quantum of retail investors. Retail participation decides the depth of the market. Korea witnessed a large-scale sale of shares by Foreign Institutional investors in 2005. However, Korean investors poured in the money and the crisis was averted. Hence, there is a need to create awareness amongst the retail investors about the stock market.

Clearly, there is a huge credibility issue that is dodging the stock markets. It is important to understand the causes and measures of revival of investor confidence leading to capital mobilization and investment in right avenues creating, economic growth in the country. The market cannot afford to drive away retail investor.

At this juncture it is important to understand the individual investors’ opinion about the ongoing capital market reforms. It is imperative to find out the answer to the question, what is the opinion of the individual investors about the capital market reforms introduced so far? And what reforms they expect in future to retain and gain investors’ confidence?

The erosion of retail investors’ confidence in the market can be tackled effectively only if we can clearly identify the factors responsible for this. The method adopted in this study for this specific purpose is to analyse the investors’ viewpoint on Indian capital market based on systematic feedback from the investors themselves.

In such an environment it was decided that the profile of investors should be studied and their problems analysed. The objective is to study the impact of the capital market reforms introduced since 1991, on individual investors.