A REPORT ON DESCRIPTIVE STUDY OF MUTUAL FUNDS AND STUDY OF INVESTORS PERCEPTION ABOUT INVESTMENT

A REPORT ON DESCRIPTIVE STUDY OF MUTUAL FUNDS AND STUDY OF INVESTORS PERCEPTION ABOUT INVESTMENT IN MUTUAL FUNDS

St. Kabir Institute of Professional Studies (SKIPS)

SUBMITTED TO: COMPANY GUIDE

FACULTY GUIDE

MR.SHIMUL DALAL

Prof. Vishakha Phadke

PREPARED BY: KAPIL MAJETHIYA(21)

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 1

CONTENTS PART-1

PAGE NO

1. ACKNOWLEDGEMENTS

3

2. PREFACE

4

3. SUMMARY/ABSTRACT

5

4. INTRODUCTION

6

5. INDUSTRY PROFIEL

7

6. ABOUT MUTUAL FUND

8

7. STRUCTURE OF MUTUAL FUND

13

8. ASSET MANAGEMTN COMPANY

18

9. HISTORY OF MUTUAL FUND

25

10.TYPES OF MUTUAL FUND

29

PART-2 11.OBJECTIVE

53

12.RESEARCH METHODOLOGY

54

13.SCALING

57

14.ANALYSIS

59-91

15.FINDINGS

92

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 2

16. QUESTIONNAIRE

94

17. BIBLIOGRAPHY

100

ACKNOWLEDGEMENT

“Expression of feelings by words makes them less significant when it comes to make statement of gratitude” I take this opportunity to express my gratitude to all the people who have guided and helped me directly or indirectly in the course of completion of my project.

I feel immense pleasure to express a deep sense of gratitude to my Director Dr. KSB NAYAR who has given me an opportunity to do my internship in Birla Sun Life Mutual Funds. I would also thankful to my Faculty Guide Prof.Vishakha Phadke and Prof. Rajiv Joshi for their constant support and guidance. His valuable suggestions and helping hands has helped me to complete my project successfully.

I am also very thankful to Mr. Shimul Dalal, Relationship Manager, Birla Sun Life Mutual -Funds, for his cooperation in providing me all the necessary information for doing this project.

Kapil Majethiya

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 3

PREFACE MBA is a stepping-stone to the management carrier and to develop good manager.

It is necessary that the theoretical must be supplemented with exposure to the real environment.

Theoretical knowledge just provides the base and it’s not sufficient to produce a good manager that’s why practical knowledge is needed.

Therefore the research product is an essential requirement for the student of MBA. This research project not only helps the student to utilize his skills properly learn field realities but also provides a chance to the organization to find out talent among the budding managers in the very beginning.

Investing money where the risk is less has always been risky to decide. The first factor, which an investor would like to see before investing, is risk factor.

Diversification of risk gave birth to the phenomenon called Mutual Fund.

The Mutual Fund Industry is in the growing stage in India, which is evident from the flood of mutual funds offered by the Banks, Financial Institutes & Private Financial Companies.

In accordance with the requirement of MBA course I have summer training Research project on the topic “A REPORT ON DESCRIPTIVE STUDY OF MUTUAL FUNDS AND STUDY OF INVESTORS PERCEPTION ABOUT INVESTMENT IN MUTUAL FUNDS”.

For conducting the research project sample size of 60 customers of Mutual Funds were selected. The information regarding the project research was collected through the questionnaire formed by me which was filled by the investors of Mutual Funds.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 4

SUMMARY Indian Stock market has undergone tremendous changes over the years.

Investment in Mutual Funds has become a major alternative among Investors. The project has been carried out to have an overview of Mutual Fund Industry and to understand investor’s perception about Mutual Funds in the context of their trading preference, explore investor’s risk perception & find out their preference over Top Mutual funds.

The methodology used was data collection using Schedule.

Secondary data was collected from Internet and Books. Primary Data was collected through survey among existing clients along with the other investors.

The procedure adopted to select sample was simple random sampling

The research design is analytical in nature. A questionnaire was prepared and distributed to Investors. The investor’s profile is based on the results of a questionnaire that the Investors completed. The Sample consists of 60 investors from various broker’s premises. The target customers were Investors who are investing in mutual fund. The area of survey was restricted to people residing in AHMEDABAD.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 5

INTRODUCTION Investment in share markets are influenced by the analysis & reasoning which help in predicting the market to some extent. Over the past years a number of technical & theories for analysis have evolved, these combined with modern technology guides the investor. The big players in the market, like Foreign Institutional Investors, Mutual Funds, etc. have the expertise for various analytical tools & make use of them. The small investors are not in a position to benefit from the market the way Mutual Funds can do. Generally a small investor’s investments are based on market sentiments, inside information, through grapevine, tips & intuition. The small investors depend on brokers and brokerage house for his investments. They can invest through the Mutual Funds who are more experienced and expert in this field than a small investor himself.

In recent years a large number of players have entered into his market. The project has been carried out to have an overview of Mutual Fund Industry and to understand investor’s perception about Mutual Funds in the context of their trading preference, explore investor’s risk perception & find out their preference over Top Mutual

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 6

INDUSTRY PROFILE

Structure of the Indian Mutual Fund industry

The largest categories of Mutual Funds are the ones floated by the private sector and by Foreign Asset Management Companies. The largest of these are Prudential ICICI AMC and Birla Sun Life AMC. The aggregate corpus of assets managed by this category of AMCs is in excess of Rs.350 bn.

Earlier the Indian Mutual Fund industry was dominated by the Unit Trust of India which has a total corpus of Rs.700 bn collected from more than 20 million investors. The UTI has many funds/schemes in all categories i.e. equity, balanced, income etc. with some being open-ended and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of about Rs.200 bn. UTI was floated by financial institutions and is governed by a special Act of Parliament. Most of its investors believe that the UTI is government owned and controlled, which, while legally incorrect, is true for all practical purposes.

The second largest categories of mutual funds are the ones floated by nationalized banks. Can bank Asset Management floated by Canara Bank and SBI Funds Management floated by the State Bank of India are the largest of these. GIC AMC floated by the General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones. The aggregate corpus of funds managed by this category of AMCs is about Rs.200 bn.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 7

ABOUT MUTUAL FUNDS A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund

AMC

Savings

Investments

Trust Units Returns

Unit holders

Registrar

SEBI

Trust Custodian

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

AMC

Page 8

• The structure of Mutual Funds in India is governed by SEBI (Mutual Fund) Regulations, 1996.

• It is mandatory to have a three tier structure of Sponsor – Trustee – Asset Management Company.

• The trust is established by a Sponsor or more than one sponsor who is like a promoter of a company. He appoints the Trustees who are responsible to the investors of the fund.

• The Trustees of the mutual fund hold its property for the benefit of the unit holders.

• Asset Management Company (AMC) approved by SEBI is the business face of the mutual fund as it manages all the affairs of the fund by making investments in various types of securities.

• Custodian, who is registered with SEBI, holds the securities of various schemes of the funds in its custody.

WHY MUTUAL FUNDS? ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 9

An investor normally prioritizes his investment needs before undertaking an investment. So different goals will be allocated different proportions of the total disposable amount. Investments for specific goals normally find their way into the debt market as risk reduction is of prime importance. This is the area for the riskaverse investors and here, mutual funds are generally the best option. The reasons are not difficult to see.

One can avail of the benefits of better returns with added benefits of anytime liquidity by investing in open-ended debt funds at lower risk. Many people have burnt their fingers by investing in fixed deposits of companies who were assuring high returns but have gone bust in course of time leading to distraught investors as well as pending cases in the Company Law Board.

This risk of default by any company that one has chosen to invest in, can be minimized by investing in mutual funds as the fund managers analyze the companies’ financials more minutely than an individual can do as they have the expertise to do so. They can manage the maturity of their portfolio by investing in instruments of varied maturity profiles. Since there is no penalty on pre-mature withdrawal, as in the cases of fixed deposits, debt funds provide enough liquidity.

Moreover, mutual funds are better placed to absorb the fluctuations in the prices of the securities as a result of interest rate variation and one can benefits from any such price movement.

Apart from liquidity, these funds have also provided very good post-tax returns on year to year basis. Even historically, we find that some of the debt funds have generated superior returns at relatively low level of risks. On an average debt funds have posted returns over 10 percent over one-year horizon. The best performing funds have given returns of around 14 percent in the last one-year period. In nutshell we can say that these funds have delivered more than what one expects of debt avenues such as post office schemes or bank fixed deposits.

Though they are charged with a dividend distribution tax on dividend payout at 10 percent (plus a surcharge of 10 percent), the net income received is still tax free in the hands of investor and is generally much more than all other avenues, on a post tax basis.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 10

Moving up in the risk spectrum, we have people who would like to take some risk and invest in equity funds/capital market. However, since their appetite for risk is also limited, they would rather have some exposure to debt as well. For these investors, balanced funds provide an easy route of investment. Armed with the expertise of investment techniques, they can invest in equity as well as good quality debt thereby reducing risks and providing the investor with better returns than he could otherwise manage. Since they can reshuffle their portfolio as per market conditions, they are likely to generate moderate returns even in pessimistic market conditions.

This risk of default by any company that one has chosen to invest in, can be minimized by investing in mutual funds as the fund managers analyze the companies’ financials more minutely than an individual can do as they have the expertise to do so. They can manage the maturity of their portfolio by investing in instruments of varied maturity profiles. Since there is no penalty on pre-mature withdrawal, as in the cases of fixed deposits, debt funds provide enough liquidity.

Moreover, mutual funds are better placed to absorb the fluctuations in the prices of the securities as a result of interest rate variation and one can benefits from any such price movement.

Next come the risk takers. Risk takers by their very nature, would not be averse to investing in high-risk avenues. Capital markets find their fancy more often than not, because they have historically generated better returns than any other avenue, provided, the money was judiciously invested. Though the risk associated is generally on the higher side of the spectrum, the return-potential compensates for the risk attached.

Capital markets interest people, albeit not all for there are several problems associated. First issue is that of expertise. While investing directly into capital ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 11

market one has to be analytical enough to judge the valuation of the stock and understand the complex undertones of the stock. One needs to judge the right valuation for exiting the stock too. It is very difficult for a small investor to keep track of the movements of the market. Entrusting the job to experts, who watch the trends of the market and analyze the valuations of the stocks will solve this problem for an investor. Mutual funds specialize in identification of stocks through dedicated experts in the field and this enables them to pick stocks at the right moment. Sector funds provide an edge and generate good returns if the particular sector is doing well.

Next problem is that of funds/money. A single person can’t invest in multiple high-priced stocks for the sole reason that his pockets are not likely to be deep enough. This limits him from diversifying his portfolio as well as benefiting from multiple investments.

Here again, investing through MF route enables an investor to invest in many good stocks and reap benefits even through a small investment. This not only diversifies the portfolio and helps in generating returns from a number of sectors but reduces the risk as well. Though identification of the right fund might not be an easy task, availability of good investment consultants and counselors will help investors take informed decision.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 12

How are the Mutual Funds Structured?

The Mutual Funds are structured in two forms: Company form and Trust form.

• Company Form: These forms of mutual funds are more popular in US.

• Trust Form: In India, mutual funds are organized as Trusts. The Trust is either managed by a Board of Trustees or by a Trustee Company.

There must be at least 4 members in the Board of Trustees and at least 2/3 of the members of the board must be independent.

Trustee of one mutual fund cannot be a trustee of another mutual fund.

Unit Trusts – Constituents: A Mutual Fund is set up in the form of a Trust which has the following constituents:ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 13

1. Fund Sponsor

2. Mutual Fund as Trust

3. Asset Management Company

4. Other Fund Constituents

4.1.

Custodian and Depositors

4.2.

Brokers

4.3.

Transfer Agent

4.4.

Distributors

FUND SPONSOR

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 14

What a promoter is to a company, a sponsor is to a mutual fund. The sponsor initiates the idea to set up a mutual fund. It could be a financial services company, a bank or a financial institution. It could be Indian or foreign. It could do it alone or through a joint venture. In order to run a mutual fund in India, the sponsor has to obtain a license from SEBI. For this, it has to satisfy certain conditions, such as on capital and profits, track record (at least five years in financial services), default-free dealings and a general reputation for fairness. The sponsor must have been profit making in at least 3 years of the above 5 years.

The Sponsor appoints the Trustees, Custodian and the AMC with the prior approval of SEBI and in accordance with SEBI Regulations.

Like the company promoter, the sponsor takes big-picture decisions related to the mutual fund, leaving money management and other such nitty-gritty to the other constituents, whom it appoints. The sponsor should inspire confidence in you as a money manager and, preferably, be profitable. Financial muscle, so long as it is complemented by good fund management, helps, as money is then not an impediment for the mutual fund- it can hire the best talent, invest in technology and continuously offer high service standards to the investors.

In the days of assured return schemes, sponsors also had to fulfill return promises made to the unit holders. This sometimes meant meeting shortfalls from their own pockets, as the government did for UTI. Now that assured return schemes are passed, such bailouts won’t be required. All things considered, choose sponsors who are good money managers, who have a reputation for fair business practices and who have deep pockets.

TRUST

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 15

The Mutual Fund is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. The Trust appoints the Trustees who are responsible to the investors of the fund.

TRUSTEES

Trustees are like internal regulators in a mutual fund, and their job is to protect the interests of the unit holders. Trustees are appointed by the sponsors, and can be either individuals or corporate bodies. In order to ensure they are impartial and fair, SEBI rules mandate that at least two-thirds of the trustees be independent, i.e., not have any association with the sponsor.

Trustees appoint the AMC, which subsequently, seeks their approval for the work it does, and reports periodically to them on how the business being run. Trustees float and market schemes, and secure necessary approvals. They check if the AMCs investments are within defined limits and whether the fund’s assets are protected. Trustees can be held accountable for financial irregularities in the mutual fund.

Rights of the Trustees:

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 16

 Trustees appoint the AMC in consultation with the sponsor and according to the SEBI Regulations.  All Mutual Fund Schemes floated by the AMC have to be approved by the Trustees.  Trustees can seek information from the AMC regarding the operations and compliance of the mutual fund.  Trustees can seek remedial actions from AMC, and in cases can the AMC.

dismiss

 Trustees review and ensure that the net worth of the AMC is according to the stipulated norms, every quarter.

Obligations of the Trustees:  Trustees must ensure that the transactions of the mutual fund are in accordance with the trust deed.  Trustees must ensure that the AMC has systems and procedures in place.  Trustees must ensure due diligence on the part of AMC in the appointment of constituents and business associates.  Trustees must furnish to the SEBI, on half yearly basis a report on the activities of the AMC.  Trustees must ensure compliance with SEBI Regulations.

ASSET MANAGEMENT COMPANY (AMC) ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 17

An AMC is the legal entity formed by the sponsor to run a mutual fund. The AMC is usually a private limited company in which the sponsors and their associates or joint venture partners are the shareholders. The trustees sign an investment agreement with the AMC, which spells out the functions of the AMC. It is the AMC that employs fund managers and analysts, and other personnel. It is the AMC that handles all operational matters of a mutual fund – from launching schemes to managing them to interacting with investors.

The people in the AMC who should matter the most to you are those who take investment decisions. There is the head of the fund house, generally referred to as the Chief Executive Officer (CEO). Under him comes the Chief Investment Officer (CIO), who shapes the fund’s investment philosophy, and fund managers, who manages its schemes. They are assisted by a team of analysts, who track markets, sectors and companies.

Although these people are employed by the AMC, its you, the unit holders, who pays their salaries, partly or wholly. Each scheme pays the AMC an annual ‘fund management fee’, which is linked to the scheme size and results in a corresponding drop in your return. If a scheme’s corpus is up to Rs.100 crores it pays 1.25% of its corpus a year; on over Rs.100 crores, the fee is 1% of the corpus. So, if a fund house has two schemes, with a corpus of Rs.100 crores and Rs.200 crores respectively, the AMC will earn Rs.3.25 crore (1.25+2) as fund management fee that year.

If an AMCs expenses for the year exceed what it earns as fund management fee from its schemes, the balance has to be met by the sponsor. Again, financial strength comes into play: a cash-rich sponsor can easily pump in money to meet short falls, while a sponsor with less financial clout might force the AMC to trim costs, which could well turn into an exercise in cutting corners.

Regulatory requirements for the AMC: ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 18

 Only SEBI registered AMC can be appointed as investment managers of mutual funds.  AMC must have a minimum net worth of Rs.10 crores at all times.  An AMC cannot be an AMC or Trustee of another Mutual Fund.  AMCs cannot indulge in any other business, other than that of asset management  At least half of the members of the Board of an AMC have to be independent.  The 4th schedule of SEBI Regulations spells out rights and obligations of both trustees and AMCs.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 19

Obligations of the AMC:

 Investments have to be according to the investment management agreement and SEBI regulations.  The actions of its employees and associates have to be as mandated by the trustees.  AMCs have to submit detailed quarterly reports on the working and performance of the mutual fund.  AMCs have to make the necessary statutory disclosures on portfolio, NAV and price to the investors.

Restrictions on the AMC:

 AMCs cannot launch a scheme without the prior approval of the trustees.  AMCs have to provide full details of the investments by employees and Board members in all cases where the investment exceeds Rs.1 lakh.  AMCs cannot take up any activity that is in conflict with the activities of the mutual fund.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 20

Conditions under which two AMCs can be merged:

SEBI Regulations require the following:

ďƒ˜ SEBI and Trustees of both the funds must approve of the merger. ďƒ˜ Unit holders should be notified of the merger, and provided the option to exit at NAV without load.

Conditions under which an AMC can be taken over:

SEBI approval is required for the change of ownership and unit holders have to be informed of the takeover.

Scheme take over: If an existing mutual fund scheme is taken over by another AMC, it is called as scheme take over. The two mutual funds continue to exist.

Trustee and SEBI approval and notification of the unit holders are required for scheme take over.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 21

CUSTODIAN A custodian handles the investment back office of a mutual fund. Its responsibilities include receipt and delivery of securities, collection of income, distribution of dividends and segregation of assets between the schemes. It also track corporate actions like bonus issues, right offers, offer for sale, buy back and open offers for acquisition. The sponsor of a mutual fund cannot act as a custodian to the fund. This condition, formulated in the interest of investors, ensures that the assets of a mutual fund are not in the hands of its sponsor. For example, Deutsche Bank is a custodian, but it cannot service Deutsche Mutual Fund, its mutual fund arm.

BROKERS Role of Brokers in a Mutual Fund:

 They enable the investment managers to buy and sell securities.  Brokers are the registered members of the stock exchange.  They charge a commission for their services.  In some cases, provide investment managers with research reports.  Act as an important source of market information.

REGISTRAR OR TRANSFER AGENTS ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 22

Registrars, also known as the transfer agents, are responsible for the investor servicing functions. This includes issuing and redeeming units, sending fact sheets and annual reports. Some fund houses handle such functions in-house. Others outsource it to the Registrars; Karvy and CAMS are the more popular ones. It doesn’t really matter which model your mutual fund opt for, as long as it is prompt and efficient in servicing you. Most mutual funds, in addition to registrars, also have investor service centers of their own in some cities.

Some of the investor – related services are:-

 Processing investor applications.  Recording details of the investors.  Sending information to the investors.  Processing dividend payout.  Incorporating changes in the investor information.  Keeping investor information up to date.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 23

DISTRIBUTORS

Role of Selling and Distribution Agents:

 Selling agents bring investor’s funds for a commission.

 Distributors appoint agents and other mechanisms to mobilize funds from the investors.

 Banks and post offices also act as distributors.

 The commission received by the distributors is split into initial commission which is paid on mobilization of funds and trail commission which is paid depending on the time the investor stays with the fund.

HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 24

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched

by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 Crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 Crores.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 25

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families.

Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 Crores. The Unit Trust of India with Rs.44,541 Crores of assets under management was way ahead of other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 26

end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 Crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 Crores under 421 schemes.

The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative investments. There was rather no choice apart from holding the cash or to further continue investing in shares. One more thing to be noted, since only closed-end funds were floated in the market, the investors disinvested by selling at a loss in the secondary market.

The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the losses by disinvestments and of course the lack of transparent rules in the whereabouts rocked confidence among the investors.

Funds now have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and technology sector. Funds performances are improving. Funds collection, which averaged at less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. In the 2000 ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 27

mobilization had exceeded Rs300bn. Total collection for the financial year ending March 2000 reached Rs450bn.

India had been at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund assets are not even 10% of the bank deposits, but this trend is beginning to change. The figures indicate that in the first quarter of the year 19992000 mutual fund assets went up by 115% whereas bank deposits rose by only 17%. (Source: Thinktank, The Financial Express September, 99) This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds are going to change the way banks do business in the future

TYPES OF MUTUAL FUNDS Mutual fund schemes may be classified on the basis of its structure and its investment objective.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 28

By Structure: Open-ended Funds An open-end fund is one that is available for subscription all through the year.

These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Closed-ended Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period.

Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.

Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective:

Growth Funds ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 29

The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors.

Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

Money Market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 30

depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

Load Funds

A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history.

No-Load Funds

A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work.

Other Schemes:

Tax Saving Schemes ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 31

These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

Special Schemes

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 32

Sectoral Schemes:- Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.

BENEFITS OF MUTUAL FUND INVESTMENT

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 33

Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 34

prospects of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 35

Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

Flexibility

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 36

Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

Choice of Schemes Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 37

RISKS ASSOCIATED WITH MUTUAL FUNDS

The most important relationship to understand is the risk-return trade-off.

Higher the risk greater the returns/loss and lower the risk lesser the returns/loss.

Hence it is up to you, the investor to decide how much risk you are willing to take.

In order to do this you must first be aware of the different types of risks involved with your investment decision.

MARKET RISK ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 38

Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”) might help mitigate this risk.

CREDIT RISK

The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cashflows determines the Credit Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. An ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor credit quality. A well-diversified portfolio might help mitigate this risk.

INFLATION RISK

Things you hear people talk about: “Rs. 100 today is worth more than Rs. 100 tomorrow.” “Remember the time when a bus ride costed 50 paisa?” “Mehangai Ka Jamana Hai.” The root cause , Inflation. Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A well-diversified portfolio with some investment in equities might help mitigate this risk.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 39

INTEREST RATE RISK

In a free market economy interest rates are difficult if not impossible to predict.

Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk.

POLITICAL RISK

Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa.

LIQUIDITY RISK

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. You have been reading about diversification above, but what is it?

Diversification The nuclear weapon in your arsenal for your fight against Risk. It simply means that you must spread your investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of your returns,

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 40

ACCOUNTING AND VALUATION

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units.

However, most people refer loosely to the NAV per unit as NAV, ignoring the “per unit�. We also abide by the same convention.

Calculation of Net Asset Value ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 41

The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of the units outstanding. The detailed methodology for the calculation of the net asset value is given below:

NAV =

Market value of investments

+ Current assets and other assets

+ Accrued income

- Current liabilities and other liabilities

- Accrued expenses

MAJOR PLAYERS IN MUTUAL FUNDS INDUSTRY ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 42

ABN AMRO Mutual Fund ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun Life Mutual Fund Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 Crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund) Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund HDFC Mutual Fund was setup on June 30, 2000 with two sponsor namely Housing Development Finance Corporation Limited and Standard Life Investments Limited.

HSBC Mutual Fund ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 43

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. The Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993.

Sahara Mutual Fund Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 44

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes.

Tata Mutual Fund Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited is one of the fastest in the country with more than Rs. 7,703 Crores (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1,99,818 investors in its various schemes.

KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 45

Unit Trust of India Mutual Fund UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crore. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds.

Reliance Mutual Fund Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

Standard Chartered Mutual Fund Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20,1999.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 46

Franklin Templeton India Mutual Fund The group, Franklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investment management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and non-profit organizations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focusing on a long-term capital appreciation.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 47

Escorts Mutual Fund Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited.

Alliance Capital Mutual Fund Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsorer. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt.) Ltd. with the corporate office in Mumbai.

Benchmark Mutual Fund Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC. Canbank Mutual Fund Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the sponsor. Canbank Investment Management Services Ltd. incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.

Chola Mutual Fund Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 48

LIC Mutual Fund Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund.

GIC Mutual Fund GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Government of India undertaking and the four Public Sector General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882.

Fidelity Investments Fidelity Investments was founded in 1946. Fidelity Investments is an international provider of financial services and investment resources that help individuals and institutions meet their financial objejectives

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 49

COMPETITION IN MUTUAL FUNDS INDUSTRY The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly realized that the AMC business is a business, which makes money in a long term and requires deep-pocketed support in the intermediate years. Some have sold out to foreign owned companies, some have merged with others and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. In fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 50

PART -2

A RESEARCH REPORT ON INVESTORS PERCEPTION ABOUT INVESTMENT IN MUTUAL FUNDS

Managerial Usefulness of Study: ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 51

 The study also provides the problems related to distribution of Mutual Fund so that they can improve the service rendered by them as a distributor.  The study will also give information about prospective investors both individual as well as institutional clients in areas of surrey where they can get lead.  The study provides the complete information about all close competitors in Mutual Fund investment.

 It provides the AMC a feedback from customers regarding their problems and perception about investing in mutual funds so that they can improve their services.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 52

Objectives:  To study the Mutual funds industry in detail  To study the Investment procedure in Mutual funds  To study in brief various Mutual funds promoted by different AMC  To study the investors Preference regarding Investment in Mutual Funds

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 53

RESEARCH METHODOLOGY

I decided to do the project in two parts. The first part of the project is comprised of the study of Mutual Funds as a whole and the second part deals with the investors perception regarding their investment preferences about investment in Mutual Funds.

The first part of the project i.e. descriptive study is comprising an overall study of Mutual funds as what it is, why to invest and where to invest, risk factor associated with it i.e. an overview of whole Mutual fund industry.

The second part of the project that is related to investors perception about investment in Mutual funds available in market. Indian Stock market has undergone tremendous changes over the years. Investment in Mutual Funds has become a major alternative among Investors. The project has been carried out to understand investor’s perception about Mutual Funds in the context of their trading preference and explore investor’s risk perception .

The first part of the project relating the study of Mutual funds is collected through secondary data obtained from internet & books whereas the second part relating the Investors perception about investment in Mutual Funds is covered using primary data.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 54

SOURCE OF DATA COLLECTION

Both Primary and Secondary data are required

Primary data is the first hand information collected directly from the respondents .

The tool used here is questionnaire. Primary Data is collected through survey among existing clients along with the other investors

Secondary data is collected through internet , books

I had prepared a questionnaire for collecting information about second part of the project.

Sample size:

Sample size for the survey is 60.

“Breakup of the sample�

20 Service Class 20 Business class 20 Professionals Age Group:Between 25 to 55 years of age Research Instrument: - Questionnaire Type of sampling: Stratified Random & Convenience sampling technique is used for collecting the primary data. The data is collected only from the respondents of Ahmedabad who have invested in Mutual Funds.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 55

Data Analysis Procedures The major focus is on the results of the questionnaire survey.

(1) I will screen all the questionnaires in order to gain a first overview over the data gathered.

(2) The analysis of the data generated during the study with the help of various statistical tools like bar charts & pie charts.

(3) At the last I will draw conclusion regarding customer’s preferences and satisfaction about mutual funds.

SCALING

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 56

In my study I have used various scales such as numerical scale, nominal scale, ranking scale and constant-sum scale

1)

Numerical scale:-

Numerical scales have numbers, rather than “Semantic space� or verbal descriptions, as response options, to identify categories (response position). If the scale items have five response positions, the scale is called a 5-point numerical scale; with seven response positions, it is called a 7-point numerical scale; and so on.

In my research project I have taken into consideration 6-point scale, as through this scale I come to at which side they fall, or to know at what extent does the market situation affect their investment decision. If I have kept the odd number than might be the majority of the people would have selected the neutral or the average choice. But this might have created problem in our analysis, so to avoid this, I have created a 5-point scale which help us to analyze that which side of the scale are the different people in different sectors affected.

2)

Nominal scale:-

A scale in which the numbers or letters assigned to objects serve as labels for identification or classification; a measurement scale of the simplest type.

In my research I have used nominal scale for to know the sector of the people, reason for investment decision and to know the frequency of the investment.

3)

Ordinal scale:-

A scale that arranges objects or alternatives according to their magnitudes.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 57

In my project respondents are asked to rank order their investment preferences, they assign ordinal values to them.

4)

Ranking scale:-

People often rank order their preferences. An ordinal scale may be develop by asking respondents to rank order (from most preferred to last preferred) a set of objects or attributes. It is not difficult for respondents to understand the task of rank ordering the importance of fringe benefits or arranging a set of job tasks according to preference.

In my research, I have taken this ranking scale as because people don’t invest only in one financial instrument, instead they invest in more than one instrument according to their preference.

Do you invest in Mutual Funds?

Case Processing Summary Cases Valid

Missing

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Total

Page 58

Respondent's occupation * Investment in mutual fund

N

Percent

N

Percent

N

Percent

60

96.8%

2

3.2%

62

100.0%

Respondent's occupation * Investment in mutual fund Crosstabulation Count Investment in mutual fund Total Respondent's occupation

Job Business Professional

Total

yes 14 18 16 48

No 6 2 4 12

Yes 20 20 20 60

Bar Chart Investment in mutual fund

20

yes no

Count

15

10

5

0 Job

Business

Professional

Respondent's occupation

From the above chart suggests that out of 60 respondents 12 respondents invests their money in mutual fund this shows that investor choose mutual fund because they want to earn good return with some safety. Ratio of respondents who are from business and professional is more than ratio of respondents who are from job that choose mutual fund as their investment tools.

If No Then, What is the most important reason for not investing in mutual funds?

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 59

Reason for not investing in mutual funds

no

Lack of knowledge about mutual funds Enjoys investing in other options N o trus t over the fund managers Pies s how counts

12 out of 60 total respondents say they are not investing their money in mutual fund the main reason behind it they enjoys investing in other options except this investors didn’t have trust over the fund manager of the AMC companies . And very few respondents says they have lack of knowledge about mutual funds.

Please rank the following investment instruments according to your preference.

(On the basis of risk and return concept) Preference for fixed instruments Cases Valid N

Case Processing Summary

Percent

Missing N

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Percent

Total N

Percent

Page 60

Respondent's occupation * Investment prefrence for fixed instrument

57

91.9%

5

8.1%

62

100.0%

Respondent's occupation * Investment prefrence for fixed instrument Crosstabulation Count

Respondent's occupation

Job Business Professional

Total

Investment prefrence for fixed instrument 1st prefrence 2nd prefrence 3rd prefrence

Total 1st prefrence

8

6

6

20

4 7 19

5 3 14

9 9 24

18 19 57

Bar Chart Investment prefrence for fixed instrument

10

1st prefrence 2nd prefrence 3rd prefrence

Count

8

6

4

2

0 Job

Business

Professional

Respondent's occupation

Above graph suggests that respondents who are doing job they prefer fixed deposit as their 1st preference because they are less interested in taking risk on the other hand respondents who are doing business or they are professional the ratio is lower than respondents who are doing job but they are interested in investing their money direct equity .

Please rank the following investment instruments according to your preference.

(On the basis of risk and return concept) Respondent’s preference for mutual fund

Case Processing Summary

Cases Valid

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Missing

Total

Page 61

Respondent's occupation * Investment prefrence for mutual funds

N

Percent

N

Percent

N

Percent

54

87.1%

8

12.9%

62

100.0%

Respondent's occupation * Investment preference for mutual funds Cross tabulation Count

Respondent's occupation

Job Business Professional

Total

Investment prefrence for mutual funds 1st preference 2nd preference 3rd prefrence

Total 1st prefrence

9

7

0

16

11 9 29

5 6 18

3 4 7

19 19 54

Bar Chart Investment prefrence for mutual funds

12

1st prefrence 2nd prefrence 3rd prefrence

10

Count

8

6

4

2

0 Job

Business

Professional

Respondent's occupation

Above graph suggests that the respondents who are in the job or they are professional person the ratio of giving 1st preference to mutual fund is same where as the ratio of the respondents who are doing business is more . All the three type of respondents wants to earn some good return so they choose mutual fund as their 1st preference.

Please rank the following investment instruments according to your preference.

(On the basis of risk and return concept) Respondent’s preference for direct equity Case Processing Summary Cases Valid N

Percent

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Missing N

Percent

Total N

Percent

Page 62

Respondent's occupation * Investment prefrence for direct equity

51

82.3%

11

17.7%

62

100.0%

Respondent's occupation * Investment prefrence for direct equity Crosstabulation Count

Respondent's occupation

Job Business Professional

Total

Investment prefrence for direct equity 1st preference 2nd prefrence

3rd prefrence

Total 1st prefrence

3

3

10

16

5 4 12

7 9 19

5 5 20

17 18 51

Bar Chart Investment prefrence for direct equity

10

1st prefrence 2nd prefrence 3rd prefrence

Count

8

6

4

2

0 Job

Business

Professional

Respondent's occupation

Above graph reflects that respondents who are from job they are the highest who gave 3 rd preference to direct equity compare to others two .The ratio of respondents who are in the business or have some profession they gave 1st and 2nd preference to direct equity is more then the respondents who are doing job.

What is your Average investment period?

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 63

3.39%

Average investment period Les s than 6 m onths 6-12 m onths 12 months - 2 year More than 2 year

30.51%

Pies s how counts 40.68%

25.42%

The above graph reflects the average investment period for all the 60 respondents. 6 – 12 months Is the most chosen option among all the other options because of the current market condition people are not interested in investing their money for short time like less than 6 months because return will be very less in short time period .If they want to earn more return they need to invest their money at least more than 6 months or more than one year.

Television influence the purchase decision ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 64

Bars s how counts 20

Count

15

10

5

0 Lea st i n fu enti al

3 2

M ost in fl uen ti al 4

Television influencing factor for purchase

Nowadays everybody have television at home and it became most used medium of marketing for any company. And AMC companies uses for advertise their investment product so the respondents who choose it is very less influential and the respondents who choose it is most influence for their purchase decision is very low but the ratio of 2 and 3 rank preferred by respondents is very high.

Internet influence for purchase decision

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 65

Bars s how counts 20

Count

15

10

5

0 L ea st in fu en ti al

2

3

4

Internet influencing factor for purchase

Usage of internet is increasing very high but it still needs to increase people uses it for their regular thing but few people manage their investment on internet. Above graph reflects that respondents choose 1st and 2nd rank are more than other two ranks choose by respondents.

Internet is very convient option for investor and nowadays AMC companies are also promoting it.

Newspaper influencing purchase decision

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 66

Bars s how counts

30

Count

20

10

0 2

3

4

M ost in fl u en ti al

Newspaper influencing factor for purchase

Peoples uses newspaper as their medium of getting information from long time and its very effective with cheap rates. The above graph shows that most of the investor choose that they got information from newspaper and very less respondents choose its very less influencing factor for their purchase decision.

Articles/journals influence purchase decision

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 67

Bars s how counts

25

Count

20

15

10

5

L ea st in fu en ti al

2

3

4

Articles influencing factor for purchase

Above graph suggests that people are now somewhat aware about reading financial magazines or articles related to finance which regularly comes in newspaper .They can get the information and can take their decision according to it. But still lots of scope of increase the usage of this tool and above graph suggest the same thing most of respondents gave more preference to 1 st and 2nd rank.

Relations/Friends influencing purchase decision

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 68

Bars s how counts

25

Count

20

15

10

5

2

3

4

M ost in fl u en ti al

Relation influencing factor for purchase

Above graph reflects that friends/relation is still very influential tool which influence the purchase decision. People still gave more preference to their friends/relative to ask before purchasing their investment product.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 69

How much Risk are you willing to take?

Bar Chart Respondent's risk taking ability

20

Low Moderate High

Count

15

10

5

0 22-30

30-40

More than 40

Respondent's age

H0 – Young age people are more willing to take risk than old age people

H1 – Young age peoples aren’t willing to take risk than old age people Above graph reflects that all the three age group respondents wants to take moderate risk that means not very low or very high because its fact that if they want to earn some good profit they need to take some risk.

The age group of more than 40 gave less preference to moderate risk compare to other two age group and they also choose they want to take low risk .As the age increase people are less

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 70

interested in taking risk the line for moderate risk reflects the same thing. So we can say that H0 is accepted.

What is your preference in Mutual Funds?

Case Processing Summary Cases Valid Respondent's occupation Prefrence in mutual fund

*

Missing

Total

N

Percent

N

Percent

N

Percent

56

90.3%

6

9.7%

62

100.0%

Respondent's occupation * Prefrence in mutual fund Crosstabulation Count Prefrence in mutual fund

Respondent's occupation

Job Business Professional

Total

Total

Equity funds

Income funds

Money market funds

ELSS(TAX SAVER)

Balanced Fund

SIP

Equity funds

8

1

2

4

1

3

19

2 9 19

1 0 2

0 0 2

5 3 12

2 2 5

10 3 16

20 17 56

Bar Chart Prefrence in mutual fund

10

Equity funds Income funds Money market funds ELSS(TAX SAVER) Balanced Fund SIP

Count

8

6

4

2

0 Job

Business

Professional

Respondent's occupation

Above graph reflects that the respondents who are from job or they have their own profession choose equity fund more than other options available. And the respondents have their own business they choose SIP more as their investment product compare to two other groups because SIP is more safe and convient

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 71

option for investment. ELSS (Tax Saver) is also choose by some respondents because they can get the tax saving benefit if they invests their money in it.

How much return do you expect from your Investments?

Return expected in percentage

6.90%

up to 15%

8.62% 31.03%

15% -25% 25% -35% More than 35% Pies s how counts

53.45%

If any person invested their money in any option which are available in the market they obviously look for good return but if they want to earn high return than high risk is also associated with it as above graph suggests that most of the respondents choose the return between 15% to 25% because they knows that the current market condition its good return they can get and very few respondents choose more than 35% return which is actually very difficult to get.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 72

Which type of Mutual funds do you prefer?

Case Processing Summary Cases Valid Respondent's occupation * Type of funds prefer by repsondents

Missing

Total

N

Percent

N

Percent

N

Percent

57

91.9%

5

8.1%

62

100.0%

Respondent's occupation * Type of funds prefer by repsondents Crosstabulation Count

Respondent's occupation Total

Job Business Professional

Type of funds prefer by respondents

Total

Open ended schemes 17 19 16 52

Open ended schemes 19 20 18 57

Close ended Schemes 2 1 2 5

Bar Chart Type of funds prefer by repsondents

20

Open ended schemes Close ended Schemes

Count

15

10

5

0 Job

Business

Professional

Respondent's occupation

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 73

H0: Most of the investors invest in Open-Ended Schemes of Mutual Funds.

H1: Most of the investors do not invest in Open-Ended Schemes of Mutual Funds.

Above graph shows that no matter in which profession they are but they choose open ended schemes. In open ended schemes they can enter at any time or they can exit at any time. And as they knows they with current market conditions no one wants to continue their investment if they won’t get good return of negative return. Ratio of close ended schemes is very low. So we can say that H0 is accepted.

Do you get influenced by the name of Company promoting Mutual

Funds?

Promotion influence yes

18.97%

no Pies s how counts

81.03%

Above graph suggests that AMC companies promoting their product well because 81% of the total respondents are influenced by their promotional activities and very few are not influenced.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 74

Rank the following companies according to your investment preference

For Reliance mutual fund

6.12%

4.08%

Investment prefrence for reliance mutualfund 1st prefrence 24.49%

2nd prefrence 3rd prefrence 4th prefrence 5th prefrence 8th prefrence

20.41%

Pies s how counts

18.37%

26.53%

As reliance is very known company in India so investor believes gave 1 st and 2nd preference to reliance followed by respondents 3rd preference and 4th preference and very few gave 7th & 8th preference to reliance.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 75

Rank the following companies according to your investment preference

For UTI mutual fund

10.34%

3.45% 3.45%

Investment prefrence for UTI mutualfund 10.34%

1st prefrence 3rd prefrence 4th prefrence 5th prefrence 6th prefrence

17.24%

7th prefrence 8th prefrence Pies s how counts

17.24%

37.93%

UTI Mutual Fund is also know in the mutual fund market but the ratio of the respondents who gave 5th preference to UTI Mutual Fund is more than any other rank.Most of the respondents gave 5th,6th and 7th for the company in which they want to invest.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 76

Rank the following companies according to your investment preference For SBI Mutual Fund

Investment prefrence for sbi mutual fund

13.33%

33.33%

1st prefrence 2nd prefrence

10.00%

4th prefrence 5th prefrence 6th prefrence 7th prefrence 8th prefrence

10.00%

10.00%

Pies s how counts

13.33% 10.00%

Above graph suggest that the respondents gave 8the as their most preferred rank to SBI Mutual Fund .The reason can be when share market was low SBI gives the bed return compare to other investment companies. About other ranks its very mix kind of reply from respondents.

Rank the following companies according to your investment preference

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 77

For HDFC mutual fund

17.24%

3.45% 3.45% 3.45%

Investment prefrence for hdfc mutual fund 6.90%

1st prefrence 2nd prefrence 3rd prefrence 4th prefrence 5th prefrence 6th prefrence 7th prefrence

17.24% 20.69%

8th prefrence Pies s how counts

27.59%

HDFC Mutual Fund is also got very low preference in 1 st,2nd ,3rd and 4th rank because most of the respondents gave 7th and 8th preference to HDFC Mutual Fund.

Rank the following companies according to your investment preference

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 78

For Birla sun life

Investment prefrence for bsl mutual fund

8.16%

1st prefrence 2nd prefrence

2.04% 6.12%

3rd prefrence 4th prefrence 5th prefrence 6th prefrence 7th prefrence

14.29% 51.02%

Pies s how counts

6.12%

12.24%

Birla Sun Life Mutual Fund is very preferred company choose by the respondents. The ratio for 1st rank is more than 50% which shows that the company is getting good reputation among the investors and the ratio for 6th and 7th rank is very low compare to others.

Rank the following companies according to your investment preference

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 79

For ICICI prudential

6.82%

2.27%

Investment prefrence for icici prudential 1st prefrence 2nd prefrence

18.18%

4.55%

3rd prefrence 4th prefrence

6.82%

5th prefrence 6th prefrence 7th prefrence 8th prefrence 13.64% Pies s how counts 27.27%

20.45%

ICICI Prudential is also very reputed company and above graph reflects that the ratio of 1 st,2nd and 3rd rank is more than other rank and very few respondents gave 7th and 8th rank.

Rank the following companies according to your investment preference

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 80

For Principal PNB

12.50%

3.13% 3.13%

Investment prefrence for principal pnb 1st prefrence 15.63%

2nd prefrence 3rd prefrence 4th prefrence 5th prefrence 6th prefrence

9.38%

7th prefrence 8th prefrence 9.38% Pies s how counts

28.13% 18.75%

Principal PNB is not very much famous in the responds group which I took as my sample because ,most of the respondents gave 4th ,5th and 8th rank to this company.

Rank the following companies according to your investment preference ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 81

For Franklin Templeton

4.55%2.27%

Investment prefrence for frankling templeton

11.36%

1st prefrence 2nd prefrence 3rd prefrence 4th prefrence

18.18%

6th prefrence 8th prefrence 22.73% Pies s how counts

40.91%

Franklin Templeton is very know company in the investment market and above graph reflects the same thing because the ratio of 1st, 2nd and 3rd rank is more than other ranks only 2% respondents choose it as last option.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 82

Do you get influenced by the returns given by a fund or by the current NAV of a fund?

Bars s how counts

Count

30

20

10

0 B y NAV

B y Retu rn

B y b o th

Influence by return or nav

If any investor invest money in the market then surely he/she is looking for good return and above graph reflects the same thihg. Respondets gave very less preference to NAV because the reason can be most of the respondents are not much aware about it they only interest in earning return.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 83

Where do you find yourself as a mutual fund investor?

10.00%

5.00%

Knowledge about mutual funds Totally ignorant Partial knowleged of mutual funds Aware only of any specific s cheme in w hich you invested Fully aware

20.00%

Pies s how counts

65.00%

Above graph suggests that most of the respondets have partial knowledge about mutual fund followed by some of the customer who are aware only of any specifics scheme in which they have invested.Only 10% of the respondetns are full ware and only 5% of the total respondetn doesn’t have any knowledge about mutual fund.

What is the major reason for using financial advisors?

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 84

Usage fo financial advisor

6.78% 22.03%

Want help with as set allocation Dont have time to make my own inves tment decision To explain various inves tment option Want to make sure i m inves ting enough to m eet my financial goals Pies s how counts

18.64% 52.54%

Nowadays financial advisors are playing very important role to sell financial product. Most of the respondent haven’t knowledge about various investment option so financial advisor are really helpful to them. Asset allocation is also important part of financial planning so many respondents choose that they need help for their asset allocation.

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 85

From where do you purchase mutual funds?

5.56%

11.11%

11.11%

Where do they purchase?

Directly from the AMCs Brokers only Brokers /sub brokers other s ources Pies show counts

72.22%

Brokers are very important role in the distribution channel of AMCS most of the respondents buys their investment produts from brokers. This shows the importance of brokers and they also want to earn money so they gave good service to their investors and in the return they gets good business. Only few of the investors knows that they can buy directly for AMCS so they can save their 2.25%.

Rank the following feature of the mutual funds that attracts you most.

(Where 1 is most preferable and 4th is less is preferable) Preference for diversification ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 86

Bars s how counts

1 0.0

Count

7 .5

5 .0

2 .5

0 .0 1 st p refre nce

2 nd p re fren ce

3rd p refre nce

4 th p refre nce

Investment prefrence for diversificaiton

Above graph reflects that respondents need diversification because through this they can reduce their risk and enjoy investing in other options. As graph shows that the ratio is 13 respondents choose it as their first priority option for investment.

Rank the following feature of the mutual funds that attracts you most.

(Where 1 is most preferable and 4th is less is preferable)

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 87

Preference for professional management

Bars s how counts

Count

15

10

5

0 1 st p refre nce

2 nd p refren ce

3 rd p refrence

4 th p refre nce

Investment prefrence for professional managment

Mutual fund is like if a perosn now much aware about investment options which are avilabe in the market then they invest their money in the different AMCS so they invest their money on behalf of the investors so they gave 1st preference to professional management here we can say its use for fund managers.

Rank the following feature of the mutual funds that attracts you most.

(Where 1 is most preferable and 4th is less is preferable) ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 88

For reduction in risk and cost

Bars s how counts

Count

15

10

5

0 1 st p refre nce

2 nd p refren ce

3 rd p refrence

4 th p refre nce

Investment prefrence for reduction in risk and cost

Mutual fund companies invest the money but they charge for that so its not fact if they invest in mutual fund they can save their cost and above graph reflects the same thing that they gave 4 th pereference to reduction in risk and cost because afterall mutual fund are subject to market risk.

Rank the following feature of the mutual funds that attracts you most.

(Where 1 is most preferable and 4th is less is preferable) ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 89

Preference for long term planing

Bars s how counts 10

Count

8

6

4

2

1 st p refre nce

2 nd p refren ce

3 rd p refrence

4 th p refre nce

Investment prefrece for help in long term goals

Above graph suggests that nowadays market condition is not very good so they are not interested in investing for long time they use it for their short term purpose but there are few respondents who uses it for their long term purpose who have some financial support or they want to earn good return or they can bare some loss.

According to you which is the most suitable stage to invest in mutual funds?

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 90

Bar Chart Most suitable age for investment

20

Young married age Young married with children stage Married with older children stage Pre-retirement age

Count

15

10

5

0 Job

Business

Professional

Respondent's occupation

As above graph reflects that whatever may be the profession but respondents think that young married age is the perfact age for investment when they don’t have much responsibilities and they have some extra ammount for investment. It is general observation that young people are willing to take sonme risk and specially when they don’t have any social responsibilties, And at the age of retirement people need fixed income because they are least interested in taking risk as they have some fix ammount which they got to use after retirement.

FINDINGS

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 91

The study done was a tool to analyze the present setup and to know the investors perception regarding investment in Mutual Funds . The study proved fruitful and many facts came to the light. The following were the findings of the study:

• People with less experience were inclined towards investment in the Mutual Funds. It attracted as a safer avenue as compared to share market.

• Mutual Funds are more of an investment option than the speculative avenue. People tend to gain through long investments rather than through short term.

• Income funds and ELSS are among the few top funds

• Old age people are not willing to take much risk and bear loss.

• Broker’s advice matters to as much as 72% of the people. Major part of people preferred self-evaluation as best.

Most of the people look at the returns that are given by a Funds and more than 35 respondents are in this favour and only 8 people are there who consider Fund name and current NAV of the fund before investing into a Mutual Fund Experience was the main factor that made a person invest in mutual funds

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 92

LIMITATIONS There were certain limitations faced during the study.

 Some people were not willing to disclose the investment profile  .The biasness was being taken care of.

 The area of sample was decided after taking into consideration the major factors like  Availability of investors  Approachability,  Time available with investor for interaction, etc.

.

QUESTIONNAIRE ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 93

I am doing P.G.D.M at St Kabir Institute of Professional Studies (SKIPS) and this is to acknowledge that the following survey is purely for academic purpose. My project topic is about knowing the “Investors perception about investment in mutual funds”. The identity of the respondent will be kept confidential. And it does not carry any commercial value Name: ...……………………..

Occupation: ………………………

Phone: ...……………………..

(1) Age A.

22-30

B.

30-40

More than 40

(2)What is your annual income?

A.

Less than 2 lakh

B.

2 – 3 lakh

C. More than 3 lakh

(3) Do you invest in Mutual Funds?

A. Yes If No Then,

B. No

What is the most important reason for not investing in mutual funds?

A.Lack of knowledge about mutual funds

B. Enjoys investing in other options C. Its benefits are not enough to drive you for investment D. No trust over the fund managers

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 94

(4) Please rank the following investment instruments according to your preference. (On the basis of risk and return concept)

A. Fixed instrument

B. Mutual fund

C. Direct Equity

(5) What is your Average investment period?

(6)

A. Less than 6 months.

B. 6 to 12 months.

C. 12 months to 2 year.

D. More than 2 year.

Which are the primary sources of your knowledge about Mutual Funds as an investment option? Corresponding to your choices how would you rate their influence on your final Mutual Fund purchase decision. Please rank them on a scale of 1-5 with 1 representing minimal influence and 5 representing Strong influence.

Source: Television

1

2

3

4

5

Least Influential

Most Influential

Rank this source *Source: Internet 1

2

Least Influential

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

3

4

5 Most Influential

Page 95

Rank this source *Source: Newspaper 1

2

3

4

5

Least Influential Influential

Most

Rank this source *Source: Scholarly Journals / Articles 1

2

3

4

5

Least Influential Influential

Most

Rank this source *Source: Friends / Relations 1

2

3

4

5

Least Influential

Most Influential

(7) How much Risk are you willing to take?

A. Low

B. Moderate

C. High

(8) What is your preference in Mutual Funds?

A. Equity Funds

B. Income Funds

C. Money Market Funds

D. ELSS (Tax Saver)

E. Balanced Funds

F. SIP

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 96

(9) How much return do you expect from your Investments?

A. Up to 15%

B. 15%-25%

C. 25%-35%

D.More than 35%

(10) Which type of Mutual funds do you prefer?

A. Open Ended Schemes

B. Closed Ended Schemes

(11) Do you get influenced by the name of Company promoting Mutual

A.

Yes

B.

Funds?

No

(12) Rank the following companies according to your investment preference A. Reliance Mutual Fund

B. UTI Mutual Fund

C. SBI Mutual Fund

D. HDFC Mutual Fund

E. Birla Sun Life Mutual Fund

F.ICICI Prudential

G. Principal PNB

H. Franklin Templeton

(13) Do you get influenced by the returns given by a fund or by the current NAV of a fund?

A. By NAV

B. By Returns

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

C. By Both

Page 97

(14) Where do you find yourself as a mutual fund investor?

A. Totally ignorant

B. Partial knowledge of mutual funds

C. Aware only of any specific scheme in which you invested

D. Fully aware

(15) What is the major reason for using financial advisors?

A. Want help with asset allocation

B. Don’t have time to make my own investment decision

C. To explain various investment options

D. Want to make sure I am investing enough to meet my financial goals

(16) From where do you purchase mutual funds?

A. Directly from the AMCs

B. Brokers only

C. Brokers/ sub-brokers

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 98

D. Other sources

(17) Rank the following feature of the mutual funds that attracts you most.

(Where 1 is most preferable and 4th is less is preferable) A. Diversification

B. Professional management

C. Reduction in risk and transaction cost

D. Helps in achieving long term goals

(18) According to you which is the most suitable stage to invest in mutual funds?

A. Young unmarried stage

B. Young Married with children stage

C. Married with older children stage

D. Pre-retirement stage

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 99

BIBLIOGRAPHY http://www.amfiindia.com/

www.bseindia.com

www.nseindia.com

www.google.com www.birlasunlife.com

ST.KABIR INSTITUTE OF PROFESSIONAL STUDIES

Page 100