A Project Report on

Investors Perceptions Towards Investment in Mutual Funds

Submitted for partial fulfilment of award of MAST R I! "#SI! SS A$MI!ISTRATI%! In FI!A!& "' RIS(A"( )#PTA #!I*+ R%,, !%+ --./012/.34 !ame of )uide Prof+ Maninder 5aur

6# ST I!F%S7S8 F R%9 )A!$(I MAR5 T8 ,#$(IA!A AFFI,,IAT $ T% P#!:A" T &(!I&A, #!I* RSIT78 :A,A!$(AR ;./-.<./-2=

A&5!%>, $) M !T
The project report concept in M.B.A. curriculum is of immense utility to the students, project helps to assess the students ability to individually conceive, conceptualize, execute and present a life-li e project by ma in! use of the s ills ac"uired durin! the course of study. My #roject could not have been fruitful $ithout the able !uidance of Mrs+ Maninder 5aur+ % extend my deepest !ratitude to all the persons $ho !ave me full support durin! the project. &espite serious constraints of time and recourse, the study $as executed $ith sincerity and commitment. The report is characterized by its strai!ht for$ard, to the point approach, $ith bare minimal reproduction of the theory of finance research. A deliberate effort has been made to introduce novelty in the report.

Ris?ab? )upta --./012/.34

& RTIFI&AT
This is certifyin! that the project $or on 'Investors Perceptions towards Investment in Mutual Funds is based on the vie$s of the students. This project is submitted by Ris?ab? )upta a student of M+"+A. in 6uest Infos's8 ,#$(IA!A under my supervision. %t is further certified that this is benefited $or of the candidate and matter embedded in this project has not been submitted to any other university earlier for the a$ard of nay de!ree to the best of my no$led!e. The data source has been duly ac no$led!ed.

Mrs+ Maninder 5aur ;Project )uide=

$ &,ARATI%!

%, Ris?ab? )upta student of 6uest Infos's8 ,ud?iana here by state that the (esearch (eport entitled Investors Perception Towards Investment in

Mutual Fund submitted in partial fulfillment for the re"uirement of de!ree of Master
of Business Administration. %t is the ori!inal $or done by me and the information provided in the study is authentic to the best of my no$led!e. This study report has not been submitted to any other institution or university for the a$ard of any other de!ree.

Ris?ab? )upta M"A 0t? Sem+ 6uest Infos's8 ,ud?iana

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,hapter-Introduction

M#T#A, F#!$S
I!TR%$#&TI%!

*f late, mutual funds have become a hot favourite of millions of people all over the $orld. The drivin! force of mutual funds is the Csafety of the principal !uaranteed, plus the added advanta!e of capital appreciation to!ether $ith the income earned in the form of interest or dividend. #eople prefer Mutual 2unds to ban deposits, life insurance and even bonds because $ith a little money, they can !et into the investment !ame. *ne can o$n a strin! of blue chips li e %T,, T%7,*, (eliance etc., throu!h mutual funds. Thus mutual funds act as a !ate$ay to enter into bi! companies hitherto inaccessible to an ordinary investor $ith his small investment.

M A!I!)
A mutual fund collects the savin!s from small investors, invest them in ;overnment and other corporate securities and earn income throu!h interest and dividends, besides capital !ains. %t $or s on the principle of Bsmall drops of water maCe a biD ocean. 2or instance, if one has (s.-??? to invest, it may not fetch very much on its o$n. But, $hen it is pooled $ith (s.-??? each from a lot of other people, then, one could create a Cbi! fund lar!e enou!h to invest in a $ide varieties of shares and debentures on a commandin! scale and thus, to enjoy the economies of lar!e-scale operations. :ence, a mutual fund is nothin! but a form of collective investment. %t is formed by the comin! to!ether of a number of investors $ho transfer their surplus funds to a professionally "ualified or!anization to mana!e it. To !et the surplus funds from the investors, the fund adopts a simple techni"ue. /ach fund is divided into a small fraction called 'unitsD of e"ual value. /ach investor is allocated units in the proportion to the size of his investment. Thus, every investor, $hether bi! or small, $ill have a sta e in the fund and can enjoy the $ide portfolio of the investment held by the fund. :ence, mutual funds enable millions of small and lar!e investors to participate in and derive the benefit of the

capital mar et !ro$th. %t has emer!ed as a popular vehicle of creation of $ealth due to hi!h return, lo$er cost and diversified ris .

T?e Securities and

Ec?anDe "oard of India ;Mutual Funds= ReDulations8

-442 defines a mutual fund as a fund establis?ed in t?e form of a trust b' a sponsor8 to raise mone' b' t?e trustees t?rouD? t?e sale of units to t?e public8 under one or more sc?emes8 for investinD in securities in accordance wit? t?ese reDulations+

%RI)I! %F T( F#!$
The ori!in of the concept of mutual fund dates bac and caravans $ith a vie$ to spreadin! the ris to the very da$n of

commercial history. %t is said that /!yptians and #hoenicians sold their shares in vessels attached $ith these ris y ventures. :o$ever, the real credit of introducin! the modern concept of mutual fund !oes to the 2orei!n and ,olonial ;overnment Trust of 3ondon /stablished in -=8=. Thereafter, a lar!e number of close-ended mutual funds $ere formed in the +.7.A. in -B.?s follo$ed by many countries in /urope, the 2ar /ast and 3atin America. %n most of the countries, both open and close-ended types $ere popular. %n %ndia, it !ained momentum only in -B=?, thou!h it be!an in the year -B8> $ith the +nit Trust of %ndia launchin! its first fund, the +nit 7cheme -B8>. %n %ndia only mutual fund operatin! for a lon! time since -B8> $as the +T%. %t is an open-ended mutual fund, $hose units can be sold and repurchased at any time. %t is in the public sector, enjoyin! a monopoly position and some uni"ue tax benefits such as exemption from income-tax of its entire income. Althou!h the +T% has operated a number of schemes lin ed to insurance and !ifts, and some tax benefits, income declared by it to unit holders is not subject to any tax deduction at source and is exempt from income tax up to a limit. +T% $as alone in the field until -B=9. 7ince -BB5-B8, there is a T&7, if the annual income is more than (s. -?,???. Mutual 2unds have been set up since -B=9 by the public sector ban s follo$in! an amendment to the Ban in! (e!ulation Act in -B=., $hich empo$ered the (B% to permit the ban s to carry on non-ban in! business such as leasin!, mutual funds, etc. under section 8 of this act. 7ince then, the 7B%, ,anara Ban , #unjab )ational Ban and some other nationalized ban s have to set up their o$n mutual funds. The business of mutual funds has cau!ht the ima!ination of the financial community and is !ro$in! at a rapid pace in %ndia. These funds cater mainly to individual investors and small savers

(IST%R7 %F T( I!$IA! M#T#A, F#!$ I!$#STR7

The mutual fund industry in %ndia started in -B8. $ith the formation of +nit Trust of %ndia, at the initiative of the ;overnment of %ndia and (eserve Ban . The history of mutual funds in %ndia can be broadly divided into four distinct phases First P?aseF -410<A@ ;#TI= +nit Trust of %ndia E+T%F $as established on -B8. by an Act of #arliament. %t $as set up by the (eserve Ban of %ndia and functioned under the (e!ulatory and administrative control of the (eserve Ban of %ndia. %n -B9=, +T% $as de-lin ed from the (B% and the %ndustrial &evelopment Ban of %ndia E%&B%F too over the re!ulatory and administrative control in place of (B%. The first scheme launched by +T% $as +nit 7cheme -B8>. %t $as follo$ed by +3%# in -B9-, ,;;A in -B=8 and Master share in -B=9. Second P?ase F -4A@<-442 ; ntr' of Public Sector Funds= -B=9 mar ed the entry of non- +T%, public sector mutual funds set up by public sector ban s and 3ife %nsurance ,orporation of %ndia E3%,F and ;eneral %nsurance ,orporation of %ndia E;%,F. 7B% Mutual 2und $as the first non- +T% Mutual 2und established in 6une -B=9. 3%, established its mutual fund in 6une -B=B $hile ;%, had set up its mutual fund in &ecember -BB?. T?ird P?aseF -442<.//2 ; ntr' of Private Sector Funds= 1ith the entry of private sector funds in -BB., a ne$ era started in the %ndian mutual fund industry, !ivin! the %ndian investors a $ider choice of fund families. Also, -BB. $as the year in $hich the first Mutual 2und (e!ulations came into bein!, under $hich all mutual funds, except +T% $ere to be re!istered and !overned. The erst$hile Gothari #ioneer Eno$ mer!ed $ith 2ran lin TempletonF $as the first private sector mutual fund re!istered in 6uly -BB.. The number of mutual fund houses $ent on increasin!, $ith many forei!n mutual funds settin! up funds in %ndia and also the industry has $itnessed several mer!ers and ac"uisitions.

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 Fourt? P?ase F since Februar' .//2 %n 2ebruary 4??., follo$in! the repeal of the +nit Trust of %ndia Act -B8. +T% $as bifurcated into t$o separate entities. *ne is the 7pecified +nderta in! of the +nit Trust of %ndia $ith assets under mana!ement of (s.4B, =.5 crores as at the end of 6anuary 4??., representin! broadly, the assets of +7 8> scheme, assured return and certain other schemes. The 7pecified +nderta in! of +nit Trust of %ndia, functionin! under an administrator and under the rules framed by ;overnment of %ndia and does not come under the purvie$ of the Mutual 2und (e!ulations. The second is the +T% Mutual 2und 3td, sponsored by 7B%, #)B, B*B and 3%,. %t is re!istered $ith 7/B% and functions under the Mutual 2und (e!ulations. 1ith the bifurcation of the erst$hile +T% $hich had in March 4??? more than (s.98, ??? crores of assets under mana!ement and $ith the settin! up of a +T% Mutual 2und, conformin! to the 7/B% Mutual 2und (e!ulations, and $ith recent mer!ers ta in! place amon! different private sector funds, the mutual fund industry has entered its current phase of consolidation and !ro$th. As at the end of 7eptember, 4??>, there $ere 4B funds, $hich mana!e assets of (s.-5.-?= crores under >4- schemes.

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)R%>T( I! ASS TS #!$ R MA!A) M !T

-.

%rDaniGation of Mutual Fund

There are many entities involved and the dia!ram belo$ illustrates the or!anizatio nal set up of a mutual fundH -+ SponsorsF %t refers to any body corporate $hich initiates the launchin! of a mutual fund it is this a!ency $hich of its o$n if eli!ible or in collaboration $ith other body corporate complies the formalities of establishin! a mutual fund. The sponsor should have a sound trac record and experience in the relevant field of financial services for a minimum period of 5 years. 7/B% ensures that sponsors should have professional competence, financial soundness and !eneral reputation. /very mutual fund shall be re!istered under the said re!ulations and it is the sponsor $ho files an application. .+ TrusteesF A trustee is a person $ho holds the property of mutual fund in trust for the benefits of the unit holders. *nce the mutual fund trust is formed, the role of sponsor virtually becomes nil. The trustees are to perform the follo$in! dutiesH To mana!e the mutual fund in accordance $ith the la$s, re!ulations, directions and !uidelines issued by 7/B%, 7toc /xchan!es and other !overnmental and re!ulatory a!encies. To collect income due to be paid in respect of the schemes of mutual fund. 2+ Assets ManaDement &ompan';AM&=F Assets Mana!ement ,ompany is a body en!a!ed to run the sho$ of mutual fund. %t is body corporate $hose Memorandum and Articles of Associations are to be approved by

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the 7/B%. The sponsor or the trustees appoint AM, to mana!e the affairs of the mutual fund. The AM, performs the follo$in! functionsH To ta e reasonable steps and exercise due dili!ence to ensure that investments of scheme are as per the provisions of the re!ulations. To submit re!ular returns to the trustees re!ularly. To appoint the custodian. To appoint re!istrar and share transfer a!ents. 0+ &ustodiansF %n a mutual fund dependin! upon its size there is a substantial $or involved for mana!in! the scrips bou!ht from the mar et. 7/B% re"uires that each mutual fund shall have a custodian $ho is responsible for such a $or . To sum up the assi!nments of custodian areH /nsurin! delivery of scrips only on receipt of payment and payment only upon receipt of scrips. (e!ular reconciliation of assets to accountin! records. Timely resolution on discrepancies and failures. ;ettin! property re!istered or recorded. 3+ Transfer ADentF The transfer a!ent handles sales and redemptions of fund shares, maintains shareholder records, computes the )A0 daily, and handles dividend and capital !ains distributions. The transfer a!ent is usually a ban or trust company.

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>orCinD of a Mutual fund

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The fund mana!ers throu!h AM,s collect money from investors and invests in securities in various stoc exchan!es, as a result they returns and this benefit !enerated is passed bac to the investors.

RisC Return MatriE

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T7P S %F M#T#A, F#!$ S&( M S

%n the investment mar et, one can find a variety of investors $ith different needs, objectives and ris ta in! capacities. 2or instance, a youn! businessman $ould li e to !et more capital appreciation for his funds and he $ould be prepared to ta e !reater ris then a person $ho is just on the ver!e of his retirin! a!e. 7o, it is very difficult to offer one fund to satisfy all the re"uirements of investors. 6ust as one shoe is not suitable for all le!s, one fund is not suitable to meet the vast re"uirement of all investors. Therefore, many types of funds are available to the investor. %t is completely left to the discretion of the investor to choose any one of them dependin! upon his re"uirement and his ris ta in! capacity. Mutual 2und schemes can broadly be classified into many types as !iven belo$H

"7 STR#&T#R F -+ &lose<ended Funds +nder this scheme the corpus of the fund and its duration are prefixed. %n other $ords, the corpus of the fund and the number of units are determined in advance. *nce the subscription reaches the pre-determined level, the entry of the investors is closed. After the expiry of the fixed period, the entire corpus is disinvested and the proceeds are distributed to the various unit holders in proportion to their holdin!. 2eaturesH These units are publicly traded throu!h stoc exchan!e Eas stoc s areF and !enerallyI there is no repurchase facility by the fund. The main objective of this fund is capital appreciation. The $hole fund is available for the entire duration of the scheme and there $ill not be any redemption demands before its maturity. :ence, the fund mana!er can mana!e the investments efficiently and profitably $ithout the necessity of maintainin! and li"uidity.

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.+ %pen<ended Funds %t is just the opposite of close-ended funds. +nder this scheme, the size of the fund andJor the period of the fund is not pre-determined. The investors are free to buy and sell any number of units at any point of time. 2or instance, the unit scheme E-B8>F of the +nit Trust of %ndia is an open-ended one, both in terms of period and tar!et amount. Anybody can purchase this unit at any time and sell it also at any time at his discretion. 2eaturesH There is complete flexibility $ith re!ard to ones investment or disinvestment. These units are not publicly traded but, the 2und is ready to repurchase them and resell them at any time. The main aim of this fund is income !eneration The fund mana!er has to be very careful in mana!in! the investments because he has to meet the redemption demands at any time made durin! the life of the scheme.

"7 I!* SM !T %": &TI* F 2+ )rowt? Funds +nli e the income funds, ;ro$th 2unds concentrate mainly on lon! run !ains i.e. capital appreciation. They do not offer re!ular income and they aim at capital appreciation in the lon! run. :ence, they have been described as ')est /!!sD investments. 2eaturesH The investment strate!y conforms to the 2und objective by investin! the funds predominantly on e"uities $ith hi!h !ro$th potential. The fund tries to !et capital appreciation by ta in! much ris s and investin! on ris bearin! e"uities and hi!h !ro$th e"uity shares.

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 This is best suited to salaried and business people $ho have hi!h ris bearin! capacity. 0+ Income Funds As the very name su!!ests, this fund aims at !eneratin! and distributin! re!ular income to the members on a periodical basis. %t concentrates more on the distribution of re!ular income and it also sees that the avera!e return is hi!her than that of the income from ban deposits. 2eaturesH The investor is assured of re!ular income at periodic intervals, say half yearly or yearly and so on. The pattern of investment is oriented to$ards hi!h and fixed income yieldin! securities li e debentures, bonds etc. This is best suited to the old and retired people $ho may not have any re!ular income. 3+ "alanced Funds This is other$ise called 'income-cum-!ro$thD fund. %t is nothin! but a combination of both income and !ro$th funds. %t aims at distributin! re!ular income as $ell as capital appreciation. This is achieved by balancin! the investments bet$een the hi!h !ro$th e"uity shares and also the fixed income earnin! securities. 1+ Mone' MarCet Funds The aim of Money Mar et 2unds is to provide easy li"uidity, preservation of capital and moderate income. These schemes !enerally invest in safer short-term instruments such as Treasury Bills, ,ertificates of &eposit, ,ommercial #aper and %nter-Ban ,all Money. (eturns on these schemes may fluctuate dependin! upon the interest rates prevailin! in the mar et. These are ideal for corporate and individual investors as a means to par their surplus funds for short periods

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%T( R S&( M SF A+ TaE SavinD Sc?eme These schemes offer tax rebates to the investors under specific provisions of the %ndian %ncome Tax la$s as the ;overnment offers tax incentives for investment in specified avenues. %nvestments made in /"uity 3in ed 7avin!s 7chemes E/377F and #ension 7chemes are allo$ed as deduction under 7ection == of the %ndian %ncome Tax Act, -B8-. An investor is entitled to !et 4?K rebate in %ncome Tax for investments made under this fund subject to a maximum investment of (s. -?,??? p.a. 4+ IndeE Funds %ndex funds refer to those funds $here the portfolios are desi!ned in such a $ay that they reflect the composition of some broad based mar et index. This is done by holdin! securities in the same proportion as the index itself. The value of these index-lin ed funds $ill automatically !o up $henever the mar et index !oes up and vice versa. -/+ Sectoral Sc?emes 7ectoral 2unds are those $hich invest exclusively in a specified sectorEsF such as

2M,;, %nfoTech, #harmaceuticals, etc. These schemes carry hi!her ris as compared to !eneral e"uity schemes as the portfolio is less diversified, i.e. restricted to sector J industry.

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--+ ,everaDed Funds These funds are also called borro$ed funds since they are used primarily to increase the size of the value of the portfolio of a mutual fund. 1hen the value increases, the earnin! capacity of the fund also increases. -.+ $ual Funds This is special ind of closed end fund. %t provides a sin!le investment stoc s i.e. income shares and capital shares. opportunity

for t$o different types of investors. 2or this purpose, it sells t$o types of investment

-.+ "ond Funds These funds have portfolios consistin! mainly of fixed income securities li e bonds. The main thrust of these funds is mostly on income rather than capital !ains.

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IMP%RTA!& %F M#T#A, F#!$S

The mutual fund industry has !ro$n at a phenomenal rate in the recent past. *ne can $itness a revolution in the mutual fund industry in vie$ of its importance to the investors in !eneral and the countrys economy at lar!e. The follo$in! are some of the important advanta!es of mutual fundsH -+ &?annelisinD SavinDs for InvestmentF Mutual funds act as a vehicle in !alvanizin! the savin!s of the people by offerin! various schemes suitable to the various classes of customers for the development of the economy as $hole. %n the absence of Mfs, these savin!s $ould have remained idle. Thus, the $hole economy benefits due to the cost efficient and optimum use and allocation of scarce financial and real resources in the economy for its development. .+ %fferinD >ide Portfolio InvestmentF %nvestors can enjoy the $ide portfolio of the investment held by mutual fund. The fund diversifies its ris s by investin! on a lar!e variety of shares and bonds, $hich cannot be done by small and medium investors. This is in accordance $ith the maxim C not to la' all eDDs in one basCet. Thus Mfs provide instantaneous portfolio diversification. The ris diversification $hich a pool of savin!s throu!h mutual funds can achieve cannot be attained by a sin!le investors savin!s. 2+ ProvidinD "etter 7ieldsF The poolin! of funds from a lar!e number of customers enables the fund to have lar!e funds at its disposal. &ue to these lar!e funds, mutual funds are able to buy cheaper and sell dearer than the small and medium investors. Thus they are able to command better mar et rates and lo$er rates of bro era!e. 7o they provide better yields to their customers. ..

0+ RenderinD Epertise Investment Service at ,ow &ostF The mana!ement of fund is !enerally assi!ned to professionals $ho are $ell trained and have ade"uate experience in the field of investment. The investment decisions of these professionals are al$ays bac ed by informed jud!ment and experience. 1+ ProvidinD Researc? ServiceF A mutual fund is able to command vast resources and hence it is possible for it to have an in depth study and carry out research on corporate securities. /ach fund maintains a lar!e research team $hich constantly analyzes the companies and the industries and recommends the fund to buy or sell a particular share. Thus investments are made purely on the basis of a throu!h research. @+ %fferinD TaE "enefitsF ,ertain funds offer tax benefits to its customers. Thus apart from dividends, interest and capital appreciation, investors also stand to !et the benefit of tax concession. Mutual funds themselves are totally exempt from tax on all income on their investments. @+ IntroducinD FleEible Investment Sc?eduleF 7ome mutual funds have permitted the investors to exchan!e their units from one scheme to another scheme and this flexibility is a !reater boom to investors. %ncome units can be exchan!ed for !ro$th units dependin! upon the performance of the funds. *ne cannot derive such flexibility in any other investments. A+ ProvidinD )reater Affordabilit' and ,iHuidit'F /ven a very small investor can afford to invest in mutual funds. They provide an attractive and cost effective alternative to direct purchase of share. %n the absence of Mfs,

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small investors cannot thin of participatin! in a number of investments $ith such a mea!re sum. There is !reater li"uidity. +nits can be sold to the fund at any time at the net asset value and thus "uic access to li"uid cash is assured. 4+ Simplified Record 5eepinDF An investor $ith just an investment in 5?? shares or so in . or > companies has to eep proper records of dividend payments, bonus issues, price movements, purchase or sale instruction, bro era!e and other related items. %t is very tedious and consumes a lot of time. Thus record eepin! is the bi!!est problem for investors. The investor has to eep a record of only one deal $ith the mutual fund. The M2s sends statements very often to the investor. -/+ SupportinD &apital MarCetF Mutual funds play a vital role in supportin! the development of capital mar ets. The mutual funds ma e the capital mar et active by means of providin! a sustainable domestic source of demand for capital mar et instruments. %n other $ords, the savin!s of the people are directed to$ards investments in capital mar ets throu!h these mutual funds. --+ PromotinD Industrial $evelopmentF The economic development of any nation depends upon its industrial advancement and a!ricultural development. All industrial units have to raise their funds by resortin! to the capital mar et by the issue of shares and debentures. The mutual fund not only create a demand for these capital mar et instruments but also supply a lar!e source of funds to the mar et, and thus, the industries are assured of their capital re"uirements.

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-.+ ActinD as substitute for Initial Public %fferinDs ;IP%s=F %n most cases investors are not able to !et allotment in %#*s of companies because they are often oversubscribed many time. Moreover, they have to apply for a minimum of 5?? shares, $hich is very difficult particularly for small investors. But, in mutual funds, allotment is more or less !uaranteed mutual funds are also !uaranteed a certain percenta!e of %#*s by companies.

-2+ ReducinD t?e MarCetinD &ost of !ew IssuesF Moreover the mutual funds help to reduce the mar etin! cost of ne$ issues. The promoters used to allot a major share of the %nitial #ublic *fferin! to the mutual funds and thus they are saved from the mar etin! cost of such issues. -0+ 5eepinD t?e Mone' MarCet ActiveF An individual investor cannot have any access to money mar et instruments since the minimum amount of investment is out of his reach. *n the other hand mutual funds eep the money mar et active by investin! money on the money mar et instruments.

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Important terms associated wit? Mutual funds

! T ASS T *A,# ;!A*=

The repurchase price is al$ays li ed to the )et #resent 0alue E)A0F. The )A0 is nothin! but the mar et price of each unit of a particular scheme in relation to all the assets of the scheme. %t can other$ise be called 'the intrinsic valueD of each unit. This value is a true indicator of the performance of the fund. %f the )A0 is more then the face value of the unit, it clearly indicates that the money invested on that unit has appreciated and the fund has performed $ell. Illustration 2or instance, 2ortune Mutual 2und has introduced a scheme called Millionaire 7cheme. The scheme size is -?? crores. The value each unit is (s. -?J-. %t has invested all the funds in shares and debentures and the mar et value of the investment comes to (s. 4?? crores. !A*L Mar et 0alue of Assets - 3iabilities
+nits *utstandin!

4?? crores )o$ )A0 L -------------- x 0alue of each unit -?? crores L 4 x -? L 4?

Thus, the value of each unit of (s. -?J- is $orth (s. 4?. :ence the )A0 L (s.4? This )A0 forms the basis for fixin! the repurchase price and reissue price. The investor can call up the fund any time to find out the )A0. 7ome M2s publish the )A0 $ee ly in t$o or three leadin! daily ne$spapers.

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,oad
%t is a char!e collected by a mutual fund $hen it sells units. %t can be either front-end loadJentry load Ei.e., the char!e is collected $hen an investor buys the unitsF or bac -end loadJexit load Ei.e, the char!e collected $hen the investor sells bac the unitsF. 7ome schemes do not char!e any load and are called )o 3oad 7chemes.

&ontinDent deferred sales c?arDe ;&$S&=

A bac -end load that is imposed upon an investor if he exits from the fund before a predetermined period Esay . monthsF.The char!es decline as lon! as the investor stays in the fund.

Portfolio
A portfolio comprises of investments in a variety of securities and asset classes. This diversification reduces the overall ris . The portfolio ris depends on the nature of each investment in the portfolio and the overall impact Efavourable or unfavourableF of the various ris factors on each security. A mutual fund scheme states the ind of portfolio it see s to construct as $ell as the ris s involved under each asset class.

Funds net assets

The total value of a fundMs cash and securities less its liabilities or obli!ations.

ReDistrar
A (e!istrar holds and maintains the details of the transactions carried out by each +nit holder in a Mutual 2und scheme. :e is appointed by the AM, to serve the +nit holder for the purchases, sales or s$itchin! of +nits that he may carry out. The dividend distribution, recordin! of nominations or transfers is some other services rendered by the (e!istrar. :e may also have %nvestor 7ervice ,entres in various cities, $here an investor can !et over-the-counter service.

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Epense ratio
The expense ratio for a fund is the annual expenses of a fund Eat the end of the financial yearF, includin! the mana!ement fee, administrative costs, divided by the number of units on that day.

Statement of account
%t is the statement sho$in! the complete portfolio of an investor re!ardin! investment in the mutual fund scheme. %t also sho$s its current $orth of holdin!s.

Sales Price
The price or )A0 a +nit holder is char!ed $hile investin! in an open-ended scheme is called sales price. %t may include sales load, if applicable.

Repurc?aseIRedemption price
(epurchase or redemption price is the price or )A0 at $hich an open-ended scheme purchases or redeems its units from the +nit holder. %t may include exit load, if applicable.

RisCs eEposed to w?ile investinD in Mutual Funds

MarCet risC - %f the overall stoc or bond mar ets fall on account of macro economic factors, the value of stoc or bond holdin!s in the fundMs portfolio can drop thereby impactin! the )A0.

!on<marCet risC < Bad ne$s about an individual company can pull do$n its stoc price, $hich can affect, ne!atively, funds holdin! a lar!e "uantity of that stoc . This ris can be reduced by havin! diversified portfolio that consists of a $ide variety of stoc s dra$n from different industries.

Interest rate risC - Bond prices and interest rates move in opposite directions. 1hen interest rates rise, bond prices fall and this decline in underlyin! securities

.A

affects the )A0 ne!atively. The extent of the ne!ative impact is dependant on factors such as maturity profile, li"uidity etc.

&redit risC - Bonds are debt obli!ations. 7o $hen the funds invest in corporate bonds, they run the ris of the corporates defaultin! on their interest payment and the principal payment obli!ations and $hen that ris crystallises it leads to a fall in the value of the bond causin! the )A0 of the fund to ta e a beatin!.

RI)(TS AS A M#T#A, F#!$ #!IT (%,$ R

+nit holders are entitled toH (eceive unit certificates or statements of accounts confirmin! title $ithin thirty days from the date of closure of the subscription under open-end schemes or $ithin 8 $ee s from the date of re"uest for a unit certificate is received by the mutual fund. (eceive information about the investment policies, investment objectives, financial position and !eneral affairs of the scheme. (eceive dividend $ithin .? days of their declaration and receive the redemption or repurchase proceeds $ithin -? days from the date of redemption or repurchase. 0ote in accordance $ith the re!ulations toH -. ,han!e the Asset Mana!ement ,ompanyI 4. 1ind up the scheme. To receive communication from the Trustees about chan!e in the fundamental attributes of any scheme or any other chan!es $hich $ould modify the scheme and affect the interest of the unit holders and to have a option to exit at prevailin! )et Asset 0alue $ithout any exit load in such cases. %nspect the documents of the mutual funds specified in the schemes offer document.

.4

 ,iHuidit' %f $e find ourselves in need of money in a short amount of time, mutual funds are hi!hly li"uid. 7imply put in our order durin! the day and $hen the mar et closes a chec $ill be sent to us or $e can have it $ired to a ban account. 7toc s can be much more difficult dependin! on $hat inds of stoc s $e are invested in. ,&Ms offer no li"uidity Enot $ithout a hefty feeF and bonds can be difficult, too. 7ome mutual funds also carry chec -$ritin! privile!es, $hich means $e can actually $rite chec s from the account, similar to our chec in! account at the ban . &ost Mutual funds are excellent for the ne$ investors because $e can invest small amounts of money and $e can invest at re!ular intervals $ith no tradin! costs. 7toc investin!, ho$ever, carries hi!h transaction fees ma in! it difficult for the small investor to ma e money. %f an investor $anted to put in N-?? a month into stoc s and the bro er char!ed N-5 per transaction, their investment is automatically do$n -5 percent every time they invest. That is not a !ood $ay to start offO RisC %n !eneral, mutual funds carry much lo$er ris than stoc s. This is primarily due to diversification. ,ertain mutual funds can be ris ier than individual stoc s. 1ith stoc s, one $orry is that the company $e are investin! in !oes ban rupt. 1ith mutual funds, that chance is next to nil. 7ince mutual funds typically hold any$here from 45-5??? companies, all of the companies that it holds $ould have to !o ban rupt.

2/

,IMITATI%!S %F M#T#A, F#!$S

Funds are not risC<freeF %t is possible that $e could lose money. $istributions are taEableF $e $ill o$e taxes on any dividend or capital !ain distributions from the fund portfolio in the year they are received, even if the distribution is reinvested. Fees and eEpenses are involvedF 7ome fund companies can impose loads Ethese are sales char!esF or other char!es, li e redemption fees, -4b-- fees Ean advertisin! and distribution feeF, lo$ balance account fees or custodial ban fees. T?e >isdom of Professional ManaDement+ The avera!e mutual fund mana!er is no better at pic in! stoc s than the avera!e non-professional. !o &ontrol+ +nli e pic in! individual stoc s, a mutual fund puts in the passen!er seat of somebody elseMs car. $ilution+ Mutual funds !enerally have such small holdin!s of so many different stoc s that insanely !reat performance by a fundMs top holdin!s still doesnMt ma e much of a difference in a mutual fundMs total performance. "uried &osts+ Many mutual funds specialize in buryin! their costs and in hirin! salesmen $ho do not ma e those costs clear to their clients.

2-

RIS5S
Mutual funds are not free from ris s. %t is so because basically the mutual funds also invest their funds in the stoc mar et on shares, $hich are volatile in nature and are not ris free. :ence, the follo$in! ris s are inherent in their dealin!sH -+ MarCet RisCsF %n !eneral, there are certain ris s associated $ith every ind of investment on shares. They are called mar et ris s. These mar et ris s can be reduced, but cannot be completely eliminated even by a !ood investment mana!ement. The prices of shares are subject to $ide price fluctuations dependin! upon mar et conditions over $hich no body has a control. Moreover, every economy has to pass throu!h a cycle- boom, recession, slump and recovery. The phase of the business cycle affects the mar et conditions to lar!er extent. .+ Sc?eme RisCsF There are certain ris s inherent in the scheme itself. %t all depends upon the nature of the scheme. 2or instance, in a pure !ro$th scheme, ris s are !reater. %t is obvious because if one expects more returns as in the case of a !ro$th scheme, one has to ta e more ris s. 2+ Investment RisCsF 1hether the mutual fund ma es money in shares or loses depends upon the investment expertise of the Asset Mana!ement ,ompany EAM,F. %f the investment advice !oes $ron!, the fund has to suffer a lot. The investment expertise of various funds is different and it is reflected on the returns $hich they offer to investors. 0+ "usiness RisCsF The corpus of the mutual fund mi!ht have been invested in a companys shares. %f the business of that company suffers any set bac , it cannot declare any dividend. %t may

2.

even !o to the extent of $idin! up its business. Thou!h the mutual fund can $ithstand such a ris , its income payin! capacity is affected. 3+ Political RisCsF 7uccessive ;overnments brin! $ith them fancy ne$ economic ideolo!ies and policies. %t is often said that many economic decisions are politically motivated. ,han!es in ;overnment brin! in the ris of uncertainty $hich every player in the financial service industry has to face. 7o mutual funds are no exception to it.

22

F#T#R %F M#T#A, F#!$ I!$#STR7

There $ill be a lot of product innovationI customization and a lot of hed!in! products $ill come. (etail participation $ill increase but that $ill be throu!h pension and insurance assets comin! in. There $ill be !reater transparencyI technolo!y $ill drive do$n cost and the speed of the transaction. The a$areness of mutual fund products amon! the investin! public has considerably increased. The ey objective $hile sellin! products has to be focused on ris s rather than on returns. ;ro$th for the fund houses depends on their capacity to spread out and mar et their schemes at urban and semi-urban places. 7o more consideration has been !iven to solicit subscriptions from small investors. There $ill be the advent of more sophisticated products in various asset classes in the times to come. ,ompetition $ill stay and $ill !ro$ stron!er $ith time. *n the overall returns front, the dominant asset class is still debt. 7o, the debt mar et may !ro$ at 5-8K. The total debt mar et covered by mutual funds cannot !ro$ beyond 5-8K. (eal !ro$th can be there in the e"uity sector but that is subject to political and mar et situations. Most e"uity funds have !iven a 9?-B?K return and some may be even -??K in the last one year.

20

 (eturns are related to the state of the financial mar ets. %nvestors have also started realizin! that a mutual fund $ill be doin! a !ood job so lon! as it !ives mar etrelated rates of return.

23

I!* ST%RS P R& PTI%!

Theres an interestin! analo!y bet$een the $ay people drive and the $ay they invest money. %mpatient drivers in traffic jams often pay lots of attention to $hat lane they are in and ho$ the other traffic lanes are doin! compared to theirs. %f the other lane loo s li e it is movin! faster, they often $ill s$erve over to cut in front of somebody else. 7ome people do this repeatedly, ta in! every openin! they can find to !et any sli!ht advanta!e for themselves. Those drivers may indeed !ain a fe$ seconds. But in the process, they escalate the levels of dan!er and annoyance to them and everybody around them. %n investment terms, they ta e on much more ris in return for uncertain !ains. ;reatest road bloc to successful lon!-term investin! is impatience, and this applies e"ually to buy-and-hold investors as $ell as those $ho use mar et timin!. %mpatient investors $atch the mar et from day to day li e a ha$ . %n their zeal to al$ays be Pon top,P these people rarely !ive any investment or strate!y enou!h time to perform ade"uately. A tradition for many investors is loo in! up their stoc s and funds every sin!le day. 7ome supposedly lon!-term investors even call their bro ers or loo up stoc prices electronically several times each tradin! dayO This added information really does lon!-term investors no !ood and it ma es it much harder to stic to a lon!-term focus. #atient investors $ho ma e investments and stic $ith them for years or decades, $ith or $ithout mar et timin!, arenMt li ely to have excitin! anecdotes to share at parties. But they are more li ely to retire comfortably. And they are more li ely to sleep $ell alon! the $ay and be able to devote their attention to other thin!s in life. These people may seem unexcitin!. As investors $e can choose every day from thousands of mutual funds, thousands of mana!ers, thousands of individual stoc s and thousands of other products and plans.

21

&?apter< .
Review of ,iterature

2@

R *I > %F ,IT RAT#R

(esearch in Mutual fund industry has !ro$n to a considerable extent. A number of ey #apers has been $ritten explorin! the different aspects but still some areas are under study such as ho$ to rate the different Assest Mana!ement ,ompanies, ho$ to desi!n assured return products, ho$ the investors ma in! investment in mutual 2unds, 1hat are the moderatin! variables in customers decision ma in! re!ardin! Mutual fundQ Are these factors have become factors for investors. This part revie$s precedin! $or s attemptin! to ans$er these issues. Most research on mutual funds has employed t$o explanatory variables, namely ,ris and return. This approach implicitly places no value on other potentially important attributes of mutual fund investment decision. %n eepin! $ith this strictly economic frame, several scholars have investi!ated $hether or not mutual funds outperform the mar et. ReviewsF &?andel J 5umar J et al ;.//4=8 %n their study of #nderstandinD RisC And Returns In Mutual Funds Investments examined the performance of mutual funds in terms of different measure viz .ris and return, beta, 6ensens alpha, 7harp index, coefficient values and t-values the performance of e"uity fund scheme has revealed that Birla 7un 3ife and 2ran lin %ndia is sho$in! more return in net asset value, as compared to avera!e return in %,%,% #rudential and 7B% Ma!num. 5umar J S?arma ;.//4=,%n their of Mutual FundF< EpandinD (oriGon study the trend prevailin! in %ndia mutual fund industry @ study the effect off 2%%s@ mutual fund on 7ensex @ found the conclusion that 2%% affect the sensex si!nificantly due to lar!e number of 2%%s and hu!e amount of investment by them 1here as mutual funds is less si!nificant due to small numbers and small amount of investment compared of 2%%s. PaniDra?i J PraCas? ;.//4= %n their study of 'Investors c?oices of Mutual Funds and t?eir sc?emes K a stud' of inter fund variations in returns found the importance 2A

of different factors on $hich investors choices of Mutual 2unds depends. They also find in their study that the returns of public and private funds, ta en to!ether as $ell as separately differ si!nificantly and there is no set patten of rise and fall of returns of either public or private funds. Arc?ana +R J Salma S?aja?an;.//A= %n their study of A stud' on Factors influencinD t?e investment on Mutual Fund found that the safe ,ris and hi!h return li"uidity , tax benefit, are sound to be the major factor influencin! the investment decision in mutual fund ,onsistent return and availability of fund are the other important factors that investors loo in funds. "anarjee J&?aCrabarti et al;.//A= %n their study of Persistence in performance of Indian eHuit' mutual fundsF< An empirical investiDation evaluated the relative performance of e"uity mutual funds in %ndia $ith respect to three performance indicators, namely, ra$ returns, the trac in! errors they !enerate over their benchmar s , and the information ratios they attain. &?ander;.//A= %n this study of ' mpirical vidence on Indian Fund ManaDers

MarCet TiminD and StocC Selection Abilities discovered insatances of performance variability on mar et timin!s as $ell as stoc selection across the measurement criteria. These findin!s have $ider ramification for the capital mar et theory as $ell for the mar et participants. &?oud?ar'8 ;.//A= %n his study of 'T?e components of investment performance of fund manaDers< vidence from Indian capital marCet examined the components of investment performance of investment mana!ers, mar et timin! stoc selection,ris bearin! and diversification, in %ndia durin! the period 6anuary -BB= to &ecember 4??5 by employin! te Treynor and Mazuya E-B88F and 2ama E-B94F performance measures. 5umar JSudalaimut?u ;.//A= '%n their study of Investors perception towards mutual funds investment effectively analyzed the perception of investors to$ards

24

mutual fund investments effectively ta in! into account the investors reference to$ards mutual fund sector, schemes type, investors opinion on factors influenced to invest in mutual funds, investors satisfaction level to$ards various motivatin! factors source of a$areness of mutual fund scheme and type of paln held by investors. Mittal J *'as ;.//A= , %n their study of '$oes investors psc'c?oloD' affect investment decision found that the over and above the objective and constraints os investors behavioral aspect of investin! paly an inte!ral role in an individual perception of ris .The research found that the investors became ris see in! and avoid sellin! securities $hen faced $ith a loss, they place investment into separate mental accounts and their decision adversely affected by !reed and fear. Pande'8 ;.//A= %n his study of Performance appraisal of s?are ?oldinD in mutual fund industr' in india found that the behavior of savin! in india durin! the reform period proved to be an improvement in financial savin!, $hich provide an opportunity for diversification across financial assests and emer!ence of mar etable return $evasenat?ipati J Saleendran et al ;.//@= , %n their study of Awareness and Perception of people towards Mutual Funds at a &oimbatore &it' found the various factors affectin! investors behavior to$ards investment in mutual funds and satisfaction level of investors from different factors related to mutual fund investment li e rate of return, tax consideration factors, safety.

SinD? J SinDla ;-44A= %n their study of $eterminants of mutual fund performance8 a factor anal'sis approac? used different factors such as correlation matrix analysis, fundamental factor, mar et performance factor , #rofitability factor @ !ro$th factor to study the variation in different mutual funds performance over a specific period of time

0/

,hapter- .
%bjectives

0-

%": &TI* S

-. To study the investor a$areness to$ards mutual fund. 4. To no$ the factors considered by investors $hile investin! in a mutual fund. .. To assess the satisfaction level of mutual fund investors and reasons for their dissatisfaction. >. To no$ the comparative preference of investors to$ards mutual funds and investment in stoc mar et directly. 5. To explore the prospect of mutual funds in %ndia.

0.

,hapter->
Researc? Met?odoloD'

02

R S AR&( M T(%$%,%)7
Researc? $esiDn
(esearch &esi!n is a series of advanced decisions that ta en to!ether comprise a master plan or model for the conduct of an investi!ation. 7o research desi!n provides a frame$or of plan for study $hich !uides the collection, measurement, analysis and interpretation of the data. The desi!n in my project is descriptive.

$ata collection Met?od

Source of data collection Both primary and secondary data has been used. #rimary source of data includes personal intervie$s as $ell as structured "uestionnaire. 7econdary source of data included the use of boo s, journals, brouchers and internet services.

#niverse
The universe for the survey included all the investors investin! in Mutual 2unds in Ludhiana ,ity.

SamplinD Plan
SamplinD unit The tar!et population included Business class, 7ervice class, #rofessionals $ho had invested in Mutual 2unds. Sample SiGe The sample size has been -// respondents. 00

SamplinD Tec?niHue The samplin! techni"ue $as non-probability convenience samplin! techni"ue

$ata Anal'sis and Interpretation

The data has been processed and analyzed by tabulation interpretation so that the findin!s can be communicated and can be easily understood. The findin!s are presented in the best possible $ay. Tables and !raphs have been used for illustration of principal findin!s of the research.

03

,IMITATI%!S %F T( ST#$7
The paucity of time and resources $as the major constraints. The sample size $as limited. The sample $as ta en from the population residin! in 3udhiana only, so the results are not applicable to $hole of %ndia. )on co-operation of some respondents has also affected the research results. Bein! an opinion survey a lot of subjectivity is involved in the study. The possibility of respondents bein! biased cannot be ruled out.

01

,hapter- 5
$ata Anal'sis J Interpretation

0@

$ATA A!A,7SIS A!$ I!T RPR TATI%!

-+ To Cnow t?e investors CnowledDe about t?e Mutual Fund+

Table 3+-F 5nowledDe about t?e Mutual Fund 5nowledDe 0ery ;ood ;ood Avera!e #oor 0ery #oor LaDe of Respondents 9K 44K 85K 5K -K

3L -L

@L ..L

Very Good Good Average Poor

13L

Very Poor

0A

)rap? 3+-F 5nowledDe about t?e Mutual Fund InferenceF %t $as attempted to understand from the investors their no$led!e of Mutual 2unds. %t $as found that 85K of the investors said that they ran their understandin! about Mutual 2unds as avera!e. 1hile 9K of the investors rated their understandin! as very !ood.

.+ To Cnow t?e percentaDe of investors w?o ?ave also invested in StocCs

Table 3+.F Investment in stocCs Response <es )o LaDe of Respondents 8BK .-K

2-L Yes No

14L

)rap? 3+.F Investment in stocCs

04

InferenceF 2rom the above data it is clear that 8BK of the investors have invested in stoc s as $ell as in Mutual 2unds. %t implies that the investors have retained their numero uno position by investin! directly in shares also.

2+ To Cnow t?e confidence level in terms of maCinD investments in StocCs and Mutual Funds+
Table 3+2 ;a=F &onfidence level in terms of maCinD investment in stocCs ,evel of &onfidence :i!h Moderate 3o$ LaDe of Respondents -=K 88K -8K

16%

18%
High Moderate Low

66%

)rap? 3+2 ;a=F &onfidence level in terms of maCinD investment in stocCs InferenceF it $as attempted to no$ the level of confidence an investor has in Mutual 2unds and the stoc mar et. 88K of the total investors demonstrated moderate confidence level in ma in! investments in stoc mar et. *nly -=K of the investors demonstrated hi!h level of confidence in optin! for stoc mar et. %t implies that the

3/

investors have retained moderate level of confidence in stoc s and the hi!h return they expect from their portfolios.

Table 3+2 ;b=F &onfidence level in terms of maCinD investment in Mutual Funds

,evel of &onfidence :i!h Moderate 3o$

LaDe of Respondents 4?K 9-K BK

4L

./L High Moderate Low

@-L

)rap? 3+2 ;b=F &onfidence level in terms of maCinD investment in Mutual Funds

InferenceF (e!ardin! mutual funds, 9-K of the investors said that they have moderate confidence level in terms of ma in! investments in mutual funds. 1hile only 4?K of the investors demonstrated hi!h level of confidence in optin! for mutual funds. %t implies that even in mutual funds they are ready to par their money $hich promise hi!h returns.

3-

0+ To Cnow t?e percentaDe of Mutual Fund investment out of t?e total investment of t?e respondents+
Table 3+0F PercentaDe of Mutual Fund investment out of t?e total investment of t?e respondents Amount ;Rs+= 3ess than -?K -?K-4?K 4?K-.?K .?K->?K >?K-5?K Above 5?K LaDe of Respondents -?K 5K ..K 49K -9K =K

AL -@L

-/L

3L

Less than 10% 10%-20% 20%- 0% 0%-!0%

22L .@L

!0%-"0% A#ove "0%

3.

)rap? 3+0F PercentaDe of Mutual Fund investment out of t?e total investment of t?e respondents

InferenceF The above data sho$s that mutual fund investment comprises 4?K->?K of the total investment for 8?K of the investors. %t implies that it is becomin! a substantial part of the total investment of the investors. 3+ To Cnow t?e time ?oriGon to Ceep investment in Mutual Fund+ Table 3+3F Time ?oriGon to Ceep investment in Mutual Fund Time (oriGon +p to - <ear -<ear - .<ears .<ears - 5<ears Above 5 <ears LaDe of Respondents 4.K 5>K -8K 9K

32

$% 16%

2 %
%& to 1 Year 1Year- Years years-"Years A#ove "years

"!%

)rap? 3+3F Time ?oriGon to Ceep investment in Mutual Fund InferenceF As this "uestion aimed at !ettin! the information re!ardin! the time horizon for $hich the people are investin! their money in mutual funds, $e can see that 5>K of the investors said that they $ould prefer to eep their investment in mutual funds for --. years $hile 4.K preferred to par their money in mutual funds for a period of - year. 1hile only 9K are interested for a period above 5 years. -8K investors preferred for a period of . to 5 years. %t implies that investors are interested to eep investment for an avera!e period in mutual funds. 1+ To Cnow t?e micro factors8 influencinD t?e Mutual Fund

investment+
Table 3+1F Micro factors influencinD t?e Mutual Fund Investment Factors 2und Mana!ers 2riendsJ(elatives 2inancial AdvisorsJ,A #ersonal AnalysisJ#erception LaDe of Respondents 4?K ..K 48K 4-K

30

)rap? 3+1F Micro factors influencinD t?e Mutual Fund Investment

InferenceF The above data sho$s that micro factors influenced by friends and relatives had major influence $ith ..K of the investors preferrin! to invest at recommendations made by their friends and relatives, $hile 48K of the investors depended on the recommendations of their financial advisors. 4-K of the investors !ave more importance to their o$n analysis and perception and 4?K of the investors thou!ht that fund mana!ers ima!e has !ot a major role to play $hile ma in! mutual fund investment @+ To Cnow t?e macro factors influencinD Mutual Fund Investment+ Table 3+@F Macro factors influencinD Mutual Fund investment FactorIRanC (eturn 7afety of %nvestment Tax Benefits 3i"uidity 54K 4=K -.K 9K . 4BK .?K 4>K -9K 2 -9K -4K -BK 54K 0 4K .?K >>K 4>K

)rap? 3+@F Macro factors influencinD Mutual Fund investment

InferenceF The above data sho$s that investors !ive maximum importance to return and safety $hile ma in! investment in mutual funds. Tax benefits and li"uidity are the factors that do not ma e much influence on the investors decision.

A+ To Cnow t?e sc?emes in w?ic? respondents ?ave invested+

33

Table 3+AF Sc?emes in w?ic? respondents ?ave invested Sc?emes %ncome 7cheme ;ro$th 7cheme Balanced 7cheme Monthly %ncome #lan Any *ther LaDe of Respondents 4>K .9K ->K 4?K 5K

3L .0L ./L
'n(o)e *(he)e Growth *(he)e +a,an(ed *(he)e Month,y 'n(o)e P,an Any -ther

-0L

2@L

)rap? 3+AF Sc?emes in w?ic? respondents ?ave invested

InferenceF The above data sho$s that maximum investors i.e. .9K are investin! in !ro$th schemes. This is because investors $ant to !et maximum returns by ta in! benefit of the present share mar et boom. %ncome schemes and monthly income plans are very popular amon! the old a!e investors and ris averters.

31

4+ To Cnow t?e freHuenc' of monitorinD fund performance+ Table 3+4F FreHuenc' of monitorinD fund performance FreHuenc' &aily 1ee ly 2ortni!htly Monthly )one LaDe of Respondents -4K 4BK 44K .-K 8K

1L

-.L

.ai,y 2-L .4L /ee0,y 1ortnight,y Month,y None

..L

)rap? 3+4F FreHuenc' of monitorinD fund performance

InferenceF The fre"uency of monitorin! the investment in funds is a representative of the a$areness level of the investors. The above data sho$s that the 4BK of the investors

3@

monitor their investments on $ee ly basis. 44K of the investors monitor at fortni!htly basis and -4K monitor it on the daily basis.

-/+ To Cnow t?e media t?rouD? w?ic? t?e respondents Det t?e

information about new sc?emes+

Table 3+-/F Media t?rouD? w?ic? t?e respondents Det t?e information about Media #rint MediaJ3atest )e$s /lectronic Media #amphlets :oardin!sJBillboards !ew sc?emes LaDe of Respondents 58K 49K --K 8K

--L

1L

Print Media2Latest New s 3,e(dtroni( Media Pa) &h,ets Hoardings2+i,,#oards

.@L

31L

)rap? 3+-/F Media t?rouD? w?ic? t?e respondents Det t?e information about new sc?emes

3A

InferenceF The above data sho$s that 58K of the respondents said that the print media is the major influencin! factor. /lectronic media $as second $ith only 49K of the investors callin! it an influencin! a!ent.

--+ To Cnow t?e satisfaction level of Mutual Fund investors and

reasons for t?eir dissatisfaction+

Table 3+-- ;a=F Satisfaction level of Mutual Fund investors Response <es )o LaDe of Respondents =.K -9K

-@L

Yes No

A2L

)rap? 3+-- ;a=F Satisfaction level of Mutual Fund investors

34

InferenceF 2rom the above data it is very clear that only -9K respondents are not satisfied $ith their investments $hile =.K respondents feel contented $ith their decision of investin! in mutual funds.

Table 3+-- ;b=F Reasons for t?e dissatisfaction amonD t?e Mutual Fund investors

Response 3o$ %ncome 3on!er (edemption #eriod #oor After 7ales 7ervice Better #ayin! Avenues in the Mar et Attitude of the Bro er

LaDe of Respondents ? 4K BK 8K ?

0 0 2 6 Low 'n(o)e Longer 5ede)&tion Period Poor A6ter *a,es *ervi(e +etter Paying Aven7es 'n the Mar0et Attit7de o6 the +ro0er

)rap? 3+-- ;b=F Reasons for t?e dissatisfaction amonD t?e Mutual Fund investors

1/

InferenceF 2rom the above data it is clear that there is no investor $ho is dissatisfied due to lo$ income or the attitude of the bro er. But 4K investors are dissatisfied due to lon!er redemption period, BK due to poor after sales service and 8K feel that there are other better payin! avenues in the mar et.

-.+ To Cnow ?ow t?e respondents Drade Mutual Fund investment as

compared to investment in StocC MarCet directl'+

Table 3+-.F )radinD t?e Mutual Fund investment as compared to FactorI)rade (eturn (is 3i"uidity (iD? 5?K >.K 9K Moderate -=K 4BK 5.K ,ow .4K 4=K >?K

investment in StocC MarCet directl'

%age o6 5es&ondents

60 "0 !0 0 20 10 0 High Moderate

Grade

5et7rn 5is0 Li87idity

Low

)rap? 3+-.F )radinD t?e Mutual Fund investment as compared to investment in StocC MarCet directl'

1-

InferenceF The above data sho$s that most of the investors believe that mutual funds fetch more returns as compared to investment in stoc the schemes are open-ended. -2+ To Cnow t?e potential for Mutual Fund MarCet in future+ Table 3+-2F Potential for Mutual Fund marCet in future Response <es )o LaDe of Respondents 98K 4>K mar et directly. But investment is sli!htly ris y. Mutual funds also ensure sufficient li"uidity, as most of

2!%

Yes No

$6%

)rap? 3+-2F Potential for Mutual Fund marCet in future

InferenceF 2rom the above data it is clear that 98K of the present investors are $illin! to invest in the mutual funds in the future also and 4>K of them are not $illin! to invest in future.

1.

-0+ To Cnow t?e perception reDardinD t?e future of Mutual Funds+

Table 3+-0F Perception reDardinD t?e future of Mutual Funds Response Bri!ht 7lo$ ;ro$th 3ac of A$areness (is y Avenue &ar )o (esponse
20%

LaDe of Respondents >=K 9K --K BK 5K 4?K

+right *,ow Grow th

"% 4% 11%

!8%

La(0 o6 Aw areness 5is0y Aven7e .ar0 No 5es&onse

$%

)rap? 3+-0F Perception reDardinD t?e future of Mutual Funds

InferenceF As the "uestion aims to no$ the future of mutual fund industry, so from the analysis $e can interpret that there are >=K respondents that believe the future of this industry is bri!ht. 9K feel that it is !ro$in! slo$ly, and 5K believe it to be dar . BK feel it is a ris y avenue and --K respondents said that most of the people are not a$are about

12

the functionin! of mutual funds. 7o some steps must be ta en to ma e the people more a$are about these funds so that these funds can have a bri!ht future.

Personal ProfileF
;a= %ccupation of t?e Respondents Table 3;a=F %ccupation of Respondents %ccupation Businessman 7erviceman #rofessional *thers 16% 0% !%
+7siness) an *ervi(e) an Pro6essina, -thers

LaDe of Respondents .>K 5?K -8K -

"0%

)rap? 3;a=F %ccupation of Respondents

InferenceF .>K of the respondents are of business class, 5?K of service class, -8K are professionals.

10

;b= ADe of Respondents Table 3;b=F ADe of Respondents ADe )roup Belo$ 45 <ears 45 R >? <ears >? R 5? <ears 5? R 8? <ears 8? and above LaDe of Respondents 8K .?K >?K 4?K >K

20%

!%

6% 0%
+e,ow 2"Years 2"-!0Years !0-"0Years "0-60Years 60 and a#ove

!0%

)rap? 3;b=F ADe of Respondents

InferenceF 4?K respondents are less than the a!e of 45 years, .?K of the respondents fall bet$een the a!e of 45->? years, >?K of the respondents fall bet$een the a!e of >?-5? years, 4?K of the respondents fall bet$een the a!e of 5?-8? years, and >K of the respondents are above 8? years.

;c= Mont?l' Income of t?e Respondents

13

Table 3;c=F Mont?l' Income of Respondents

Mont?l' Income Belo$ -?,??? -?,??? R 45,??? 45,??? R >?,??? >?,??? R 5?,??? 5?,??? and above
16% 0% 28%

LaDe of Respondents 4=K .?K 48K -8K

+e,ow 109000 109000-2"9000 2"9000-!09000

26%

!09000-"09000 "09000 and a#ove

0%

)rap? 3;c=F Mont?l' Income of Respondents

InferenceF )one of the respondents earns belo$ -?,???, 4=K of the respondents fall bet$een the income !roup -?,???->?,???, .?K of the respondents fall bet$een the income !roup 45,???->?,???, 48K of the respondents fall bet$een the income !roup >?,???-5?,???, and -8K of the respondents earn 5?,??? and above.

FI!$I!)S
The no$led!e of the investor about the mutual fund is avera!e.

11

 8BK of the investors have retained their numero uno position by investin! directly in shares also. The investors confidence level in stoc s and mutual funds is almost the same. 8?K of the investors invest more than 4?K of their total investment in mutual funds. Most of the people li e to stay invested for - to . years. 2riends and relatives act as the major influencers in mutual fund investin!. *ver 5?K of the investors invest to maximize their returns. ;ro$th scheme is the most preferred for investment because investors $ant to !et maximum returns by ta in! benefit of the present share mar et boom. #rint media have the maximum impact on the investors as over 55K consider them as the influencin! a!ents. Mostly investors are satisfied $ith their investment and poor after sales service is the main factor for their dissatisfaction. More than half of the mutual fund investors are $illin! to invest in these funds in future $hich means that the mutual fund industry has a !ro$th potential.

1@

,hapter- 8
&onclusion J Recommendations

R &%MM !$ATI%!S

1A

 The shift in investor preference to$ards mutual funds should be facilitated by increasin! returns from debt mutual fund investments due to the decline in interest rates. A funds past performance is no !uarantee of its future performance. %nvestors should al$ays ta e into consideration the funds investment objective as $ell as its style. %nvestors should consider their o$n investment needs, both short term as $ell as lon! term and their investment horizon, that is the period for $hich they can invest in a fund. %nvestors should remember the old maxim that one should not put all his e!!s in one bas et. %nvestors should spread or diversify their investment related ris . %nvestors could achieve diversification by spreadin! their investment across different mutual fund schemes. %ncome funds are still a !ood option by investin! in $hich the investor can avail the benefit of re!ular income. The investors should eep in mind that they should not compare apples $ith oran!es. That is a fund must be compared $ith another fund $hich belon!s to the same cate!ory. 2or example, an e"uity-diversified fund should be compared only $ith e"uity-diversified funds and not $ith debt or balanced funds.

&%!&,#SI%!

14

#eople have the traditional mindset of investin! in ban s, post- offices and !overnment securities. 1ith declinin! interest rates, the time has come $hen investors are realizin! the need to loo at other avenues and the first and foremost avenue that comes to mind is mutual funds. The mutual fund industry has come a lon! $ay since the days of the +T% in %ndia. The number of mutual funds has increased over the years. Mutual funds are seen as an avenue for the investor to enter the stoc mar ets and bonds. They provide the professional competence to the investors. Mutual 2unds in %ndia provide safety, li"uidity and !ro$th to investors. They are safe and readily available conduits for channelisin! savin!s into investments yieldin! income and !ro$th. The funds provide stability to share prices, safety to investors and resources to promoter entrepreneurs. The major factor that is pushin! the industrys !ro$th today is the a$areness level on mutual funds amon! the investors. There is a need for further improvin! a$areness in a bi! $ay.

@/

Biblio!raphy

"I",I%)RAP(7

@-

Banerjee, ,ha rabarti @ &eb E4??=F, '#ersistence %n #erformance of /"uity Mutual 2unds H- An /mpirical %nvesti!ationD , %%MB Mana!ement (evie$ , 0ol .-, p! -9---=8 ,hander,(ameshE4??=F, '/mpirical /vidences *n %ndian 2und Man!ersD mar et Timin! And 7toc 7election Abilities,D 0ol.- , no.- ,p! .--,handel, (ana @ umar E4??=F, 'understandin! (is And (eturn %n Mutual 2und %nvestmentsD, Apeejay 6ournal of Mana!ement And Technolo!y , 0ol.>,)o.- ,p! 9B-=B ,houdharyE4??=F, 'The ,omponents of %nvestments performance *f 2und Mana!ersH /vidence 2rom %ndian ,apital Mar etD , The ;lobal 6ournal *f 2inanceD , 0ol. 5, )o.p! -- -9 &evasenathipathi, 7aleendran,7anmu!asundaram E4??9F, 'A$areness and #erception of people to$ards mutual funds in 3udhiana cityD ,0ol.4 , p! .--.8 Gumar @ 7harma E4??BF, 'Mutual 2undsH /xpandin! :orizonsD , 7,M7 journal of %ndian Mana!ementD , #! -?? ---9 Gumar @ 7udalaimuthu E4??=F, 'A 7tudy of %nvestors #erception To$ards Murual 2und %nvestments,D Mana!ement Trends,0olH5,)o .-,p! -?8 ---9 Mittal @ 0yas E4??=F, '&oes investors #sycholo!y affect investment decision Ha literature revie$D, ';lobal mana!ement revie$D , 0ol..E-F , p! -B -4= #andey E4??=F,#erformance appraisal of shareholdin! in mutual fund industry in %ndiaD '%ndian mana!ement studies journalD , 0ol.4 ,)o -4 p!.--5--4.

@.

#ani!rahi,#ra ash, E4??BF, '%nvestors ,hoices *f Mutual funds And Their 7chmes R A 7tudy *f %nter 2und 0ariation in (eturnsD , ;lobal Mana!ement (evie$D 0ol.., )o. 4 p! -> ->4 7alma 7hajahan @ Archana.( E4??=F ,DA 7tudy *n factor %nfluencin! The %nvestments %n Mutual fundsD , ;lobal Mana!ement (evie$D , 0ol.4, )o.4, p! .B->. 7in!h @ 7i!la E-BB=F &eterminants *f mutual fund performance H A factor analysis approachD , 3udhiana journal of mana!ement associationD , 0ol. - , p! . >= -5.

1ebsitesHhttpHJJ$$$.moneycontrol.comJ $$$.iloveindia.comJfinance Jmutual-fundsJindex.html httpHJJfinance.indiamart.comJindiaSbusinessSinformationJmutual SfundsSconcept.html $$$.dance$ith shado$s.comJbusinessJmutual-fund-scheme.asp httpHJJbusiness.mapsofindia.comJmutual-fundsJfuture.html httpHJJprofit.ndtv.comJMutual2und httpHJJ$$$.scribd.comJdocJ9>?5?>= httpHJJ$$$.scribd.comJdocJ9>?5?>=JMutual-funds httpHJJ$$$.mutualfundsindia.comJmfbasic.aspTreturn httpHJJfinance.yahoo.comJfunds httpHJJ$$$.investopedia.comJuniversityJmutualfundsJmutualfunds>.asp httpHJJ$$$.fool.comJMutual2undsJ;lossary.htm httpHJJen.$i ipedia.or!J$i iJMutualSfund

@2

Annexure

@0

6# STI%!!AIR

-+ >?at is 'our CnowledDe about t?e Mutual FundM EaF 0ery !ood EcF Avera!e EeF 0ery poor U U U EbF ;ood EdF #oor U U

.+ (ave 'ou ever invested in StocCsM EaF <es U EbF )o U

2+ >?at is 'our confidence level in terms of maCinD investments in StocCs and Mutual FundsM :i!h EaF 7toc Mar et EbF Mutual funds U U Moderate U U 3o$ U U

0+ >?at is t?e percentaDe of Mutual Fund investment out of 'our total investmentM EaF 3ess than -?K EcF 4?K - .?K EeF >?K - 5?K U U U EbF -?K - 4?K EdF .?K - >?K EfF Above 5?K U U U

3+ >?at is 'our time ?oriGon to Ceep investment in Mutual FundM EaF +p to - <ear U EbF -<ear R .<ears EdF Above 5 <ears U U

EcF . <ears R 5 <ears U

1+ >?ic? micro factors ?ave influenced 'ou to invest in t?e Mutual FundsM @3

;TicC one= EaF 2und Mana!ers U EbF 2riendsJ(elatives U

EcF 2inancial AdvisorsJ,.A. U

EdF #ersonal AnalysisJ#erception U

@+ >?at macro factors do 'ou consider w?ile investinD in a Mutual FundM ;RanC t?em= EaF (eturn EbF 7afety of %nvestment EcF Tax Benefits EdF 3i"uidity A+ >?ic? sc?eme 'ou ?ave invested inM EaF %ncome 7cheme EcF Balanced 2und EeF Any other U U U EbF ;ro$th 7cheme EeF Monthly %ncome #lan U U U U U U

4+ >?at is t?e freHuenc' of monitorinD fund performanceM EaF &aily EcF 2ortni!htly EdF )one U U U EbF 1ee ly EdF Monthly U U

-/+ >?at is t?e media t?rouD? w?ic? 'ou Det t?e information about new sc?emesM EaF #rint media J3atest ne$s EbF /lectronic media EcF #amphlets EdF :oardin!sJBillboards U U U U

@1

--+ Are 'ou satisfied wit? Mutual Fund investmentM EaF <es %f no, $hyQ 3o$ income 3on!er redemption period #oor after sales services Better payin! avenues in the mar et Attitude of the bro er U U U U U U EbF )o U

-.+ (ow do 'ou Drade Mutual Fund investment as compared to investment in StocC MarCet directl'M :i!h (eturn (is 3i"uidity U U U Moderate U U U 3o$ U U U

-2+ >ould 'ou liCe to invest in Mutual Funds in futureM EaF <es U EbF )o U

-0+ >?at is 'our perception reDardinD t?e future of Mutual FundsM EaF Bri!ht EcF 3ac of a$areness EeF &ar U U U EbF 7lo$ !ro$th EdF (is y avenue EfF )o response U U U

@@

P RS%!A, $ TAI,SF !AM F -----------------------------

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------------------------------------------------

&%!TA&T !%F <<<<<<<<<<<<<<<<<

%&&#PATI%!F "usinessman U Serviceman U Professional U %t?ers U

A) F

"elow .3 7ears .3 K 0/ 7ears 0/ K 3/ 7ears 3/ K 1/ 7ears 1/ and above

U U U U U U U U U U

IncomeF "elow -/8/// ;p+m+= -/8///<.38/// .38///<0/8/// 0/8///<3/8/// 3/8/// and above

@A