HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

Origin

The origin of the Indian mutual funds industry dates back to 1963 when the Unit Trust of India
(UTI) came into existence at the initiative of the Government of India and the Reserve Bank of
India.

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.

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

1
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 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, 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.

2
The graph indicates the growth of assets over the years.

Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit
Trust of India effective from February 2003. The Assets under management of the Specified
Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the
industry as a whole from February 2003 onwards.
Source: www.amfiindia.com

3
Concept

A mutual fund is a professionally managed, collective investment scheme that pools money
from many investors and invests typically in investment securities.

Mutual fund is a trust that manages the pool of money collected from various investors and it is
managed by a team of professional fund managers.

The money thus collected is invested in accordance with the stated investment objectives in
stocks, bonds, short-term money market instruments, other mutual funds, other securities,
and/or commodities such as precious metals.

Mutual Fund companies are known as Asset Management Companies (AMC). They offer a
variety of diversified schemes. They pool the savings of investors and invest them in a well-
diversified portfolio of sound investments.

The income earned through these investments and the capital appreciation realised are shared by
its unit holders in proportion to the number of units owned by them.

The current value of such investments is calculated on daily basis and the same is reflected in the
Net Asset Value (NAV) declared by the funds from time to time. This NAV keeps on changing
with the changes in the equity and bond market. Therefore, the investments in Mutual Funds is
not risk free, but a good managed Fund can give you regular and higher returns than when you
can get from fixed deposits of a bank etc.

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.

4
5
Mutual Fund Operation

Pool their money with

Passed back to

Generates
Invest in

Investor pool in their money and invests in Mutual Fund. The Mutual Fund Manager invests the
so collected money in various securities in accordance with the investment objective of the fund.
Any Capital gains & losses from such investments are passed on to the investors in proportion of
the number of units held by them.

6
Organisation of Mutual Fund

Source: www.amfiindia.com

Unit Holders
They are the parties to whom the mutual fund is sold. They are ultimate beneficiary of the
income earned by the mutual funds.

SEBI
The regulation of mutual funds operating in India falls under the preview of authority of the
“Securities and Exchange Board of India” (SEBI). Any person proposing to set up a mutual fund
in India is required under the SEBI (Mutual Funds) Regulations, 1996 to be registered with the
SEBI.

7
Sponsor
The sponsor should contribute at least 40% to the net worth of the AMC. However, if any person
holds 40% or more of the net worth of an AMC shall be deemed to be a sponsor and will be
required to fulfill the eligibility criteria in the Mutual Fund Regulations. The Sponsor is not
responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond
the initial contribution made by it towards setting up of the Mutual Fund.

Trustee
The mutual fund is required to have an independent Board of Trustees, i.e. two third of the
trustees should be independent persons who are not associated with the sponsors in any manner.
An AMC or any of its officers or employees are not eligible to act as a trustee of any mutual
fund. The trustees are responsible for - inter alia – ensuring that the AMC has all its systems in
place, all key personnel, auditors, registrar etc. have been appointed prior to the launch of any
scheme.

Transfer Agent
The transfer agent is contracted by the AMC and is responsible for maintaining the register of
investors / unit holders and every day settlements of purchases and redemption of units. The role
of a transfer agent is to collect data from distributors relating to daily purchases and redemption
of units. The Registrar and Transfer agent also handles communications with investors and
updates investor records.

Custodian
The mutual fund is required, under the Mutual Fund Regulations, to appoint a custodian to carry
out the custodial services for the schemes of the fund. Only institutions with substantial
organizational strength, service capability in terms of computerization and other infrastructure
facilities are approved to act as custodians. The custodian must be totally delinked from the
AMC and must be registered with SEBI. This structure mitigates the risk of dishonest activity by
separating the fund managers from the physical securities and investor records.

8
Asset Management Company (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. An Asset
Management Company (AMC) is an investment management firm that invests the pooled
funds of investors in securities in line with the stated investment objectives.

The diversification of portfolio is done by investing in such securities which are inversely
correlated to each other. They collect money from investors by way of floating various mutual
fund schemes.

At least 50% of the directors of the AMC are independent directors who are not associated with
the Sponsor in any manner. The AMC must have a net worth of at least 10 crores at all times.
The chairman of the AMC is not a trustee of any mutual fund.

At present there are 38 AMCs operating in India. The names of all the AMCs operating in India
are given below:

9
Asset Management Companies in India

AIG Global AMC (India) Pvt. Ltd.

Axis Asset Management Company Ltd.
Baroda Pioneer Asset Management Co. Ltd.
Benchmark Asset Management Co. Pvt. Ltd.
Bharti AXA Investment Managers Private Ltd.
Birla Sun Life Asset Management Co. Ltd.
Canara Robeco Asset Management Co. Ltd.
Deutsche Asset Management (India) Pvt. Ltd.
DSP BlackRock Investment Managers Pvt. Ltd.
Edelweiss Asset Management Limited
Escorts Asset Management Ltd.
FIL Fund Management Private Ltd.
Fortis Investment Management (India) Pvt. Ltd.
Franklin Templeton Asset Management (India) Pvt.
HDFC Asset Management Co. Ltd.
HSBC Asset Management (India) Private Ltd.
ICICI Prudential Asset Management Co. Ltd.
IDFC Asset Management Company Pvt. Ltd.
ING Investment Management (India) Pvt. Ltd.
J.M. Financial Asset Management Private Ltd.
JPMorgan Asset Management (India) Pvt. Ltd.
Kotak Mahindra Asset Management Co. Ltd.
L&T Investment Management Limited
LIC Mutual Fund Asset Management Co. Ltd.
Mirae Asset Global Investments (India) Pvt. Ltd.
Morgan Stanley Investment Management Pvt. Ltd.
Peerless Funds Management Co. Ltd.
Principal Pnb Asset Management Co. Pvt. Ltd
Quantum Asset Management Co. Private Ltd.
Reliance Capital Asset Management Ltd.
Religare Asset Management Company Pvt. Ltd.
Sahara Asset Management Co. Private Ltd.
SBI Funds Management Private Ltd.
Shinsei Asset Management (India) Pvt. Ltd.
Sundaram BNP Paribas Asset Management Co. Ltd.
Tata Asset Management Ltd.
Taurus Asset Management Co. Ltd.
UTI Asset Management Company Ltd.

10
Characteristics of a Mutual Fund

Some of the traditional & distinguishing characteristics of mutual funds are given below:
• The investors share in the fund is denoted by “units”. The value of the units changes
every day with change in the portfolio’s value. The value of one unit of investment is
called as the Net Asset Value or NAV.
• The pool of funds is invested in a portfolio of marketable investments. The value of the
portfolio is updated every day.
• The investment portfolio of the mutual fund is created according to the stated investment
objectives of the fund.
• Mutual fund units are “redeemable”. This means that when mutual fund investors want to
sell their fund units, they sell them back to the fund or to broker acting for the fund at
their Net Asset Value (NAV).
• Investors purchase mutual fund units from the fund itself or through a broker for the fund,
but are not able to purchase the units from other investors on a secondary market, such as
the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE).

Advantages of Mutual Fund to the investors

Every investment tool has some advantages and disadvantages. But it's important to remember
that features and benefits that matter to one investor may not be important to you. Whether any
particular feature is an advantage for you will depend on your unique circumstances, risk profile
and investment objectives. For some investors, mutual funds provide an attractive investment
choice because they generally offer the following benefits:

• Professional Management: The primary advantage of funds is the professional

management of your money. Investors purchase mutual funds because they do not have
the time or the expertise to manage their own portfolio. A mutual fund is a relatively

11
 inexpensive way for a small investor to get a full-time manager to make and monitor
investments.

• Portfolio Diversification: A proven principle of sound investment is that of

diversification. By investing in many companies, the mutual funds protect themselves
from drop in value of shares. Majority of people consider diversification as the major
strength of mutual funds.

• Reduction of Risk: Risk in investment is as to recovery of the principal amount and as to

return on it. Mutual funds, on both fronts provide a comfortable situation for investors.
The expert supervision, diversification, and liquidity of units ensured in mutual funds
minimize the risks.

• Economies of Scale: Mutual funds having large funds at their disposal avail economies
of scale. The brokerage fee or trading commission may be reduced substantially. The
reduced transaction costs obviously increases the income available for investors.

• Liquidity: A distinct advantage of mutual fund over other investments is that, there is
always a market for its units/shares. Moreover, Securities & Exchange Board of India
requires that mutual funds in India have to ensure liquidity.

• Choice: Mutual funds come in a wide variety of types. Some mutual funds invest
exclusively in a particular sector (e.g. energy funds), while others might target growth
opportunities in general. There are thousands of funds, and each has its own objectives
and focus. The key is for you to find the mutual funds that most closely match your own
particular investment objectives

12
 • Convenience: When you own a mutual fund, you don't need to worry about tracking the
dozens of different securities in which the fund invests; rather, all you need to do is to
keep track of the fund's performance.

• Tax Shelter: Depending on the schemes of mutual funds, tax shelter is also available
under section 80C. The returns from the mutual funds are also eligible for favorable tax
treatment.

• Systematic investment plans: A specific amount is invested for a continuous period at

regular intervals under this plan. The investor decides the amount and also the mutual
fund scheme. The amount to be invested could be as low as Rs. 500 per month.

Disadvantages of Mutual Fund to the investors:

• No Insurance: Mutual funds, although regulated by the government are not insured
against losses. That means that despite the risk-reducing diversification benefits provided
by mutual funds, losses can occur, and it is possible (although extremely unlikely) that
you could even lose your entire investment.

• Dilution: Although diversification reduces the amount of risk involved in investing in

mutual funds, it can also be a disadvantage due to dilution. For example, if a single
security held by a mutual fund doubles in value, the mutual fund itself would not double
in value because that security is only one small part of the fund's holdings. By holding a
large number of different investments, mutual funds tend to do neither exceptionally well
nor exceptionally poorly.

• Inefficiency of Cash Reserves: Mutual funds usually maintain large cash reserves as
protection against a large number of simultaneous withdrawals. Although this provides

13
 investors with liquidity, it means that some of the fund's money is invested in cash
instead of assets, which tends to lower the investor's potential return.

• Trading Limitations: Although mutual funds are highly liquid in general, most mutual
funds cannot be bought or sold in the middle of the trading day. You can only buy and
sell them at the end of the day, after they've calculated the current value of their holdings.

14
Types of Mutual Funds:

Mutual funds come in many varieties. For example, there are index funds, stock funds, bond
funds, money market funds, and more. Each of these may have a different investment objective
and strategy and a different investment portfolio. Different mutual funds may also be subject to
different risks, volatility, and fees and expenses.

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. The table below gives an overview into the existing types
of schemes in the Industry:

15
BY STRUCTURE

• Open – ended Schemes: An open – ended 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 – ended
schemes is liquidity.

• Close – ended Schemes: A close – ended 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 same time of the initial public
issue and thereafter they can buy and 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

BY INVESTMENT OBJECTIVES

• Growth Schemes: 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 are much better than the other
investments had over the long term. Growth schemes are ideal for investors having a long
term outlook seeking growth over a period of time.

16
• Income Schemes: 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. Capital appreciation in such funds may be limited, though
risks are typically lower than that in a growth fund.

• Balanced Schemes: 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.
This proportion affects the risks and the returns associated with the balanced fund - in
case equities are allocated a higher proportion, investors would be exposed to risks
similar to that of the equity market. Balanced funds with equal allocation to equities and
fixed income securities are ideal for investors looking for a combination of income and
moderate growth.

• Money Market Schemes: 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 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.

17
OTHER SCHEMES

• Tax Saving Schemes: 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 under Section 80C of the Indian
Income Tax Act, 1961.

• Special Schemes:

o Index Schemes: Index Funds attempt to replicate the performance of a particular

index such as the BSE Sensex or the NSE S&P CNX 50.The objective of Nifty
Plan is to replicate the composition of the Nifty, with a view to endeavor to
generate returns, which could approximately be the same as that of Nifty.
o Sector Specific Schemes: Sector – specific funds are those Funds which make
investments in those sectors that have been specified in the prospectus of the
funds. The various sectors in which the Sector - Specific Funds in India make
investments are software, petroleum stocks, power, and pharmaceuticals.

18
 CHAPTER 2
LITERATURE REVIEW

19
Indian Mutual Fund Industry – The Future in a Dynamic Environment

(June 2009, KPMG & CII)

This report highlighted the following findings. Low customer awareness levels and financial
literacy pose the biggest challenge to channelizing household savings into mutual funds. Further,
fund houses have shown limited focus on increasing retail penetration and building retail AUM.
Customer awareness is the pre-requisite for the achievement of the industry growth potential,
there is a need for planning, financing and executing initiatives aimed at increasing financial
literacy and enhancing investor education across the country through a sustained collaborative
effort across all stakeholders, which is expected to result in a massive increase in mutual fund
penetration.
Distributors and the mutual fund houses have exhibited limited interest in continuously engaging
with customers post closure of sale as the commissions and incentives have been largely in the
form of upfront fees from product sales.
The next phase in the industry is likely to be characterized by a stronger focus on customer
centricity, cost management and robust governance and regulatory framework – all aimed at
enabling the industry to achieve sustained, profitable growth, going forward.

Making Mutual Fund Work for You

(June 2008, AMFI in association with Price Waterhouse LLP/FIRE Project funded by
USAID and Ogilvy & Mather, Financial & Business Communications)
This guide on the concept, operations and advantages of mutual funds and the rights of mutual
fund unitholders was produced by AMFI to promote financial literacy among public regarding
Indian Mutual fund Industry. This guide explains the concept of mutual fund, its advantages and
risks associated with the mutual funds. The main aim of this guide was to spread awareness
among investors regarding their rights as mutual fund unitholders.

India’s Mutual Fund Industry

(Tetsuya Kamiyama, Nomura Capital Market Review, Vol. 10, No. 4, Winter 2007)
The assets managed by India's mutual funds have shown impressive growth, and had totaled 3.3
trillion rupees (Rs 3.3 trillion) as of the end of March 2007. India's middle class, who are
prospective investors in mutual funds, has been growing, and we expect to see further growth in

20
the mutual fund market moving forward. In this paper, the researcher first provides an overview
of the assets managed within India's mutual fund market, both now and in the past, and of the
legal framework for mutual funds, and then discuss the current situation and recent trends in
financial products, distribution channels and asset management companies.

The Fall and Rise of Mutual Funds in India

(Kaushal Shah & Associates, 2007)
This article take the reader through the entire journey of mutual fund industry in India, its origin,
its fall & rise throughout all these years and tried to predict what the future may hold for the
mutual fund investors in the long run.

Downside Risk Analysis of Indian Equity Mutual Funds: A Value at Risk Approach
(Soumya Guha Deb & Ashok Banerjee, International Research Journal of Finance &
Economics, Issue 23, 2009)
The current study attempts to highlight the importance of VaR as a measure of ‘downside risk’
for Indian equity mutual funds, an aspect which is completely ignored for performance reporting
in Indian mutual fund industry. The study used three parametric models and one non parametric
model and weekly returns of a sample of equity mutual fund schemes in India, to predict their
weekly VaR on a ‘rolling’ basis and also tested the robustness and predictive ability of the
models by employing two popular ‘back testing’ approaches. Overall the analysis shows that the
Indian equity mutual funds have exhibited considerable downside risk in terms of VaR measures.
Back testing of the models suggest that the ‘random walk’ and the ‘moving average’ models
suffer from a downward bias and err by underestimating the VaR frequently. The EWMA and
historical simulation models are free from that bias, but these two models, particularly the later,
show tendency of providing too conservative estimates of VaR.

India’s Capital Markets: Unlocking the door to future growth

(Deutsche Bank Research, Feb 2007)
The paper follows an analysis of supply (bonds, equities and derivatives) and demand conditions
(household and institutional investors) in India’s capital markets. Some stylised facts regarding
India’s capital market infrastructure and corporate governance are first presented, followed by an

21
analysis of its fixed income, equity and derivatives markets. Later, the paper discusses the
classes of investors in India’s markets and the constraints they face in optimising the risk/return
objectives of their portfolios. Finally, some brief comments regarding the link between economic
growth and capital markets reform conclude the paper.

22
 CHAPTER 3
RESEARCH METHEDOLOGY

23
INTRODUCTION
Methodology includes a philosophically coherent collection of theories, concepts or ideas as they
relate to a particular discipline or field of inquiry.
Methodology refers to more than a simple set of method; rather it refers to the rationale and the
philosophical assumptions that underlie a particular study relative to the scientific method. This
is why scholarly literature often includes a section on the methodology of the researchers. This
section does more than outline the researchers’ methods (as in, “I conducted a survey of 50
people over a two-week period and subjected the results to statistical analysis”, etc.); it might
explain what the researchers’ views are.
Researchers acknowledge the need for rigor, logic, and coherence in their methodologies, which
are subject to peer review.
In the present project regarding mutual funds I have tried to unrevealed the perception and
attitudes of the investors across different sections of the society.
I have also tried to learn about the relationship between income, age and risk taking capacity of
the investors. Keeping these objectives and in mind I have conducted the research on mutual
fund.

RESEARCH PROBLEM
I conducted a market research project to examine the perception of investors towards mutual
funds as an investment option. The judgment is based upon the survey conducted by me at
various locations in Delhi. The survey is conducted with help of a structured questionnaire. The
analysis of this study is done using software known as SPSS and complied using MS Word .The
study will reveal about the different important aspects of Investors perception towards mutual
funds.

OBJECTIVE OF THE RESEARCH

The objective of carrying out the research is to access the:
“Investors Perception towards mutual funds and its performance”

24
RESEARCH DESIGN

Research design is a plan outlining how the information is to be gathered for an assessment or
evaluation that includes identifying data gathering methods, instruments to be used and how the
information will be organized and analyzed.

Furthermore a research design also includes timely completion of the study and also keeping cost
within the budgeted levels.

In this market research project for mutual funds I have firstly prepared a questionnaire which
comprises of 14 questions enquiring about the perception of numerous investors towards mutual
funds.

The structured questionnaire will then be analyzed with the help of SPSS. Based on the analysis
done in SPSS I have drawn conclusion

25
 CHAPTER 4
DATA COLLECTION

26
TECHNIQUES OF DATA COLLECTION

PRIMARY DATA
In this project I have analyzed data from a sample size of 50 people from, mainly Delhi by
administering questionnaires.

SECONDARY DATA
In the project I have collected the information from different sources about mutual funds that are
from:
1. Internet:
2. Books:
3. Newspaper

RESEARCH INSTRUMENTS
The kind of research instruments one uses greatly helps in realizing the reliability and validity of
a research. In the present research I have used questionnaires as my research instrument.

Questionnaire
A questionnaire is a research instrument consisting of a series of questions and other prompts for
the purpose of gathering information from respondents. Although they are often designed for
statistical analysis of the responses, this is not always the case.

SAMPLING
Sampling is that part of statistical practice concerned with the selection of individual
observations intended to yield some knowledge about a population of concern, especially for the

27
purposes of statistical inference. Results from probability theory and statistical theory are
employed to guide practice.
Sampling is useful for a researcher as it saves time, effort and money.
In this research on “mutual funds” I have followed the following steps:
1. Target Population: The target population used for sample selection here is the people
above the age of 18 years who are the potential investors in mutual funds.
2. Geographical Spread of the target population (Sampling Frame): The area of research is
Delhi.
3. Sampling Method Used: I have used the Non- Probability Sampling method which is
Convenience Sampling.
4. Sample size: the sample size is 50.

DATA ANALYSIS TECHNIQUES USED

Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with the
goal of highlighting useful information, suggesting conclusions, and supporting decision making.
Data analysis has multiple facets and approaches, encompassing diverse techniques under a
variety of names, in different business, science, and social science domains.

The various data analysis used in the present research is as follows:

Descriptive Data Analysis
Crosstab Data Analysis

SOFTWARE USED

SPSS (originally, Statistical Package for the Social Sciences)

Microsoft office

28
 CHAPTER 5
DATA INTERPRETATION & ANALYSIS

29
 DESCRIPTIVE ANALYSIS OF QUESTIONAIRE

(1) What products/services you are currently using from your bank?

What products/services you are currently using from your bank? Frequency
Savings A/C 50
Current A/C 14
Life Insurance 25
Fixed Deposits 24
Mutual Funds 10
Loans 14
Lockers 10

As we can observe from the above analysis, all the respondents used “Savings A/C” from
their bank and “Life Insurance” & “Fixed Deposits” being other most used services availed
by most of the respondents.

30
(2) In what modes do you invest your money?

In what modes do you invest your money? Frequency

Fixed Deposits 29
Equity 10
Debt 5
Life Insurance 30
Mutual Funds 18
Gold 20
Government Bonds 5
Other 8

As we can observe from the above analysis, most of the respondents preferred to invest in
“Life Insurance” & “Fixed Deposits”, whereas “Government Bonds” & “Debt” were the least
preferred investment options by the respondents.

31
(3) What is your investment objective?

What is your investment objective? Frequency

Capital Growth 22
Capital protection 27
Regular income 14
Children Education & Marriage 12
Retirement 9

As we can observe from the above analysis, most of respondents wanted to protect their
invested capital and Capital growth being the secondary investment objective.

32
(4) What type of risk profile do you belong to?

What type of risk profile do you belong

to? Frequency
High Risk taker 7
Medium Risk taker 27
Low Risk Taker 16

As we can observe from the above analysis, most of the respondents belonged to the
“Medium Risk Takers,” there were very few “High Risk Takers”.

33
 (5) Before this survey, how often had you heard of Mutual Funds?

Before this survey, how often had you heard of Mutual Funds? Frequency
I’ve never heard of Mutual Funds before 0
I’ve heard of Mutual Funds a few times 21
I’ve heard of Mutual Funds frequently 29

As we can observe from the above analysis, there is no respondent who has not heard of mutual
funds, and majority of respondents said that they have heard of it frequently, so we can say that
people are aware of mutual funds as an investment option.

34
 (6) How did you come to know about Mutual Funds?

How did you come to know about Mutual Funds? Frequency

Bank 19
Newspaper 37
Radio 3
Agents 18
Television 26
Word of Mouth 26

As we can observe from the above analysis, most of the respondents have heard of mutual funds
through “Newspapers”, “Television” and through “word of mouth”.

35
 (7) What are your general impressions of Returns associated with Mutual Fund?

What are your general impressions of Returns associated with Mutual Fund? Frequency
High returns 8
Average returns 39
Low returns 3

As we can observe from the above analysis, majority of the respondents perceived that the
returns generated from mutual funds were average.

36
 (8) What are your general impressions of Risk associated with Mutual Fund?

What are your general impressions of Risk associated with Mutual Fund? Frequency
High Risk 13
Average Risk 30
Low Risk 7

As we can observe from the above analysis, most of the respondents perceived that there is
average risk involved with mutual funds.

37
 (9) Have you ever invested in Mutual Funds?

Have you ever invested in Mutual Funds? Frequency

Yes 18
No 32

As we can observe from the above analysis, majority of respondents did not invest in mutual
funds.

38
 (10) If you do invest in Mutual funds, how do you invest?

If you do invest in Mutual funds, how do you invest? Frequency

Lumpsum Investment 3
Through systematic investment plans (SIP) 6
Both lumpsum & systematic investment plans 9

As we can observe from the above analysis, most of the respondents who invested in mutual
funds preferred to invest in it through both Lumpsum investment & Systematic investment plans
(SIP).

39
 (11) How much do you usually invest in Mutual Funds in a year?

How much do you usually invest in Mutual Funds in a year? Frequency

Below 10,000 4
10,000 – 49,999 12
50,000 – 99,999 2
Above 1,00,000 0

As we can observe from the above analysis, most of the respondents who invested in mutual
funds preferred to invest between Rs. 10,000 to Rs. 49,999 and not one of the respondent
invested above Rs. 1,00,000.

40
(12) If you invest in mutual funds, would you like your portfolio to be managed &
controlled at a single point rather than being done at various points?

If you invest in mutual funds, would you like your portfolio

to be managed & controlled at a single point rather than
being done at various points? Frequency
Yes 8
No 3
Don’t Matter 7

As we can observe from the above analysis, most of the respondents who invested in mutual
funds wanted their portfolio to be managed at one single point so that they can keep a track
of their investments & returns, whereas very few were against this idea.

41
(13) Which Income group do you fall in?

Which Income group do you fall in? Frequency

Below 2,50,000 12
2,50,000 – 5,00,000 28
Above 5,00,000 10

As we can observe from the above analysis, most of the respondents income ranged from
Rs.250,000 to Rs.500,000.

42
(14) Which age group do you fall in?

Which age group do you fall in? Frequency

18 – 25 years 11
26 – 45 years 19
46 – 60 years 20
Above 60 0

As we can observe from the above analysis, most of the respondents were aged between 26
years to 60 years and there was no respondent above the age of 60 years.

43
 CROSS TABULATION ANALYSIS OF QUESTIONAIRE

Cross Tab between Q13 & Q4

Which Income group do you fall in? * what type of risk profile do you belong to?

What type of risk profile do you

belong to?
High Medium
Risk Risk Low Risk
taker taker Taker
Which Income Below 1 5 6
group do you fall 2,50,000
in 2,50,000 3 17 8
–
5,00,000
Above 3 5 2
5,00,000

As we can observe from the above analysis, most of the respondents below the income of
Rs.250,000 were low risk takers, while respondents between the income of Rs.250,000 to
Rs.500,000 were medium risk takers and majority of respondents above the income of
Rs.500,000 were also medium risk takers.

44
Cross Tab between Q14 & Q4
Which age group do you fall in? * What type of risk profile do you belong to?

What type of risk profile do

you belong to?
High Medium Low
Risk Risk Risk
taker taker Taker
Which age 18 – 25 0 8 3
group do you years
fall in? 26 – 45 5 9 5
years
46 – 60 2 10 8
years

As we can observe from the above analysis, most of the respondents between the age of 18 years
to 25 years are medium risk takers. Majority of respondents between the age of 26 years to 45
years are also medium risk takers. Respondents between the age of 46 years to 60 years are also
medium risk takers which were closely followed by low risk takers.

45
Cross Tab between Q13 & Q7
Which Income group do you fall in * What are your general impressions of Returns associated
with Mutual Fund?

What are your general

impressions of Returns
associated with Mutual Fund?
High Average Low
Returns Returns Returns
Which Income Below 2 10 0
group do you fall 2,50,000
in 2,50,000 2 23 3
–
5,00,000
Above 4 6 0
5,00,000

As we can observe from the above analysis, majority of respondents in all the income groups
perceived that mutual funds have average returns.

46
Cross Tab between Q13 & Q8
Which Income group do you fall in * What are your general impressions of Risk associated with
Mutual Fund?

What are your general

impressions of Risk associated
with Mutual Fund?
High Average
Risk Risk Low Risk
Which Income Below 7 4 1
group do you fall 2,50,000
in 2,50,000 6 20 2
–
5,00,000
Above 0 6 4
5,00,000

As we can observe from the above analysis, most of the respondents below the income of
Rs250,000 perceived mutual funds as high risk investments. While most of the respondents in
other income groups perceived mutual funds as average risk investments.

47
Cross Tab between Q14 & Q7
Which age group do you fall in? * What are your general impressions of Returns associated with
Mutual Fund?

What are your general

impressions of Returns
associated with Mutual Fund?
High Average Low
Returns Returns Returns
Which age group 18 – 25 1 9 1
do you fall in? years
26 – 45 6 13 0
years
46 – 60 1 17 2
years

As we can observe from the above analysis, majority of respondents in all the income groups
perceived that mutual funds have average returns.

48
Cross Tab between Q14 & Q8
Which age group do you fall in? * What are your general impressions of Risk associated with
Mutual Fund?

What are your general

impressions of Risk associated
with Mutual Fund?
High Average
Risk Risk Low Risk
Which age group 18 – 25 4 7 0
do you fall in? years
26 – 45 3 11 5
years
46 – 60 6 12 2
years

As we can observe from the above analysis, majority of respondents in all the income groups
perceived mutual funds have average risk. However in the income group of 46 years to 60 years
about 30% of respondents perceived mutual funds have high risk.

49
 CHAPTER 6
SUGGESTIONS, RECOMMENDATIONS & CONCLUSIONS

50
 FINDINGS

From the above descriptive and crosstab analysis, I came across the following findings:
• Most of the respondents were average risk takers i.e. they wanted that their capital
invested should remain protected even if they have to tradeoff returns for the protection
of their investments.

• Respondents had heard about mutual funds as an investment option however, they were
not financially literate to know about the various features, advantages and risks
associated with the mutual funds that would have enabled them to make a sound
investment decision.

• Most of the respondents believed that the mutual funds have Average Returns and
Average Risks however if look at the performance tables of the various mutual funds we
find that the annualized returns provided by majority of mutual funds was above 20%.

• Income and Risk Profile of an respondent is positively related, Higher the income higher
is the risk taking capacity of an investor, as we can notice from the analysis that 30% of
the respondents above the income of Rs.500,000/- were high risk takers whereas only
8.33% of the respondents below the income of Rs.250,000/- were high risk takers.

• Age and Risk Profile of a respondent is inversely related, lower the age higher is the risk
taking capacity of an investor, as we can notice from the analysis that only 10% of the
respondents between the age of 46-60 years were high risk takers whereas 26.31% of the
respondents between the age of 26-45 years were high risk takers.

• Systematic Investment Plans are simple and time honored investment strategy for
accumulation of wealth in a disciplined manner over long term period. They help the
retail investors in overcoming the decision of ‘when to time the market?’

51
 SUGGESTIONS AND RECOMMENDATIONS

• SEBI and AMFI should spread awareness about mutual funds. They can conduct various
seminars and workshops were general public could be informed about various features of
mutual funds.

• Systematic Investment Plans should be promoted as they help the retail investors to
accumulate wealth in a disciplined manner over long term period; they help to overcome
the dilemma of when to enter the market?

• An investor should be explained about various risks associated with their investment in
mutual funds as this would enable them to weigh the investment options rationally.

• SEBI and AMFI could bring in more investor friendly rules and regulations to increase
the investments in mutual funds; they should also bring in stricter rules and regulations to
stop miss-selling of funds.

• SEBI and AMFI should ensure that the investor is not forgotten once the sale is made,
they should take necessary steps to ensure that the distributors and fund houses interact
with the investors even after the sale is made.

52
 CONCLUSION

From the above analysis I can conclude the following points:

• Mutual Funds are dynamic financial institutions, which play crucial role in an economy
by mobilizing savings and investing them in the capital market.

• Mutual funds should be the part of portfolio of every investor as it enables an investor to
diversify into various securities which he may not be able to otherwise. Mutual Funds is
an investment option that reduces investors risk while providing the investor with an
good possibility of making greater returns than other investment options like Fixed
Deposits.

• Systematic Investment Plan provided by mutual funds is a great investment opportunity

especially for the retail investor as is a simple and time honored investment strategy for
accumulation of wealth in a disciplined manner over long term period. SIP enables an
investor to overcome the dilemma of ‘when to enter the market?’

• We can also conclude from the above analysis that an investor should give consideration
to his risk profile before opting for a particular investment tool. Age of the investor and
risk profile of an investor are inversely related. Investors above the age of 55 years
should normally have 70% of their investment in debt as it provides them liquidity and
capital protection option.

• Majority of investors are average risk takers i.e. they want to safeguard their investment
even if they have to tradeoff returns for it, for these types of investors mutual fund
provides a great opportunity to earn good returns while reducing the risk through
diversification and professional management.

53
www.amfiindia.com

www.moneycontrol.com

www.valueresearchonline.com

54