1

CHAPTER 1
INTRODUCTION
The term investment is used to describe the process of investing money in shares,
debentures, fixed deposits, gold, real assets, life policies, mutual funds, and money market
instruments. These outlets where the money is invested are known as investment assets. By
investing, an investor commits the present funds to one or more assets to be held for some time
in expectation of some future return in terms of interest or capital gain. Individual investor
considers a number of factors before deciding to invest their funds in various securities involving
varying degrees of risk and return. In the present economic scenario, the option available to
them is different and the factor motivating the investors to invest is governed by their socioeconomic profile including expected return and risk tolerance.
In short, the investment decision making process is a multi-faceted subject to change
over a period of time. An attempt has been made in this study to identify the perceptual factors
which influence the investors to invest in mutual funds. There are a number of investment
opportunities available to an investor. Each of these investments has its own risk and return
features. The proverb never put all the eggs in the same basket guides the investor to diversify
the risk. Diversification refers to the process whereby an investor invests his funds in more than
one investment opportunity. An investor must learn to analyze and measure the risk and return
of the portfolio. All investors may not be in a position to undertake fundamental and technical
analysis before they decide about their investment options. Neither do they have the resources
nor the expertise to do so. Instead of investing directly, the investors particularly, small investors
may go for indirect investment through the mutual funds. Instead of becoming the share holder
or bondholder of a company, these investors would become the unit holders of mutual funds. In
almost all the capital markets throughout the world, mutual funds have gained a significant
position.
The mutual fund industry plays a significant role in the development of the economy as
well. Its buoyant growth leads to lower intermediation costs, more efficient financial markets,
and increased vibrancy of the capital markets and higher local ownership of financial assets. If
retail investment is directed through the mutual fund route, it will lead to greater wealth creation
in the long run. Thus, the industry can be one of the causative factors for a healthy economy.

2
Mutual fund is a retail product designed to target small investors, salaried people and
others who are intimidated by the mysteries of stock market but, nevertheless, like to reap the
benefits of stock market investment. SEBI has played a vital role in regularizing the mutual fund
business. From time to time it has tried to plug the loopholes prevailing in the system and
safeguard the interest of investors who has been backbone of this unprecedented growth. As of
now big challenge of mutual fund industry is to mount on investor awareness and to spread
further to the semi urban and rural areas. Since the need of this study has been aroused in
order to see the preference awareness and the investors attitude regarding the mutual funds.
Investment is a commitment of funds made in the expectation of some positive return. If
the investment is properly undertaken, the return will be commensurate with the risk the investor
assumes. Investment goals vary from person to person business to business. While some want
security, others give more weightage to returns alone. With objectives defying any range, it is
obvious that the products required will vary as well.
Investments generally involve real assets. Real assets are tangible, material thing
such as buildings, automobiles, and gold etc. financial assets are pieces of paper representing
an indirect claim to real assets held by someone else.
MUTUAL FUNDS:
A mutual fund is an investment vehicle that pools in the monies of several investors, and
collectively invests this amount in either the equity market or the debt market, or both,
depending upon the funds objective. This means you can access either the equity or the debt
market, or both, without investing directly in equity or debt.

INVESTING IN MUTUAL FUNDS:

Diversification is a major advantage of investment through Mutual Funds, as
investors get the benefit of various instruments through a single avenue.

Professionally qualified people manage the funds.

Mutual Funds offer flexibility in options and choice of schemes to match individual
needs.

Transparency of operations as well as investment pattern and philosophy by disclosures

of portfolio also add to the advantages of investing in Mutual Funds.

The Mutual Fund industry is very well regulated by SEBI

Mutual Funds offer tax benefits. Dividend income received from investing in Mutual

Funds is tax free in the hands of the investor. Investments in the growth option will be subject to
long term or short-term capital gains tax as applicable.

ADVANTAGE OF MUTUAL FUNDS

1. Professional Fund Management

2. Services
3. Diversification
4. Affordability
5. Cost effectiveness
6. Liquidity
7. Tax breaks
8. Transparency.
There are wide varieties of mutual fund schemes and are classified on the basis of
its structure and its investment objective.

BASED ON STRUCTURE

OPEN ENDED FUNDS

An open-end fund is one that is available for subscription all through the year. These
do not have a fixed maturity. Investors can conveniently buy and sell units at Net asset value
(NAV) related prices. The key feature of this scheme is liquidity.

4
CLOSED-ENDED FUNDS
The fund is open for subscription only during a specific period. Investors can invest in
the scheme at the time of the initial public issue and thereafter they can buy or sell the units of
the scheme on the stock exchanges where they are listed. The objective of the fund is to
declare regular dividend.

BASED ON INVESTMENT OBJECTIVE

GROWTH FUNDS
The aim of growth funds is to provide capital appreciation over the medium to longterm. Such schemes normally invest a majority of the stock exchanges where they are listed.
The fund may declare dividend but the main objective is only capital appreciation.

INCOME FUNDS
These are also known as debt funds since they invest in debt instruments issued by
the government, private companies banks and financial institutions. These funds target low risk
and stable income to the investors. While returns in these funds may be regular, their scale may
fluctuate depending on the prevailing interest rates and the credit quality of the debt securities.

BALANCED FUNDS
These funds, as the name suggests, are a mix of both equity and debt funds. They
invest in both equities and fixed income securities in line with pre-defined investment objectives.
The aim at providing a balanced mix of capital appreciation through investments in equities
coupled with investments in stable instruments like bonds etc.

LIQUID FUNDS
Also know as Money market funds as they invest in securities of short term nature,
typically securities of less than one-year maturity like Treasury Bills issued by the government,
Certificate of Deposits issued by banks and Commercial Paper issued by companies as well as
in the inter- bank call money market. These funds are considered to be at the lowest rung in the
hierarchy of risks.

1.1 COMPANY PROFILE

6
Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of Indias leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 78,112 Crores and an investor count of over
64.65 and 70.99 Lakh folios. (AAUM and investor count as of Jan - Mar '12 )

Source :

http://www.amfiindia.com/
Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing mutual
funds in India. RMF offers investors a well-rounded portfolio of products to meet varying investor
requirements and has presence in 179 cities across the country. Reliance Mutual Fund
constantly endeavors to launch innovative products and customer service initiatives to increase
value to investors. Reliance Capital Asset Management Limited (RCAM) is the asset manager
of Reliance Mutual Fund. RCAM a subsidiary of Reliance Capital Limited, which holds 92.93%
of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders.
Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial
services companies, and ranks among the top 3 private sector financial services and banking
companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life
and general insurance, private equity and proprietary investments, stock broking and other
financial services.

Sponsor

: Reliance Capital Limited

Trustee

: Reliance Capital Trustee Co. Limited

Investment Manager / : Reliance Capital Asset Management Limited

AMC

Statutory Details

: The Sponsor, the Trustee and the Investment Manager are

incorporate under the Companies Act 1956.

Vision Statement

To be a globally respected wealth creator with an emphasis on customer care and a

culture of good corporate governance.

Mission Statement

To create and nurture a world-class, high performance environment aimed at delighting

our customers

Our Corporate Governance Policy:

Reliance Capital Asset Management Limited has a vision of being a leading player in the
mutual fund business and has achieved significant success and visibility in the market.
However, an imperative part of growth and visibility is adherence to good conduct in the
marketplace. At Reliance Capital Asset Management Limited, the implementation and
observance of ethical processes and policies has helped us in standing up to the scrutiny of our
domestic and international investors.
Management:
The management at Reliance Capital Asset Management Limited is committed to good
corporate governance, which includes transparency and timely dissemination of information to
its investors and unit holders. The Board of Directors of RCAM is a professional body
constituting inter-alia of, well-experienced and knowledgeable independent members.
Employees:
Reliance Capital Asset Management Limited has at present, a code of conduct for all its
officers. It has a clearly defined prohibition on insider trading policy and regulations. The
management believes in the principles of propriety and utmost care is taken while handling
public money, making proper and adequate disclosures. All personnel at RCAM are made
aware of their rights, obligations and duties as part of the Dealing Policy laid down in terms of
SEBI guidelines. They are taken through a well-designed HR program, conducted to impart
work ethics, the Code of Conduct, information security, Internet and e-mail usage and a host of

8
other issues. One of the core objectives of RCAM is to identify issues considered sensitive by
global corporate standards, and implement policies/guidelines in conformity with the best
practices as an ongoing process. RCAM gives top priority to compliance in true letter and spirit,
fully understanding its fiduciary responsibilities.
Sponsors
Reliance Capital Limited:
Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management
Limited, a subsidiary of Reliance Capital Limited, which holds 86.80% of the paid-up capital of
Reliance Capital Asset Management Limited, the balance paid up capital being held by minority
shareholders. Reliance Mutual Fund (RMF) has been sponsored by Reliance Capital Ltd (RCL).
The promoter of RCL is AAA Enterprises Private Limited.
Reliance Capital Limited is a Non Banking Finance Company and is one of the Indias
leading and fastest growing financial services companies, and ranks among the top three
private sector financial services and banking companies in India, in terms of networth.
Reliance Capital Limited has interests in asset management and mutual funds, life and
non-life insurance, private equity and proprietary investments, stock broking and other activities
in the financial services sector. The net worth of RCL is as follows:
Particulars
(Rs.in crores) 2009-10 2008-09 2007-08
Net Worth 6885.70 6687.30 5927.50
Total Income 2366.62 2974.85 2079.79
Profit After Tax 339.42 968.02 1025.45
Reliance Capital Limited has contributed Rupees One Lac as the initial contribution to
the corpus for the setting up of the Reliance Mutual Fund. Reliance Capital Limited is
responsible for discharging its functions and responsibilities towards the Fund in accordance
with the Securities and Exchange Board of India (SEBI) Regulations.
The Sponsor is not responsible or liable for any loss resulting from the operation of the
Scheme beyond the contribution of an amount of Rupees one Lac made by them towards the
initial corpus for setting up the Fund and such other accretions and additions to the corpus.

9
AMC:
About Reliance Capital Asset Management Limited.
Reliance Capital Asset Management Limited (RCAM) is an unlisted Public Limited
Company incorporated under the Companies Act, 1956 on February 24, 1995. RCAM has been
appointed as the Asset Management company of Reliance Mutual Fund by the Trustees of
Reliance Mutual Fund vide Investment Management Agreement (IMA) dated May 12, 1995 and
executed between Reliance Capital Trustee Co. Limited and Reliance Capital Asset
Management Limited and amended on August 12, 1997 and amended on August 12, 1997,
January 20, 2004 and February 17, 2011 in line with SEBI (Mutual Funds) Regulations, 1996.
Pursuant to this IMA, RCAM is acting as the Investment Manager of the Mutual Fund. The net
worth of the Asset Management Company based unautdited financials statements as on
September 30, 2011 is Rs. 1,228.89 Crore. RCAM is also registered as a Portfolio Manager vide
SEBI Registration Number PM/INP000000423 and renewed with effect from August1, 2009. The
AMC is also rendering advisory services in respect of Emergent India Investment Limited, an
offshore fund for investment in India.
RCAM has ensured that key personnel of the AMC, the systems, back office, bank and
securities accounts are segregated activity wise and there exists systems to prohibit access to
inside information of various activities. As per SEBI Regulations, it will further ensure that AMC
meets the capital adequacy requirements, if any, separately for each such activity. However,
there is no conflict of interest between various business activities carried on by RCAM.
The mutual fund:
About
RMF has been registered with the Securities & Exchange Board of India (SEBI) vide
registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual
Fund was changed to Reliance Mutual Fund effective 11th March 2004 vide SEBI's letter no.
IMD/PSP/4958/2004 date 11th March 2004. Reliance Mutual Fund was formed to launch
various schemes under which units are issued to the Public with a view to contribute to the
capital market and to provide investors the opportunities to make investments in diversified
securities.
The main objectives of the Reliance Mutual Fund are:

10

To carry on the activity of a Mutual Fund as may be permitted at law and formulate and
devise various collective Schemes of savings and investments for people in India and
abroad and also ensure liquidity of investments for the Unit holders.

To deploy Funds thus rose so as to help the Unit holders earn reasonable returns on
their savings.

To take such steps as may be necessary from time to time to realise the effects without
any limitation.

Awards and achievements:

CNBC TV18 - CRISIL Mutual Fund of the Year Award for 2009: Reliance Mutual Fund
has won the CNBC TV18 - CRISIL Mutual Fund of the Year Award in the Category Mutual
Fund House of the Year (Awarded by CRISIL Fund Services, CRISIL Limited). In total 37 fund
houses were considered as the award universe. Fund Houses winning at least one award for
their schemes in the category level awards for 2009 were eligible to be in contention for the
award. The award is based on consistency of fund houses performance across various scheme
categories in the four quarterly CRISIL Composite Performance Rankings (CPRs) released
during the calendar year 2009. The individual CRISIL CPR ranks for their schemes were
aggregated on a weighted average basis to arrive at the final ranks for fund houses. The mutual
fund house with the highest final score is the Mutual Fund House of the Year. The award has
been granted for the year 2009 and will be in vogue till the announcement of the award for the
next year in the same category. A detailed methodology of the CRISIL CPR is available at
www.crisilfundservices.com.

Past

performance

is

no

guarantee

Rankings and Award Source: CRISIL Fund Services, CRISIL Limited.

of

future

results.

11

1.2 OBJECTIVES OF THE STUDY:

To study the investors attitude towards the mutual funds.
To find out the factors which influencing the investors to prefer the investment in mutual
funds.
To suggest the suitable measures for extending the scope for investment in mutual funds
based on findings of the study.

1.3 SCOPE OF THE STUDY:

The present study is an attempt to study the investors attitude towards mutual fund of
Chennai city. it involves understanding the basic concept of mutual fund, various
concepts of mutual fund, various schemes of mutual fund, investment alternatives.
Factor influencing to investment in mutual funds, investors expectations regarding the
mutual fund and investors attitudes of different mutual funds.
The analysis would help how much importance investors giving to the mutual funds
comparing to the other investments.

1.4 NEED OF THE STUDY:

This study gives information about mutual fund industry and as well as awareness level
among the people for mutual funds.
And this study deals with the investors attitude and how the mutual funds are performing
in the current market situation.

12
This study facilitates the general people who can understand the importance and explore
the new option for investment in the mutual funds

1.5 LIMITATIONS OF THE STUDY

For the research work, data was collected and interpreted with utmost reliability and
consistency but due to prejudices of a few respondents, certain limitations of the study are as
follows:

The study depicts the present scenario in the selected city of Chennai and hence the
result may not be applicable to another period of time.
The study is limited to 150 respondents of the selected city of Chennai.
Answer to the questionnaire depends upon the beliefs and prejudices of investors.
It is assumed that respondents are true and honest in expressing their views and have
filled the questionnaire honestly and without any bias.
The present study is restricted to information collected about the Mutual Fund Investors
with the help of questionnaire.

13

CHAPTER 2
REVIEW OF LITERATURE
Investors are generally more careful while making investment decision and presence of
rationality in every investor demands higher return at minimum risk but when markets are
efficient it is not possible to gain abnormal returns. Risk is generally, associated with various
applications differently but in common it means negative connotation such as harm or loss or
some undesirable action.
2.1 Factors influencing the retail investors to prefer investment in mutual funds in
Puducherry: An Emprical study
*D.Kandavel
*Asst. Professor of Commerce, DDE, Annamalai University, Annamalai
Nagar, Tamil Nadu, India.
Mutual funds have emerged as an important segment of financial markets
and so far have delivered value to the investors. It has grown by leaps and bounds in last
couple of years. But no industry can flourish without a proper regulatory mechanism in the
place. These initiatives would help towards making the Indian mutual fund industry more vibrant
and competitive. Since, the need of study has been aroused in order to see the factors

14
influencing the retail investors to prefer investment regarding the mutual funds in Puducherry.
The study is based on the formulation of the following null hypotheses:
There is no significant relationship among the acceptance level of the retail investors
belonging to different demographic profile towards factors influencing to invest in mutual funds.
In order to study the factors influencing the retail investors to prefer investment in mutual funds
in Puducherry, chi square test, analysis of one-way variance, student t-test, analysis of coefficient of variation, multiple regression analysis, and percentage analysis have been
employed. Chi square test was employed to measure the association between the demographic
profile of the respondents and their satisfaction with investment in mutual funds and type of fund
preferred. The present study looks at the small investors purchase behavior does not have a
high level of coherence due to the influence of different purchase factors. If the study provokes
the authority concerned to take some positive measures for expanding the scope of mutual
funds investment.
2.2 Investors perception towards investment in mutual funds
Kaplan and Garrick (1981), Rajeshwari TR and Rama moorthy VE (2002)
The investment decision making process is a multi-faceted subject to change over a
period of time. Mutual Funds have become an important portal for the small investors. The
objectives of the study are to know investors motivational factors, investment preference and
problems faced by investors in Mutual Funds. The study reveals that 1) The motivational factors
to invest in mutual funds are Portfolio diversification, Risk minimization and greater tax benefits;
2) Lack of knowledge is the primary reason for not investing in mutual fund.
Risk expressed by Kaplan and Garrick (1981) demonstrates that risk involves a factor of
uncertainty and potential loss that might be incurred. Rajeshwari TR and Rama moorthy VE
(2002) studied the financial behavior and factors influencing fund/scheme selection of retail
investors by conducting factor analysis using principal component analysis, to identify the
investors underlying fund scheme selection criteria, so as to group them into specific market
segment for designing of the appropriate marketing strategy. Although majority of investors who
invest in mutual fund themselves are not clear with the objective and constraints of their
investment but in addition to this most important critical gap that exist in this process is lack of
awareness about presence of risk elements in mutual fund investment. The new marketing
philosophy and strategies place special emphasis on recognition of customer needs in an effort
to provide high level of quality services (Harrison, 2000).

15
2.3 Learn how to invest in Mutual Funds
Mustafa Soleimanzadeh
Mustafa Soleimanzadeh in his article, Learn how to invest in Mutual Funds had
discussed about the risk and return in mutual funds. He stated that the risk and return depend
each other, the greater the risk, the higher the potential return; the lower the risk, the lower the
expected return. Mutual funds try to reduce their risk by investing in a diversified group of
individual stocks, bonds, or other securities. He concluded that the investment in stocks can get
more return than mutual funds but investment in mutual funds the risk is lower. Mutual funds are
great for funding retirement plans and investors that don't have the time or energy to consider
individual stocks.(2006) Kum Martin in his article, Basics about Mutual Funds had discussed
about different types of mutual funds. He stated that the equity funds involve just common stock
investments. They are extremely risky but can end up earning a lot of money. Fixed income
funds are government and corporate securities. Fixed income funds offer fixed returns and the
risk associated with these funds is very low. Balanced mutual funds are a combination of bonds
and stocks. He concluded that the low risk in investment will not earn a lot of returns. (2007)
Mutual fund managers have to use various investment styles depending upon investors
requirement. Most of the empirical evidences have shown that mutual fund investors purchase
decision is influenced by past performance (Patel, et al. 1992). Research study by (Jones et al,
2007) has proved that a negative correlation exists between advertisement and fund quality. A
common investor may expect that mutual fund should option strategies that have been
documented to produce superior returns in the past instead they follow to select portfolios that
dont deviate markedly from market benchmarks.
2.4 Investors Preference towards Mutual Funds in Coimbatore City
A. Vennila, Author, Assistant Professor, Sri Krishna College of Technology, Coimbatore.
R. Nandhagopal, Co-Author, Director, PSG Institute of Management, Coimbatore
There are a lot of investment avenues available today in the financial market for an
investor with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and
Bonds where there is low risk but low return. The recent trends in the Stock Market have shown
that an average retail investor always lost with periodic bearish tends. If the invests in Index
Funds, they foregoes management risk, because these funds do not employ managers.
In the present study an attempt has been made to study the attitude of the investors
towards investment in mutual funds in Coimbatore City. The study aims at finding out the
attitude of the investors towards investment in mutual funds in Coimbatore city. The primary

16
data was collected from the investors of mutual funds with help of the questionnaire. The
secondary data were collected from the books, records and journals. By adopting convenience
sampling, 250 respondents were selected for this study.
2.5 .An Analysis of Investors' Attitude towards Tax Saving Mutual Funds in India
N. S. Santhi, Assistant Professor, Department of Business Administration, KSR College
of Engineering, Tiruchengode.
K. Balanaga Gurunathan, Professor, Department of Management Studies, KSR College of
Technology, Tiruchengode.
Investment is saving money and engaging them with the expectation of earning profit in
future. Mutual fund is supposed to be a better avenue for the individual investor. Tax saving
mutual funds is also known as Equity Linked Saving tax saving mutual funds which provides all
the benefits along with tax exemption on their investment. This study makes an attempt to
analyze the investors attitude towards their investment on Tax saving mutual funds. The study
finds that the participation of investors in Tax saving mutual funds is comparatively less than
other safer investment areas like Insurance, Postal Deposit Schemes and Fixed Deposits. The
dynamic relationship between investors biographical information and their behavior has been
examined by using relevant statistical techniques.
The investors Knowledge and satisfaction on Tax saving mutual funds and awareness
on regulating bodies also has been analyzed. The study finds that majority of the investor
doesnt have the knowledge on schemes and awareness on controlling authorities and they are
satisfied with the overall benefits on Tax saving mutual funds.
For the purpose of research, Primary data have been collected from the Tax saving Mutual fund
Investors in Tamil Nadu, India through well structured questionnaire schedule.
2.6 Investors attitude towards Mututal Funds Project Report
The research was done on the topic Investors Attitude towards UTI Mutual Funds. The
study aims at analysing the attitude of the investors towards UTI Mutual Funds. The data was
collected with the help of a questionnaire. The sample size considered for the study was 100
wherein all the samples were investors of UTI Mutual Funds in Coonoor.
The tools used for the analysis include Percentage Analysis and Mean Score Values.
The analysis was divided into 2 phases which are Personal Factors and Investment Factors.
The study revealed that the investors have a positive attitude towards their investments in UTI
Mutual Funds. The investors mainly look into the returns earned from the investment. It was

17
found that the awareness towards the risk related to the investment was relatively low. Based on
the analysis Suggestions for improvement are provided.
2.7 Perceptions of investors, brokers and fund managers on the indian mutual fund
industry
Financial system comprises of financial institutions, services, market and instruments.
Financial institutions mobilize resources, purchase and sell instruments and render various
services in accordance with the practices and procedures of law. Investing in financial securities
is a complex one involving knowledge of various investment tools, terms, concepts, strategies
and process. The success of a financial investment activity depends on the knowledge and
ability of investors to invest the
right amount, in the right type, at the right time. Investor has to use his intellect, which is an art
to acquire by learning and experience.
Knowledge of financial investment principles and the art of investment management are
the basic requirements for a successful investment. The financial securities include ownership
securities (like shares, mutual fund units) and creditorship securities (like debentures, bonds).
Ownership securities are more risky than creditorship securities. Investment decisions relating
to ownership securities involve planning of investment strategies according to the extent of
diversification desired by individuals. Investors can reduce risk and maximize returns by way of
mutual fund investments, enjoying the expertise of professional fund management. In India,
Mutual fund industry is an organised financial system, accessible to individual investors having
varied needs and options. In order to identify the preferences of brokers and investors for
mutual funds, a careful collection of primary data through questionnaire was made. Schedules
were used to collect data from fund managers on mutual funds.
2.8 Investors Preference for Investment in Mutual Funds: An Empirical Evidence
Since interest rates on investments like PPF, NSC, bank deposits, etc., are falling, the
question to be answered is: What investment alternative should a small investor adopt? Direct
investment in capital market is an expensive proposal, and keeping money in saving schemes is
not advisable. One of the alternatives is to invest in capital markets through mutual funds. This
helps the investor avoid the risks involved in direct investment. Considering the state of mind of
the general investor, this article figures out: (i) the preference attached to different investment
avenues by the investors; (ii) the preference of Mutual Funds schemes over others for
investment; (iii) the source from which the investor gets information about Mutual Funds; and

18
(iv) the experience with regard to returns from mutual funds. The results show that the investors
consider gold to be the most preferred form of investment, followed by NSC and Post Office
schemes. Hence, the basic psyche of an Indian investor, who still prefers to keep his savings in
the form of yellow metal, is indicated. Investors belonging to the salaried category, and in the
age group of 20-35, years showed inclination towards close-ended growth (equity-oriented)
schemes over the other scheme types. A majority of the investors based their investment
decision on the advice of brokers, professionals and financial advisors. The findings also
reveals the varied experiences of respondents regarding the returns received from investments
made in mutual funds.
The masses in India generally prefer to save in those instruments that are safe. The
safety of the money invested is not compromised, and at times, they do not mind accepting
lesser returns on their investment. An average small investor generally advocates the
phenomenon of risk aversity. But, return on investment in capital markets comes with the
associated risk.
2.9 An Empirical Study of Retail Investors Attitude Towards Investment in Mutual Funds
Ashok Khurana, Guru Nanak Khalsa College, Yamunanagar
Vikas Chaudhary
In the financial industry, Mutual Funds have become a hot favourite of millions of people
all over the world. A mutual fund is a special type of institution, a trust or an investment company
which acts as an investment intermediary and invests the savings of large number of people to
the corporate securities in such a way that investors get steady returns, capital appreciation and
a low risk. It is essentially a mechanism of pooling together the savings of a large number of
investor for collecting investment with an avowed objective of attractive yields and appreciation
in their values. The concept of 'Mutual Fund' is a new feature in Indian capital market but not to
international capital markets. A mutual fund in the most suitable investment for the retail
investors as it offers an opportunity to invest in a diversified, professionally managed portfolio at
a relatively low cost. At the retail level, investors are unique and are a highly heterogeneous
group. A large number of investment options are available to investors. Currently there are large
numbers of schemes available and asset management companies (AMCs) compete against
one another by launching new products or repositioning old ones. Unless mutual fund schemes
are tailored to the changing needs, and the AMCs understand the fund selection behaviour of
the investors, survival of funds will be difficult in future. With this significance an attempt is made
to study the attitude of mutual fund investors.

19

2.10 A study on investors attitude towards mutual funds as an investment option Dr.
Binod Kumar Singh, Faculty Member,Amity Global Business School,Patna.
In this paper, structure of mutual fund, operations of mutual fund, comparison between
investment in mutual fund and bank and calculation of NAV etc. have been considered. In this
paper, the impacts of various demographic factors on investors attitude towards mutual fund
have been studied. For measuring various phenomena and analyzing the collected data
effectively and efficiently for drawing sound conclusions, Chi-square () test has been used and
for analyzing the various factors responsible for investment in mutual funds, ranking was done
on the basis of weighted scores and scoring was also done on the basis of scale. Key words:
Hypothesis, Chi-square () test, Rank, Weighted score and Scaling.

CHAPTER 3
RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve a problem. It may be understood
as a science of study where research is done scientifically. It includes various steps that are
generally adopted by a researcher in studying his research problem.

3.1 Type of research:

The type of research carried out was Descriptive. Descriptive research, also known as
statistical research, describes data and characteristics about the population or phenomenon
being studied. Descriptive research answers the questions who, what, where, when, "why" and
how.

3.2 Data collection methods:

3.2.1 Primary data:
Questionnaire was used as a tool for primary data collection.
3.2.1 Secondary data:
Secondary data were collected from books, journals, websites and magazines.

20

3.3 Sampling design:

Collection of data from a sample of units that have been selected from the target universe
with the intention that they may be representative of that universe. This is referred to as
purposive sampling or judgemental sampling.

Sample size taken for this study is 150.

Convenience sampling technique was used. Accidental sampling (sometimes known as
grab, convenience or opportunity sampling) is a type of non-probability sampling which
involves the sample being drawn from that part of the population which is close to hand.
That is, a population is selected because it is readily available and convenient. It may be
through meeting the person or including a person in the sample when one meets them
or chosen by finding them through technological means such as the internet or through
phone.

3.4 Statistical tool for analysis:

3.4.1 Percentage analysis:
Percentage method refers to a specified kind which is used in making comparison
between two or more series of data. Percentages are based on descriptive relationship. It
compares the relative items. Since the percentage reduces everything to a common base and
thereby allow meaning comparison.
Percentage =

Number of respondents x 100

Total no of respondents

3.4.2 Cross tabulation:

Cross tabulation tables (contingency tables) display the relationship between two or
more categorical (nominal or ordinal) variables. The Cross tabs procedure forms two-way and
multiway tables and provides a variety of tests and measures of association for two-way tables.
The structure of the table and whether categories are ordered determine what test or measure
to use.
3.4.3 Chi-square:
The Chi square test procedure tabulates a variable into categories and computes a chi
square statistic. This goodness-of-fit test compares the observed and expected frequencies in

21
each category to test that all categories contain the same proportion of values or test that each
category contains a user-specified proportion of values.
Statistical method to test whether two (or more) variables are: (1) independent or (2)
homogeneous. The chi-square test for independence examines whether knowing the value of
one variable helps to estimate the value of another variable. The chi-square test for
homogeneity examines whether two populations have the same proportion of observations with
a common characteristic.

CHAPTER 4
DATA ANALYSIS AND INTERPRETATION
4.1 Univariate Percentage Analysis
Table showing classification of respondents based on Gender

Valid

MALE
FEMALE
Total

Frequency
93
57
150

Percent
62.0
38.0
100.0
Table 4.1

Valid Percent
62.0
38.0
100.0

Chart showing classification of respondents based on Gender

Cumulative
Percent
62.0
100.0

22

Chart 4.1
INTERPRETATION:
Out of 150 respondents 62% were male and 38% were female.
Table showing classification of respondents based on Occupation

Valid

STUDENT
GOVT.EMP
PRI.EMP
BUSINESS
RETIRED
Total

Frequency
12
64
59
11
4
150

Percent Valid Percent

8.0
8.0
42.7
42.7
39.3
39.3
7.3
7.3
2.7
2.7
100.0
100.0
Table 4.2

Chart showing classification of respondents based on Occupation

Cumulative
Percent
8.0
50.7
90.0
97.3
100.0

23

Chart 4.2
INTERPRETATION:

8% are the students

42.7%are the government employees
39.3% are the private employees
7.3%are the business
2.7% are the retired peoples.

Table showing classification of respondents based on Age

Valid

< 20
21 TO 40
41 TO 60
> 60
Total

Frequency
5
98
46
1
150

Percent Valid Percent

3.3
3.3
65.3
30.7
.7
100.0
Table 4.3

Chart showing classification of respondents based on Age

65.3
30.7
.7
100.0

Cumulative
Percent
3.3
68.7
99.3
100.0

24

Chart 4.3
INTERPRETATION:

3.3% of the respondents are at the age less than 20.

65.3% are at the age 21 to 40
30.7% are at the age 41 to 60
0.7% are at the age above 60.

Table showing classification of respondents based on Annual income

Valid

< 1LAC
1 TO 3LAC
3 TO 5LAC
>5LAC
Total

Frequency
9
92
31
18
150

Percent Valid Percent

6.0
6.0
61.3
61.3
20.7
20.7
12.0
12.0
100.0
100.0
Table 4.4

Chart showing classification of respondents based on Annual income

Cumulative
Percent
6.0
67.3
88.0
100.0

25

Chart 4.4
INTERPRETATION:

6% of the respondents earn less than 1lakh annually.

61.3% earn 1 to 3lakh.
20.7% earn 3 to 5lakh
12% earn above 5lakh

Table showing classification of respondents based on Amount invested

Cumulative
Valid

<10000
>10000
Total

Frequency
66
84
150

Percent Valid Percent

44.0
44.0
56.0
56.0
100.0
100.0
Table 4.5

Chart showing classification of respondents based on Amount invested

Percent
44.0
100.0

26

Chart 4.5
INTERPRETATION:
44% of the respondents are invested less than 10000.
56% of the respondents are invested above 10000

Table showing classification of respondents based on reason for investment in mutual funds

Valid

CHILD EDU
RETIREMENT
HOUSE
VACATION
ABROAD
OTHER
Total

Frequency
32
16
48
26

Percent Valid Percent

21.3
21.3
10.7
10.7
32.0
32.0
17.3
17.3

28
18.7
150
100.0
Table 4.6

18.7
100.0

Cumulative
Percent
21.3
32.0
64.0
81.3
100.0

27
Chart showing classification respondents based on reason for investment in mutual funds

Chart 4.6
INTERPRETATION:

21.3% of the respondents are invested for their child education.

10.7% are invested for retirement
32% are invested for house
17.3% are invested for vacation abroad.
18.7% are invested for other purposes.

Table showing classification of respondents based on how long they are investors of
mutual funds

Valid

< 1YR
1 TO 3YR
>5yr
Total

Frequency
7
103
40
150

Percent Valid Percent

4.7
4.7
68.7
68.7
26.7
26.7
100.0
100.0
Table4.7

Cumulative
Percent
4.7
73.3
100.0

Chart showing classification of respondents based on how long they are investors of
mutual funds

28

Chart 4.7
INTERPRETATION:
4.7% of the respondents are investing in less than one year
68.7% are invested one to 3 year.
26.7% are invested above 5 year.
Table showing classification of respondents based on reason for choosing mutual funds

Valid

SAVINGS
returns
diversification
risk tolerance
Total

Frequency Percent Valid Percent

73
48.7
48.7
44
29.3
29.3
20
13.3
13.3
13
8.7
8.7
150
100.0
100.0
Table 4.8

Cumulative
Percent
48.7
78.0
91.3
100.0

Chart showing classification of respondents based on reason for choosing mutual funds

29

Chart 4.8
INTERPRETATION:

48.7% are chosen mutual funds for savings.

29.3% are chosen mutual funds for returns.
13.3% are chosen mutual funds for diversification.
8.7% are chosen mutual funds for risk tolerance.

Table showing classification of respondents based on number of plans they have invested in
mutual funds.

Valid

1
2
3
>3
Total

Frequency
65
54
24
7
150

Percent Valid Percent

43.3
43.3
36.0
36.0
16.0
16.0
4.7
4.7
100.0
100.0
Table 4.9

Cumulative
Percent
43.3
79.3
95.3
100.0

Chart showing classification of respondents based on number of plans they have invested in
mutual funds.

30

Chart 4.9
INTERPRETATION:

43.3% of the respondents invested in one scheme.

36% of the respondents invested in 2 schemes.
16%of the respondents invested in 3 schemes.
4.7% of the respondents invested in more than 3 schemes.

Table showing classification of respondents based on the reason for selecting a particular
mutual fund company.

Valid

REPUTATION
GOOD RETURNS
EXPERT ADVICE
OTHER
Total

Frequency
27
88
33
2
150

Percent Valid Percent

18.0
18.0
58.7
58.7
22.0
22.0
1.3
1.3
100.0
100.0

Cumulative
Percent
18.0
76.7
98.7
100.0

Table 4.10
Chart showing classification of respondents based on the reason for selecting a particular
mutual fund company.

31

Chart 4.10
INTERPRETATION:

18% are chosen the mutual fund company for the company reputation.
58.7% chosen for the good returns.
22% chosen for the expert advice.
1.3% chosen for the other reasons.

Table showing classification of respondents based on the option they prefer for investment in
mutual fund

Valid

DIV
GROWTH
NOT SURE
Total

Frequency
55
90
5
150

Percent Valid Percent

36.7
36.7
60.0
60.0
3.3
3.3
100.0
100.0

Cumulative
Percent
36.7
96.7
100.0

Table 4.11
Chart showing classification of respondents based on the option they prefer for investment in
mutual fund

32

Chart 4.11
INTERPRETATION:
36.7% of the respondents prefer the dividends for their investments.
60.7% of the respondents prefer the growth for their investments.
3.3% of the respondents are not sure their investments.
Table showing classification of respondents based on how frequent they monitor performance of
investment

Vali M
d
Q
HY
Y
N
Total

Frequency Percent Valid Percent

109
72.7
72.7
18
12.0
12.0
16
10.7
10.7
6
4.0
4.0
1
.7
.7
150
100.0
100.0
Table 4.12

Cumulative
Percent
72.7
84.7
95.3
99.3
100.0

Chart showing classification of respondents based on how frequent they monitor performance of
investment

33

Chart 4.12
INTERPRETATION:
72.7% of the respondents are monitoring their performance of the investments monthly.
12% of the respondents are monitoring quarterly.
10.7%of the respondents are monitoring half yearly.
4% of the respondents are monitoring yearly.
And 0.7% of the respondents are never monitoring their performance.
Table showing classification of respondents based on how frequent they monitor risk factors.

Valid

M
Q
HY
Y
N
Total

Frequency
77
37
21
7
8
150

Percent Valid Percent

51.3
51.3
24.7
24.7
14.0
14.0
4.7
4.7
5.3
5.3
100.0
100.0
Table 4.13

Cumulative
Percent
51.3
76.0
90.0
94.7
100.0

Chart showing classification of respondents based on how frequent they monitor risk factors.

34

Chart 4.13
INTERPRETATION:
51.3% of the respondents are monitoring their risk factors monthly.
24.7% of the respondents are monitoring quarterly.
14% of the respondents are monitoring half yearly.
4.7% of the respondents are monitoring yearly.
5.3% of the respondents are never monitor their risk factor.
Table showing classification of respondents based on how frequent they monitor portfolio of
securities

Valid

M
Q
HY
Y
N
Total

Frequency
89
26
18
14
3
150

Percent Valid Percent

59.3
59.3
17.3
17.3
12.0
12.0
9.3
9.3
2.0
2.0
100.0
100.0
Table 4.14

Cumulative
Percent
59.3
76.7
88.7
98.0
100.0

35
Chart showing classification of respondents based on how frequent they monitor portfolio of
securities

Chart 4.14
INTERPRETATION:
59.3% of the respondents are monitoring their portfolio of securities monthly.
17.3% of the respondents are monitoring their quarterly.
12% of the respondents are monitoring half yearly.
9.3% of the respondents are monitoring yearly.
2% of the respondents are never monitor their portfolio securities.
Table showing classification of respondents based on how frequent they monitor portfolio of
fund manager

Valid

M
Q
HY
Y
N
Total

Frequency
68
31
25
16
10
150

Percent Valid Percent

45.3
45.3
20.7
20.7
16.7
16.7
10.7
10.7
6.7
6.7
100.0
100.0
Table 4.15

Cumulative
Percent
45.3
66.0
82.7
93.3
100.0

36

Chart showing classification of respondents based on how frequent they monitor portfolio of
fund manager

Chart 4.15
INTERPRETATION:
45.3% of the respondents are monitoring their portfolio of fund manager monthly.
20.7% of the respondents are monitoring quarterly.
16.7% of the respondents are monitoring half yearly.
10.7% of the respondents are monitoring yearly.
6.7% of the respondents are never monitoring their portfolio of fund manager.
4.2 BIVARIATE - CHI SQUARE:
Null hypothesis H0: There is no significance relationship between gender & preference for
investment option.
Alternative hypothesis H1: There is significance relationship between gender & preference for
investment option.
Table showing crosstab between gender and preference for investment option

37

GENDER

MALE
FEMALE

Total

OPT.INV
DIV
GROWTH NOT SURE
27
62
4
28
28
1
55
90
5
Table 4.16

Total
93
57
150

Table showing relationship between gender and preference for investment option

Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear
Association
N of Valid Cases

Value
6.391a
6.390
6.227

Df
2
2
1

Asymp. Sig.
(2-sided)
.041
.041
.013

150
Table 4.17.

INTERPRETATION:
27 males out of 93 and 28 females out of 57 prefer the mutual fund investments for
dividends. Therefore women mostly prefer the dividends.
62 males out of 93 and 28 females out of 57 prefer the mutual fund investments for
growth. Therefore women mostly prefer the growth also. So womens only equally prefer
the dividends and growth for their investments.
4 males out of 93 and 1 female out of 57 are not prefer anything for their investments.
From the chi square test table we infer that reject the h0.and accept the h1 so there is
significance relationship between gender& respondents preference for investment
option.
Null hypothesis H0: There is no significance relationship between gender & respondents
purpose for investments.
Alternative hypothesis H1: There is significance relationship between gender & respondents
purpose for investments.
Table showing crosstab of gender and purpose for investment

38

INV.FOR

GENDER MALE
FEMALE
Total

CHILD
RETIREMEN
EDU
T
HOUSE
26
13
23
6
32

3
16

Total
VACATION
ABROAD
OTHER
19
12

93

7
26

57
150

25
48

16
28

Table 4.18

Table showing relationship between gender and purpose for investment

Asymp. Sig.
(2-sided)
.002
.001
.004

Value
df
Pearson Chi-Square
17.300a
4
Likelihood Ratio
17.901
4
Linear-by-Linear
8.076
1
Association
N of Valid Cases
150
a. 0 cells (.0%) have expected count less than 5. The minimum
expected count is 6.08.
Table 4.19

INTERPRETATION:
26 males out of 93 and 6 females out of 57 are purpose to invest for their child
education. Therefore males mostly purose the investments for their child education.
13 males out of 93 and 3 females out of 57 are purpose to invest for their retirement.
23 males out of 93 and 25 females out of 57 are purpose to invest for their house.
Therefore females mostly purpose the investments for house.
19 males out of 93 and 7 females out of 57 are purpose to invest for vacation abroad.

39

12 males out of 93 and 16 females out of 57 are purpose to invest for other reasons and
other purposes.
From the chi square test table we infer that reject h0.and accept h1.so there is
significance relationship between gender and respondents purpose for investments.

Null hypothesis H0: There is no significance relationship between age & respondents purpose
for investments.
Alternative hypothesis H1: There is significance relationship age & respondents purpose for
investments.
Table showing crosstab of age and purpose for investment

40

INV.FOR

AGE

< 20
21 TO 40
41 TO 60
> 60

Total

Total

CHILD EDU RETIREMENT HOUSE

2
0
2
17
11
32
13
5
13
0
0
1
32
16
48
Table 4.20

VACATION
ABROAD
1
17
8
0
26

OTHER
0
21
7
0
28

5
98
46
1
150

Table showing relationship between age and purpose for investment

Value
7.232a
8.638
.535

df

Asymp. Sig. (2sided)

12
.842
12
.734
1
.464

Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear
Association
N of Valid Cases
150
a. 11 cells (55.0%) have expected count less than 5. The minimum
expected count is .11.
Table 4.21
INTERPRETATION:

Less than 20 age 2 respondents out of 5 and 21 to 40 age 17 respondents out of 98 and
41 to 60 age 13 respondents out of 46 are invest for the child education. And there are
no respondents for this option above 60 ages.
21 to 40 age 11 respondents out of 98 and 41 to 60 age 5 respondents out of 46 are
invest for retirement. And there are no respondents for this option less than 20 ages and
above 60 ages.
Less than 20 age 2 respondents out of 5 and 21 to 40 age 32 respondents out of 98 and
41 to 60 age 13 respondents out of 46 and above 60 age 1 respondents are invest for

house.
Less than 20 age 1 respondents out of 5 and 21 to 40 age 17 respondents out of 98 and
41 to 60 age 8 respondents out of 46 are invest for the vacation abroad. And there are

no respondents for this option above 60 ages.

From this chi square test table we infer that accept h0 and reject h1. And there is no
significance relationship between age and respondents purpose for investments.

41

Null hypothesis H0: There is no significance relationship between age & respondents preferring
for mutual funds.
Alternative hypothesis H1: There is significance relationship between age & respondents
preferring for mutual funds.
Table showing crosstab of age and reason for preferring mutual fund

42

AGE

< 20
21 TO 40
41 TO 60
> 60

Total

SAVINGS
1
46
26
0
73

REA.MF
returns
diversification risk tolerance
1
2
1
32
14
6
11
4
5
0
0
1
44
20
13
Table 4.22

Total
5
98
46
1
150

Table showing relationship between age and reason for preferring mutual fund
Asymp. Sig. (2sided)
9
.033
9
.222
1
.607

Value
df
Pearson Chi-Square
18.209a
Likelihood Ratio
11.843
Linear-by-Linear
.265
Association
N of Valid Cases
150
a. 9 cells (56.3%) have expected count less than 5. The minimum
expected count is .09.
Table 4.23

INTERPRETATION:
Less than 20 age 1 respondent out of 5 and 21 to 40 age 46 respondents out of 98 and
41 to 60 age 26 respondents out of 46 are prefer the mutual fund for savings. And there
are no respondent from above 60 ages.

43
Less than 20 age 1 respondent out of 5 and 21 to 40 age 32 respondents out of 98 and
41 to 60 age 11 respondents out of 46 are prefer the mutual funds for returns. And there
are no respondent from above 60 ages.
Less than 20 age 2 respondents out of 5 and 21 to 40 age 14 respondents out of 98 and
41 to 60 age 4 respondents out of 46 are prefer the mutual funds for diversifications. And
there are no respondent from above 60 ages.
Less than 20 age 1 respondent out of 5 and 21 to 40 age 6 respondents out of 98 and
41 to 60 age 5 respondents out of 46 and above 60 age 1 respondent out of 1
respondent are prefer the mutual fund for risk tolerance.
From the chi square test table we infer that reject h0.accepth1. so there is significance
relationship between age and respondent preference for mutual funds.

Table showing rank of reason for investing in mutual fund

FACTORS

SUM OF SCORE

RANK

44

Savings

302

Tax benefits

276

Portfolio
management

305

Balanced risk

341

Potential returns

363

TOTAL

1587
Table 4.24

INTERPRETATION:
In case of the factors responsible for investing in mutual funds is concerned tax benefits
has got first rank, savings has got second rank, portfolio management , balanced risk and
potential returns have been ranked third, fourth and fifth respectively.

CHAPTER 5
5.1 FINDINGS:

45
The Study was aimed at identifying the level of attitude towards the mutual funds.
There is significance relationship is found between the gender and respondents
preferences for investment options, and womens are equally prefer the dividends and
growth for the investments.
There is significance relationship is found between the gender and respondents purpose
for investments. Males are mostly purposeto invest for their child education. and females
are mostly purpose to invest for house and other purposes.
There is no relationship found between age and respondent preferring for investments.

There is significance relationship found between age and respondents preference for
mutual funds. Respondents are mostly prefer the mutual funds for savings and returns.
And next they prefer the mutual funds for diversifications and risk tolerance.

Ranking the factors for investing in mutual funds is concerned the tax benefit has got
first rank and savings has got second rank and portfolio management and balanced risk
and potential risk has got third, fourth, fifth ranks.

5.2 SUGGESTIONS:

46

The average attitude score reveals that the respondents are giving more importance to
the dividends and growth. Therefore the mutual funds should improve the scope of
dividends and growth of the mutual funds.
Mutual fund companies should segment their target customers and position their
products. The target segment can be broadly divided into institutional segment and retail
investor segment. The institutional segment consisted of treasury departments of
corporate, trusts, etc and suitable products such as institutional income schemes and
money market schemes can be targeted at them. As far as retail investors are
concerned, they can be in turn divided into various segments such as young families
with small or no children, middle-aged people saving for retirement and retired people
looking for steady income. Suitable products such as growth and balanced schemes for
young families and income schemes with certain and steady returns for retired people
can be marketed. By proper segmentation and by targeting the right product to the right
customer, mutual fund companies can hope to win the confidence of their customers and
own them for a lifetime. In this way the market scope for mutual funds can be expanded.

Investors usually review a range of information before purchasing mutual fund shares.
In general, they frequently review or ask questions about a funds fees and expenses
and its historical performance. They most often turn to professional financial advisers for
information prior to purchasing fund shares. Some investors also visit Mutual Fund
Company; confer with friends, family, or business associates for information before
buying fund shares, while others use the Internet regularly. The Internet, with its
interactive capabilities, is an effective vehicle for communicating mutual fund information
to retail investors

5.3 CONCLUSION:

47

The present study looks at the attitude level of the retail investors towards investment in
mutual funds. The small investors purchase behavior does not have a high level. The buying
intent of a mutual fund product by a small investor can be due to multiple reasons depending
upon customers risk return trade off. Presently, more and more funds are entering the industry
and their survival depends on strategic marketing choices of mutual fund companies, to survive
and thrive in this highly promising industry, in the face of such cut throat competition. Therefore,
the mutual fund industry today needs to develop products to fulfils customer needs and help
customers understand how its products to their needs. Thus the study provokes the authority to
take some positive measures for expanding the scope of mutual funds investment.

REFERENCES:

48

Aman Srivastava (2007). An Analysis of Behaviour of Investors in India, ICFAI Journal of

Behavioural Finance.
Bala Ramasamy, Matthew C.H. Yeung (2003).
Singh Jaspal and Chander Subhash (2004). An Empirical Analysis of Perceptions of
Investors towards Mutual Fund.

WEBSITES:
http://www.appuonline.com/mf/knowledge/industry.html
http://www.appuonline.com/mf/knowledge/industry.html
http://www.investopedia.com/articles/mutualfund/05/MFhistory.asp
http://www.mutualfundsresource.com/history/
www.reliancemutual.com