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A study on


Dissertation submitted in partial fulfillment of the requirements for the award of the Degree of MASTER OF BUSINESS ADMINISTRATION OF


MUJEEB K.M Reg No: 06ACCM6047 Under the Guidance of Mrs.GHOUSIA KHATOON


Hosur Road, Near Lalbagh Main Gate, BANGALORE-560027

CONTENTS CHAPTERS Chapter-1 Chapter-2 Introduction Research Design Statement of the Problem Objectives Scope Limitations Methodology Chapter-3 Chapter-4 Chapter-5 Industry & Company profile Analysis & Interpretations Findings , suggestions&Conclusions Bibliography Annexure TITLE PAGE NO. 1 25 26 26 27 27 27 29 44 81 87 89

LIST OF TABLES SL NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 TITLE

Age Profile of the Respondents Occupation profile of the respondents Number of Family Dependents of the Respondent Income Profile of the respondents Awareness of Investment options among respondents Investment Profile of the respondents Reason for not investing in Mutual Funds Annual investment of the respondents Popular Mutual Fund Products among the respondents Ranking of factors for Investment Investment Opinion of respondents if the returns are between 15 % to 25% and above Investing Option among the respondents between risk and return Awareness of Mutual Fund advertisements among the respondents most common Mutual Fund Company Advertisement Influence of Brand among respondents while investing in Mutual Fund Opinion of respondents on returns in Mutual Funds compared to Shares/Derivatives Investment Firms transparency in recent times Performance of funds according to respondents

45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Age Profile of the Respondents Occupation profile of the respondents Number of Family Dependents of the Respondent Income Profile of the respondents Awareness of Investment options among respondents Investment Profile of the respondents Reason for not investing in Mutual Funds Annual investment of the respondents Popular Mutual Fund Products among the respondents Ranking of factors for Investment Investment Opinion of respondents if the returns are between 15 % to 25% and above Investing Option among the respondents between risk and return Awareness of Mutual Fund advertisements among the respondents most common Mutual Fund Company Advertisement Influence of Brand among respondents while investing in Mutual Fund Opinion of respondents on returns in Mutual Funds compared to Shares/Derivatives Investment Firms transparency in recent times Performance of funds according to respondents

46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80


In the early commercial history, Egyptians and Phoenicians sold shares in vessels and caravans in order to spread the risk of there venture. On the same lines the idea of mutual fund has its formal origin in Belgium, here the idea was used in transportation of ships. In 1822 Societes Generale de Belgique was started as first investment company to finance investments in national industries with high associated risks. Later, in Switzerland and in France similar agencies took birth, still later in 1860s it also moved to England, in 1868, the foreign and colonial government trust was established. In USA, the idea took root in the beginning of the 20 century and there was little activity uptill 1924, in 1924 three investment companies were organized Massacheusells Investment Corporation. State Stree Investment Corporation. US and foreign securities corporation.

All these institutions are still operating. Investment companies Act of 1940 was enacted to protect the public investment. There are over 5000 mutual fund schemes with total assets of over US $1million will prefer to mutual fund route to investing in equity instead of direct participation in share market. Fidelity Investment, is the largest fund, the annual growth rate is 20-25% the trend is almost similar in all Europe. In 1920, it entered Canada, Canadian Investment Fund in 1932, was the first mutual fund in Canada, later on it spread to almost all countries of the world. In U.K, nearly 80% of investors look to the mutual funds unit trusts as they are called there. The unit trust is leading bank deposits.

Mutual funds in the U.K. are divided into two namely, 1. Unit trusts are essentially open ended funds. 2. Investment trusts are close ended funds. Japanese Trusts are of two kinds: 1. Unity type investment centers. 2. Open type investment centers. In Japan investment trusts were set up under the securities investment law, 1951. The unique characteristic difference between Japanese investment trusts and American mutual funds is the fact tat the mutual fund industries in America evolved in response to market needs, whereas the development of the Japanese investment trusts has been in response to Government Policy. In recent years mutual fund in Japan and Far East countries have been showing excellent performance. Mauritius and Netherlands are emerging as tax heavens for off shore mutual funds.

HISTORY OF MUTUAL FUNDS IN INDIA Mutual funds entered Indian Market in 1963. Unit trust of India was set up under the UTI Act, 1963. It operates both as a Financial Institution and as an Investment Trust. Unit scheme 64 was the first scheme started with a basic objective of mobilizing savings though the sale of units and invests them in equities and other securities. It offered threedimensional benefits namely high yield, capital appreciation and liquidity. The history of mutual fund in India till the mid 80s in virtually synonymous with the history of UTI. In 1986, the UTI launched first growth scheme. Master shares which was listed and treated in stock exchanges. The monopoly of the UTI was broken in 1987. Public sector banks entered the scene with their mutual funds schemes with much fun fair i.e. in 1987, five banks State Bank of India Canara Bank Bank of India Indian Bank Punjab National Bank Along with LIC and GIC came out with their mutual funds. Mutual funds sponsored by the banks and other public sector financial institutions became popular on account of Wide network of collection centers of the bank and other sponsoring organizations. Guaranteed returns. Trust in the ability and reliability of the sponsors. Accessibility and familiarity with the sponsor bank/ organizations.

Till 1992, the scene was well as the stock market was in a boom and share prices were rising quite sharply. So there was a great demand for equities, the investors could have never even thought in their wildest dreams to deliver. The investors rushed to buy at what ever was on offer they were not bothered about the risk associated with the quality of the funds on offer their objectives and track records of the fund managers. This irrational action on the part of the investors cost them heavily, when the bubble of Securities Scam burst in 1992, as the rise in the prices of the stock were not because of the business performance but because of handiwork of few brokers it was destined to meet its logical tragic end. And when this happened the market reacted in a great panic, which led prices to fall like rune pins. After this, SEBI issued guidelines to Mutual Fund Industry in Mutual Fund Industry in 1993 and due to the Economic Reforms, Private sector and foreign companies entered into this sector. The reasons for private mutual fund to enter maybe1. Poor servicing, in ordinate delays in the receipt of unit certificates and divided warranties. 2. Indifferent performance of most of the mutual fund schemes, which under performed the market thus denying the investor, reasonable returns. 3. Absence of adequate disclosure norms. 4. Lack of an investor friendly approach in general. Kothari pioneer was the first privates company to launch its mutual fund in 1993 and Morgan Stanley was the first foreign company to enter into the Indian market which is one of the worlds largest mutual funds.

Briefly the categories of players can be divided into four types, viz UTI Public sector banks Insurance companies / All India financial institutions. Private sector- inclusive of foreign companies and joint ventures. Private sector funds are performing well in the market. A fund mobilized by private sector is more than UTI and public sector.

RESOURCES MOBILISED BY MUTUAL FUNDS According to data available on provisional basis, the mutual funds mobilized Rs.22710.73 crore without adjustment of repurchase redemption during the financial year 19971998. However, it is important to note that in case of open ended schemes, there was a continuous sale and repurchase of mutual funds, and there was redemption of some of the schemes as specially of unit 64 scheme of UTI. Consequently investible resources of mutual funds declined to that extent. Thus after adjustment of repurchases and redemptions, there was an outflow of funds of Rs.949.67 crore during 1998-1999. Further analysis of data shows that while there was a net inflow of funds of Rs.1452.70 crore and Rs.315.16 crore in case of privates sector mutual funds and public sector mutual funds, respectively, there was a net outflow of Rs.2737.53crore in case of the UTI the largest mutual fund. The outflow would have been still larger for the year but for sharp increase in net mobilization during March 1999. Details are given in the following table:

Table showing Resources Mobilization by Mutual Funds (Rs. In crore) Private Sector MFs Open Mobili -zation of Funds Repur -chase Amount Redem -ption Amount Net In/ Out flow of Funds 5180.98 1486.77 74.16 33.98 5255.14 1452.70 0.27 72.03 639.90 263.13 640.17 335.16 0.00 2953.18 5610.75 215.65 5610.75 -2737.53 11506.06 -949.67 1101.93 36.73 1138.66 291.85 404.16 696.01 9773.41 546.26 10319.67 12154.34 end 7769.59 Close end 76.91 Total 7846.5 Public Sector MFs Open end 364.1 Close end 1307.1 Total 1671.3 UTI Open end 6820.23 Close end 6372.66 Total 13192.9 22710.7 Grand Total


Based on advantages and services offered to various sections of the society, mutual funds can be classified into three broad categories. Viz., Functional Classification Portfolio Classification Geographical classification

FUNCTIONAL CLASSIFICATION It is based on the basis characteristics of the mutual fund schemes opened for the public subscription; it can be classified as; A. OPEN ENDED MUTUAL FUNDS: It is a scheme in which a investor can buy and sell units on daily basis, where in the scheme have perpectual existence and a flexible ever changing corpus. Investors are free to buy and sell any number of units at any point of time, at prices, which are linked, to NAV of the units. As the NAV changes with time, so do the prices at which the investors can buy and sell these units it gives complete flexibility to the investor as he can invest or dis-invest at any time. The fund is not listed in the stock market. The investor can buy and sell these units form and to the mutual fund. In accordance with the recent changes, the fund manager has the option to list the fund in the stock market in addition to repurchase and resale. B. CLOSE ENDED MUTUAL FUND: It is a fund where in it has a fixed corpus and operates for fixed duration at the end of which the entire corpus is disinvested and proceeds are distributed to the various unit holders in proportion of their holdings. The fund can also make interim payments if it so decides. Thus it

ceases the exist after final distribution. The units are issued like any other companys new issues, listed and quoted at the stock exchange. The units of close-ended funds are not always redeemable at their NAV. Market prices are determined by demand and supply and not solely by NAV. If the fund manager so chooses, he can offer repurchase facility. So also he can resume resale to the extent of repurchase. All the schemes discussed below are either open ended or close ended. PORFOLIO CLASSIFICATION; Mutual funds differ with reference to the type of instruments in which the money can be invested. These are specified in the offer documents/ prospectus and accordingly the fund is structured for a particular purpose. A. BOND FUNDS: They provide fixed returns for those who desire safety and steady income. The Fund is invested in Government securities and Bonds. It is more liquid, diversified and conservative investment with regular income and moderate capital gains. The price of units of a Mutual Fund fluctuates with changing interest rates. B.STOCK FUNDS: They are mainly those who are willing to accept risk in the hope of a high Return. These are called Common Stock Fund. They are of two types Growth Funds and Go-Go Funds. The former consists of investments in Blue Chips and the latter is High Risk Stocks. C.INCOME FUNDS:

They are mainly to maximize the current income of investors. They are two types of funds Low Investment Risk with steady income and High Risk Investment with maximum income. Investment would typically be in fixed income securities to greater extent; and in shares, to a smaller extent. Capital appreciation in such schemes may be limited. It is ideal for retired people and others with a need for capital stability and regular income, and investors who need some income to supplement their earnings. As most of Investors prefer income Funds, the sales of this fund had dominated the other types of funds. D.MONEY MARKET MUTUAL FUNDS: Investments are predominantly in Money Market Instruments like, Certificate of Deposits, Commercial Paper, Treasury Bills etc. They are short term in tenure, highly liquid with high safety. This fund is an alternative to saving account of high bracket savers. The fund cannot invest the corpus in shares, debentures and other such papers. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. E. SPECIALISED FUNDS: These funds invest in securities of certain industries/ specific set of or specific income producing securities. They carry more risk due to lack of diversification. F. LEVERAGE FUNDS: The funds borrow money in order to increase the size of the corpus and there by increase the benefit to the Unit Holders by operating with a larger corpus than the money collected. Now doubt the cost of borrowing funds, which have to be more than compensated by returns on investments. G. BALANCE FUNDS: Here the assets are made up of a judicious mixture of industries, Stock and Bonds. To secure reasonable rate of return, the funds are employed in high-grade common stock and conservative fixed income securities like debentures, bonds and preference shares. In a rising

stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls. It is ideal for investors looking for a combination of income and moderate growth.

H. PENSION FUNDS: These Funds provide for long term investments out of individuals investors superannuation savings. They take advantage of tax rate available for such investors. I. INDEX FUNDS: Investments are made in the index scripts with the same proportion and weight age as that of index. The performance of fund will be in the line with the index. J. TAX SAVING SCHEMES: These schemes offer tax rebate to the investors under tax laws as prescribed from time to time. This is made possible because the government offer tax incentives for investment in specific avenues. Recent amendments to the Income Tax Act provide further opportunities to investors to save capital gains by investing in Mutual Funds. This scheme is ideal for investors seeking tax rebate. MUTUAL FUND FRAME WORK SPONSOR Approval by SEBI Sound track record Experience in Financial Services Professional Competence, Financial Soundness, Reputation, etc Contribution to AMC Capital 40% minimum

TRUSTEE Names to be approved by SEBI Legally responsible for administering the Trust and Compliance with Regulations Norms for Trustees

Experience in Financial Services Minimum 4 members on the board and 50% of the members not to be connected with the sponsor

ASSET MANAGEMENT COMPANY (AMC) Responsible for Launching schemes Managing funds for schemes Performing Accounting Function All day-to-day affairs of the Mutual Funds

Income of an AMC/ AM fee 1.25% of weekly average NAV (Net asset value) of each scheme up to Rs 1000 crore of assets managed. 1.00% greater than 100 crore Infrastructure expenses to be borne by the AMC

CUSTODIAN RESPONSIBILITIES Safe keeping of the assets held by the Fund Receives and Delivers Securities for payment Follow up on Corporate benefits Provide an independent means of control

TRANSFER AGENTS Issue of Account Statements to Investors Arranges payment to Investors when they redeem

Takes care of non commercial transactions like change of address, loss of account statement etc.

REGISTRAR The registrar maintains the investment account of the Unit holders and also handles the complaints and grievances from the investors relating to dividend, purchase and sale of units. REGULATION OF MUTUAL FUNDS The Mutual Funds operating in India was governed by a number of Regulations and guidelines issued by various Agencies viz., UTI Act 1963 and UTI Guidelines, the Indian Trust Act 1882, Income Tax Act 1961 etc. Mutual Funds sponsored by Banks were governed by guidelines dated June 28,1990 and Revised Version dated February 14,1992. The Ministry of Finance and Government of India realized the need for a set of common rules governing entire Mutual Fund Industry, appointing a Committee under the Chairmanship of Dr.S.A.Dave, who was the Chairman of UTI. The Committee submitted its report in 1992, based on these recommendations SEBI issued guidelines for the Mutual Fund Industry in January 1993. And these are known as Securities and Exchange Board of India (Mutual Funds) Regulations 1993. After the issue of these guidelines by SEBI, Mutual Fund Industry was opened for private sector to enter the field. And all the Mutual Funds controlled by SEBI except UTI. Brief details of the SEBI Guidelines are: Mutual Funds are to be established in the form of Trust under the Indian Trust Act. Funds and assets are to be managed by an Asset Management Company.

ASSET MANAGEMENT COMPANY AMC shall have minimum net worth of Rs.10 Crores. AMC and Trustee of Mutual Funds are two separate legal entities.

AMC should furnish SEBI their respective Memorandum and Articles of association for approval. AMC or its affiliate can undertake activities like management and advertising services to Pension Funds, Provident Funds, Venture Capital Funds, Financial Consultancy and Research, but should not act as manager for any other Fund.

SCHEMES: All schemes floated by Mutual Funds are to be registered with SEBI. A standard format of Schemes prospectus has to be introduced. All the investors up to 5,000 Units will be given full allotment subscription. Mutual funds dealing with money market instruments are to be . Other Mutual Funds Schemes, which invest partly in money market and partly in Capital market, are regulated by SEBI. regulated by SEBI. in case of over

INVESTMENT LIMITATIONS: No Mutual Funds, under all its schemes should own more than 10% of any companys paid up capital carrying voting rights. Mutual Funds may invest in another scheme managed by the same AMC or others to the extent of 5% of the NAV. Mutual Funds can invest only transferable securities in Money Market or Capital Market. Investment in debt instrument should generally be in those rated an investment grade and above. INCOME DISTRIBUTION: All Mutual Funds must distribute 90% of their profits every year among their investors. MARKETING OF MUTUAL FUNDS Marketing is the big challenge in business especially of marketing of Mutual Fund. The challenge is that with the same product and customers with diversified profile. Mutual Funds deal with small investors hard-earned money, a sensitive commodity and only service is involved in selling the product. Since mutual Funds interacts with lakhs of investors who are

likely to be associated for a longer tenure, post issue services plays an important role in customer satisfaction. Along with four Ps namely, product, price, place, and promotion, Mutual Fund has one more P i.e., Portfolio. The marketing division has to design the product according to the needs of the investors and place it in right market, in right manner, targeted to the right segment. Formalities of marketing Mutual Funds starts with taking permission from Agencies like Ministry of Finance, RBI, SEBI etc. Gazette Notification of Schemes is then done. Marketing division has to evaluate the strengths, potentials, opportunities and weakness of the market. According to the market condition it has to design the products i.e., the Scheme. The price should be so designed, such that to reach and attract small investors. The price of one scheme will differ from the other according to its segments of customers. Various techniques are used to reach the unaware pocket of investors like direct mailers to full-fledged marketing campaigns, the Fund will spend lakhs of rupees to mobilize investments and consequently marketing cost will increase. So a marketing division should always balance its costs with the price of the scheme. The expenses of the fund should not increase the income from the fund. A Mutual Fund is an investment vehicle for those who want to spread their risks and seek returns, which are than those available from Bank deposits or other investment avenues. Such investors from should be educated to avoid facing situations of loss of faith in investments or heavy off-loading in the huge discount of NAV. Positioning of Mutual Fund is very important. Mr. G.D.Shenai, Managing Director, Canara bank Mutual Fund states that Most funds have targeted the wrong segment of customers, he feels mutual offer a solution to those people who do not have access to the Stock Market, due to lack of time or because of geographical spreads limitations. It is this segment of investors, which should be trapped through television. Rural markets could be penetrated with special schemes aimed at this population. Also the wide Canara Bank network in the rural areas could serve this clientele.

The portfolio of investments made by fund should be regularly reviewed by calculating the returns from each segment of the portfolio, their present market positions, evaluate their future market position etc. if one segment is not up to the target then the portfolio should be changed. The portfolio should be so designed which satisfies the Schemes need. The portfolio of a debt scheme will have more equities and less debt, liquid funds has money market instruments and debt of very short-term tenure. Marketing of Mutual Fund is not deal based, but it is relationship based. The psychology of investors needs deep insight; understanding and responding to present investor will obviously bring new investors beside retaining present investors. Thus data based marketing should be emphasized for open-ended schemes. PRICING OF MUTUAL FUND UNITS Pricing is a very concept of marketing mix. Pricing of financial products is a complicated issue. Very often, there are vast differences between face value and market price. There are some legal restrictions on pricing of units. SEBI Experts Committee on pricing units: An Expert Committee was set up by SEBI under the Chairmanship of Mr.L.C.Gupta. The Committee has suggested two options namely,1. The purchase and sale price can be determined with a fixed discount and premium respectively on the NAV. 2. The AMC should have the discretion to fix the repurchase and sale prices as long as they are anchored to the NAV i.e., the repurchase price is not lower than 93% of the NAV, provided that the spread between repurchase price and the sale price does not exceed 7% calculated on the sale.

Thus the Committee has opined the repurchase and sale prices in the case open ended schemes should be nearer to NAV after suitable adjustments for expenses in connection with entry and exit to or from the scheme as the case may be. SOME TERMS RELATING TO PRICE 1. Entry load or front end load A sales fee charged at the time of purchase. 2. Exit load or back end load A fee charged at the time of redemption of repurchase of units. 3. Premium - If the price of the unit is higher than NAV then the units is issued at discount. 4. Discount - If the NAV is higher than the price of the unit then the unit is issued at discount. 5. Managed Fees The percentage changed for portfolio management. This expense will be stated in Funds prospectus. This expenses may decline proportionately as the Funds asset base increases. 6. Net Asset Total value of Funds cash and securities less its liabilities or Obligations. 7. Expenses Ratio The annual expenses of a Fund include the Management fee, Administrative costs, dividend by net assets. 8. Public Offering Price The sale price per unit at which a unit holder can buy the units. POP = NAV / 1 Sales Load 1. Redemption Price The sales price per unit at which a unit holder can sell the units of

open ended scheme. REDEMPTION PRICE = NAV / 1 + Exit Load 2. Repurchase Price It is the price at which a close-ended scheme repurchased its units

and it may include a back end load.

Benefits of Mutual Funds 1. Professional Management:

Availing of the services of experienced and skill professionals who are backed by a dedicated investment research team which analyses the performance and prospectus of Companies and select suitable investments to achieve the objectives of the Scheme. 2. Diversification:

Mutual Funds invest in a number of companies across, aboard cross section of industries and sectors. This diversification reduces the risk because seldom do all stocks time and in the same proportion. Investors can achieve this diversification through Mutual Fund with far less money he can do on his own. 3. Convenient Administration:

Investing in a Mutual Fund reduces the paper work and helps in avoiding many problems such as bad deliveries, delay payment and unnecessary follow up with brokers and companies. Mutual; Fund save time and make investing easy and convenient. 4. Return Potential:

Over a medium of long term, Mutual Funds have the potential to provide a higher as they invest in a diversified basket of selected securities. 5. Low Cost:

Mutual Funds are a relatively less expensive way to invest, compared to directly investing in the Capital Market, because the benefits of scale in brokerage, custodian and other fees translate into lower costs for investors.



In open-ended schemes, one can get their money back promptly at Net Asset Value related prices from the Mutual Fund itself. Close ended schemes units can be sold in a Stock Exchange at the prevailing market price or avail the facility of direct repurchase at NAV related prices which some close ended and interval schemes offer. 7. Transparency:

Investor can get regular income information on the value of their investment in addition to disclosure on the specific investment made by the scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook. 8. Flexibility:

Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans one can systematically invest or withdraw according to their needs and convenience. 9. Choice of Scheme:

Mutual Funds offer a family of schemes to suit the varying needs of different types of investors. 10. Well Regulated:

All Mutual Funds are registered with SEBI and they function within the provision or strict regulations designed to protect the investors investment. The operations of Mutual Funds are regularly monitored by SEBI.


Managing Risk:

While risk cannot be eliminated. Skillful management can minimise risk. Mutual funds help to reduce risk through diversification and professional management. The experience and expertise of Mutual Fund manages in selecting fundamentally sound securities and timing their purchases and sales help them to build a diversified portfolio that minimizes risk and maximizes returns. 12. Tax Benefit:

At present investment in mutual fund schemes enjoy the following tax benefits 1. Since, April 1, 2003, all dividends declared by debt-based mutual funds are tax-free in the hands of the investor. A dividend distribution tax of 12.5% (including surcharge) is be paid by the mutual fund on the dividends declared by the fund. 2. Investors in ELSS (equity-linked savings schemes) can avail rebate under Section 88 of the Income Tax Act, 1961 on investment up to Rs 10,000 subject to the various conditions laid down in the said Section. 3. Under Section 10(38) of the Act, long-term capital gains arising from transfer of a unit of mutual fund is exempt from tax if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid to the appropriate authority. 4. Under Section 111A of the Act, short-term capital gains arising from transfer of a unit of mutual fund is chargeable to tax @ 10% (plus applicable surcharge) if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid.

However, such securities transaction tax will be allowed as rebate under Section 88E of the Act if the transaction constitutes business income. Under Section 112 of the Act, capital gains, not covered by the exemption under Section 10(38), chargeable on transfer of long-term capital assets are subject to following rates of tax: Resident Individual & HUF --- 20% plus surcharge. Partnership Firms & Indian Companies --- 20% plus surcharge. Foreign Companies --- 20% (no surcharge). Capital gains will be computed after taking into account cost of acquisition as adjusted by Cost Inflation Index notified by the central government. Under Section 115AB of the Income Tax Act, 1961, long-term capital gains in respect of units purchased in foreign currency by an overseas financial organization held for a period of more than 12 months will be chargeable at the rate of 10%. Such gains will be calculated without indexation of cost of acquisition. No surcharge is applicable for taxes under section 115AB, in respect of corporate. PROBLEMS FACED BY MUTUAL FUNDS; The problems in mutual fund industry are as follows: Volatility in Indian economy:

Shares prices in Indian stock changes frequently. Thus a fund manager has to change the portfolio according to the changes of share prices. Investors education:

Many investors are not aware of the benefits from mutual funds, they are not aware of the characteristics return risk trade off in investing in a mutual fund many investors are inactive and ignorant. 3. Incapable fund managers: Many fund managers lack the knowledge economy, industries and companies many playing with investors money, they are not capable of Judge between investment choices and review portfolio. 4. Non co-operation between organisational committee: Sponsors, custodians, fund managers are not working hand in hand. 5. Transparency: SEBI guidelines say mutual fund has to maintain transparency in its operations, but many funds are not transparent to its investors, government and public. 6. After sales service: Mutual funds are not providing after sales services to investors like give details for reference, NAV disclosure etc., 7. Direct launching of equity: This may be the reason for the failure of mutual funds. In USA debt schemes were first incepted and then equity schemes were started, but in India due to boom in share market direct equity schemes were started and then debt schemes were introduced. 8. High risk, low return:

The return, which a investor gets from mutual fund, is low, but the risk is high. Return earned from fund has to be distributed among the unit holders only after deduction for maintenance of the fund, thus the return will be low.

New trends in mutual fund industry Systematic investment plan (SIP):

Unit holders can benefit by investing specified rupee accounts at regular intervals for a continuous periods, for purchasing additional units of the schemes at NAV based prices. By this unit holder can take advantage of the benefits of rupee cost averaging. Systematic withdrawal plan (SWP):

SWP allows the unit holders to withdraw a specific sum of money each month/ quarter/ half year/ yearly from his investments in the schemes. The amount thus withdrawn by redemption will be converted into units at applicable NAV based prices and the numbers of units so arrived at will be subtracted from the units balance to the credit of the unit holder. Switching options:

Unit holders under one scheme can switch or all of their holdings in the schemes to another, which is available for investment at that time. Dividend at short intervals:

Dividends from liquid funds are now coming thick and fast, with funds promising fortnightly and even weekly, pay-outs, liquid funds mainly targets companies and high net worth individuals. Loans against Mutual Funds:

Birla Global finance offers loans against mutual fund units. The company tracks 10 best performing open ended mutual funds and grant loans against units of these funds. Investors have to pledge their units at interest rate of 17.5%. the company will disburse loan up to 60% of the value of equity fund up to 85-90% of the debt fund units. Term of the loan is a minimum of 15 days up to a maximum of a year.

Electronic clearance:

Reserve bank of India has introduced a new method of payment which promises, investors an option to collect periodic interest/ dividend/ repurchase/ redemption directly through bank account. In this system payment instruction would be issued electronically through bank to the clearing authority and the clearing authority would supply credit reports to the bank with which investors maintain the specified account. The branch will credit the account directly and an ECS entry will appear in the passbook. A payment advice will also be send to investors. This facility will help kin avoiding cases of pilferage, fraudulent encashment etc.,

TITLE OF THE STUDY PERCEPION OF INVESTORS TOWARDS THE MUTUAL FUND STATEMENT OF THE PROBLEM In the minds of every common man investing in mutual funds is a very risky affair, if not the riskiest. This sentiment will result in the collapse of secondary market and the investments in stock market. For wiping off the wrong feeling from general customers mind there is a need to study the perception towards Mutual Funds in Bangalore and to see if there is dependency of income level over investment in Mutual Funds and some efforts have been made to know about existing Investors opinion about Mutual Funds and their performances.


1) To study the investors perception towards Mutual Funds 2) To know customers awareness about Mutual Funds 3) To study whether investment in Mutual Funds is dependent of income levels or not. 4) To study investor or customers willingness to take market risk. 5) To know the Brand and Advertisement influence on customer about Mutual Funds. 6) To be aware of Investors as well as new potential customers confidences about Mutual Funds. 7) To evaluate the direction, growth and extent in the context of the recent development in the Indian capital market. 8) To study what age and income people are most interested to invest in Mutual Funds.


The scope of the study is extended to study investors perception towards the mutual fund schemes and preparations of feasibility report based on study conducted by the research in Bangalore during the period of 2007&2008 LIMITATIONS OF THE STUDY Efforts were made to see that the data collected and analysed were as accurate as possible. In

spite of all precautions taken, certain limitations of the study can be observed. 1. The sample size taken for research may not give exact figure or may not cover the entire

population artificially or that the respondent may be biased. 2. The second constrain is that the respondent may skip some questions. Also they may not

respond to every question correctly. 3. 4. The third and important constrain is the time limit. Since the study had to be conducted in Finally the techniques used in data analysis may not be as accurate as other software

a short span of time, the accuracy may be affected. applications.

RESEARCH METHODOLOGY: In due course of data collection for covering the above stated objectives, the study methodologies followed are: Direct interview with unit holders. Discussion with persons who have knowledge about mutual funds. Discussion with brokers. In-depth study of various books on mutual funds, magazines, journals and newspapers.

TOOLS USED IN DATA COLLECTION: Primary data:Primary data was collected through: Questionnaire . Discussion with persons who have knowledge about this subject.

Secondary data:Secondary data was obtained from: Magazines, journals and newspapers. Internet.

Reports of SEBI, RBI etc..

SAMPLE It includes investors who are investing mutual fund and money market. SAMPLE SIZE Sample size is 50 respondents and method of sampling is random sampling.

Global trends in Mutual Fund Mutual funds have emerged as the chief vehicle of individual savings and investments the world over. In the U.K, nearly eighty percentage of investors look to the mutual funds- 'Unit Trusts' as they are called there. In the U.S an individual with even $1 million of investable funds takes the mutual fund route to investing in equity, instead of resorting to direct participation. This is so even though he has access to a mass of information like Standard and Poors 500 and Dow Jones Index to guide him in taking his own investment decisions. Presently in the U.S there are nearly 5000 mutual fund schemes with asset of $1.6 trillion invested by 75 million unit-holders. By the turn of the century, the total assets are likely to touch $4 trillion. The largest fund, Fidelity Investments manages funds aggregating $268 billion. This has to be appraised in the context of total market capitalization of all the stocks listed in Bombay Stock Exchange standing at a mere $115 billion.

In the U.S the mutual fund business is growing at an annual rate of twenty to twentyfive per cent. According to a review conducted by Gold man Sachs, a leading U.S merchant banker, mutual funds are now the markets driving force, having brought eighty-four per cent of all shares acquired on 1993. The great diversity if mutual fund schemes in the U.S is illustrated by the Amana funds, the first and apparently the only U.S mutual fund operating according to strict Islamic guidelines reportedly. Since Islamic law prohibits a guaranteed return on investment, the fund holds no bond orpreferred stock, and keeps its cash in checking accounts, which pay no interest. Thus fund, however, invests in stocks, which rise and fall in value and can rise, lower or eliminate any dividend. In all of Europe, too, the trend is similar. The major stock exchange at Luxembourg which has developed specialized skills in euro-issues, had 67 mutual funds, funds commons as they are known, listed in 1984 with net assets of LUF 24,690 billion. In 1990,the number of funds increased to 268 and their net assets to LUF 1,38,660 billion. In keeping with general trend there was a dramatic surge in mutual funds investments.Obviously with such a large choice, the western investors has a wide variety of options and doesnt have to rely on the same stereotyped schemes popularly known as plain vanilla schemes. Mutual Funds in India Mutual funds first made their entry in India in 1964 with the Unit Scheme 64 launched by the Unit Trust of India (UTI). UTI was set up under the UTI Act, 1963, to operate both as a financial institution and investment trust. Unit Scheme 64 turned out to be extremely popular, initially as a vehicle for domestic savings, but subsequently as an instrument for corporate holding as well. By 1964, the investable funds in this scheme had crossed Rs. 12,000 crores. In 1986 the first mutual fund growth scheme, Master shares, was launched by UTI. This was successfully listed and traded in the stock exchange. Encouraged by this venture, other players emerged. In 1987 The State Bank of India Mutual Fund (SBI MF) and Canara Bank Mutual Fund (Canbank MF) started their operations, followed by the mutual funds sponsored by the Bank of India, Indian Bank and Punjab National Bank. Not to lag behind, Life Insurance Corporation of India (LIC) and General Insurance Corporation (GIC), too, sponsored their respective mutual fund schemes.

Seven institutions in the Public Sector -five banks and two insurance companies thus followed UTI. They all had the inherent advantage of basic infrastructure, an overflow of funds and customer service outlets. By the end of March 93, the total corpus of the big eight was approximately Rs 50,000 crores. With UTI alone, accounting for Rs 40,000 crores. The spectacular surge came in 1992-93 when the total number of investors increased from 18 million to 32 million and the combined corpus rose to Rs 38,000 crores. Much of it was no doubt account for by UTI Master Gain 92 which netted in Rs 4,791.79crore winning for itself a place in Guinness book of records. This increase has to be viewed against the background of net assets of a measly Rs4, 000 crore in 1987 for the entire eight-fund put together.

Phase of development of mutual fund in India The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases. First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The

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

Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990 At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

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

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the

end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India withRs.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 Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes The graph indicates the growth of assets over the years:GROWTH IN ASSETS UNDER MANAGEMENT

Private mutual funds However, the monopoly of the big eight was ended by the new economic policy spearheaded by Dr. Manmohan Singh from 1991. The process of liberalization threw the doors open to players in the private sector to provide the much-needed competitive edge and a wider scope of options to the investors. The existing mutual funds, it was felt, had failed to live up to the expectations of common investors due to: (a) Poor servicing, inordinate delays in the receipt of unit certificates and dividend warrants; (b) Indifferent performance of most of the mutual fund schemes which under-performed the market thus denying the investors a reasonable return; (c) Absence of adequate disclosure norms; and (d) Lack of an investor-friendly approach in general. Hence the securities and Exchange Board of India (SEBI) accorded approval to a number of players in the private sector to sponsor mutual funds. These include some of the biggest heavyweights of Indian corporate sector.

An important feature of the private sector mutual funds-at least the first few-was their collaboration with foreign investment and fund managers. Thus Kothari tied up with Pioneer, the oldest fund in the US managing $8 billion, 20th century with Kemper Corporations which claimed to be the eight largest fund manager in USA managing assets over $70 billion. Credit capital asset managers inc. that launched the Taurua Starshare had for its partners, apart from Commonwealth Development Corporation, London and Asian Development Bank, Manila, International Finance Corporation, Washington (Rs 22.50 crore), and Edinburgh Fund Managers, U.K (Rs 24 crores). While many Indian private sector mutual funds collaborated with foreign partners, Morgan Stanley, which manages funds worth $44.2 billion, chose to go it alone. Its issue was a runaway success. There was serious controversy and the apex court had to intervene. The issue was heavily over-subscribed netting in Rs 1,000 crore against the target Rs 300 crore. The vital aspect of a strong research capability of foreign collaborators had been recognized and the public sector GIC Mutual Fund, too, reacted to the winds of change and tied up with he U.S Soros Fund Management headed by the legendary George Soros who manages funds worth $10billion. ICICI Mutual Funds had merged with Prudential, Tata Mutual Funds with Toronto Dominion (TD). Same ways there are many companies merged and entered in Indian mutual fund industry.

Important Domestic Mutual Fund Players


SBI Mutual Fund

SBI Mutual Fund draws strength from India's premier and largest bank; the State Bank of India. Set up on July 1, 1955, the State Bank of India is the largest banking operation in the country. SBI Mutual Fund has grown tremendously in terms of corpus as well as number of investors.

Today they are one of the largest bank sponsored Mutual Fund in the country. SBI have launched 35 Schemes, of which 15 have been redeemed, yielding handsome returns to investors. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management, one of the worlds leading fund management companies that manage over US$ 330 Billion worldwide. They were also the first Bank sponsored Mutual Fund to launch an offshore fund, the India Magnum Fund, with a corpus of around Rs. 225 Crores.. Today, the fund manages over Rs. 16500 crores of assets and has a diverse profile of investors actively parking their investments across 30 active schemes. With a large network over 100 collection branches, 26 Investor Service Centres, 28 Investor Service Desks and 52 District Organizers, SBI constantly endeavour to get closer to their growing family of investors.

SBI gives the investors the following options: 1) Open ended schemes Equity schemes Magnum Equity Fund Magnum Tax gain

Magnum Index Fund Magnum Sector Funds Umbrella Magnum Multiplier Plus Scheme Magnum Global Fund Debt Schemes Magnum NRI Investment Fund Magnum Income Plus Fund Magnum Income Fund Magnum Children's Benefit Plan Magnum Monthly Income Plan Magnum Gilt Fund


Closed schemes Magnum Tax Profit 1994 Magnum Equity Linked Savings Scheme 95 Magnum Equity Linked Savings Scheme 96


Birla Sun Life

Birla Sun Life Financial Services offers a range of financial services for resident Indians and Non Resident Indians. Brought together by two large, powerful and reputed business houses, the Aditya Birla Group and Sun Life Financial, the aim is to offer diverse and top quality financial

services to customers. The Mutual Fund and Insurance companies provide wealth management and protection products to customers while the Distribution and Securities companies provide brokerage and trading services for investment in equities, debt securities, fixed deposits, etc. Birla Sun Life Asset Management Company Limited Birla Sun Life Mutual Fund follows a conservative long-term approach to investment, which is based on identifying companies that have good credit-worthiness and are fundamentally strong. It places a lot of emphasis on quality of management and risk control. This is done through extensive analysis that includes factory visits and field research. It has one of the largest team of research analysts in the industry. Investment options:

Equity Schemes Debt Schemes Balanced Schemes Offshore Schemes Reliance Mutual Fund


Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settlor/Sponsor and Reliance Capital Trustee Co. Limited (RCTCL), as thetrustee. RMF has been registered with the Securities & Exchange Board of India (SEBI). The name of Reliance Capital Mutual Fund has been changed to Reliance Mutual Fund effective 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. Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Assets Under Management (AUM) of Rs. 39019 crore (AUM as on 31st Jan 2007) and an investor base of over

3.1 million.RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 115 cities across the country. OPTIONS AVAILABLE TO AN INVESTOR DEBT SCHEMES Reliance Monthly Income Plan Reliance Income Fund Reliance Medium Term Fund Reliance Liquid Fund Reliance Short Term Fund Reliance Gilt Securities Fund Reliance Fixed Term Scheme Reliance Floating Rate Fund EQUITY SCHEMES Reliance Growth Fund Reliance Vision Fund

SECTOR SPECIFIC SCHEMES Reliance Banking Fund Reliance Diversified Power Sector Fund Reliance Pharma Fund



Prudential ICICI Asset Management Company, (55%:45%) a joint venture between Prudential Plc, UK's leading insurance company and ICICI Bank Ltd, India's premier financial institution. The joint venture was formed with the key objective of providing the Indian investor mutual fund products to suit a variety of investment needs. The AMC has already launched a range of products to suit different risk and maturity profiles. Prudential ICICI Asset Management Company Limited with asset over Rs.37906.24 crore as on march 31, 2008. Both Prudential and ICICI Bank Ltd have a strategic long-term commitment to the rapidly expanding financial services sector in India.

Options Equity funds The funds offered under this category are the Prudential ICICI Growth Plan, Prudential ICICI FMCG Fund, Prudential ICICI Technology Fund, Prudential ICICI Tax Plan, Prudential ICICI Index Fund and Prudential ICICI Power. Debt funds The funds offered under this category are the Prudential ICICI Income Plan, the Prudential ICICI Gilt-Treasury Fund, The Prudential ICICI Gilt-Investment Fund, Prudential ICICI Liquid plan, Prudential ICICI Fixed Maturity Plan, Prudential ICICI Short Term Plan, Prudential ICICI Long Term Plan and Prudential ICICI Sweep Plan

Balanced fund The funds offered under this category are the Prudential ICICI Balanced Fund and Prudential ICICI Child Care Plan.



Corporate Profile Tata Asset Management Limited is one of India's fastest growing fund management companies with more than Rs. 12562.65(31st august 2006) crores investors. Tata Asset Management Ltd. is a part of the Tata group - one of India's largest and most respected industrial group. The Tata Group is one of India's best-known conglomerate in the private sector with a turnover of around US $ 11.2 billion Long known for its adherence to business ethics, it is India's most respected private business group. With 210,443 employees across 93 companies, it is also India's largest employer in the private sector. The Group has always believed in returning wealth to the society which it serves. Thus, nearly two-thirds of the equity of Tata Sons, the Group's promoter company, is held by philanthropic trusts which have created a host of national institutions in natural sciences, medical care, energy and the arts, and which give substantial annual grants and endowments to deserving individuals and institutions in the areas of education, healthcare and social Upliftment. of assets, from about 0.3 million

Investment Process Every aspect of this process is tightly controlled and monitored to optimize returns for the investors. The investment process is built around four key principles:

The investment and risk control process concentrates on Fundamentals, Exposure, Liquidity and Tenure. Tata Mutual Fund call it the FELT process of Investment and risk control. Products

Equity Products Tata Pure Equity Fund Tata Tax Saving Fund Tata Select Equity Fund Tata Life Sciences

Balanced Products Tata Balanced Fund Tata Young Citizens' Fund &

Debt Products Tata Liquid Fund Tata Short Term Bond Fund Tata Gilt Securities Fund Tata Income Fund Tata Income Plus Fund Tata Fixed Horizon Fund Tata Monthly Income Fund

Technology Fund Tata Equity Opportunities Fund Tata Index Fund Tata Growth Fund



Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). The group has a net worth of around Rs.2,900 crore and employs around 8,800 employees across its various businesses servicing around 2 million customer accounts through a distribution network of branches, franchisees, representative offices and satellite offices across 282 cities and towns in India and offices in New York, London, Dubai and Mauritius. KMMF offers schemes catering to investors with varying risk- return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. Products Debt Kotak Bond Kotak Dynamic Income Kotak Floater Short Term Kotak Floater Long Term Kotak Gilt Kotak Income Plus Balance Kotak Balance Equity Kotak Equity FOF Kotak Global India

DATA ANALYSIS AND INTERPRETATION TABLE NO: 1 Table showing Age Profile of the Respondents Age 18-25 26-30 31-35 36 & Above Total No. Of Respondents 07 09 24 10 50 Percentage 14 18 48 20 100

Analysis: This table is designed to measure the Age Profile of the respondents. 48% of the respondents are of 31-35 age groups. 20% of these falls under 36 and above age group. 18% of the respondents are of 26-30 age groups. Remaining 14% belong to 18-25 age groups. Interpretation: From the Age Profile of the respondents, it is clear that people are investing once they earn a regular income. 86% are above 26 years which means people invest once they are settled.

GRAPH: 1 Graph showing Age Profile of the Respondents

TABLE No: 2 Table showing Occupation profile of the respondents Occupation Business Profession House wife Service Others Total No. Of respondents 06 19 08 18 04 50 Percentage 12 38 06 36 08 100

Analysis: In occupation profile there are five groups namely business, profession, housewife, services and others. Here professional respondent are 38%, services 36 %, business people 12 %, others 8% and housewives 6%. Interpretation: This data shows that respondents from profession and service category are aware of mutual funds and have also invested in it, whereas business people are aware of mutual funds but they are not ready to invest. Whereas, in case of others (student) and housewives investment is lesser. Thus this implies that respondents from professional and services category are good contributors to mutual funds.

GRAPH: 2 Graph showing Occupation profile of the respondents

TABLE NO: 3 Table Showing Number of Family Dependents of the Respondent

SLNO 1 2 3

SIZE 0-2 3-4 5 & Above

NO 18 48 34

% 18 48 34

Analysis: In the above table, 48% of the respondents have family dependents.With in the range of 34, 34% of the respondents have 5 and above dependents, 18% of the people have family dependents in the range of 0-2. Interpretation: As most of the respondents are having their dependents in range of 3-4 and 5 & above they are more serious in investing their savings for the future of their dependents.

GRAPH-3 Graph Showing Number of Family Dependents of the Respondent

TABLE No: 4 Table showing Income Profile of the respondents

Income Below 5000 6000 to 15000 16000 to 25000 26000 to 35000 36000 and above Total

No. Of respondents 00 05 21 15 09 50

Percentage 00 10 42 30 18 100

Analysis: It is clear from the table that 42% of investors fall in the income bracket of 16000-25000. 30% of the investors have income of 26000-35000; where as 18% of the investors have income of 36000 and above. The remaining 10% of the investors fall in the income bracket of 6000-15000. Interpretation: 90% of the respondents earn Rs.16000/- or more every month. The more they earn the more they can invest and vice versa. People earning less can invest in small amounts, whereas people earning more can go for higher investments and take higher risks for higher returns.

GRAPH No: 4 Graph showing Income Profile of the respondents

TABLE No: 5 Table showing Awareness of Investment options among respondents

Investment Option Insurance Bonds Real Estate Stock Mutual Fund

No. Of respondents aware 45 40 20 42 43

Percentage 90 80 40 84 86

Analysis: In the above table it is found that 90% of the respondents are aware of insurance,80% are aware of bonds,40% for real estate,84%on stocks and 86% are aware of Mutual Funds. Interpretation: This table gives you idea about awareness on investment options among all the respondents. Here it is indicated that mutual fund is popular, second only to insurance. This study is conducted for general public and mutual fund investors. Mutual funds are not as old as insurance in India. From this table it is clear that 86 % of respondents are aware of mutual funds.

GRAPH No: 5 Graph showing Awareness of Investment options among respondents

TABLE No: 6 Table showing Investment Profile of the respondents

Investment Option Insurance Bonds Real Estate Stock Mutual Funds Analysis:

No. Of respondents 25 15 05 25 33

Percentage 50 30 10 50 66

In a sample size of 50, 66% of the respondents are mutual fund investors and rest of them have not invested in mutual funds. They have invested in various options like insurance, bonds, real estate and stocks.(34%) Interpretation: Most of the respondents have invested in Mutual funds with bonds and stocks coming second. This means the awareness about Mutual funds have prompted more and more persons to invest in Mutual funds, since it has a high return. Stocks and Mutual funds are high risk areas with high returns. So people are ready to take more risks for more returns.

GRAPH No: 6 Graph ShowingInvestment Profile of the respondents

TABLE: 7 Table showing reason for not investing in mutual funds SLNO 1 2 3 4 REASON Dont know about mutual funds they are risky dont have enough money happy with present investments NO 10 26 0 30 % 15 39 0 46

Analysis: In the above table, 46% of the respondents are satisfied with their present investments, 39% of the respondents think that Mutual funds are risky, and 15% of them say that they do not know what Mutual funds are. Interpretation: Most of the respondents who have not invested in the Mutual funds are satisfied with their present investments, some people think that the Mutual funds involve risk and most important is that the 15% of the respondents do not know what Mutual funds are, What they do and How they function.


Graph showing reason for not investing in mutual funds


Table showing annual investment of the respondents

SLNO 1 2 3 4

ANNUAL INVESTMENT Less than 5,000 5,000-10,000 10,000-20,000 Above 20,000

NO 14 44 20 22

% 14 44 20 22

Analysis: In the above table most of them invest/ save between 5,000 to 10,000 - 44% . 22% of the people save/invest above 20,000, 20% of the respondents save/invest between 10,000 to 20,000 and 14% of them invest less than 5,000. Interpretation: As many respondents income lie below Rs 1,00,000 p.a they are possible to save/invest only for about five to ten thousand rupees p.a. The higher they invest, the higher is the return and vice versa.


Graph showing the annual investment of the respondents


Table showing Popular Mutual Fund Products among the respondents

Mutual Fund Products Prudential ICICI Kotak Mahindra HDFC Mutual Fund Birla Sun life SBI Mutual Fund LIC Mutual Fund Canbank Mutual Fund Franklin Templeton M.F Analysis:

No.of respondents 29 15 19 17 09 08 08 21

Percentage 88 45 57 51 27 24 24 63

The most popular mutual funds among the respondents are, Prudential ICICI with 88%, Franklin Templeton mutual funds with 63%, HDFC mutual funds 57%, Birla Sun Life 51%, Kotak Mahindra mutual funds 45%, and rest of them are with average of around 24%and 27%. This is applicable for only mutual investors. Interpretation: From the above its clear that ICICI and Franklin Templeton are popular among investors. This is because of the aggressive advertisements they employ. Advertisements help a company to have a brand image which is very important in the field of Mutual funds.

GRAPH No: 9 Graph Showing Popular Mutual Fund Products among the respondents

TABLE No: 10 Table Showing Ranking of factors for Investment

Factors Assured Return Risk Cover Government Guarantee

Simple average 7 4 5

Ranks 02 05 04

High Return Voting right Liquidity

7 2 5

01 06 03

Analysis: This table is designed to study the most important factors for investors to invest in various investment options. Investors have ranked High Return, Assured Return, Liquidity, Government Guarantee, Risk Cover and Voting Right as the important factors for investments respectively.

Interpretation: Returns are the most sought after criteria for investment. In other words, returns are the key for investments. The investors are not worried about the risk involved. Mutual funds are high risk

areas with high returns. People are ready to take more risks for more returns. They are not bothered about voting powers or taxation aspect either.

GRAPH No: 10 Graph Showing Ranking of factors for Investment

Table No: 11 Table showing Investment Opinion of respondents if the returns are between 15 % to 25% and above Opinion Consider Ignore Total No. Of respondents 12 05 17 Percentage 71 29 100

Analysis: This table is constructed to know the opinion of the respondents if the returns are between 15% to 25%. These respondents have not invested in Mutual Funds. If the return is 15% to 25 %, then 71% of the respondents say that they may consider investing in mutual funds. Where as 29% of them say they ignore. Interpretation: From this also it is clear that investors care primarily about one thing only Returns. If they are assured of a certain return, people who usually dont invest 0r also ready to invest. So return is the buzz word for investments. A company who can provide consistent returns can attract more number of investors.

Graph No: 11

Graph showing Investment Opinion of respondents if the returns are between 15 % to 25% and above

Table No: 12 Table showing Investing Option among the respondents between risk and return


No. respondents

Of Percentage

15% to 20% return with moderate 04 risk 20% to 30% with high risk 30% to 40% with very high risk Total 06 02 12


50 17 100

Analysis: This table shows the expectations of investor on the returns, the data show that 33% are interested in 15 %to 20 % returns with moderate risk. 50% say 20% to30% with high risk and finally 17% respondents want 30% to 40% with very high risk.

Interpretation: Even a high risk is okay for the respondents, as 50% suggested. More than three fourth of the respondents are not concerned about risk if they get returns for the risk taken. This once again proves the fact that investors care more for returns and not for risks.

Graph No 12

Graph showing Investing Option among the respondents between risk and return

Table No: 13 Table showing Awareness of Mutual Fund advertisements among the respondents

Awareness Yes No Total

No. Of respondents 39 11 50

Percentage 78 22 100

Analysis: Data analysis says that 78% are aware of mutual fund Advertisements and 22% say that they are not aware. Interpretation: Awareness about the product is very important for financial service marketing, in particular, to succeed in modern competitive world. The more the advertisements, the more it helps the company to have a proper brand image and brand is the key to success in Mutual funds as people like to invest in a popular and well known company.

Graph No: 13 Graph showing Awareness of Mutual Fund advertisements among the respondents

Table No: 14 Table showing The most common Mutual Fund Company Advertisement Mutual Fund Company No.of respondents Percentage

ICICI Prudential Kotak Mahindra HDFC Mutual Fund Birla Sun life SBI Mutual Fund LIC Mutual Fund Canbank Mutual Fund FranklinTempleton M.F

28 09 07 19 18 06 04 26

72 23 18 49 46 15 10 67

Analysis: 72% of the respondents have voted Prudential ICICIs advertisement as the most popular one closely followed by Templeton. Birla and SBI, with Canbank getting the least percentage. Interpretation: This table is designed to study the most common advertisement of Mutual Fund companies among the respondents. Prudential ICICI and Franklin Templeton are the popular companies as

far as advertisement goes. Theses advertisements have helped these two companies to be the most respected brands in this field.

Graph No: 14 Graph showing The most common Mutual Fund Company Advertisement

Table No: 15

Table showing Influence of Brand among respondents while investing in Mutual Fund

Influence Yes No Total

No. Of respondents 44 06 50

Percentage 88 12 100

Analysis: This table is designed to study the Influence of Brand name while investing. According to the study it is clear that 88% of respondents say that branding is very important to build investors confidence, and 12% of respondents say that brand name is not important for them while investing. Interpretation: Brand name comes along with experience, quality, trust worthiness and most importantly by advertisements. A company acquiring all the above features will have a good brand name. In Mutual funds, investors look for the brand before investing as 88% said. Therefore if the company has to be in the top, creating a brand name is very important.

Graph No: 15

Graph showing Influence of Brand Name among respondents while investing in Mutual Fund

Table No: 16

Table showing Opinion of respondents on returns in Mutual Funds compared to Shares/Derivatives

Opinion Yes No Total

No. Of respondents 31 19 50

Percentage 62 38 100

Analysis: This table shows that 62%of respondent say that mutual funds returns are better than shares or derivatives. 38% of respondents say that mutual funds returns are not good compared to shares or derivatives. Interpretation: All the three are having good returns, as well as unpredictable returns. But Mutual funds seem to have an impression in the respondents mind as they think its unpredictability is less compared to the other two. In shares or derivatives the volatility is much more, where as in Mutual funds consistency of returns is more.

Graph No: 16 Graph showing Opinion of respondents on returns of Mutual Funds compared to Shares/Derivatives

Table No: 17 Table showing Investment Firms transparency in recent times

Transparency Yes No Total Analysis:

No. of respondents 36 14 50

Percentage 72 28 100

As far as transparency is concerned the survey says that 72% of the respondents say that firms are transparent presently and 28% say that firms are not transparent as compared to earlier times. Interpretation: People now a days want everything to be revealed. A hidden agenda makes them conspicuous. So in the best interest of the firm its better to have transparencies in their transactions.

Graph No: 17

Graph showing Investment Firms transparency in recent times

Table No: 18 Table showing Performance of funds according to respondents

Funds Equity Debt Balanced Gilt Index and Industry

No. Of respondents 16 33 23 29 12

Percentage 32 66 46 58 24

Analysis: This data analysis says that which fund is performing better at present. It is clear from the response that Debt and Gilt Funds are performing better, where as index and industry and equity schemes are less popular. Interpretation: Understanding which schemes are more popular and work better with investors is crucial for any company, as they can introduce schemes relating to those, if not already there. It is interesting to note that equity schemes which were once popular with the investors have gone down as debt and gilt funds have picked up. Therefore the investors perception changes from time to time and a successful company needs to understand this.

Graph No: 18 Graph showing Performance of funds according to respondents

FINDINGS The main finding of the study is that, there is no dependency of income level over investment

in Mutual Funds. Therefore income being high or low is not the major criteria for Mutual Fund investments. The awareness towards Mutual Fund is good, but not excellent. For this study the

collected sample size was 50. out of them 33 are mutual fund investors. Next finding is that the brand name of investment firm is very important to gain or

attract customers. Out of 50-sample size 44 respondents said that brand name is required. Only 6 respondents said that brand name is not required. From investors point, the popular mutual fund companies are Prudential ICICI, and

Franklin Templeton mutual funds. Most common advertisements of Mutual Funds Companies from investors point of view

are Prudential ICICI with 71.79% and Franklin Templeton with 66.66%. This shows that aggressiveness on advertisements in Mutual Funds could make the company a hit, as these two companies are the two popular ones as well.

Investors have ranked High Return, Assured Return, Liquidity, Government Guarantee,

Risk Cover and Voting Right as the important factors for investments respectively. Tax benefit, surprisingly, doesnt find place in the top five. The transparency is the order of the day. The overall perception about this matter is that 72% of the respondents say that these days firms are more transparent than in old days. Private sector Mutual Funds are on a rampage. The market share of private sector mutual From existing mutual fund investors it is found that the debt funds and gilt funds are

funds is increased. performing better than last year. Investors are worried and confused about the legal formalities of the Mutual Fund as it is

complicated compared to other investment avenues like bank deposits. The launching up of new schemes by Mutual Fund companies has increased the number

of investors. Mutual Fund has become the buzz word currently. More and more people are investing in

Mutual Funds lately. Shares, Real Estate, and Insurance are presently other hot areas for investment.

SUGGESTIONS / RECOMMENDATIONS Mutual Fund companies should be more transparent while declaring their dividends, Net

Asset Value, administration charges and their accounting norms. Brand name of investment firm is very important to gain or attract customers. Mutual

Fund companies should make their advertisements more aggressively, so that the common public should come to know about their product features and there position in the market. It is the perception of investors that the Mutual funds will not give any surety on returns.

This perception should be removed from their mind. For this the Mutual fund companies need to formulate some marketing strategies. This analysis shows that Mutual fund returns are better than shares or derivatives. So the

existing investors are satisfied with their returns, so the mutual fund companies should make efforts to retain the existing investors.

The launching up of new schemes by Mutual Fund companies has increased the number

of investors. More and more schemes, both attractive as well as effective, need to be introduced on a frequent basis so as to increase the investor base. Investors are worried and confused about the legal formalities of the Mutual Fund as it is

complicated compared to other investment avenues like bank deposits. Therefore legal formalities need to be minimised and the dealings have to be simplified. Mutual Funds need itself to be differentiated from other hot investment avenues. Mutual

Funds must offer to the public more returns, safety and tax benefits so as to attract investors into investing in Mutual Funds rather than in Shares or Real-estate. Increased deregulation of the financial markets in the country coupled with the

introduction of derivative products will offer tremendous scope for the industry to design and sell innovative schemes to suit individual customer needs, which helps the Mutual Fund industry.

CONCLUSION A perceptible change is sweeping across the mutual Fund landscape in India. Factors such as changing investors needs and their appetite for risk, emergence of internet as a powerful platform, and above all the growing commoditization of mutual fund products are acting as major catalysts putting pressure on industry players to formulate strategies to stay the course. Building and sustaining a powerful brand is also becoming an issue of paramount importance. With investor today having a range of products to choose from, effective communication is required to reach a wider audience. The success of marketer in future would depend upon his ability to use 360-degree compounding effect of media through a presence in all media interfaces with the investors. Increased deregulation of the financial markets in the country coupled with the introduction of derivative products offers tremendous scope for the industry to design and sell innovative schemes to suit individual customer needs. As it is being increasingly felt, with the commoditization of products looking imminent, service to investors and performance would be the major differentiators in the years to come.


Evaluating Mutual Fund Performance -------J.B. Warner Mastering in Mutual Funds Investment Analysis and Portfolio Management ------------------K. S. Murthy

S.P Kothari.&

Prasanna Chandra


Magazines: 1) 2) 3) 4) Capital Market Business World Business Week Business Today

QUESTIONRE ) 1Name: ------------------------------------

2) Age:

1) 18 to 25 3) 31 to 35

2) 26 to 30 4) 36 and above 2) Profession 4) Service

3) Occupation: 1) Business 3) House wife 5) Others 4.) No. of family dependents: 5) Income: 1) Below 5000 3) 16000 to 25000 5) 36000 to above

2) 6000 to 15000 4) 26000 to 35000

6) What type of investment options are you aware off? 1) Insurance 2) Bonds

3) Real Estate 5) Mutual Funds

4) Stock

7) In which of this type have you invested so far? 1) Insurance 3) Real Estate 5) Mutual Funds 2) Bonds 4) Stock

8) Why have you not invested in Mutual Funds? Dont know about Mutual Funds Dont have enough money Risky Happy with present investments

9) What % of your income or turnover do you invest annually? Less than 5000 10000 15000 5000 10000 Above 15000

10) What are the factors you will consider while investing (Rank them) 1) 2) 3) Assured return Risk cover Government guarantee

4) 5) 6)

High return Voting right Liquidity

11) Can you name any Mutual Fund products? 1) ----------------------------------------2) ----------------------------------------3) ---------------------------------------4) ---------------------------------------12) If Investment type gives return between 15 to 25% and more respect to market risk, what would you do? 1) Consider 2) Ignore

13) 1) 2) 3)

If consider investing, how? 15 % to 20 % return with moderate risk 20 % to 30 % with high risk 30 % to 40 % with very high risk

14) Have you come across any Mutual Fund Advertisements? 1) Yes 2) No

15) If yes Name the company 1) ------------------------------------------2) ----------------------------------------3) ----------------------------------------16) Do you consider that Brand name is required while investing in any 1) Yes 2) No Mutual Funds?

17) Do you think Mutual Fund return is better than Shares/Derivatives? 1) Yes 2) No

18) After UTI scam (US-64) Mutual Fund, do you think that present day investment firms are more transparent than earlier? 1) Yes 2) No

19) Which Funds (Allocation) are performing better this year?

1) 2) 3) 4) 5) Gilt Funds

Equity Funds Debt Funds Balanced Funds Index and Industry Funds