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Int. J. Mgmt Res. & Bus. Strat.

2013 R Padmaja, 2013

ISSN 2319-345X www.ijmrbs.com


Vol. 2, No. 2, April 2013
2013 IJMRBS. All Rights Reserved

A STUDY OF CONSUMER BEHAVIOR TOWARDS


MUTUAL FUNDS WITH SPECIAL REFERENCE TO
ICICI PRUDENTIAL MUTUAL FUNDS, VIJAYAWADA
R Padmaja1*

*Corresponding Author: R Padmaja, padmajapeddireddi@rediffmail.com

A mutual fund is a type of professionally-managed collective investment vehicle that pools money
from many investors to purchase securities. As there is no legal definition of mutual fund, the
term is frequently applied only to those collective investments that are regulated, available to the
general public and open-ended in nature. Mutual funds have both advantages and disadvantages
compared to direct investing in individual securities. Today they play an important role in household
finances. So the present study aims at consumer behavior towards mutual funds with special
reference to ICICI Prudential Mutual Funds Limited, Vijayawada. Data was collected through
primary and secondary sources. Primary data was collected through structured questionnaire.
Convenience sampling method was used to collect the data and entire study was conducted in
Vijayawada City. The study explains about investors awareness towards mutual funds, investor
perceptions, their preferences and the extent of satisfaction towards mutual funds. Some
suggestions were also made to increase the awareness towards mutual funds and measures
to select appropriate mutual funds to maximize the returns.

Keywords: Mutual funds, Customer perception, Consumer behavior

INTRODUCTION operations in 1964 with the issue of units under


A mutual fund is a type of professionally-managed the scheme US-64. In India, mutual funds must
collective investment vehicle that pools money be registered with Securities Exchange Board of
from many investors to purchase securities. As India (SEBI) is the regulatory body for all the
there is no legal definition of mutual fund, the term mutual funds. The only exception is the UTI, since
is frequently applied only to those collective it is a corporation formed under a separate Act of
investments that are regulated, available to the Parliament. Mutual funds have both advantages
general public and open-ended in nature. Unit and disadvantages compared to direct investing
Trust of India is the first mutual fund set up under in individual securities. Today they play an impor-
a separate act, UTI Act in 1963, and started its tant role in household finances. The first mutual

1
Department of Business Management, Krishna University, Machilipatnam-521 001, Krishna District, AP.

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Int. J. Mgmt Res. & Bus. Strat. 2013 R Padmaja, 2013

funds were established in Europe in 1774. The oversight and ease of comparison. Mutual funds
first mutual fund outside the Netherlands was the have disadvantages as well, which include fees,
Foreign & Colonial Government Trust, which was less control over timing of recognition of gains,
established in London in 1868. Mutual funds were less predictable income and no opportunity to
introduced into the United States in the 1890s. customize. Top 10 mutual funds in India are ICICI
They became popular during the 1920s. These Prudential Top 100, Escorts Income Plan- Gro,
early funds were generally of the closed-end type Reliance RSF Balanced, DSP Black Rock MIP
with a fixed number of shares which often traded Fund, Escorts Liquid Plan Gr, Reliance Equity
at prices above the value of the portfolio. The first Linked S, MOSt Shares NASDAQ 100, Baroda
open-end mutual fund with redeemable shares Pioneer Gilt Fund, IDFC Nifty Fund Growth.
was established on March 21, 1924.
SEBI Guidelines Pertaining to Mutual Funds:
SEBI is the regulatory authority of MFs. SEBI has
MUTUAL FUNDS IN INDIA
the following broad guidelines pertaining to mutual
In India mutual funds are divided in to balanced funds: They are MFs should be formed as a Trust
funds, Income fund, Growth funds, Sector funds, under Indian Trust Act and should be operated by
etc. Equity funds mainly consist of common Asset Management Companies (AMCs). MFs
shares and stocks of companies listed in the need to set up a Board of Trustees and Trustee
stock exchanges. They are considered risky but Companies. They should also have their Board
are likely to give higher return in the longer run. of Directors. The net worth of the AMCs should
Fixed income funds: Also known as low risk be at least Rs. 5 cr.
funds, these funds mainly invest in government
AMCs and Trustees of a MF should be two
and corporate securities (debentures) with fixed
separate and distinct legal entities.
amount of returns, which are generally moderate.
Balanced funds are basically a combination of The AMC or any of its companies cannot act
both bonds and stocks, which involves moderate as managers for any other fund.
to little risk. Hybrid funds include other investment AMCs have to get the approval of SEBI for its
classes in their portfolio like gold apart from equity Articles and Memorandum of Association.
and debt. Since April 2011, the mutual fund All MF schemes should be registered with
industry clocked a 3% growth in its average Assets SEBI. MFs should distribute minimum of 90% of
Under Management (AUM) to touch Rs. 7.53 lakh their profits among the investors. There are other
cr in August (month-on-month) on the back of guidelines also that govern investment strategy,
higher inflows into liquid and income funds. (Crisil disclosure norms and advertising code for mutual
Report-September 2012). Mutual funds have funds.
advantages compared to direct investing in
individual securities. These include increased NEED FOR STUDY
diversification, daily liquidity, professional invest- For retail investor who does not have the time
ment management, ability to participate in invest- and expertise to analyze and invest in stocks and
ments that may be available only to larger bonds, mutual funds offer a viable investment
investors, service and convenience, government alternative. This is because mutual funds provide

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Int. J. Mgmt Res. & Bus. Strat. 2013 R Padmaja, 2013

the benefit of cheap access to expensive stocks. sampling. Sample size is 100 respondents and
Mutual funds diversify the risk of the investor by sampling units include businessmen, Govern-
investing in a basket of assets. A team of ment servants, professional and retired Indivi-
professional fund managers manages them with duals. The secondary data was collected through
in-depth research inputs from investment journals, magazines, books, company manuals,
analysts. Being institutions with good bargaining websites, etc.
power in markets, mutual funds have access to
crucial corporate information which individual LIMITATIONS
investors cannot access. So the present study 1. Sample size was limited to 100 because of
has taken up to know the extent of awareness limited time which is small to represent the
about mutual funds and to analyze the investors whole population.
perception towards mutual funds.
2. The research was limited to Vijayawada city
only and if the same research would have been
OBJECTIVES
carried in another city, the results may vary.
1. To know about the extent of awareness about
mutual funds with special reference to ICICI 3. Sometimes the respondents because of their
Prudential Mutual Funds, Vijayawada. business didnt able to concentrate while filling
up the questions. However the researcher
2. To know about the preferences of investors
tried her level best to overcome the limitation
towards mutual funds with special reference
by explaining the importance of research.
to ICICI Prudential Mutual Funds, Vijayawada.
3. To know about the perceptions of investors DATA ANALYSIS AND
towards mutual funds with special reference INTERPRETATION
to ICICI Prudential Mutual Funds, Vijayawada. From Table 1, it is observed that 25% of all the
4. To know about the extent of satisfaction of respondents fall under income group of less than
investors towards mutual funds with special 1,00,000, 65% of our total respondents fall under
reference to ICICI Prudential Mutual Funds, income group of 1,00,001-2,00,000 and 10% of
Vijayawada. our respondents fall under income group of
2,00,001-3,00,000.
METHODOLOGY
From Table 2, it is observed that out of the total
Research Design selected for this research is
respondents, 76 respondents are aware of
descriptive design and the Universe is Vijayawada
mutual funds and 24 respondents are not aware
City. Data was collected in two ways, i.e., Primary
of mutual funds.
data and Secondary data. The data collection
method used for collection of primary data was From Table 3, it is observed that 68% of the
survey method and the data collection instrument respondents invest in mutual fund and 32% of
used is structured questionnaire. The sampling total respondents were not invested in any mutual
technique used is non probability convenience fund.

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Int. J. Mgmt Res. & Bus. Strat. 2013 R Padmaja, 2013

Table 1: Classification of Respondents Based on Income

S. No. Income (In rupees)/Month Number of Respondents Percentage

1. Less than 1,00,000/- 25 25

2. 1,00,001/-to 2,00,000/- 65 65

3. 2,00,001/- to 3,00,000/- 10 10

4. 3,00,001/- and Above 00 00

Total 100

Table 2: Classification of Mutual Funds Basing on the Awareness Towards Mutual Funds

S. No. Aware/Not Aware Number of Respondents Percentage

1. Yes 76 76

2. No 24 24

Total 100 100

Table 3: Classification of Respondents Basing on Whether


they Invest/or Not Invest in Mutual Funds

S. No. Investment Number of Respondents Percentage

1. Yes 68 68

2. No 32 32

Total 100 100

From Table 4, it is observed that 89% of the 45% invest for the purpose of saving, 10% invest
respondents are interested in getting good for the purpose of wealth creation and 7% invest
deduction from tax and 11% of respondents are for the purpose of risk diversification.
not interested in getting deduction from tax. From the Table 8, it is observed that 3% of the
From Table 5, it is observed that 76% of all the respondents get less than 5%, 65% of the
respondents know mutual fund is a good instru- respondents get between 5%-10% returns. So
ment of tax saving and 24% of total respondents majority of the respondents get 5-10% returns.
did not that mutual fund is a good instrument of From the Table 9, it is observed that 65% of all
tax saving. the respondents prefer investment in equity fund,
From Table 6, it is observed that majority of 11% of all the respondents prefer investment in Debt
the responders prefer mutual funds as an fund, and remaining 24% of the respondents prefer
investment rather than other type of investment. investment in balanced fund. So it can be concluded
that majority of the respondents are interested to
From the Table 7, it is observed that 20% of
invest in equity funds.
the respondents invest for the purpose of high
return, 18% invest for the purpose of tax benefit, From Table 10, it is observed that SBI magnum

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Int. J. Mgmt Res. & Bus. Strat. 2013 R Padmaja, 2013

Table 4: Classification of Respondents Basing on Their Interest to get Deduction from Tax

S. No. Interest Number of Respondents Percentage

1. Yes 89 89

2. No 11 11

Total 100 100

Table 5: Respondents Classification Basing on Whether They


Know/Not Know That Mutual Fund is a Good Instrument of Tax Saving

S. No. Investment Number of Respondents Percentage

1. Yes 76 76

2. No 24 24

Total 100 100

Table 6: Classification of the Respondents Basing on the


Type of the Investments They Hold at Present

S. No. Investment Number of Respondents Percentage

1. Equity market 20 20

2. Mutual fund 54 54

3. Government bond 00 00

4. Real estate 09 09

5. Bank FD 48 48

6. Post office 26 26

7. Insurance 45 45

Total 202 202

Note: Respondent invest in more than one instrument of saving.

Table 7: Classification of Respondents Basing on the Purpose they Invested in Mutual Funds

S. No. Investment Purpose Number of Respondents Percentage

1. High return 20 20

2. Tax benefit 18 18

3. Saving 45 45

4. Wealth creation 10 10

5. Risk diversification 7 7

Total 100 100

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Int. J. Mgmt Res. & Bus. Strat. 2013 R Padmaja, 2013

Table 8: Classification of the Respondents Basing


on the Returns Receive From all their Investments

S. No. Investment Returns (%) Number of respondents Percentage

1. <5 03 03

2. 5-10 65 65

3. 10-15 20 20

4. 15-20 07 07

5. >20 05 05

Total 100 100

Table 9: Classification of the Respondents Basing


on Their Preference Towards Different Types Of Mutual Funds

S. No. Investment preference Number of respondents Percentage

1. Equity fund 65 65

2. Debt fund 11 11

3. Balanced fund 24 24

Total 100 100

tax gain scheme gained more points when From the Table 12, it is observed that wealth
compared with other plans. maximization benefit is most preferred benefit by
From the Table 11, it is observed that majority of the investors.
the respondents preferred to invest in three year period
From Table 13, it is observed that investor
mutual funds. It means majority of the respondents
prefer ICICI tax plan.
preferred SBI magnum tax gain scheme.

Table 10: Preference for the SIP Tax Plan of Various Companies
(Where 1 Point is For Most Preferred and 6 For Least Preferred)

S. No. Investment in Various Company Tax Plan Number of Points Percentage

1. SBI magnum tax gain scheme 545 26.0

2. Kotak tax saver 198 09.4

3. ICICI prudential tax plan 498 23.7

4. Fidelity tax advantage fund 275 13.1

5. Reliance tax saver fund 345 16.4

6. HDFC tax saver 239 11.4

Total 2100 100.0

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Table 11: Preference for the Period of Investment of Systematic Investment Plan (SIP)
for your tax Saving (Where 1 is for Most Preferred and 4 is for Least Preferred)

S. No. Investment time period Number of points Percentage

1. Three year 316 31.6

2. Five year 286 28.6

3. Six year 275 27.5

4. Seven year 123 12.3

Total 1000 100.0

Table 12: Preference for Benefits Offered Among Various AMC Tax Plan
of Mutual Funds (Where 1 is for Most Preferred and 5 is Least Preferred)

S. No. Investment Benefits Number of Points Percentage

1. Flexibility to investors 256 17.1

2. Capital appreciation 323 21.5

3. Tax free return 387 25.8

4. Wealth maximization 389 25.9

5. Small amount of investment 145 09.7

Total 1500 100.0

From the Table 14, it is observed that the people Money in Real Estate. Business class people
in the age group of 20-30 years are more open to focus more on high return with moderate security
mutual fund holding and equity market. The share of return. So majority of their investment is made
of mutual fund shows a decreasing trend as the in Mutual Investment. Also comparing the options
age increases. It is observed that in the latter age
the maximum is in Mutual Fund then come Equity
groups, Life Insurance policies and Government
Market and at the third Position there are three
Securities and Bonds have an increasingly
types of holding with similar preferences. They
preferred. Overall, Mutual Fund, Stock Market,
Bank Fixed Deposits and Life Insurance policies are Post Office, Real Estate and Bank FD.
are the most preferred holdings amongst all age From the Table 16, it is observed that people
groups in the service category in the age category of 30-40 and 40-50 years have
From the Table 15, it is observed that maximum a certain preference for equity holdings, mutual
investment is made in 30-40 age group investors. fund, real estate. However these people are very
Also they are holding a diversified portfolio which conscious for the assured return and security.
includes PPF, Postal Schemes, Fixed Deposit,
This category mostly consisting of retired
as well as Equity Schemes (Mut-ual fund, Stock
people and housewives and from Table 17, it has
Market). Age group 25-40 holds investments in
been observed that preference for mutual fund is
Equity Market, Bank FD, and some also hold their
low in this category. However Bank Fixed Depo-

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Table 13: Classification of Respondents Basing on the Preference


for Tax Saving Plan of ICICI Prudential Mutual Fund

S. No. Investment Preference Number of Respondents Percentage

1. Most preferred 12 12

2. Favorably preferred 16 16

3. Preferred 44 44

4. Least preferred 11 11

5. Not preferred 17 17

Total 100 100

Table 14: Age Wise Classification of Respondents Basing on Their Preference of Investment

S. No. Service Class 20-30 30-40 40-50 50-60 > 65 Total

1. Equity Market 5 6 1 0 0 12

2. Mutual Fund 12 8 2 0 0 22

3. Govt. Bonds 1 2 1 0 0 04

4. Real Estate 0 1 0 0 0 01

5. Bank F.D. 3 1 0 0 0 04

6. Post office 0 1 0 0 0 01

7. Life Ins. 4 1 1 0 0 06

Total 25 20 5 0 0 50

Table 15: Age Wise Break up of Business Class Respondents

S. No. Business Class 20-30 30-40 40-50 50-60 > 65 Total

1 Equity Market 1 3 0 1 0 5

2 Mutual Fund 0 6 0 0 0 6

3 Govt. Bonds 0 0 0 0 0 0

4 Real Estate 1 4 0 0 0 5

5 Bank F.D. 1 2 1 0 0 4

6 Post office 0 2 0 0 0 2

7 Life Ins. 0 0 0 0 0 0

Total 3 17 1 1 0 22

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Table 16: Age Wise Break up of Professional Class Respondents

S. No. Professional 20-30 30-40 40-50 50-60 > 65 Total

1. Equity Market 0 2 2 0 0 4

2. Mutual Fund 3 4 0 0 0 7

3. Govt. Bonds 0 1 0 0 0 1

4. Real Estate 0 0 5 0 0 5

5. Bank F.D. 0 0 1 1 0 2

6. Post office 0 0 0 0 0 0

7. Life Ins. 0 1 0 0 0 1

Total 3 8 8 1 0 20

Table 17: Age Wise Break Up of Retired Class Respondents

S. No. Retired 20-30 30-40 40-50 50-60 >65 Total

1. Equity Market 0 0 0 0 0 0

2. Mutual Fund 0 0 0 0 0 0

3. Govt. Bonds 0 0 0 0 0 0

4. Real Estate 0 0 0 1 0 1

5. Bank F.D. 0 0 0 1 0 1

6. Post office 0 0 0 2 1 3

7. Life Ins. 0 0 0 0 3 3

Total 0 0 0 4 4 8

sits, Post Schemes, Life Insurance have the but investors between the age of 20-30 and 30-
greatest preference amongst people in this 40 years mostly prefer to invest in Mutual Fund.
category.
From the Table 19, it is observed that investor
From the Table 18, it is observed that whose income is between 100001/- to 200000/- highly
investment in mutual funds is by all age groups prefer to invest in tax saving plan of Mutual Fund.

Table 18: Age Wise Break Up of Investment in Mutual Funds

S. No. Attribute 20-30 30-40 40-50 50-60 > 65 Total

1. Yes 18 36 15 5 2 76

2. No 2 1 1 5 15 24

Total 20 37 16 10 17 100

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Table 19: Income Wise Break Up Of Investment

S. No. >100,000 100001-200000 200001-300000 300001 and More Total

1. Yes 19 42 7 0 68

2. No 6 23 3 0 32

Total 25 65 10 0 100

Table 20: Occupation Wise Break Up For Investment in Different Funds

S. No. Service Class Business Class Professional Retired Total

1. Equity Fund 35 11 17 02 65

2. Debt Fund 01 07 01 02 11

3. Balanced Fund 14 04 02 04 24

Total 50 22 20 8 100

Table 21: Occupation Wise Preference for ICICI Mutual Funds

S. No. Service Class Business Class Professional Retired Total

1. Most Preferred 3 5 1 3 12

2. Favorably Preferred 4 5 5 2 16

3. Preferred 32 4 7 1 44

4. Least Preferred 3 3 4 1 11

5. Not Preferred 8 5 3 1 17

Total 50 22 20 8 100

From the Table 20, it is observed that investors following suggestions were made in order to
in business class and professionals like to invest increase the awareness among the people
in equity fund and balanced fund. especially the rural people.
From the Table 21, it is observed that investors 1. Increase awareness among investors: Many
of service class, business and professional like investors are still restricting their choices to
to invest in ICICI Tax saving plan, while retired the non-governmental options like gold and
class are less likely to invest. fixed deposits even the market is flooded with
countless investment opportunities. This is
SUGGESTIONS
because of lack of awareness about mutual
Even though the mutual funds are good source funds which makes many investors restrict
of income, the people lack awareness and their choice to traditional options like gold and
information towards mutual funds. So the fixed deposits. So awareness relating to

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Int. J. Mgmt Res. & Bus. Strat. 2013 R Padmaja, 2013

mutual funds must be increased among the CONCLUSION


investors to encourage them to invest in Mutual funds are good source of returns for
mutual funds. majority of households and it is particularly useful
2. Provide complete information relating to for the people who are at the age of retirement.
mutual funds: Even among the investors who However, average investors are still restricting
invest in mutual funds are unclear about how their choices to conventional options like gold and
they function and how to manage them. So fixed deposits when the market is flooded with
proper information must be provided to the countless investment opportunities, with mutual
investors in order to increase the loyalty among funds. This is because of lack of information about
the investors. how mutual funds work, which makes many
3. Investors fee must be reduced by reducing investors hesitant towards mutual fund invest-
paper work: Investors fee includes manage- ments. In fact, many a times, people investing in
ment fee, distribution fee, distribution fee, and mutual funds too are unclear about how they
administrative costs, etc., which are generally function and how one can manage them. So the
deducted from the asset value. This can be organizations which are offering mutual funds
possible if the investment is made without have to provide complete information to the
agent and if the paper work is reduced. prospective investors relating to mutual funds.
The government also has to take some measures
4. Better commission should be paid to Asset
to encourage people to invest in mutual funds
Management Companies: From the past 4-5
even though it is offering schemes like Rajiv
years the trust of investors on mutual funds is
Gandhi Equity Savings Scheme to the investors.
reduced because of the poor performance of
It is believed that some of these measures could
mutual funds in these years. So if better
lift the morale of the mutual fund industry which
commission is paid to Asset Management
has been crippled for the last three years.
Companies which are highly knowledgeable
and by motivating them we can improve the
REFERENCES
distribution system of mutual funds.
1. Investment Company Institute (2011), as
5. Subsidized Investments to rural investors: cited in Ignites, December 30.
Because of the issue of commercial viability,
2. Fink Matthew P (2008), The Rise of Mutual
mutual funds were limited to major cities only.
Funds, Oxford University Press, p. 9.
So if mutual funds are offered to rural and semi
urban investors at subsidized rates like 3. Pozen Robert and Hamacher Theresa
agricultural loans, the demand for mutual funds (2011), The Fund Industry: How Your Money
increases in rural and semi urban areas also. is Managed, John Wiley & Sons. pp. 5-7.
6. Advertising campaigns must be conducted in 4. Pozen and Hamacher (2011), pp. 7-9.
rural areas to increase awareness among rural
5. Pozen and Hamacher (2011), pp. 11-15.
investors.

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Int. J. Mgmt Res. & Bus. Strat. 2013 R Padmaja, 2013

6. Rouwenhorst K Geert (2004), The Origins 7. 2011 Investment Company Fact Book,
of Mutual Funds, Yale ICF Working Paper Investment Company Institute. Retrieved
No. 04-48, December 12, 2004), p. 5. 2011-08-02.

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