PROJECT REPORT

ON
MUTUAL FUNDS
BACHELOR OF MANAGEMENT STUDIES
SEMESTER V
(2017 - 2018)
Submitted In partial fulfillment of the requirements for the
award of degree of BMS (Bachelor of Management Studies.)

Submitted by
YASH .D. BHANUSHALI

Under the guidance of

ASST. PROF . MUDASSAR SAYYED

S.I.C.E.S DEGREE COLLEGE OF ARTS, SCIENCE AND

COMMERCE.
JAMBHUL PHATA, K.B.Rd.,
AMBARNATH (WEST), THANE 421505.
2017-2018

CERTIFICATE

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This is to certify that MR.UTKARSH.R.SINGH of TYBMS, Semester-V
(2017-2018) has successfully completed the project on MUTUAL
FUNDS under the guidance of ASST. PROF. MUDASSAR SAYYED

_______________________________ ____________________________
ASST. PROF. NAIRA BHATIA DR. HARSHAL .H. BACHHAV
(Coordinator) (I/C.Principal)

_____________________________ _____________________________

ASST. PROF. NAIRA BHATIA EXTERNAL EXAMINER

(Project Guide)

DECLARATION

I YASH .D. BHANUSHALI\ student of TYBMS Semester - V hereby

declare that I have completed the project on MUTUAL FUNDS.

I further declare that the information imparted is true and fair to the best of
my knowledge.

(SIGNATURE)
YASH .D. BHANUSHALI
ROLL NO. TMS-17015

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 ACKNOWLEDGEMENT

Preparing the project on (MUTUAL FUNDS ) has given me extensive

practical knowledge related to the course.

I would like to first thank our principal DR. Harshal Bachhav, for his
valuable support in preparing this project.

I express my deep sense of gratitude to the course coordinator, ASST.

PROF. Naira Bhatia for the valuable guidance and support during my
project work

I am thankful to my ASST. PROF. MUDASSAR SAYYED for providing

me the guidance throughout the course of this project. I am also thankful to
him/her for patiently critically evaluating the content of this project.

I would like to take this opportunity to express my gratitude to all the staff of
the library and the computer lab for their support.

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 TABLE OF CONTENTS

SR. NO. CHAPTER NAME PAGE NO.

1. INTRODUCTION 1-31

2. REVIEW OF LITERATURE 32-35

3 OBJECTIVES 36-37

4. RESEARCH METHODOLOGY 38-40

5. LIMITATIONS 41

6. DATA ANALYSIS & INTERPRETATION 42-61

7. FINDINGS 62

8. CONCLUSION & RECOMMENDATIONS 63-65

9. BIBLIOGARPHY 66-68

10. ANNEXURE 69-73

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Chapter-1

Introduction

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 MUTUAL FUNDS
INTRODUCTION

Of late, mutual funds have become a hot favourite of millions of people all over
the world. The driving force of mutual funds is the safety of the principal guaranteed,
plus the added advantage of capital appreciation together with the income earned in the
form of interest or dividend. People prefer Mutual Funds to bank deposits, life insurance
and even bonds because with a little money, they can get into the investment game. One
can own a string of blue chips like ITC, TISCO, Reliance etc., through mutual funds.
Thus mutual funds act as a gateway to enter into big companies hitherto inaccessible to
an ordinary investor with his small investment.

MEANING

A mutual fund collects the savings from small investors, invest them in
Government and other corporate securities and earn income through interest and
dividends, besides capital gains. It works on the principle of small drops of water make
a big ocean. For instance, if one has Rs.1000 to invest, it may not fetch very much on its
own. But, when it is pooled with Rs.1000 each from a lot of other people, then, one could
create a big fund large enough to invest in a wide varieties of shares and debentures on a
commanding scale and thus, to enjoy the economies of large-scale operations. Hence, a
mutual fund is nothing but a form of collective investment. It is formed by the coming
together of a number of investors who transfer their surplus funds to a professionally
qualified organization to manage it. To get the surplus funds from the investors, the fund
adopts a simple technique. Each fund is divided into a small fraction called units of
equal value. Each investor is allocated units in the proportion to the size of his
investment. Thus, every investor, whether big or small, will have a stake in the fund and
can enjoy the wide portfolio of the investment held by the fund. Hence, mutual funds
enable millions of small and large investors to participate in and derive the benefit of the

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capital market growth. It has emerged as a popular vehicle of creation of wealth due to
high return, lower cost and diversified risk.

The Securities and Exchange Board of India (Mutual Funds) Regulations,

1993 defines a mutual fund as a fund established in the form of a trust by a
sponsor, to raise money by the trustees through the sale of units to the public, under
one or more schemes, for investing in securities in accordance with these
regulations.

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ORIGIN OF THE FUND

The origin of the concept of mutual fund dates back to the very dawn of
commercial history. It is said that Egyptians and Phoenicians sold their shares in vessels
and caravans with a view to spreading the risk attached with these risky ventures.
However, the real credit of introducing the modern concept of mutual fund goes to the
Foreign and Colonial Government Trust of London Established in 1868. Thereafter, a
large number of close-ended mutual funds were formed in the U.S.A. in 1930s followed
by many countries in Europe, the Far East and Latin America. In most of the countries,
both open and close-ended types were popular. In India, it gained momentum only in
1980, though it began in the year 1964 with the Unit Trust of India launching its first
fund, the Unit Scheme 1964.

In India only mutual fund operating for a long time since 1964 was the UTI. It is
an open-ended mutual fund, whose units can be sold and repurchased at any time. It is in
the public sector, enjoying a monopoly position and some unique tax benefits such as
exemption from income-tax of its entire income. Although the UTI has operated a
number of schemes linked to insurance and gifts, and some tax benefits, income declared
by it to unit holders is not subject to any tax deduction at source and is exempt from
income tax up to a limit. UTI was alone in the field until 1987. Since 1995-96, there is a
TDS, if the annual income is more than Rs. 10,000.

Mutual Funds have been set up since 1987 by the public sector banks following
an amendment to the Banking Regulation Act in 1983, which empowered the RBI to
permit the banks to carry on non-banking business such as leasing, mutual funds, etc.
under section 6 of this act. Since then, the SBI, Canara Bank, Punjab National Bank and
some other nationalized banks have to set up their own mutual funds. The business of
mutual funds has caught the imagination of the financial community and is growing at a
rapid pace in India. These funds cater mainly to individual investors and small savers

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HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

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 history of
mutual funds in India can be broadly divided into four distinct phases

First Phase: 1964-87 (UTI)

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. It was
followed by ULIP in 1971, CGGA in 1986 and Master share in 1987.

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. LIC established its mutual fund in June 1989 while GIC had set
up its mutual fund in December 1990.

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 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.

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 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.

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GROWTH IN ASSETS UNDER MANAGEMENT

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 Organization of Mutual Fund

There are many entities involved and the diagram below illustrates the organizatio
nal set up of a mutual fund:

1. Sponsors:
It refers to any body corporate which initiates the launching of a mutual fund it is this
agency which of its own if eligible or in collaboration with other body corporate complies
the formalities of establishing a mutual fund.
The sponsor should have a sound track record and experience in the relevant field
of financial services for a minimum period of 5 years.
SEBI ensures that sponsors should have professional competence, financial
soundness and general reputation.
Every mutual fund shall be registered under the said regulations and it is the
sponsor who files an application.

2. Trustees:
A trustee is a person who holds the property of mutual fund in trust for the
benefits of the unit holders. Once the mutual fund trust is formed, the role of sponsor
virtually becomes nil. The trustees are to perform the following duties:

To manage the mutual fund in accordance with the laws, regulations, directions
and guidelines issued by SEBI, Stock Exchanges and other governmental and
regulatory agencies.
To collect income due to be paid in respect of the schemes of mutual fund.

3. Assets Management Company(AMC):

Assets Management Company is a body engaged to run the show of mutual fund. It is
body corporate whose Memorandum and Articles of Associations are to be approved by

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the SEBI. The sponsor or the trustees appoint AMC to manage the affairs of the mutual
fund. The AMC performs the following functions:
To take reasonable steps and exercise due diligence to ensure that investments of
scheme are as per the provisions of the regulations.
To submit regular returns to the trustees regularly.
To appoint the custodian.
To appoint registrar and share transfer agents.

4. Custodians:
In a mutual fund depending upon its size there is a substantial work involved for
managing the scrips bought from the market. SEBI requires that each mutual fund shall
have a custodian who is responsible for such a work. To sum up the assignments of
custodian are:
Ensuring delivery of scrips only on receipt of payment and payment only upon
receipt of scrips.
Regular reconciliation of assets to accounting records.
Timely resolution on discrepancies and failures.
Getting property registered or recorded.

5. Transfer Agent:
The transfer agent handles sales and redemptions of fund shares, maintains
shareholder records, computes the NAV daily, and handles dividend and capital gains
distributions. The transfer agent is usually a bank or trust company.

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Working of a Mutual fund

The fund managers through AMCs collect money from investors and invests in securities
in various stock exchanges, as a result they returns and this benefit generated is passed
back to the investors.

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Risk Return Matrix

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TYPES OF MUTUAL FUND SCHEMES

In the investment market, one can find a variety of investors with different needs,
objectives and risk taking capacities. For instance, a young businessman would like to get
more capital appreciation for his funds and he would be prepared to take greater risk then
a person who is just on the verge of his retiring age. So, it is very difficult to offer one
fund to satisfy all the requirements of investors. Just as one shoe is not suitable for all
legs, one fund is not suitable to meet the vast requirement of all investors. Therefore,
many types of funds are available to the investor. It is completely left to the discretion of
the investor to choose any one of them depending upon his requirement and his risk
taking capacity.
Mutual Fund schemes can broadly be classified into many types as given below:

BY STRUCTURE:

1. Close-ended Funds

Under this scheme the corpus of the fund and its duration are prefixed. In other
words, the corpus of the fund and the number of units are determined in advance. Once
the subscription reaches the pre-determined level, the entry of the investors is closed.
After the expiry of the fixed period, the entire corpus is disinvested and the proceeds are
distributed to the various unit holders in proportion to their holding.
Features:
These units are publicly traded through stock exchange (as stocks are) and
generally; there is no repurchase facility by the fund.
The main objective of this fund is capital appreciation.
The whole fund is available for the entire duration of the scheme and there will
not be any redemption demands before its maturity.
Hence, the fund manager can manage the investments efficiently and profitably
without the necessity of maintaining and liquidity.

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 2. Open-ended Funds

It is just the opposite of close-ended funds. Under this scheme, the size of the fund
and/or the period of the fund is not pre-determined. The investors are free to buy and sell
any number of units at any point of time. For instance, the unit scheme (1964) of the Unit
Trust of India is an open-ended one, both in terms of period and target amount. Anybody
can purchase this unit at any time and sell it also at any time at his discretion.
Features:
There is complete flexibility with regard to ones investment or disinvestment.
These units are not publicly traded but, the Fund is ready to repurchase them
and resell them at any time.
The main aim of this fund is income generation
The fund manager has to be very careful in managing the investments because
he has to meet the redemption demands at any time made during the life of the
scheme.

BY INVESMENT OBJECTIVE:

3. Growth Funds

Unlike the income funds, Growth Funds concentrate mainly on long run gains i.e.
capital appreciation. They do not offer regular income and they aim at capital
appreciation in the long run. Hence, they have been described as Nest Eggs
investments.
Features:
The investment strategy conforms to the Fund objective by investing the funds
predominantly on equities with high growth potential.
The fund tries to get capital appreciation by taking much risks and investing
on risk bearing equities and high growth equity shares.

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 This is best suited to salaried and business people who have high risk bearing
capacity.
4. Income Funds

As the very name suggests, this fund aims at generating and distributing regular
income to the members on a periodical basis. It concentrates more on the distribution of
regular income and it also sees that the average return is higher than that of the income
from bank deposits.
Features:
The investor is assured of regular income at periodic intervals, say half
yearly or yearly and so on.
The pattern of investment is oriented towards high and fixed income yielding
securities like debentures, bonds etc.
This is best suited to the old and retired people who may not have any
regular income.

5. Balanced Funds

This is otherwise called income-cum-growth fund. It is nothing but a combination

of both income and growth funds. It aims at distributing regular income as well as capital
appreciation. This is achieved by balancing the investments between the high growth
equity shares and also the fixed income earning securities.

6. Money Market Funds

The aim of Money Market Funds is to provide easy liquidity, preservation of capital
and moderate income. These schemes generally invest in safer short-term instruments
such as Treasury Bills, Certificates of Deposit, Commercial Paper and Inter-Bank Call
Money. Returns on these schemes may fluctuate depending upon the interest rates

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prevailing in the market. These are ideal for corporate and individual investors as a means
to park their surplus funds for short periods

OTHER SCHEMES:

8. Tax Saving Scheme

These schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the Government offers tax incentives for investment in
specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and
Pension Schemes are allowed as deduction under Section 88 of the Indian Income Tax
Act, 1961. An investor is entitled to get 20% rebate in Income Tax for investments made
under this fund subject to a maximum investment of Rs. 10,000 p.a.

9. Index Funds

Index funds refer to those funds where the portfolios are designed in such a way that
they reflect the composition of some broad based market index. This is done by holding
securities in the same proportion as the index itself. The value of these index-linked funds
will automatically go up whenever the market index goes up and vice versa.

10.Sectoral Schemes

Sectoral Funds are those which invest exclusively in a specified sector(s) such as
FMCG, InfoTech, Pharmaceuticals, etc. These schemes carry higher risk as compared to
general equity schemes as the portfolio is less diversified, i.e. restricted to sector /
industry.

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 11.Leveraged Funds

These funds are also called borrowed funds since they are used primarily to increase
the size of the value of the portfolio of a mutual fund. When the value increases, the
earning capacity of the fund also increases.

12.Dual Funds
This is special kind of closed end fund. It provides a single investment opportunity
for two different types of investors. For this purpose, it sells two types of investment
stocks i.e. income shares and capital shares.

12.Bond Funds

These funds have portfolios consisting mainly of fixed income securities like
bonds. The main thrust of these funds is mostly on income rather than capital gains.

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 IMPORTANCE OF MUTUAL FUNDS

The mutual fund industry has grown at a phenomenal rate in the recent past. One can
witness a revolution in the mutual fund industry in view of its importance to the investors
in general and the countrys economy at large. The following are some of the important
advantages of mutual funds:

1. Channelising Savings for Investment:

Mutual funds act as a vehicle in galvanizing the savings of the people by offering
various schemes suitable to the various classes of customers for the development of the
economy as whole. In the absence of Mfs, these savings would have remained idle. Thus,
the whole economy benefits due to the cost efficient and optimum use and allocation of
scarce financial and real resources in the economy for its development.

2. Offering Wide Portfolio Investment:

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 Investors can enjoy the wide portfolio of the investment held by mutual fund. The
fund diversifies its risks by investing on a large variety of shares and bonds, which cannot
be done by small and medium investors. This is in accordance with the maxim not to lay
all eggs in one basket. Thus Mfs provide instantaneous portfolio diversification. The
risk diversification which a pool of savings through mutual funds can achieve cannot be
attained by a single investors savings.

3. Providing Better Yields:

The pooling of funds from a large number of customers enables the fund to have large
funds at its disposal. Due to these large funds, mutual funds are able to buy cheaper and
sell dearer than the small and medium investors. Thus they are able to command better
market rates and lower rates of brokerage. So they provide better yields to their
customers.
4. Rendering Expertise Investment Service at Low Cost:

The management of fund is generally assigned to professionals who are well trained
and have adequate experience in the field of investment. The investment decisions of
these professionals are always backed by informed judgment and experience.

6. Providing Research Service:

A mutual fund is able to command vast resources and hence it is possible for it to
have an in depth study and carry out research on corporate securities. Each fund
maintains a large research team which constantly analyzes the companies and the
industries and recommends the fund to buy or sell a particular share. Thus investments
are made purely on the basis of a through research.

7. Offering Tax Benefits:

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 Certain funds offer tax benefits to its customers. Thus apart from dividends, interest
and capital appreciation, investors also stand to get the benefit of tax concession. Mutual
funds themselves are totally exempt from tax on all income on their investments.

7. Introducing Flexible Investment Schedule:

Some mutual funds have permitted the investors to exchange their units from one
scheme to another scheme and this flexibility is a greater boom to investors. Income units
can be exchanged for growth units depending upon the performance of the funds. One
cannot derive such flexibility in any other investments.

8. Providing Greater Affordability and Liquidity:

Even a very small investor can afford to invest in mutual funds. They provide an
attractive and cost effective alternative to direct purchase of share. In the absence of Mfs,
small investors cannot think of participating in a number of investments with such a
meagre sum. There is greater liquidity. Units can be sold to the fund at any time at the net
asset value and thus quick access to liquid cash is assured.

9. Simplified Record Keeping:

An investor with just an investment in 500 shares or so in 3 or 4 companies has to

keep proper records of dividend payments, bonus issues, price movements, purchase or
sale instruction, brokerage and other related items. It is very tedious and consumes a lot
of time. Thus record keeping is the biggest problem for investors. The investor has to
keep a record of only one deal with the mutual fund. The MFs sends statements very
often to the investor.

10.Supporting Capital Market:

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 Mutual funds play a vital role in supporting the development of capital markets. The
mutual funds make the capital market active by means of providing a sustainable
domestic source of demand for capital market instruments. In other words, the savings of
the people are directed towards investments in capital markets through these mutual
funds.

11.Promoting Industrial Development:

The economic development of any nation depends upon its industrial advancement
and agricultural development. All industrial units have to raise their funds by resorting to
the capital market by the issue of shares and debentures. The mutual fund not only create
a demand for these capital market instruments but also supply a large source of funds to
the market, and thus, the industries are assured of their capital requirements.

12.Acting as substitute for Initial Public Offerings (IPOs):

In most cases investors are not able to get allotment in IPOs of companies because
they are often oversubscribed many time. Moreover, they have to apply for a minimum of
500 shares, which is very difficult particularly for small investors. But, in mutual funds,
allotment is more or less guaranteed mutual funds are also guaranteed a certain
percentage of IPOs by companies.

13.Reducing the Marketing Cost of New Issues:

Moreover the mutual funds help to reduce the marketing cost of new issues. The
promoters used to allot a major share of the Initial Public Offering to the mutual funds
and thus they are saved from the marketing cost of such issues.

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 14.Keeping the Money Market Active:

An individual investor cannot have any access to money market instruments since the
minimum amount of investment is out of his reach. On the other hand mutual funds keep
the money market active by investing money on the money market instruments.

Important terms associated with Mutual funds

NET ASSET VALUE (NAV)

The repurchase price is always liked to the Net Present Value (NAV). The NAV is
nothing but the market price of each unit of a particular scheme in relation to all the
assets of the scheme. It can otherwise be called the intrinsic value of each unit. This
value is a true indicator of the performance of the fund. If the NAV is more then the face
value of the unit, it clearly indicates that the money invested on that unit has appreciated
and the fund has performed well.

Illustration

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 For instance, Fortune Mutual Fund has introduced a scheme called Millionaire
Scheme. The scheme size is 100 crores. The value each unit is Rs. 10/-. It has invested all
the funds in shares and debentures and the market value of the investment comes to Rs.
200 crores.
NAV= Market Value of Assets - Liabilities
Units Outstanding

200 crores
Now NAV = -------------- x Value of each unit
100 crores

= 2 x 10 = 20

Thus, the value of each unit of Rs. 10/- is worth Rs. 20.

Hence the NAV = Rs.20

This NAV forms the basis for fixing the repurchase price and reissue price. The investor
can call up the fund any time to find out the NAV. Some MFs publish the NAV weekly in
two or three leading daily newspapers.

Load

It is a charge collected by a mutual fund when it sells units. It can be either front-end
load/entry load (i.e., the charge is collected when an investor buys the units) or back-end
load/exit load (i.e, the charge collected when the investor sells back the units). Some
schemes do not charge any load and are called No Load Schemes.

Contingent deferred sales charge (CDSC)

A back-end load that is imposed upon an investor if he exits from the fund before a
predetermined period (say 3 months).The charges decline as long as the investor stays in
the fund.

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Portfolio

A portfolio comprises of investments in a variety of securities and asset classes. This

diversification reduces the overall risk. The portfolio risk depends on the nature of each
investment in the portfolio and the overall impact (favourable or unfavourable) of the
various risk factors on each security. A mutual fund scheme states the kind of portfolio it
seeks to construct as well as the risks involved under each asset class.

Funds net assets

The total value of a fund's cash and securities less its liabilities or obligations.

Registrar

A Registrar holds and maintains the details of the transactions carried out by each Unit
holder in a Mutual Fund scheme. He is appointed by the AMC to serve the Unit holder
for the purchases, sales or switching of Units that he may carry out. The dividend
distribution, recording of nominations or transfers is some other services rendered by the
Registrar. He may also have Investor Service Centres in various cities, where an investor
can get over-the-counter service.

Expense ratio

The expense ratio for a fund is the annual expenses of a fund (at the end of the financial
year), including the management fee, administrative costs, divided by the number of units
on that day.

Statement of account

It is the statement showing the complete portfolio of an investor regarding investment in

the mutual fund scheme. It also shows its current worth of holdings.

Sales Price

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The price or NAV a Unit holder is charged while investing in an open-ended scheme is
called sales price. It may include sales load, if applicable.

Repurchase/Redemption price

Repurchase or redemption price is the price or NAV at which an open-ended scheme

purchases or redeems its units from the Unit holder. It may include exit load, if
applicable.

Risks exposed to while investing in Mutual Funds

Market risk - If the overall stock or bond markets fall on account of macro
economic factors, the value of stock or bond holdings in the fund's portfolio can
drop thereby impacting the NAV.

Non-market risk - Bad news about an individual company can pull down its
stock price, which can affect, negatively, funds holding a large quantity of that
stock. This risk can be reduced by having diversified portfolio that consists of a
wide variety of stocks drawn from different industries.

Interest rate risk - Bond prices and interest rates move in opposite directions.
When interest rates rise, bond prices fall and this decline in underlying securities
affects the NAV negatively. The extent of the negative impact is dependant on
factors such as maturity profile, liquidity etc.

Credit risk - Bonds are debt obligations. So when the funds invest in corporate
bonds, they run the risk of the corporates defaulting on their interest payment and
the principal payment obligations and when that risk crystallises it leads to a fall
in the value of the bond causing the NAV of the fund to take a beating.

RIGHTS AS A MUTUAL FUND UNIT HOLDER

Unit holders are entitled to:

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 Receive unit certificates or statements of accounts confirming title within thirty
days from the date of closure of the subscription under open-end schemes or
within 6 weeks from the date of request for a unit certificate is received by the
mutual fund.

Receive information about the investment policies, investment objectives,

financial position and general affairs of the scheme.

Receive dividend within 30 days of their declaration and receive the redemption
or repurchase proceeds within 10 days from the date of redemption or repurchase.

Vote in accordance with the regulations to:

1. Change the Asset Management Company;

2. Wind up the scheme.

To receive communication from the Trustees about change in the fundamental

attributes of any scheme or any other changes which would modify the scheme
and affect the interest of the unit holders and to have a option to exit at prevailing
Net Asset Value without any exit load in such cases.

Inspect the documents of the mutual funds specified in the schemes offer
document.

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 Liquidity

If we find ourselves in need of money in a short amount of time, mutual funds are
highly liquid. Simply put in our order during the day and when the market closes a check
will be sent to us or we can have it wired to a bank account. Stocks can be much more
difficult depending on what kinds of stocks we are invested in. CD's offer no liquidity
(not without a hefty fee) and bonds can be difficult, too. Some mutual funds also carry
check-writing privileges, which means we can actually write checks from the account,
similar to our checking account at the bank.

Cost

Mutual funds are excellent for the new investors because we can invest small
amounts of money and we can invest at regular intervals with no trading costs. Stock
investing, however, carries high transaction fees making it difficult for the small investor
to make money. If an investor wanted to put in $100 a month into stocks and the broker
charged $15 per transaction, their investment is automatically down 15 percent every
time they invest. That is not a good way to start off!

Risk

In general, mutual funds carry much lower risk than stocks. This is primarily due to
diversification. Certain mutual funds can be riskier than individual stocks. With stocks,
one worry is that the company we are investing in goes bankrupt. With mutual funds,
that chance is next to nil. Since mutual funds typically hold anywhere from 25-5000
companies, all of the companies that it holds would have to go bankrupt.

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LIMITATIONS OF MUTUAL FUNDS

Funds are not risk-free: It is possible that we could lose money.

Distributions are taxable: we will owe taxes on any dividend or capital

gain distributions from the fund portfolio in the year they are received, even if
the distribution is reinvested.

Fees and expenses are involved: Some fund companies can impose loads
(these are sales charges) or other charges, like redemption fees, 12b-1 fees (an
advertising and distribution fee), low balance account fees or custodial bank fees.

The Wisdom of Professional Management: The average mutual fund

manager is no better at picking stocks than the average non-professional.

No Control: Unlike picking individual stocks, a mutual fund puts in the

passenger seat of somebody else's car.

Dilution: Mutual funds generally have such small holdings of so many

different stocks that insanely great performance by a fund's top holdings still
doesn't make much of a difference in a mutual fund's total performance.

Buried Costs: Many mutual funds specialize in burying their costs and in
hiring salesmen who do not make those costs clear to their clients.

31
RISKS

Mutual funds are not free from risks. It is so because basically the mutual funds also
invest their funds in the stock market on shares, which are volatile in nature and are not
risk free. Hence, the following risks are inherent in their dealings:

1. Market Risks:

In general, there are certain risks associated with every kind of investment on shares.
They are called market risks. These market risks can be reduced, but cannot be
completely eliminated even by a good investment management. The prices of shares are
subject to wide price fluctuations depending upon market conditions over which no body
has a control. Moreover, every economy has to pass through a cycle- boom, recession,
slump and recovery. The phase of the business cycle affects the market conditions to
larger extent.

2. Scheme Risks:

There are certain risks inherent in the scheme itself. It all depends upon the nature of
the scheme. For instance, in a pure growth scheme, risks are greater. It is obvious because
if one expects more returns as in the case of a growth scheme, one has to take more risks.

3. Investment Risks:

Whether the mutual fund makes money in shares or loses depends upon the
investment expertise of the Asset Management Company (AMC). If the investment
advice goes wrong, the fund has to suffer a lot. The investment expertise of various funds
is different and it is reflected on the returns which they offer to investors.

4. Business Risks:

The corpus of the mutual fund might have been invested in a companys shares. If the
business of that company suffers any set back, it cannot declare any dividend. It may

32
even go to the extent of widing up its business. Though the mutual fund can withstand
such a risk, its income paying capacity is affected.

5. Political Risks:

Successive Governments bring with them fancy new economic ideologies and
policies. It is often said that many economic decisions are politically motivated. Changes
in Government bring in the risk of uncertainty which every player in the financial service
industry has to face. So mutual funds are no exception to it.

33
FUTURE OF MUTUAL FUND INDUSTRY

There will be a lot of product innovation; customization and a lot of hedging

products will come.

Retail participation will increase but that will be through pension and insurance
assets coming in.

There will be greater transparency; technology will drive down cost and the speed
of the transaction.

The awareness of mutual fund products among the investing public has
considerably increased.

The key objective while selling products has to be focused on risks rather than on
returns.

Growth for the fund houses depends on their capacity to spread out and market
their schemes at urban and semi-urban places. So more consideration has been
given to solicit subscriptions from small investors.

There will be the advent of more sophisticated products in various asset classes in
the times to come. Competition will stay and will grow stronger with time.

On the overall returns front, the dominant asset class is still debt. So, the debt
market may grow at 5-6%. The total debt market covered by mutual funds cannot
grow beyond 5-6%.

Real growth can be there in the equity sector but that is subject to political and
market situations. Most equity funds have given a 70-90% return and some may
be even 100% in the last one year.

34
 Returns are related to the state of the financial markets. Investors have also started
realizing that a mutual fund will be doing a good job so long as it gives market-
related rates of return.

35
INVESTORS PERCEPTION

Theres an interesting analogy between the way people drive and the way they
invest money.

Impatient drivers in traffic jams often pay lots of attention to what lane they are in
and how the other traffic lanes are doing compared to theirs. If the other lane looks like it
is moving faster, they often will swerve over to cut in front of somebody else. Some
people do this repeatedly, taking every opening they can find to get any slight advantage
for themselves. Those drivers may indeed gain a few seconds. But in the process, they
escalate the levels of danger and annoyance to them and everybody around them. In
investment terms, they take on much more risk in return for uncertain gains.

Greatest road block to successful long-term investing is impatience, and this

applies equally to buy-and-hold investors as well as those who use market timing.
Impatient investors watch the market from day to day like a hawk. In their zeal to always
be "on top," these people rarely give any investment or strategy enough time to perform
adequately. A tradition for many investors is looking up their stocks and funds every
single day. Some supposedly long-term investors even call their brokers or look up stock
prices electronically several times each trading day! This added information really does
long-term investors no good and it makes it much harder to stick to a long-term focus.

Patient investors who make investments and stick with them for years or decades,
with or without market timing, aren't likely to have exciting anecdotes to share at parties.
But they are more likely to retire comfortably. And they are more likely to sleep well
along the way and be able to devote their attention to other things in life. These people
may seem unexciting. As investors we can choose every day from thousands of mutual
funds, thousands of managers, thousands of individual stocks and thousands of other
products and plans.

36
Chapter- 2

Review of
Literature

37
 REVIEW OF LITERATURE

Research in Mutual fund industry has grown to a considerable extent. A number of key
Papers has been written exploring the different aspects but still some areas are under
study such as how to rate the different Assest Management Companies, how to design
assured return products, how the investors making investment in mutual Funds, What are
the moderating variables in customers decision making regarding Mutual fund? Are
these factors have become factors for investors. This part reviews preceding works
attempting to answer these issues.
Most research on mutual funds has employed two explanatory variables, namely ,risk and
return. This approach implicitly places no value on other potentially important attributes
of mutual fund investment decision. In keeping with this strictly economic frame, several
scholars have investigated whether or not mutual funds outperform the market.

Reviews:

Chandel & Kumar & et al (2009), In their study of Understanding Risk And
Returns In Mutual Funds Investments examined the performance of mutual funds in
terms of different measure viz .risk and return, beta, Jensens alpha, Sharp index,
coefficient values and t-values the performance of equity fund scheme has revealed that
Birla Sun Life and Franklin India is showing more return in net asset value, as compared
to average return in ICICI Prudential and SBI Magnum.

Kumar & Sharma (2009),In their of Mutual Fund:- Expanding Horizon study the
trend prevailing in India mutual fund industry & study the effect off FIIs& mutual fund
on Sensex & found the conclusion that FII affect the sensex significantly due to large
number of FIIs and huge amount of investment by them Where as mutual funds is less
significant due to small numbers and small amount of investment compared of FIIs.

38
Panigrahi & Prakash (2009) In their study of Investors choices of Mutual Funds
and their schemes a study of inter fund variations in returns found the importance
of different factors on which investors choices of Mutual Funds depends. They also find
in their study that the returns of public and private funds, taken together as well as
separately differ significantly and there is no set patten of rise and fall of returns of either
public or private funds.

Archana .R & Salma Shajahan(2008) In their study of A study on Factors

influencing the investment on Mutual Fund found that the safe ,risk and high return
liquidity , tax benefit, are sound to be the major factor influencing the investment
decision in mutual fund Consistent return and availability of fund are the other important
factors that investors look in funds.

Banarjee &Chakrabarti et al(2008) In their study of Persistence in performance of

Indian equity mutual funds:- An empirical investigation evaluated the relative
performance of equity mutual funds in India with respect to three performance indicators,
namely, raw returns, the tracking errors they generate over their benchmarks , and the
information ratios they attain.

Chander(2008) In this study of Empirical Evidence on Indian Fund Managers

Market Timing and Stock Selection Abilities discovered insatances of performance
variability on market timings as well as stock selection across the measurement criteria.
These findings have wider ramification for the capital market theory as well for the
market participants.

Choudhary, (2008) In his study of The components of investment performance of

fund managers-Evidence from Indian capital market examined the components of
investment performance of investment managers, market timing stock selection,risk
bearing and diversification, in India during the period January 1998 to December 2005 by
employing te Treynor and Mazuya (1966) and Fama (1972) performance measures.

39
Kumar &Sudalaimuthu (2008) In their study of Investors perception towards
mutual funds investment effectively analyzed the perception of investors towards
mutual fund investments effectively taking into account the investors reference towards
mutual fund sector, schemes type, investors opinion on factors influenced to invest in
mutual funds, investors satisfaction level towards various motivating factors source of
awareness of mutual fund scheme and type of paln held by investors.

Mittal & Vyas (2008) , In their study of Does investors pscychology affect
investment decision found that the over and above the objective and constraints os
investors behavioral aspect of investing paly an integral role in an individual perception
of risk.The research found that the investors became risk seeking and avoid selling
securities when faced with a loss, they place investment into separate mental accounts
and their decision adversely affected by greed and fear.

Pandey, (2008) In his study of Performance appraisal of share holding in mutual

fund industry in india found that the behavior of saving in india during the reform
period proved to be an improvement in financial saving, which provide an opportunity for
diversification across financial assests and emergence of marketable return

Devasenathipati & Saleendran et al (2007) , In their study of Awareness and

Perception of people towards Mutual Funds at a Coimbatore City found the various
factors affecting investors behavior towards investment in mutual funds and satisfaction
level of investors from different factors related to mutual fund investment like rate of
return, tax consideration factors, safety.

Singh & Singla (1998) In their study of Determinants of mutual fund performance,
a factor analysis approach used different factors such as correlation matrix analysis,
fundamental factor, market performance factor , Profitability factor & growth factor to
study the variation in different mutual funds performance over a specific period of time

40
Chapter- 3

Objectives

41
 OBJECTIVES

1. To study the investor awareness towards mutual fund.

2. To know the factors considered by investors while investing in a mutual fund.
3. To assess the satisfaction level of mutual fund investors and reasons for their
dissatisfaction.
4. To know the comparative preference of investors towards mutual funds and
investment in stock market directly.
5. To explore the prospect of mutual funds in India.

42
Chapter-4
Research
Methodology

43
 RESEARCH METHODOLOGY

Research Design

Research Design is a series of advanced decisions that taken together comprise a

master plan or model for the conduct of an investigation. So research design provides a
framework of plan for study which guides the collection, measurement, analysis and
interpretation of the data.
The design in my project is descriptive.

Data collection Method

Source of data collection

Both primary and secondary data has been used. Primary source of data includes
personal interviews as well as structured questionnaire.
Secondary source of data included the use of books, journals, brouchers and
internet services.

Universe
The universe for the survey included all the investors investing in Mutual Funds in
Ludhiana City.

Sampling Plan

Sampling unit
The target population included Business class, Service class, Professionals who had
invested in Mutual Funds.

Sample Size

44
The sample size has been 100 respondents.
Sampling Technique
The sampling technique was non-probability convenience sampling technique

Data Analysis and Interpretation

The data has been processed and analyzed by tabulation interpretation so that the
findings can be communicated and can be easily understood. The findings are presented
in the best possible way. Tables and graphs have been used for illustration of principal
findings of the research.

45
 LIMITATIONS OF THE STUDY

The paucity of time and resources was the major constraints.

The sample size was limited.
The sample was taken from the population residing in Ludhiana only, so the
results are not applicable to whole of India.
Non co-operation of some respondents has also affected the research results.
Being an opinion survey a lot of subjectivity is involved in the study.
The possibility of respondents being biased cannot be ruled out.

46
 Chapter- 5
Data Analysis &
Interpretation

47
 DATA ANALYSIS AND INTERPRETATION

1. To know the investors knowledge about the Mutual Fund.

Table 5.1: Knowledge about the Mutual Fund

Knowledge %age of Respondents

Very Good 7%
Good 22%
Average 65%
Poor 5%
Very Poor 1%

5% 1% 7% Very Good
22%
Good
Average
Poor
65% Very Poor

Graph 5.1: Knowledge about the Mutual Fund

Inference: It was attempted to understand from the investors their knowledge of Mutual
Funds. It was found that 65% of the investors said that they rank their understanding

48
about Mutual Funds as average. While 7% of the investors rated their understanding as
very good.
2. To know the percentage of investors who have also invested in
Stocks

Table 5.2: Investment in stocks

Response %age of Respondents

Yes 69%

No 31%

31%

Yes

No

69%

Graph 5.2: Investment in stocks

Inference: From the above data it is clear that 69% of the investors have invested in
stocks as well as in Mutual Funds. It implies that the investors have retained their numero
uno position by investing directly in shares also.

49
 3. To know the confidence level in terms of making investments in
Stocks and Mutual Funds.

Table 5.3 (a): Confidence level in terms of making investment in stocks

Level of Confidence %age of Respondents

High 18%
Moderate 66%
Low 16%

16% 18%

High
Moderate
Low

66%

Graph 5.3 (a): Confidence level in terms of making investment in stocks

Inference: it was attempted to know the level of confidence an investor has in Mutual
Funds and the stock market. 66% of the total investors demonstrated moderate
confidence level in making investments in stock market. Only 18% of the investors
demonstrated high level of confidence in opting for stock market. It implies that the

50
investors have retained moderate level of confidence in stocks and the high return they
expect from their portfolios.

Table 5.3 (b): Confidence level in terms of making investment in Mutual Funds

Level of Confidence %age of Respondents

High 20%
Moderate 71%
Low 9%

9%
20%

High
Moderate
Low

71%

Graph 5.3 (b): Confidence level in terms of making investment in Mutual Funds

Inference: Regarding mutual funds, 71% of the investors said that they have moderate
confidence level in terms of making investments in mutual funds. While only 20% of the
investors demonstrated high level of confidence in opting for mutual funds. It implies that
even in mutual funds they are ready to park their money which promise high returns.

51
4. To know the percentage of Mutual Fund investment out of the
total investment of the respondents.

Table 5.4: Percentage of Mutual Fund investment out of the total investment
of the respondents

Amount (Rs.) %age of Respondents

Less than 10% 10%
10%-20% 5%
20%-30% 33%
30%-40% 27%
40%-50% 17%
Above 50% 8%

8% 10% Less than 10%

5%
17%
10%-20%

20%-30%
30%-40%

33% 40%-50%

27% Above 50%

52
 Graph 5.4: Percentage of Mutual Fund investment out of the total investment
of the respondents

Inference: The above data shows that mutual fund investment comprises 20%-40% of
the total investment for 60% of the investors. It implies that it is becoming a substantial
part of the total investment of the investors.

5. To know the time horizon to keep investment in Mutual Fund.

Table 5.5: Time horizon to keep investment in Mutual Fund

Time Horizon %age of Respondents

Up to 1 Year 23%
1Year - 3Years 54%
3Years - 5Years 16%
Above 5 Years 7%

7%
23%
16%
Up to 1 Year
1Year-3Years
3years-5Years
Above 5years

54%

Graph 5.5: Time horizon to keep investment in Mutual Fund

53
Inference: As this question aimed at getting the information regarding the time horizon
for which the people are investing their money in mutual funds, we can see that 54% of
the investors said that they would prefer to keep their investment in mutual funds for 1-3
years while 23% preferred to park their money in mutual funds for a period of 1 year.
While only 7% are interested for a period above 5 years. 16% investors preferred for a
period of 3 to 5 years. It implies that investors are interested to keep investment for an
average period in mutual funds.

6. To know the micro factors, influencing the Mutual Fund

investment.

Table 5.6: Micro factors influencing the Mutual Fund Investment

Factors %age of Respondents

Fund Managers 20%
Friends/Relatives 33%
Financial Advisors/CA 26%
Personal Analysis/Perception 21%

21% 20% Fund Managers

Friends/Relatives

Financial
Advisors/CA

26% Personal
33% Analysis/Perception

Graph 5.6: Micro factors influencing the Mutual Fund Investment

54
Inference: The above data shows that micro factors influenced by friends and relatives
had major influence with 33% of the investors preferring to invest at recommendations
made by their friends and relatives, while 26% of the investors depended on the
recommendations of their financial advisors. 21% of the investors gave more importance
to their own analysis and perception and 20% of the investors thought that fund
managers image has got a major role to play while making mutual fund investment

7. To know the macro factors influencing Mutual Fund Investment.

Table 5.7: Macro factors influencing Mutual Fund investment

Factor/Rank 1 2 3 4
Graph 5.7: Return 52% 29% 17% 2% Macro
factors Safety of Investment 28% 30% 12% 30% influencing
Mutual Tax Benefits 13% 24% 19% 44% Fund
investment Liquidity 7% 17% 52% 24%

Inference: The above data shows that investors give maximum importance to return and
safety while making investment in mutual funds. Tax benefits and liquidity are the factors
that do not make much influence on the investors decision.

8. To know the schemes in which respondents have invested.

Table 5.8: Schemes in which respondents have invested

Schemes %age of Respondents

Income Scheme 24%
Growth Scheme 37%
Balanced Scheme 14%
Monthly Income Plan 20%
Any Other 55 5%
 Graph 5.8: Schemes in which respondents have invested

Inference: The above data shows that maximum investors i.e. 37% are investing in
growth schemes. This is because investors want to get maximum returns by taking benefit
of the present share market boom. Income schemes and monthly income plans are very
popular among the old age investors and risk averters.

9. To know the frequency of monitoring fund performance.

Table 5.9: Frequency of monitoring fund performance

Frequency %age of Respondents

Daily 12%
Weekly 29%
Fortnightly 22%
Graph 5.9: Monthly 31% Frequency of
monitoring None 6% fund
performance

Inference: The frequency of monitoring the investment in funds is a representative of the

awareness level of the investors. The above data shows that the 29% of the investors
monitor their investments on weekly basis. 22% of the investors monitor at fortnightly
basis and 12% monitor it on the daily basis.

10. To know the media through which the respondents get the

information about new schemes.

56
 Table 5.10: Media through which the respondents get the information about

New Media %age of Respondents schemes

Print Media/Latest News 56%
Electronic Media 27%
Pamphlets 11%
Hoardings/Billboards 6%

6% Print Media/Latest
11% New s
Elecdtronic Media

Pam phlets
27% 56%
Hoardings/Billboards

Graph 5.10: Media through which the respondents get the information about new
schemes

Inference: The above data shows that 56% of the respondents said that the print media is
the major influencing factor. Electronic media was second with only 27% of the investors
calling it an influencing agent.

11. To know the satisfaction level of Mutual Fund investors and

reasons for their dissatisfaction.

57
 Table 5.11 (a): Satisfaction level of Mutual Fund investors

Response %age of Respondents

Yes 83%

No 17%

17%

Yes
No

83%

Graph 5.11 (a): Satisfaction level of Mutual Fund investors

Inference: From the above data it is very clear that only 17% respondents are not
satisfied with their investments while 83% respondents feel contented with their
decision of investing in mutual funds.

Table 5.11 (b): Reasons for the dissatisfaction among the Mutual Fund investors

Response %age of Respondents

Low Income 0
Longer Redemption Period 2%
Poor After Sales Service 58 9%
Better Paying Avenues in the Market 6%
Attitude of the Broker 0
 0
0
Low Income
2
Longer Redemption
6 Period
Poor After Sales Service

Better Paying Avenues

In the Market
9 Attitude of the Broker

Graph 5.11 (b): Reasons for the dissatisfaction among the Mutual Fund investors

Inference: From the above data it is clear that there is no investor who is dissatisfied due
to low income or the attitude of the broker. But 2% investors are dissatisfied due to
longer redemption period, 9% due to poor after sales service and 6% feel that there are
other better paying avenues in the market.

12. To know how the respondents grade Mutual Fund investment as

compared to investment in Stock Market directly.

Table 5.12: Grading the Mutual Fund investment as compared to

Factor/Grade High Moderate Low investment in

Return 50% 18% 32% Stock
Risk 43% 29% 28%
Market
Liquidity 7% 53% 40%
directly

59
 Graph 5.12: Grading the Mutual Fund investment as compared to investment in
Stock Market directly

Inference: The above data shows that most of the investors believe that mutual funds
fetch more returns as compared to investment in stock market directly. But
investment is slightly risky. Mutual funds also ensure sufficient liquidity, as most of
the schemes are open-ended.

13. To know the potential for Mutual Fund Market in future.

Table 5.13: Potential for Mutual Fund market in future

Response %age of Respondents

Yes 76%
Graph 5.13: Potential for
No 24%
Mutual Fund market in
future

60
Inference: From the above data it is clear that 76% of the present investors are willing to
invest in the mutual funds in the future also and 24% of them are not willing to invest in
future.

14. To know the perception regarding the future of Mutual Funds.

Table 5.14: Perception regarding the future of Mutual Funds

Response %age of Respondents

Bright 48%
Slow Growth 7%
Lack of Awareness 11%
Risky Avenue 9%
Dark 5%
No Response 20%

20% Bright

Slow Grow th

5% Lack of
48% Aw areness
Risky Avenue
9%
Dark

11% No Response
7%

Graph 5.14: Perception regarding the future of Mutual Funds

61
Inference: As the question aims to know the future of mutual fund industry, so from the
analysis we can interpret that there are 48% respondents that believe the future of this
industry is bright. 7% feel that it is growing slowly, and 5% believe it to be dark. 9% feel
it is a risky avenue and 11% respondents said that most of the people are not aware about
the functioning of mutual funds. So some steps must be taken to make the people more
aware about these funds so that these funds can have a bright future.

Personal Profile:

(a) Occupation of the Respondents

Table 5(a): Occupation of Respondents

Occupation %age of Respondents

Businessman 34%
Serviceman 50%
Professional 16%
Others -

0%
16%

34%
Businessm an
Servicem an
Professinal
Others

50%

62
 Graph 5(a): Occupation of Respondents

Inference: 34% of the respondents are of business class, 50% of service class, 16% are
professionals.

(b) Age of Respondents

Table 5(b): Age of Respondents

Age Group %age of Respondents

Below 25 Years 6%
25 40 Years 30%
40 50 Years 40%
50 60 Years 20%
60 and above 4%

4% 6%
20%
Below 25Years
30%
25-40Years
40-50Years
50-60Years
60 and above
40%

63
 Graph 5(b): Age of Respondents

Inference: 20% respondents are less than the age of 25 years, 30% of the respondents fall
between the age of 25-40 years, 40% of the respondents fall between the age of 40-50
years, 20% of the respondents fall between the age of 50-60 years, and 4% of the
respondents are above 60 years.

(c) Monthly Income of the Respondents

Table 5(c): Monthly Income of Respondents

Monthly Income %age of Respondents

Below 10,000 -
10,000 25,000 28%
25,000 40,000 30%
40,000 50,000 26%
50,000 and above 16%

0%
16%
28% Below 10,000

10,000-25,000

25,000-40,000

26% 40,000-50,000

50,000 and
above
30%

64
 Graph 5(c): Monthly Income of Respondents

Inference: None of the respondents earns below 10,000, 28% of the respondents fall
between the income group 10,000-40,000, 30% of the respondents fall between the
income group 25,000-40,000, 26% of the respondents fall between the income group
40,000-50,000, and 16% of the respondents earn 50,000 and above.

FINDINGS

The knowledge of the investor about the mutual fund is average.

69% of the investors have retained their numero uno position by investing directly
in shares also.
The investors confidence level in stocks and mutual funds is almost the same.
60% of the investors invest more than 20% of their total investment in mutual
funds.
Most of the people like to stay invested for 1 to 3 years.
Friends and relatives act as the major influencers in mutual fund investing.
Over 50% of the investors invest to maximize their returns.
Growth scheme is the most preferred for investment because investors want to get
maximum returns by taking benefit of the present share market boom.
Print media have the maximum impact on the investors as over 55% consider
them as the influencing agents.
Mostly investors are satisfied with their investment and poor after sales service is
the main factor for their dissatisfaction.
More than half of the mutual fund investors are willing to invest in these funds in
future which means that the mutual fund industry has a growth potential.

65
 Chapter- 6
Conclusion &
Recommendations

66
 RECOMMENDATIONS

The shift in investor preference towards mutual funds should be facilitated by

increasing returns from debt mutual fund investments due to the decline in interest
rates.
A funds past performance is no guarantee of its future performance. Investors
should always take into consideration the funds investment objective as well as
its style.
Investors should consider their own investment needs, both short term as well as
long term and their investment horizon, that is the period for which they can
invest in a fund.
Investors should remember the old maxim that one should not put all his eggs in
one basket. Investors should spread or diversify their investment related risk.
Investors could achieve diversification by spreading their investment across
different mutual fund schemes.
Income funds are still a good option by investing in which the investor can avail
the benefit of regular income.
The investors should keep in mind that they should not compare apples with
oranges. That is a fund must be compared with another fund which belongs to the

67
 same category. For example, an equity-diversified fund should be compared only
with equity-diversified funds and not with debt or balanced funds.

CONCLUSION

People have the traditional mindset of investing in banks, post- offices and
government securities. With declining interest rates, the time has come when investors
are realizing the need to look at other avenues and the first and foremost avenue that
comes to mind is mutual funds.

The mutual fund industry has come a long way since the days of the UTI in India.
The number of mutual funds has increased over the years. Mutual funds are seen as an
avenue for the investor to enter the stock markets and bonds. They provide the
professional competence to the investors. Mutual Funds in India provide safety, liquidity
and growth to investors. They are safe and readily available conduits for channelising
savings into investments yielding income and growth. The funds provide stability to
share prices, safety to investors and resources to promoter entrepreneurs.

The major factor that is pushing the industrys growth today is the awareness level
on mutual funds among the investors. There is a need for further improving awareness in
a big way.

68
Bibliography

69
 BIBLIOGRAPHY

Banerjee, Chakrabarti & Deb (2008), Persistence In Performance of Equity Mutual

Funds :- An Empirical Investigation , IIMB Management Review , Vol .1, pg 171-186

Chander,Ramesh(2008), Empirical Evidences On Indian Fund Mangers market Timing

And Stock Selection Abilities, Vol.1 , no.1 ,pg 3-11

Chandel, Rana & kumar (2008), understanding Risk And Return In Mutual Fund
Investments, Apeejay Journal of Management And Technology , Vol.4,No.1 ,pg 79-89

Choudhary(2008), The Components of Investments performance Of Fund Managers:

Evidence From Indian Capital Market , The Global Journal Of Finance , Vol. 5, No.1
pg 1- 17

Devasenathipathi, Saleendran,Sanmugasundaram (2007), Awareness and Perception of

people towards mutual funds in Ludhiana city ,Vol.2 , pg 31-36

70
Kumar & Sharma (2009), Mutual Funds: Expanding Horizons , SCMS journal of
Indian Management , Pg 100 -117

Kumar & Sudalaimuthu (2008), A Study of Investors Perception Towards Murual Fund
Investments, Management Trends,Vol:5,No .1,pg 106 -117

Mittal & Vyas (2008), Does investors Psychology affect investment decision :a
literature review, Global management review , Vol.3(1) , pg 19 -28

Pandey (2008),Performance appraisal of shareholding in mutual fund industry in India

Indian management studies journal , Vol.2 ,No 12 pg.115-123

Panigrahi,Prakash, (2009), Investors Choices Of Mutual funds And Their Schmes A

Study Of Inter Fund Variation in Returns , Global Management Review Vol.3, No. 2
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Salma Shajahan & Archana.R (2008) ,A Study On factor Influencing The Investments
In Mutual funds , Global Management Review , Vol.2, No.2, pg 39-43

Singh & Sigla (1998) Determinants Of mutual fund performance : A factor analysis
approach , Ludhiana journal of management association , Vol. 1 , pg . 48 -53

Websites:-

http://www.moneycontrol.com/
www.iloveindia.com/finance /mutual-funds/index.html
http://finance.indiamart.com/india_business_information/mutual _funds_concept.html
www.dancewith shadows.com/business/mutual-fund-scheme.asp
http://business.mapsofindia.com/mutual-funds/future.html
http://profit.ndtv.com/MutualFund

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http://www.scribd.com/doc/7405048
http://www.scribd.com/doc/7405048/Mutual-funds
http://www.mutualfundsindia.com/mfbasic.asp#return
http://finance.yahoo.com/funds
http://www.investopedia.com/university/mutualfunds/mutualfunds4.asp
http://www.fool.com/MutualFunds/Glossary.htm
http://en.wikipedia.org/wiki/Mutual_fund

Annexure

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 QUESTIONNAIRE

1. What is your knowledge about the Mutual Fund?

(a) Very good (b) Good

(c) Average (d) Poor
(e) Very poor

2. Have you ever invested in Stocks?

(a) Yes (b) No

3. What is your confidence level in terms of making investments in Stocks and

Mutual Funds?
High Moderate Low
(a) Stock Market
(b) Mutual funds

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4. What is the percentage of Mutual Fund investment out of your total investment?

(a) Less than 10% (b) 10% - 20%

(c) 20% - 30% (d) 30% - 40%
(e) 40% - 50% (f) Above 50%

5. What is your time horizon to keep investment in Mutual Fund?

(a) Up to 1 Year (b) 1Year 3Years

(c) 3 Years 5 Years (d) Above 5 Years

6. Which micro factors have influenced you to invest in the Mutual Funds?
(Tick one)

(a) Fund Managers (b) Friends/Relatives

(c) Financial Advisors/C.A. (d) Personal Analysis/Perception

7. What macro factors do you consider while investing in a Mutual Fund?

(Rank them)

(a) Return
(b) Safety of Investment
(c) Tax Benefits
(d) Liquidity

8. Which scheme you have invested in?

(a) Income Scheme (b) Growth Scheme

(c) Balanced Fund (e) Monthly Income Plan
(e) Any other

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9. What is the frequency of monitoring fund performance?

(a) Daily (b) Weekly

(c) Fortnightly (d) Monthly
(d) None

10. What is the media through which you get the information about new schemes?

(a) Print media /Latest news

(b) Electronic media
(c) Pamphlets
(d) Hoardings/Billboards
11. Are you satisfied with Mutual Fund investment?

(a) Yes (b) No

If no, why?

Low income
Longer redemption period
Poor after sales services
Better paying avenues in the market
Attitude of the broker

12. How do you grade Mutual Fund investment as compared to investment in Stock
Market directly?

High Moderate Low

Return
Risk

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Liquidity

13. Would you like to invest in Mutual Funds in future?

(a) Yes (b) No

14. What is your perception regarding the future of Mutual Funds?

(a) Bright (b) Slow growth

(c) Lack of awareness (d) Risky avenue
(e) Dark (f) No response

PERSONAL DETAILS:

NAME: -----------------------------

ADDRESS:
---------------------------------------------------------------------------------

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

CONTACT NO: -----------------

OCCUPATION: Businessman Serviceman Professional Others

AGE: Below 25 Years

25 40 Years
40 50 Years
50 60 Years

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 60 and above

Income: Below 10,000

(p.m.) 10,000-25,000
25,000-40,000
40,000-50,000
50,000 and above

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