STUDY ON INVESTOR’S PERCEPTION OF MUTUAL FUNDS

CHAPTER I
INTRODUCTION
Mutual funds are financial intermediaries, which collect the savings of investors & invest
them in a large & well diversified portfolio of securities such as money market instruments,
corporate & government bonds & equity shares of joint stock companies. A Mutual fund is a
pool of common funds invested by different investors, who have no contact with each other.
Mutual funds are conceived as institutions for providing small investors with avenues of
investments in the capital market. Since small investors generally do not have adequate time
knowledge, experience & resources for directly accessing the capital market, they have to rely
on an intermediary which undertakes informed investment decisions & provides consequential
benefits of professional expertise. The advantages for the investors are reduction in risk, expert
professional management, diversified portfolios, & liquidity of investment & tax benefits. By
pooling their assets through mutual funds, investors achieve economies of scale. The interests
of the investors are protected by the SEBI, which acts as a watchdog. Mutual funds are
governed by the SEBI (Mutual funds) regulations, 1993.

From its inception the growth of mutual funds is very slow and it took really long years
to evolve the modern day mutual funds. Mutual Funds emerged for the first time in Netherlands
in the18th century and then got introduced to Switzerland, Scotland and then to United States
in the 19th century. The main motive behind mutual fund investments is to deliver a form of
diversified investment solution. Over the years the idea developed and people received more
and more choices of diversified investment portfolio through the mutual funds. In India, the
mutual fund concept emerged in 1960. The credit goes to UTI for introducing the first mutual
fund in India. Monetary Funds benefited a lot from the mutual funds. Earlier investors used to
invest directly in the stock market and many times suffered from loss due to wrong speculation.
But with the coming up of mutual funds, which were handled by efficient fund managers, the
investment risks were lowered by a great extent.

History of Mutual Funds

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 of India.

Unit Trust of India(UTI) was established in 1963 by Act of Parliament. It was set up by
the reserve Bank of India and functional under the Regulatory and administrative control of
Reserve bank of India. In 1978 UTI was de-linked form the RBI and the industrial Development
Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The
first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700
crores of assets under management.

1987 marked the entry of non-UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of
India (GIC). SBI Mutual Fund was the first non-UTI Mutual fund established in June 1987
followed by can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),
Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct
921), LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in
December 1990.
Scope of Mutual Fund
Scope of mutual fund has grown enormously over the year. In the first age of mutual
funds when investment management companies started to offer mutual funds, choices were
few. Ever through people invested their money in mutual funds as these funds offered them
diversified investment option for the first time. By investing in these funds they were able to
diversify their investment in common stocks, preferred stocks, bonds and other financial
securities. At the same time they also enjoyed the advantages of liquidity. With mutual fund,
they got the scope of easy access to their invested funds on requirement.

But in today’s world, scope of mutual funds has become so wide, that people sometimes
take time to decide the mutual fund type, they are going to invest in several investment
management companies have emerged over the years who offer various types of mutual funds.
Each type carrying unique characteristics and different beneficial features.

To understand the board scope of mutual funds we need to discuss the main types of
mutual funds that are normally offer by mutual companies.

Advantages of Mutual Fund Investments

1. Manage inflation
2. Safe and transparent
3. High return
4. Diversification
5. Liquidity
6. Professional management
7. Flexibility
8. Choice of scheme
9. Tax benefits

Types of Mutual Funds

Mutual funds can be classified in different ways according to their investment

objectives, their constitution, as follows;

• Equity Funds
• Debt / income Funds
• Balanced Funds
• Liquid / Money Market Funds.
• Closed Ended Funds
• Open Ended Funds
• Load Funds
• No Load Funds
Structure of the Mutual Fund

Statement of the problem

Mutual funds are the avenues for common investors to reap the benefits of share market
performance. Investing in equity directly by investors is fraught with highest level of risk &
uncertainty Retail investors do not actively participate in share market but inflation edged
investment return demands the exploitation of the equity market as an investment avenue
Therefore there is a necessity to create awareness of the utility of investing in mutual funds
schemes to enjoy a return which will be inflation adjusted real returns Therefore this project is
taken on to assess the investors perception of mutual fund investment. This project will evaluate
the financial performance of mutual fund schemes.

Scope of research
From the various mutual funds operated in India Three mutual funds organizations has
been identified based on convenient sampling. Selected equity funds of these organizations are
taken up for research. The financial details reflecting performance of mutual funds for the
financial year 2018-19 is considered as an academic project. It is executed during a period of
one month, conclusions arrived at are influenced by economic and business environment of the
year 2018-19.
The research is based on different investment & saving schemes so there’s lots of
opportunities to choose an investment schemes which is beneficial to investor as well as the
companies in the market. Choosing a right research technique lead to better profits &
investment decisions.

Research objectives
• To examine the penetration of mutual funds among Indian investors.
• To examine the various mutual fund investments available to investors in India.
• Finally, to assess the perception of investors towards mutual funds schemes.
• Awareness of mutual funds in Indian market.

• To identify the investor behaviour while selecting a fund

Research Methodology
Sources of data
Introduction:
This report is based on secondary data. All the data required for this analytical study has been
obtained mainly from secondary sources. The secondary data has been collected through various
journals & websites. Secondary data is based on information gleaned from studies previously
performed by various journals.

Collection of data
Primary data: Since the study require a systematic gathering of information, a survey
research (using a structured questionnaire) was selected
Secondary data: Here in this research project the secondary data is used data which are
taken from published sources of Bombay stock exchange, Money control, value research
online, National stock exchange & Mutual fund India.

Limitation of the study

Apart from Details about mutual funds it has some limitations due to that all the details
could not be published & displayed. It has been done on the basis of secondary sources like
Journals, Websites & like resources.

Limitations of the study can be pointed out as follows

• Time constraints: - Due to shortage or less availability of time it may be possible that
all the related & concerned aspects may not be covered in the project.
• Analysis done is limited to the availability of data.
• It is very difficult to evaluate the accuracy of secondary data. Before using secondary
data.
• The quality of internal secondary data may be exaggerated or biased
• Mismatch between purpose collected and purpose used.
• Desired information may be unavailable or out-of-date.
• The conclusions derived from the report cannot be generalized.