Asia Pacific Journal of Research Vol: I Issue XII, April 2014

ISSN: 2320-5504, E-ISSN-2347-4793

INVESTORS PREFERENCES TOWARDS MUTUAL FUNDS

- A STUDY ON SILK CITY SECURITIES AT BERHAMPUR TOWN-ODISHA, INDIA

*Dr.Suman Kalyan Chaudhury, Faculty Member, P.G. Department of Business Administration,

Berhampur University, Berhampur, Odisha, India.
**Mr. C. S. Pattnaik, Faculty Member, St Vincent P G College (MBA), Hyderabad, India
ABSTRACT

With progressive liberalization of economic policies, there has been a rapid growth of capital market,
money market and financial services industry including merchant banking, leasing and venture
capital. Consistent with this evolution of the financial sector, the mutual fund industry has also come
to occupy an important place. To meet these needs of the population new financial instruments like
mutual funds and institutions like Asset Management Company (AMCs) are aimed at increasing the
range of investment avenues. It is really challenging for the companies to change the attitude and
perception of people. This research paper attempts to review and assess the preference of the investors
for investment in mutual funds. Further, it intends to throw light in improving the efficiency of
investing surplus money by the investors towards mutual funds.

Keywords: Mutual Funds, Asset Management, Unit Holders, Mutual Funds Services System

INTRODUCTION:
Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as shares,
debentures and other securities. The income earned through these investments and the capital
appreciation realized are shared by its unit holders in proportion to the number of units owned by
them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a relatively low
cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified
portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the
fund. Units are issued and can be redeemed as needed. The fund’s Net Asset value (NAV) is
determined each day. The flow chart below describes broadly the working of a mutual fund:

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Mutual Fund Operation Flow Chart

Investments in securities are spread across a wide cross-section of industries and sectors and thus the
risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction
in the same proportion at the same time. Mutual fund issues units to the investors in accordance with
quantum of money invested by them. Investors of mutual funds are known as unit holders. In order to
facilitate transactions through stock exchange infrastructure, National Stock Exchange (NSE) has
introduced Mutual Fund Service System (MFSS). All trading members who are registered with NSE
as participants and/or registered clearing members of National Securities Clearing Corporation
Limited (NSCCL) who are registered with AMFI as mutual fund advisors and who are empanelled
with Principal PNB Asset Management Co. Pvt. Ltd. (AMC) will be eligible (eligible brokers) to offer
this facility to the investors (PNB-Punjab National Bank). Further, only for the purpose of processing
redemption request, Depository Participant of Depositories, who are registered with AMFI
(Association of Mutual Funds in India) as mutual fund advisors and who are empanelled with
Principal PNB Asset Management Co. Pvt. Ltd. (AMC), are eligible for processing redemption
transaction.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India(UTI), at the initiative of the Government of India and Reserve Bank. Though the growth was
slow, but it accelerated from the year 1987 when non-UTI players entered the Industry.
In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities
wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the
Assets Under Management (AUM) was Rs. 67 billion. The private sector entry to the fund family
raised the Amount to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs.
1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual
fund industry can be broadly put into four phases according to the development of the sector. Each
phase is briefly described as under.
First Phase: 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve
Bank of India and functioned under the regulatory and administrative control of the Reserve Bank of
India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI)
took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI
was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
Second Phase: 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks
and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI
Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by Canada 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 92). LIC established its mutual fund in

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June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual
fund industry had assets under management of Rs.47, 004 cores.
Third Phase: 1993-1996 (Entry of Private Sector Funds)
1993 was the year in which the first Mutual Fund Regulations came into being, under which
all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 Securities & Exchange Board of India-SEBI (Mutual Fund) Regulations were
substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996.
Fourth Phase: 1996-1999(Growth and SEBI Regulations)
A set of regulations for all mutual funds operating in India was introduced with SEBI (Mutual Fund)
Regulations, 1996.
Fifth Phase: 1999-2004(Emergence of a large and uniform industry)
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 cores as at the end of January 2003, representing broadly, the assets of US
64 scheme, assured return and certain other schemes. The second is the UTI Mutual Fund Ltd,
sponsored by SBI (Sate Bank of India), PnB (Punjab National Bank), BoB (Bank of Baroda) and LIC
(Life Insurance Corporation of India). It is registered with SEBI and functions under the Mutual Fund
Regulations
Sixth Phase: 2004 onwards (Period of Consolidation & Growth)
In this period the industry has witnessed a spate of mergers and takeovers. Also more and more new
international and private sector players are entering the fray. This period has been witnessing the
growth of the industry.

MUTUAL FUND & FINANCIAL PLANNING:

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets
of the fund in the same proportion as his contribution amount put up with the corpus (the total amount
of the fund). Mutual fund investor is also known as a mutual fund shareholder or a unit holder.
Any change in the value of the investments made into capital market instruments (such as shares,
debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the
market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated
by dividing the market value of scheme's assets by the total number of units issued to the investors.
Mutual funds invest in a portfolio of securities. It is based on the fundamental principle: “Do
not put all your eggs in one basket” This means that all funds are not invested in the same investment
avenue. It is well known that risk and returns of various investment options do not move uniformly or
in sympathy with one another. If a pharmacy company share is going down, an InfoTech company’s
shares could be moving up; if the equity market is moving down, the debt markets may be moving up.
Therefore, holding a portfolio that is diversified across investment avenues is a wise way to manage
risk. When such a portfolio is liquid and marked to market, it enables investors to continuously
evaluate the portfolio and manage their risks more efficiently.
By offering ready-made diversified portfolios, mutual funds enable investors to hold
diversified portfolios. Though investors can create their own diversified portfolios, the costs of
creating and monitoring such portfolios can be high, apart from the fact that investors may lack the
professional expertise to manage such a portfolio.
Mutual funds inform investors periodically, about the performance of the fund. They disclose
the NAVs daily, and in most cases this information is available on phone and on the Internet. The
complete portfolios of the fund, and commentaries of the fund managers on how they are managing
the fund, are also available to investors. Many mutual funds also provide additional information on
the maturity profile of their investments, credit quality of their portfolios, and the behavior of NAV

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over the period since inception of the fund. Investors can make informed decisions about their mutual
fund investments, from these disclosures made by funds.

LITERATURE REVIEW:
A Literature review is a body of text that aims to review the critical points of current knowledge on a
particular topic. Most often associated with science-oriented literature, such as a thesis, the literature
review usually precedes a research proposal, methodology and results section. Its ultimate goal is to
bring the reader up to date with current literature on a topic and forms the basis for another goal,
such as the justification for future research in the area.
Chen, Kraft & Weiss (2011) have tested mutual funds that engage in tax planning and how do they
respond to changes in the capital gains tax rates was investigated. It was found that there was
consistency with tax planning by managers of both open-end and closed-end mutual fund and mutual
fund managers may not tax plan like individuals because fund managers have incentives to consider
the tax liability of both current and potential investors. Agapova (2011) has examined the cross-
sectional differences among money market mutual funds (MMMFs) in the context of sponsoring fund
families and found that flows to family non-MMMFs are negatively related to family MMMF flows,
and family non-MMMF cash flow volatility is positively related to family MMMF cash flow volatility.
The study has further suggested that fund family investors also use family MMMFs as cash centres by
utilizing free asset transfers within the family. Application of these strategies can , translate into
significant benefits for the fund family and it’s invested. Badrinath S.G & Gubellini S (2011) have
evaluated the return performance of long-short, market-neutral and bear mutual funds using multi-
factor models and a conditional CAPM (Capital Assets Pricing Model) and revealed that Market-
neutral funds provide a down market hedge, but bear funds do not generate the returns that investors
hope for. Cao, Ghysels & Hatheway (2011) have investigated two types of funds that make more
extensive use of derivatives, global funds and specialized domestic equity fund and found that risk and
return characteristics of these two groups of funds are significantly different from funds employing
derivatives sparingly or not at all and that Fund managers time their use of derivatives in response to
past returns. Agarwal. et.al (2009) have examined the performance of these funds relative to hedge
funds and traditional mutual funds and found that despite using similar trading strategies, hedged
mutual funds underperform hedge funds.
Bazo Javier & Pablo (2009) have examined the market for equity mutual funds and found that Funds
with worse before-fee performance charge higher fees and that better fund governance may bring fees
more in line with performance. Cao, Ghysels & Hatheway (2011) have investigated two types of funds
that make more extensive use of derivatives, global funds and specialized domestic equity fund and
found that risk and return characteristics of these two groups of funds are significantly different from
funds employing derivatives sparingly or not at all and that fund managers time their use of derivatives
in response to past returns.
De Bond & Thaler (1985) while investigating the possible psychological basis for investor
behavior, argue that mean reversion in stock prices is an evidence of investor over reaction where
investors over emphasize recent firm performance in forming future expectations of the investment.
Gupta (1994) made a household investor survey with the objective to provide data on the
investor preferences on MF’s and other financial assets. The findings of the study were more
appropriate, at that time, to the policy makers and mutual funds to design the financial products for the
future.
Madhusudhan Vs Jambodekar (1996) conducted a study to assess the awareness of MFs among
investors, to identify the information sources influencing the buying decision and the factors
influencing the choice of a particular fund. The study reveals among other things that Income Schemes
and Open Ended Schemes are more preferred than Growth Schemes and Close Ended Schemes during
the then prevalent market conditions. Investors look for safety of Principal, Liquidity and Capital
appreciation in the order of importance; Newspapers and Magazines are the first source of information
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through which investors get to know about MFs/Schemes and investor service is a major
differentiating factor in the selection of Mutual Fund Schemes.
Syama Sunder (1998) conducted a survey to get an insight into the mutual fund operations of
private institutions with special reference to Kothari Pioneer. The survey revealed that awareness
about Mutual Fund concept was poor during that time in small cities. Agents play a vital role in
spreading the Mutual Fund culture; open-end schemes were much preferred then; age and income are
the two important determinants in the selection of the fund/scheme; brand image and return are the
prime considerations while investing in any Mutual Fund.
Ippolito (1992) says that fund/scheme selection by investors is based on past performance of
the funds and money flows into winning funds more rapidly than they flow out of losing funds.
Shanmugham (2000) conducted a survey of 201 individual investors to study the information
sourcing by investors, their perceptions of various investment strategy dimensions and the factors
motivating share investment decisions, and reports that among the various factors, psychological and
sociological factors dominated the economic factors in share investment decisions.
Goetzman (1997) states that there is evidence that investor psychology affect Fund/scheme
selection and switching.
Anjan Chakarabarti and Harsh Rungta (2000) stressed the importance of brand effect in
determining the competitive position of the AMCs. Their study reveals that brand image factor, though
cannot be easily captured by computable performance measures, influences the investor’s perception
and hence his fund/scheme selection.
Shankar (1996) points out that the Indian investors do view Mutual Funds as commodity
products and AMCs, to capture the market should follow the consumer product distribution model.
Since 1986, a number of articles and brief essays have been published in financial dailies, periodicals,
professional and research journals, explaining the basic concept of Mutual Funds and highlight their
importance in the Indian capital market environment. They touch upon varied aspects like Regulation
of Mutual Funds, Investor expectations, Investor protection, Trend in growth of Mutual Funds and
some are critical views on the performance and functioning of Mutual Funds. A few among them are
Vidyashankar (1990), Sarkar (1991), Agarwal (1992), Sadhak (1991), Sharma C. Lall (1991), Samir
K. Barua (1991), Sandeep Bamzai (2001), Atmaramani (1995), Atmaramani (1996), Subramanyam
(1999), Krishnan (1999), Ajay Srinivsasn (1999). Segmentation of investors on the basis of their
characteristics was highlighted by Raja Rajan (1997). Investor’s characteristics on the basis of their
investment size Raja Rajan (1997), and the relationship between stage in life cycle of the investors and
their investment pattern was studied by Raja Rajan (1998).
Akhilesh Mishra(2008) has done a study on the topic “Mutual Fund as a Better Investment
Plan” and states that many of the people have the fear of Mutual Funds. “They think their money will
not be secure in Mutual funds,” says Mishra. He also says that the investors need the knowledge of
Mutual Funds and its related terms. Many of the people have not invested in Mutual funds due to lack
of awareness although they have money to invest, he adds. Mishra also points out that “Brand” plays
an important role for the investment. Only people who invest directly know well about the Mutual
fund and its operations as observed.

From the above review it can be inferred that Mutual Fund has gained the attention of various
segments of the society, like academicians, industrialists, financial intermediaries, investors and
regulators for varied reasons and deserves an in depth study.

SCOPE OF THE STUDY:

A big boom has been witnessed in Mutual Fund Industry in recent times. A large number of new
players have entered the market and trying to gain market share in this rapidly improving market. The
research is carried at Silk City Securities (SCS) of Berhampur town in Odisha. The study will help to

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know the preferences of the customers, to choose company, portfolio, mode of investment, and option
for getting return and so on they prefer.

OBJECTIVES OF THE STUDY :

The main aim of the study is to focus on the preferences of the investors for Investment in
Mutual Funds. The objectives are stated hereunder:
1. To know why one has invested or not invested in Mutual fund ;
2. To find out the investors Preferences for Asset Management Company;
3. To understand the Preferences for the portfolios ;
4. To find out the most preferred channel ;
5. To find out what should be done to boost Mutual Fund Industry.

HYPOTHESES OF THE STUDY:

The specific hypotheses are as follows:
H1: Educational Qualifications does not have any effect on the composition of no of investors.
H2: Occupations of investors does not play a role in making investments.
H3: Family income and number of investors are no way related.
H4: People do not try to access any source of information before investing in a mutual fund.
H5: People are aware of the reason for not investing in any mutual funds.
H6: People seek advice from banks as sole channel for investment through mutual funds.
H7: There is no preference of options to get the returns from the mutual fund by the investors.

RESEARCH METHODOLOGY OF THE STUDY :

The study was conducted with the definitions of seven hypotheses as follows. Then the data
were collected through various data sources as described. Simple Mathematical and statistical
tools like percentages were being used to analyse and interpretate. Findings and suggestions
were put forth at the end of the study.
DATA SOURCES:
Both primary and secondary sources were being used for data collection. Structured Questionnaire
was administered for primary data collection while unstructured interviews with the executives,
company websites, journals and news papers formed the sources for the collection of the secondary
data.
SAMPLING:
Sampling Procedure:
The study is based on a judgment sample of customers/visitors of Silk City Securities,
Berhampur, irrespective of the fact that they are investors or not or availing the services or not. It was
also collected through personal visits to persons, by formal and informal talks and through filling up
the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool.
Sample size:
The sample size of the present research work is limited to 200 people only. Out of which only 120
people are aware of mutual funds and had invested in Mutual Fund. Other 80 people were neither
aware nor have invested in Mutual Fund.

LIMITATION OF THE STUDY:

The following are the limitations of the study:
 Some of the persons were not so responsive.
 Possibility of error in data collection because many of investors may have not given actual
answers to the questionnaire.

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 Sample size is limited to 200 visitors of silk City Securities, Berhampur, out of these only 120
are aware of mutual funds and had invested in Mutual Fund and the study is confined to limited
areas of the Town.
 Some respondents were reluctant to divulge personal information which can affect the validity of
all responses.

DATA ANALYSIS & INTERPRETATION OF DATA:

Table-1 Age wise distribution of the Investors

Age Group <30 31-35 36-40 41-45 46-50 >50

No. of 12 18 30 24 20 16
Investors

Source : Primary Data

From Table 1 it is observed that chart out of 120 Mutual Fund investors of Berhampur the most
number of investors are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the
age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

Table 2 Educational Qualification of investors

Educational Qualification Number of

Investors
Graduate/ Post Graduate 88

Under Graduate 25

Others 7

Total 120

Source: Primary Data

From Table 2 it is observed that out of 120 Mutual Fund investors 71% of the investors in Berhampur
are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under High School
Certificate-HSC i.e. 10th Class/Grade).
Table-3 Occupation of the investors

Occupation No. of Investors

Govt. Service 35
Pvt. Service 45
Business 30
.
Agriculture 4
Others 6

Source: Primary Data

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From Table 3 it is observed that out of 120 investors, 38% are Pvt. Employees, 25% are Businessman,
29% are Govt. Employees, 3% are in Agriculture and 5% are in others.

Table-4 Monthly Family Income of the Investors

Income Group No. of Investors

<=10,000 5
10,001-15,000 12
15,001-20,000 28
20,001-30,000 43
>30,000 32

Source : Primary Data

From Table 4 it is observed that out of 120 investors, 36% investors that is the maximum investors are
in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the
monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly
income group of below Rs. 10,000.

Table 5 Investors invested in different kind of investments

Kind of Investments No. of Respondents

Saving A/C 117
Fixed deposits 89
Insurance 91
Mutual Fund 72
Post office (NSC) 45
Shares/Debentures 30
Gold/Silver 18
Real Estate 39

Source : Primary Data

From the Table 5 it can be inferred that out of 120 people, 97.5% people have invested in Saving A/c,
76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares
or Debentures, 15% in Gold/Silver and 32.5% in Real Estate. Further, for different combinations of
investment options people have chosen Savings A/c as the common basis for almost all other
combinations.
Table 6 Preference of factors while investing

Factors (a) Liquidity (b) Low (c) High (d) Trust

Risk Return

No. of 24 36 38 22
Respondents

Source : Primary Data

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From Table 6 it is observed that out of 120 People, 32% People prefer to invest where
there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy
Liquidity and 18% prefer Trust.

Table 7 Awareness about Mutual Fund and its Operations

Response Yes No
No. of Respondents 81 39

Source : Primary Data

From the table 7 it is inferred that 67% People are aware of Mutual Fund and its
operations and 33% are not aware of Mutual Fund and its operations.
Table 8 Source of information for customers about Mutual Fund

Source of information No. of Respondents

Advertisement 16
Peer Group 22
Bank 27
Financial Advisors 55

Source : Primary Data

From the Table 8 it can be inferred that the Financial Advisor is the most important source of
information about Mutual Fund. Out of 120 Respondents, 46% know about Mutual fund Through
Financial Advisor, 22% through Bank, 18.5% through Peer Group and 13.5% through Advertisement.
Table 9 Reason for not invested in Mutual Fund
Reason No. of Respondents

Not Aware 97
Higher Risk 8
Not any Specific Reason 15
Source : Primary Data
Further from table 9 it is observed that out of 120 people, who have not invested in Mutual Fund,
81% are not aware of the reasons for not investment, 6.5% said there is likely to be higher risk
and 12.5% do not have any specific reason.

Table 10 Investors invested in different Assets Management Co. (AMC)

Name of AMC No. of Investors

SBIMF 55
UTI 75
HDFC 30
Reliance 75
ICICI Prudential 56
Kotak 45
Others 70

Source : Primary Data

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From table 10 it is observed that in Berhampur, most of the Investors preferred UTI and Reliance
Mutual Fund. Out of 120 Investors 62.5% have invested in each of them, only 46% have invested in
SBIMF, 47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC. Further, out of different asset
management companies (AMCs) people have opted for more than one AMC while making investment
through mutual funds
Table 11 Reason for invested in SBIMF
Reason No. of Respondents
Associated with SBI 76
Better Return 11
Agents Advice 33

Source: Primary Data

From table 11 it is observed that out of 120 investors of SBIMF 64% have invested because of its
association with Brand SBI, 27% invested on Agent’s Advice, 9% invested because of better return.
Table 12 Reason for not invested in SBIMF
Reason No. of Respondents
Not Aware 46
Less Return 33
Agent’s Advice 41

Source: Primary Data

From table 12 it is observed that out of 120 people who have not invested in SBIMF, 38% were not
aware with SBIMF, 28% do not have invested due to less return and 34% due to Agent’s Advice.
Table 13 Preference of Investors for future investment in Mutual Fund
Name of AMC No. of Investors
SBIMF 76
UTI 45
HDFC 35
Reliance 82
ICICI Prudential 80
Kotak 60
Others 75
Source : Primary Data
From table 13 it is observed that out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI
Prudential, 63% in SBIMF, 62.5% in others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual
Fund. Further, People select more than one AMC for future investment.

Table 14 Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial Bank AMC
Advisor

No. of 72 18 30
Respondents

Source : Primary Data

From table 14 it is observed that Out of 120 Investors 60% preferred to invest through Financial
Advisors, 25% through AMC and 15% through Bank.

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Table 15 Mode of Investment Preferred by the Investors
Mode of Investment One time Investment Systematic Investment Plan
(SIP)
No. of Respondents 78 42

Source : Primary Data

From table 15 it is observed that out of 120 Investors 65% preferred One time Investment and 35 %
Preferred through Systematic Investment Plan.
Table 16 Preferred Portfolios by the Investors
Portfolio No. of Investors
Equity 56
Debt 20
Balanced 44

Source : Primary Data

From table 16 it is observed that 46% preferred Equity Portfolio, 37% preferred Balance and 17%
preferred Debt portfolio.
Table 17 Option for getting Return Preferred by the Investors
Option Dividend Payout Dividend Growth
Reinvestment

No. of Respondents 25 10 85

Source: Primary Data

From table 17 it is observed that 71% preferred Growth Option, 21% preferred Dividend Payout and
8% preferred Dividend Reinvestment Option.
Table 18 Preference of Investors whether to invest in Sectoral Funds
Response No. of Respondents
Yes 25
No 95

Source : Primary Data

From table 18 it is observed that Out of 120 investors, 79% investors do not prefer to invest in
Sectoral Fund because there is maximum risk. Further, because the holdings of this type of fund are in
the same industry, there is an inherent lack of diversification associated with these funds and even
increases the risk. It is on this basis that only 21% of the investors prefer to invest in Sectoral Fund.

TESTING OF HYPOTHESES:
H1: Educational Qualifications does not have any effect on the composition of no of investors

From Table 2 it is observed that out of 120 Mutual Fund investors 71% of the investors in Berhampur
are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under High School
Certificate-HSC i.e. 10th Class/Grade).

As 71% of the investors are at least graduates, hence it is proved that, educational qualification
and investors composition are very much affected. Hence the stated hypothesis i.e. H 1 is tested.

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H2: Occupations of investors does not play a role in making investments
From Table 3 it is observed that out of 120 investors, 38% are Pvt. Employees, 25% are Businessman,
29% are Govt. Employees, 3% are in Agriculture and 5% are in others.
Since 38% of investors fall under the category of private employee and these are the largest
occupation category among all the remaining categories of investors, it is proved that occupation has a
role in the number of investors. Thus, the hypothesis i.e. H 2 is tested.

H3: Family income and number of investors are no way related

From Table 4 it is observed that out of 120 investors, 36% investors that is the maximum investors are
in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the
monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly
income group of below Rs. 10,000.
Respondents in the family income group of 20,000/- to 30,000/- are the highest in number and
hence in percentage too confirming that family income affects the number of investors. Thus, the
hypothesis i.e. H3 is tested.

H4: People do not try to access any source of information before investing in a mutual fund
From the Table 8 it can be inferred that the Financial Advisor is the most important source of
information about Mutual Fund. Out of 120 Respondents, 46% know about Mutual fund Through
Financial Advisor, 22% through Bank, 18.5% through Peer Group and 13.5% through Advertisement.
Hence it has been found that, people definitely collect information and also consult various
sources before making any investment in any mutual fund. Out of the four major sources people
consult financial advisors the most prior to taking any investment decision. Thus Hypothesis H4 is
tested.

H5: People are aware of the reason for not investing in any mutual funds
Further from table 9 it is observed that out of 120 people, who have not invested in Mutual Fund,
81% are not aware of the reasons of non-investment, 6.5% said there is likely to be higher risk
and 12.5% do not have any specific reason.
It is surprising to note that as 81% of people are not even aware of mutual funds, the question of
reason behind non-investment does not arise. Thus the Hypothesis H5 is tested.

H6: People seek advice from banks as sole channel for investment through mutual funds
From table 14 it is observed that Out of 120 Investors 60% preferred to invest through Financial
Advisors, 25% through AMC and 15% through Bank.
As majority of the investors seek the advice from the financial advisors, the common assumption that
people seek advice from banks for investment through mutual funds does not hold good. Hence the
Hypothesis H6 is tested.

H7: There is no preference of options to get the returns from the mutual fund by the investors
From table 17 it is observed that 71% preferred Growth Option, 21% preferred Dividend Payout and
8% preferred Dividend Reinvestment Option.
People prefer growth option to dividend payout and dividend reinvestment options. Hence Hypothesis
H7 is tested.

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MAJOR FINDINGS OF THE STUDY:
The following are the major findings of the research study:
 In Berhampur in the Age Group of 36-40 years were more in numbers. The second most
Investors were in the age group of 41-45 years and the least were in the age group of below 30
years.
 In Berhampur most of the Investors were Graduate or Post Graduate and below HSC(under
High School Certificate-HSC i.e. 10th Class/Grade) there were very few in numbers.
 In Occupation group most of the Investors were Govt. employees, the second most Investors
were Private employees and the least were associated with Agriculture.
 In family Income group, between Rs. 20,001- 30,000 were more in numbers, the second most
were in the Income group of more than Rs.30,000 and the least were in the group of below Rs.
10,000.
 About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only
60% Respondents invested in Mutual fund.
 Mostly Respondents preferred High Return while investment, the second most preferred Low
Risk then liquidity and the least preferred Trust.
 Only 67% Respondents were aware about Mutual fund and its operations and 33% were not
aware of the mutual fund and its operations.
 Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not invest in
Mutual fund.
 Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not any specific
reason for not invested in Mutual Fund and 6% told there is likely to be higher risk in Mutual
Fund.
 Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI Prudential has also
good Brand Position among investors, SBIMF (State Bank of India Mutual Fund) places after
ICICI Prudential according to the Respondents.
 Out of 55 investors of SBIMF 64% have invested due to its association with the Brand SBI,
27% Invested because of Advisor’s Advice and 9% due to better return.
 Most of the investors who did not invested in SBIMF due to not Aware of SBIMF, the
second most due to Agent’s advice and rest due to Less Return.
 For Future investment the maximum Respondents preferred Reliance Mutual Fund, the
second most preferred ICICI Prudential, SBIMF has been preferred after them.
 60% Investors preferred to Invest through Financial Advisors, 25% through AMC
(means Direct Investment) and 15% through Bank.
 65% preferred One Time Investment and 35% preferred SIP out of both type of Mode
of Investment.
 The most preferred Portfolio was Equity, the second most was Balance (mixture of both
equity and debt), and the least preferred Portfolio was Debt portfolio.
 Maximum Number of Investors Preferred Growth Option for returns, the second most
preferred Dividend Payout and then Dividend Reinvestment.
 Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to invest
in Sectoral Fund.

SUGGESTIONS AND RECOMMENDATIONS:

Based on the above major findings of the study, the following suggestions and recommendations
are offered for greater level of customers preference of the investors for Investment in Mutual
Funds.
 Mutual Fund Company needs to give the training of the Individual Financial Advisors about the
Fund/Scheme and its objective, because they are the main source to influence the investors.
 Before making any investment Financial Advisors should first enquire about the risk tolerance of
the investors/customers, their need and time (how long they want to invest). By considering these
three things they can take the customers into consideration.
 Younger people aged fewer than 35 will be a key new customer group into the future, so making
greater efforts with younger customers who show some interest in investing should pay off.
 Customers with graduate level education are easier to sell to and there is a large untapped market
there. To succeed however, advisors must provide sound advice and high quality.

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 Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management
Companies very recently in the industry. SIP is easy for monthly salaried person as it provides the
facility of investing through equated monthly installments (EMI). Though most of the prospects
and potential investors are not aware about the SIP. There is a large scope for the companies to tap
the salaried persons.
 As there is no comprehensive law to regulate the mutual fund in India, uniform coordinated
regulations by a single agency should be formed which would provide the shelter to the investors.
 As the investors are not willing to invest in mutual fund unless a minimum return is assured, it is
very essential to educate the investors about mutual fund that they are market instruments and
associated with market risk hence the guarantee of assured return can’t be offered.
 Private sector may also be encouraged to float mutual funds, for creating intensifying competition
in the industry as it has been done incase of Banks.
 Due to operations of many mutual funds, there will be need for appropriate guidelines for self-
regulation in respect of publicity/advertisement and inter- scheme transactions within each mutual
fund. Care should be taken not to promulgate misleading information to the public in general and
unit holders in specific.
 The growth of mutual fund tends to increase the shareholdings in good companies, give raise to
the fear of destabilising among industrial group, hence introduction of voting shares and lowering
the debt-equity ratio help to remove these apprehension.
 Additional clarity is required regarding the roles and responsibilities together with duties and
rights of Trustees, Sponsors, Fund Managers, Lead Managers, Custodians and Unit Holders. A
separate legal framework in the lines of SEBI is the need of the hour to protect the interest of the
investors.
 Some steps should be taken to make fair and truthful disclosures of information to the investors, so
that subscribers know what risk they will have by investing in fund. Infrastructure bottlenecks will
have to be removed and banking and postal network have to be taken place for growth of mutual
funds.
 Mutual funds should formulate their working policy with the use of modern technology like
computer and tele-communications to render service to the investors. Mutual funds are made by
investors and investor’s interest ought to be paramount by setting standard of behaviours and
efficiency through self-regulations and professionalism.
 Whatever may be the conditions and regulatory framework, mutual fund is always subject to
market risk and investors in their own interest must and should read the offer document carefully
before deciding upon any investment through mutual funds.

CONCLUSION:
Financial planning is an exercise aimed at identifying all financial needs of an individual, translating
the needs into monetarily measurable goals at different times in the future, and planning the financial
investments that will allow the individual to provide for and satisfy his future financial needs and
achieve his/her life’s goals.
Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian
Stock Market and also the psyche of the small investors. This study has made an attempt to understand
the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC),
Products, and Channels etc. It is observed that many people have fear of Mutual Fund. They think
their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its
related terms. Many of people do not have invested in mutual fund due to lack of awareness although
they have money to invest. As the awareness and income is growing the number of mutual fund
investors are also growing. “Brand” plays important role for the investment. People invest in those
Companies where they have faith or they are well known with them. There are many AMCs in
Berhampur but only some are performing well due to Brand awareness. Some AMCs are not
performing well although some of the schemes of them are giving good return because of not
awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. Distribution channels are also
important for the investment in mutual fund. Financial Advisors are the most preferred channel for the
investment in mutual fund. They can change investors’ mind from one investment option to others.
Many of investors directly invest their money through AMC because they do not have to pay entry
load. Only those people invest directly who know well about mutual fund and its operations and those
have time. Thus the need of the hour for all the domestic mutual fund companies is to expand their

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investor base which can be possible, only when the companies are determined to understand the value
drivers and thus lure retail investors to invest in mutual fund.

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Websites:
1. www.mutualfund.india.com
2. www.silkcitysecurities.com
3. www.principalindia.com
4. www.sebi. gov. in
5. www.amfiindia.com
6. www.sbimf.com

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