A

SUMMER INTERNSHIP PROJECT REPORT

ON

“INVESTORS PERCEPTION TOWARDS MUTUAL FUND ”

For the partial fulfilment of the requirement

For the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED TO: SUBMITTED BY:

DR. JASPREET KAUR MD SALAMATULLAH AARFI

MANGALMAY INSTITUTE OF MANAGEMENT & TECHNOLOGY

GREATER NOIDA (U.P.)

Dr. A.P.J. ABDUL KALAM TECHNICAL UNIVERSITY,

LUCKNOW
 DECLARATION

I undersigned, hereby declare that the project titled “INVESTORS PERCEPTION

TOWARDS MUTUAL FUND” submitted in partial fulfilment for the award of
Degree of Master of Business Administration of Dr. A.P.J. Abdul Kalam
Technological University is a bonafide record of work done by me under the guidance
of Dr. Jaspreet Kaur, MANAGEMENT DEPARTMENT & Mangalmay Institute of
Management and Technology. This report has not previously formed the basis for the
award of any degree, diploma, or similar title of any University.

Place: Greater Noida MD SALAMATULLAH AARFI

Date: (Student Signature)

 Certificate

This is to certify that Mr. MD SALAMATULLAH AARFI, University Roll No. 1815270058 is a
regular student of MBA 2nd year, full time degree course at out institute. His/her Project Report
work titled, ‘INVESTORS PERCEPTION TOWARDS MUTUAL FUND ” submitted
as part of the curriculum for the award of the degree of Master of Business Administration from Dr.
A.P.J. ABDUL KALAM TECHNICAL UNIVERSITY, LUCKNOW, is an original work done by
him/her. This work has not been submitted earlier in any form partially or fully to this or any other
Institute/University for any degree or diploma.

Dr. Jaspreet Kaur Dr. Amit Gupta

(GUIDE) (HEAD OF DEPARTMENT)

 ACKNOWLEDGEMENT

“Acknowledgement is an art, one can write glib stanzas without meaning a

word, and on the other hand one can make a simple expression of gratitude”

I take the opportunity to express my gratitude to all of them who in some or

other way helped me to accomplish this challenging project. No amount of
written expression is sufficient to show my deepest sense of gratitude to them.

I am extremely thankful and pay my gratitude to our Prashant Kumar and my

faculty guide Dr. Jaspreet Kaur, Mangalmay Institute of Management and
Technology for their valuable guidance and support on completion of this
project.

I am very thankful to Mr. MOHD ARSHAL (Asst. Manager) for their

everlasting support and guidance on the ground of which I have acquired a new
field of knowledge.

A special appreciative “Thank you” in accorded to all staff of NOIDA for their
positive support.

I also acknowledge with a deep sense of reverence, my gratitude towards my

parents and member of my family, who has always supported me morally as
well as economically.

At last but not least gratitude goes to all of my friends who directly or indirectly
helped me to complete this project report.

MD SALAMATULLAH AARFI
 TABLE OF CONTENTS

CHAPTER- 1: INTRODUCATION
1.1 MUTUAL FUND
1.1.1 ORIGIN OF MUTUAL FUND IN INDIA
1.1.2 GROWTH OF MUTUAL FUND
1.1.3 INVESTORS EARN FROM A MUTUAL FUND IN THREE WAYS
1.1.4 TYPES OF MUTUAL FUND SCHEME
1.1.5 ADVANTAGE OF MUTUAL FUND
1.1.6 DISADVANTAGE OF MUTUAL FUND

1.2 SCOPE OF THE STUDY

1.3 LIMITATIONS OF MUTUAL FUNDS
1.4 INTRODUCING TO THE PROBLEM
1.5 NEED OF THE STUDY
1.6 OBJECTIVE OF THE STUDY

CHAPTER 2: LITERATURE REVIEW

2.1 Studies related to Mutual Funds Perceptions

CHAPTER- 3: RESEARCH METHODOLOGY

3.1 Methodology of Work
3.1.1 EXPLORATORY RESEARCH
3.1.2 DESCRIPTIVE RESEARCH
3.1.3 CAUSATIVE RESEARCH
3.1.4 DATA SOURCE
3.1.5 SAMPLE
3.1.6 SAMPLING METHOD
3.2 LIMITATIONS
CHAPTER- 4: DATA ANALYSIS AND INTERPRETATION
4.1 Data Analysis
4.1.1 Objective 1
4.2.2 Objective 2

CHAPTER- 5: FINDINGS

CHAPTER- 6: RECOMMENDATIONS

CHAPTER 7: CONCLUSION

BIBLIOGRAPHY
Appendix
 CHAPTER 1
INTRODUCTION

Mutual funds are recognized as a mechanism of pooling together the investment of

unsophisticated investors and turn in the hands of professionally managed fund managers for
consistent return along-with capital appreciation. Money collected in this process is then
invested in capital market instrument such as shares, debentures and other securities. Finally,
unit holders in proportion of units owned by them share the income earned through these
investments and capital appreciation. Mutual funds put forward a way out to investors to
approach most schemes and get well-diversified portfolio because investors with small
savings neither have sufficient expertise nor have access to required diversification.
Mutual funds have already entered into a world of exciting innovative products. These
products are now tailor made to suit specific needs of investors. Intensified competition and
involvement of private players in the race of mutual funds have forced professional managers
to bring innovation in mutual funds. Thus, mutual funds industry has moved from offering a
handful of schemes like equity, debt or balanced funds to liquid, money market, sector
specific funds, index funds and gilt edged funds. Beside this recently mutual funds have also
introduced some special specific funds like children plans, education plans, insurance linked
plans, and exchange traded funds. The result is that over the time Indian investors have
started shifting towards mutual funds instead of traditional financial avenues.
Diversification in mutual funds is coming up with many new faces and as a result Indian
mutual fund industry has been growing exceptionally well on the back of country’s booming
economy but still further mutual funds need to create more lucrative solutions to suit
investor’s expectations. The active involvement of mutual fund in economic development
can be witnessed from dominant presence of mutual funds in worldwide capital and money
market. Although mutual funds industry is responding very fastly to dynamism in investor’s
perception towards rewards still they are continuously following this race in their endeavor to
differentiate their products responding to sudden changes in the economy. These acts of
innovation include both invention and diffusion that persist to address information
asymmetries.
Mutual funds as blessed with professional management use their diligent skills for efficient
resource allocation by making markets more efficient, bringing transparency and foremost
important risk management. Automated approaches designed by new technology and data
mining is helping AMC’s of mutual funds in strategic planning and investment decision
making by uncovering the hidden patterns and predict future trends and behavior in financial
markets. Intensive global competition and ICT enabled tools are promoting more demanding
investors every day. To satisfy the needs of investors’ mutual funds are designing more
lucrative and innovative tools considering the appetite for risk taking of individual investors.
While designing these innovative fund scheme AMCs mainly consider for risk return trade
off and after completely evaluating the various securities on various risk parameters new
fund scheme is launched that can satisfy the quest of every investor to maximize the returns.
Although risk and return are the two prime concerns for any mutual fund investment but
investor’s also go for sale charges, fund manager’s reputation, fund history, management
fees, clarity in disclosure, Recommendation from media. So, whether it is a winner’s game or
loser’s game the trick is to access the level of risk that investor wishes to assume and make
certain that collection of assets fulfill their risk expectations. A successful investor is one
who strives to achieve not less than rate of return consistent with risk assumed. Thus, it
becomes imperative for the Mutual funds AMCs to judge the presence of rationality in
investment behavior.

Mutual funds are recognized as a mechanism of pooling together the investment of

unsophisticated investors and turn in the hands of professionally managed fund managers for
consistent return along-with capital appreciation. Money collected in this process is then
invested in capital market instrument such as shares, debentures and other securities. Finally,
unit holders in proportion of units owned by them share the income earned through these
investments and capital appreciation. Mutual funds put forward a way out to investors to
approach most schemes and get well-diversified portfolio because investors with small
savings neither have sufficient expertise nor have access to required diversification.
Mutual funds have already entered into a world of exciting innovative products. These
products are now tailor made to suit specific needs of investors. Intensified competition and
involvement of private players in the race of mutual funds have forced professional managers
to bring innovation in mutual funds. Thus, mutual funds industry has moved from offering a
handful of schemes like equity, debt or balanced funds to liquid, money market, sector
specific funds, index funds and gilt edged funds. Beside this recently mutual funds have also
introduced some special specific funds like children plans, education plans, insurance linked
plans, and exchange traded funds. The result is that over the time Indian investors have
started shifting towards mutual funds instead of traditional financial avenues.
Diversification in mutual funds is coming up with many new faces and as a result Indian
mutual fund industry has been
growing exceptionally well on the back of country’s booming economy but still further
mutual funds need to create
More lucrative solutions to suit investor’s expectations. The active involvement of mutual
fund in economic development can be witnessed from dominant presence of mutual funds in
worldwide capital and money market. Although mutual funds industry is responding very
fast to dynamism in investor’s perception towards rewards still they are continuously
following this race in their endeavor to differentiate their products responding to sudden
changes in the economy. These acts of innovation include both invention and diffusion that
persist to address information asymmetries.
Mutual funds as blessed with professional management use their diligent skills for efficient
resource allocation by making markets more efficient, bringing transparency and foremost
important risk management. Automated approaches designed by new technology and data
mining is helping AMC’s of mutual funds in strategic planning and investment decision
making by uncovering the hidden patterns and predict future trends and behavior in financial
markets. Intensive global competition and ICT enabled tools are promoting more demanding
investors every day. To satisfy the needs of investors’ mutual funds are designing more
lucrative and innovative tools considering the appetite for risk taking of individual investors.
While designing these innovative fund scheme AMCs mainly consider for risk return trade
off and after completely evaluating the various securities on various risk parameters new
fund scheme is launched that can satisfy the quest of every investor to maximize the returns.
Although risk and return are the two prime concerns for any mutual fund investment but
investor’s also go for sale charges, fund manager’s reputation, fund history, management
fees, clarity in disclosure, Recommendation from media. So, whether it is a winner’s game or
loser’s game the trick is to access the level of risk that investor wishes to assume and make
certain that collection of assets fulfill their risk expectations. A successful investor is one
who strives to achieve not less than rate of return consistent with risk assumed. Thus, it
becomes imperative for the Mutual funds AMCs to judge the presence of rationality in
investment behavior.
Indian Capital Market has been linked to the International Financial Market and the
Standard has been increased in terms of efficiency and transparency through
Dematerialization of the Indian Capital Market in terms of handling and dealing in securities
in paper mode , the main objective of this study is to analyze trends in growth of
dematerialization process was not keeping pace with the Indian Capital Market due to un
popularity of demat lack of information , and short direction after the inception of the
scheme or the earliest time taken to evaluate its popularity. My project is Base on study about
dematerialization in the Indian Capital Market .The project covers issues related to
depository .Project start with objective , Methodology ,and limitation of project than it
highlight company profile with product details, than it explains capital market and depository
part of this capital market . This project cover trading in equity of capital market, settlement
of trade in depository, comparative analysis of structure and services offers in the same
industry , analysis of structure and services offers in the same industry, analysis of
dematerialization , issues related to demat e.g. opening account , nomination
dematerialization ,transmission ,freezing defreezing.

(DEPOSITORY SHARE CAPITAL

DEPOSITORY
PARTICIPANT) MARKET MARKET

1.1 MUTUAL FUND:

A 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 invested by the fund manager in different types of
securities depending upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned through these investments and
the capital appreciations realized by the scheme 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
portfolio at a relatively low cost. The small savings of all the investors are put together to
increase the buying power and hire a professional manager to invest and monitor the money.
Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual
Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

1.1.1 ORIGIN OF MUTUAL FUND IN INDIA:

The history of mutual funds dates backs to 19th century when it was introduced in Europe, in
particular, Great Britain. Robert Fleming set up in 1968 the first investment trust called
Foreign and Colonial Investment Trust which promised to manage the finances of the
moneyed classes of Scotland by spreading the investment over a number of different stocks.
This investment trust and other investments trusts which were subsequently set up in Britain
and the US, resembled today’s close – ended mutual funds. The first mutual in the U.S.,
Massachustsettes investor’s Trust, was set up in March 1924. This was the open – ended
mutual fund. The stock market crash in 1929, the Great Depression, and the outbreak of the
Second World War slackened the pace of mutual fund industry, innovations in products and
services increased the popularity of mutual funds in the 1990s and 1960s. The first
international stock mutual fund was introduced in the U.S. in 1940. In 1976, the first tax –
exempt municipal bond funds emerged and in 1979, the first money market mutual funds
were created. The latest additions are the international bond fund in 1986 and arm funds in
1990. This industry witnessed substantial growth in the eighties and nineties when there was
a significant increase in the number of mutual funds, schemes, assets, and shareholders. In
the US, the mutual fund industry registered a ten – fold growth the eighties. Since 1996,
mutual fund assets have exceeded bank deposits. The mutual fund industry and the banking
industry virtually rival each other in size.

1.1.2 GROWTH OF MUTUAL FUNDS IN INDIA :

By the year 1970, the industry had 361 Funds with combined total assets of 47.6 billion
dollars in 10.7 million shareholder’s account. However, from 1970 and on wards rising
interest rates, stock market stagnation, inflation and investors some other reservations about
the profitability of Mutual Funds, Adversely affected the growth of mutual funds. Hence
Mutual Funds realized the need to introduce new types of Mutual Funds, which were in tune
with changing requirements and interests of the investors. The 1970’s saw a new kind of fund
innovation; Funds with no sales commissions called “ no load “ funds. The largest and most
successful no load family of funds is the Vanguard Funds, created by John Bogle in 1977. In
the series of new product, the First Money Market Mutual Fund (MMMF) i.e., the Reserve
Fund" was started in 1971.This new concept signaled a dramatic change in Mutual Fund
Industry. Most importantly, it attracted new small and individual investors to mutual fund
concept and sparked a surge of creativity in the industry.
MUTUAL FUND FLOW CHART
1.1.3 INVESTORS EARN FROM A MUTUAL FUND IN THREE WAYS:

1. Income is earned from dividends declared by mutual fund schemes from time to
2. If the fund sells securities that have increased in price, the fund has a capital gain.
This is reflected in the price of each unit. When investors sell these units at prices
higher than their purchase price, they stand to make a gain.
3. If fund holdings increase in price but are not sold by the fund manager, the fund’s
unit price increases. You can then sell your mutual fund units for a profit. This is
tantamount to a valuation gain.

Though still at a nascent stage, Indian MF industry offers a plethora of schemes and serves
broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt
and balanced funds. There are also funds meant exclusively for young and old, small and
large investors. Moreover, the setup of a legal structure, which has enough teeth to safeguard
investors' interest, ensures that the investors are not cheated out of their hard- earned money.
All in all, benefits provided by them cut across the boundaries of investor category and thus
create for them, a universal appeal.
Investors of all categories could choose to invest on their own in multiple options but opt for
mutual funds for the sole reason that all benefits come in a package.
1.1.4 TYPES OF MUTUAL FUND SCHEME

Mutual fund schemes may be classified on the basis of its structure and its investment
objective.

A. BY STRUCTURE

1. Open-end Funds
An open-end fund is one that is available for subscription all through the year. These
do not have a fixed maturity. Investors can conveniently buy and sell units at Net
Asset Value ("NAV") related prices. The key feature of open-end schemes is
liquidity.

2. Closed-end Funds
A closed-end fund has a stipulated maturity period which generally ranging
from 3 to 15 years. The fund is open for subscription only during a specified
period. Investors can invest in the scheme at the time of the initial public issue
and thereafter they can buy or sell the units of the scheme on the stock
exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related prices. SEBI
Regulations stipulate that at least one of the two exit routes is provided to the
investor.

3. Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during pre-determined intervals at NAV related prices.
B. BY INVESTMENT OBJECTIVE
1. Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to long
term. Such schemes normally invest a majority of their corpus in equities. It has been
proved that returns from stocks, have outperformed most other kind of investments
held over the long term. Growth schemes are ideal for investors having a long-term
outlook seeking growth over a period of time.

2. Income Funds
The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and
Government securities. Income Funds are ideal for capital stability and regular income.
3. Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the
NAV of these schemes may not normally keep pace, or fall equally when the market falls.
These are ideal for investors looking for a combination of income and moderate growth.

4. 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 prevailing in the market.
These are ideal for Corporate and individual investors as a means to park their surplus funds
for short periods.
1.1.5 Advantages of Mutual Funds
1. Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme. This risk
of default by any company that one has chosen to invest in, can be minimized by investing in
mutual Hinds as the fund managers analyze the companies' financials more minutely than an
individual can do as they have the expertise to do so. They can manage the maturity of their
portfolio by investing in instruments of varied maturity profiles.

1. Diversification

Mutual Funds invest in a number of companies across a broad cross-section of industries and
sectors. This diversification reduces the risk because seldom do all stocks decline at the same
time and in the same proportion. You achieve this diversification through a Mutual Fund
with far less money than you can do on your own.

3 .CONVENIENT ADMINISTRATION

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as
bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds
save your time and make investing easy and convenient.

4. RETURN POTENTIAL

Over a medium to long-term. Mutual Funds have the potential to provide a higher return as
they invest in a diversified basket of selected securities. Apart from liquidity, these funds
have also provided very good post-tax returns on year to year basis. Even historically, we
find that some of the debt funds have generated superior returns at relatively low level of
risks. On an average debt funds have posted returns over 10 percent over one-year horizon.
The best performing funds have given returns of around 14 percent in the last one-year
period. In nutshell we can say that these funds have delivered more than what one expects of
debt avenues such as post office schemes or bank fixed deposits. Though they are charged
with a dividend distribution tax on dividend payout at 12.5 percent (plus a surcharge of 10
percent), the net income received is still tax free in the hands of investor and is generally
much more than all other avenues, on a post-tax basis.

5. LOW COSTS

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

6. LIQUIDITY

In open-end schemes, the investor gets the money back promptly at net asset value related
prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock
exchange at the prevailing market price or the investor can avail of the facility of direct
repurchase at NAV related prices by the Mutual Fund. Since there is no penalty on premature
withdrawal, as in the cases of fixed deposits, debt funds provide enough liquidity. Moreover,
mutual funds are better placed to absorb the fluctuations in the prices of the securities as a
result of interest rate variation and one can benefits from any such price movement.

7. TRANSPARENCY

Investors get regular information on the value of your investment in addition to disclosure on
the specific investments made by your scheme, the proportion invested in each class of assets
and the fund manager's investment strategy and outlook.

8. FLEXIBILITY

Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans; you can systematically invest or withdraw funds according to your needs
and convenience.
9. AFFORDABILITY

A single person cannot invest in multiple high-priced stocks for the sole reason that his
pockets are not likely to be deep enough. This limits him from diversifying his portfolio as
well as benefiting from multiple investments. Here again, investing through MF route
enables an investor to invest in many good stocks and reap benefits even through a small
investment. Investors individually may lack sufficient funds to invest in high-grade stocks. A
mutual fund because of its large corpus allows even a small investor to take the benefit of its
investment strategy.

10. CHOICE OF SCHEMES

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

11. WELL REGULATED

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

12.TAX BENEFITS

Last but not the least, mutual funds offer significant tax advantages. Dividends distributed by
them are tax-free in the hands of the investor. They also give you the advantages of capital
gains taxation. If you hold units beyond one year, you get the benefits of indexation. Simply
put, indexation benefits increase your purchase cost by a certain portion, depending upon the
yearly cost-inflation index (which is calculated to account for rising inflation), thereby
reducing the gap between your actual purchase cost and selling price. This reduces your tax
liability. What's more, tax-saving schemes and pension schemes give you the added
advantage of benefits under Section 88. You can avail of a 20 per cent tax exemption on an
investment of up to Rs 10,000 in the scheme in a year.
1.1.6 DISADVANTAGES OF MUTUAL FUNDS

Mutual funds are good investment vehicles to navigate the complex and unpredictable world
of investments. However, even mutual funds have some inherent drawbacks. Understand
these before you commit your money to a mutual fund.

1. NO ASSURED RETURNS AND NO PROTECTION OF CAPITAL

If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not
offer assured returns and carry risk. For instance, unlike bank deposits, your investment in a
mutual fund can fall in value. In addition, mutual funds are not insured or guaranteed by any
government body (unlike a bank deposit, where up to Rs 1 lakh per bank is insured by the
Deposit and Credit Insurance Corporation, a subsidiary of the Reserve Bank of India). There
are strict norms for any fund that assures returns and it is now compulsory for funds to
establish that they have resources to back such assurances. This is because most closed- end
funds that assured returns in the early-nineties failed to stick to their assurances made at the
time of launch, resulting in losses to investors. A scheme cannot make any guarantee of
return, without stating the name of the guarantor, and disclosing the net worth of the
guarantor. The past performance of the assured return schemes should also be given.

2. RESTRICTIVE GAINS

Diversification helps, if risk minimization is your objective. However, the lack of investment
focus also means you gain less than if you had invested directly in a single security. Assume,
Reliance appreciated 50 per cent. A direct investment in the stock would appreciate by 50 per
cent. But your investment in the mutual fund, which had invested 10 percent of its corpus in
Reliance, will see only a 5 per cent appreciation.
3. TAXES

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you will
pay taxes on the income you receive, even if you reinvest the money you made. 

4. MANAGEMENT RISK

When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you had
hoped, you might not make as much money on your investment as you expected. Of course,
if you invest in Index Funds, you forego management risk, because these funds do not
employ managers.

1.2 Three Common Investment Scope

Goal No. 1: Retirement

Most individuals buy mutual funds for long-term goals, especially retirement. It is estimated
that retirees will need 70 to 80 percent of their final, pre-tax income to maintain a
comfortable lifestyle in retirement. If you plan to retire at age 65, retirement savings should
last for at least 18.5 years, since the average life expectancy for a 65-year-old is 83.5, and
continues to rise. Ideally, individuals use a
Combination of sources to fund retirement, such as Social Security benefits, employer-
sponsored retirement plans-like 401(k) plans—and personal savings, including Individual
Retirement Accounts (IRAs).

Goal No. 2: Education

Many parents and grandparents use mutual funds to invest for children’s college
educations. Your time horizon is an essential consideration when investing for
education: if you start when the child is born, you have 18 years to invest. However, if
a child or grandchild is in your future, the time horizon can be lengthened by
investing now.

Goal No. 3: Emergency Reserves and Other Short-Term Goals

Emergency reserves are assets you may need unexpectedly on short notice. Many
investors use money market funds for their reserves. Money market funds alone, or in
combination with short-term bond funds, can also be appropriate investments for
other short-term goals.

OTHER SCHEMES

1. Tax Saving Schemes

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 u/s 88 of the Income Tax Act, 1961. The Act also provides
opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual
Funds.

3 Special Schemes

 Index Schemes

Index Funds attempt to replicate the performance of a particular index such as

the BSE Sensex or the NSE 50
 Sect oral Schemes

Sect oral Funds are those that invest exclusively in a specified sector. This
could be an industry or a group of industries or various segments such as 'A'
Group shares or initial public offering.
1.2.1 How to invest in Mutual Fund:

Step One- Identify your investment needs.

Your financial goals will vary, based on your age, lifestyle, financial independence, family
commitments, level of income and expenses among many other factors. Therefore, the first
step is to assess your needs.

Step Two- Choose the right Mutual Fund.

Once you have a clear strategy in mind, you now have to choose which Mutual
Fund and scheme you want to invest in. The offer document of the scheme tells
you its objectives and provides supplementary details like the track record of
other schemes managed by the same Fund Manager. Some factors to evaluate
before choosing a particular Mutual Fund Lire:

'P The track record of performance over the last few years in
relation to the appropriate yardstick and similar funds in the
same category.
y How well the Mutual Fund is organized to provide efficient,
prompt and personalized service.
y Degree of transparency as reflected in frequency and quality of their
communications.

Step Three- Select the ideal mix of Schemes.

Investing in just one Mutual Fund scheme may not meet all your investment
needs. You may consider investing in a combination of schemes to achieve your
specific goals.
The following charts could prove useful in selecting a combination
of schemes that satisfy your needs.

Figure
4

This plan may suit

y Investor seeking Income & moderate growth .y

Investor looking for growth & stability with moderate
risk
 Figure 5

Step Four - Invest regularly.

Step Five- Keep your taxes in mind
Step Six- Start early it is desirable to start investing early and stick to a regular investment
plan. If you start now, you will make more than if you wait and invest later. The power of
compounding lets you earn income on income and your money multiplies at a compounded
rate of return.

Step Seven-The final step all you need to do now is to get in touch with a Mutual Fund or
your Agent/broker and start investing. Reap the rewards in the years to come. Mutual Funds
are suitable for every kind of investor-whether starting a career or retiring, conservative or
risk taking, growth oriented or income seeking.
1.2.2 WHAT FEES AND COMMISSIONS WILL YOU PAY WHEN YOU
INVEST IN MUTUAL FUNDS:

The fees and commissions you may be charged can vary widely from one fund, and one
dealer, to the next. Some of the charges may be negotiable, but you should make sure that you
understand all of the costs before you invest. There are two main costs to consider – THE
MANAGEMENT AND OPERATING EXPENSES that are charged to the fund each year,
and the SALES CHARGES (or loads) that you pay when you buy or sell the fund.
MANAGEMENT AND OPERATING EXPENSES are expenses paid each year by the fund
and include such things as the manager's fees, legal and accounting fees, custodial fees and
bookkeeping costs. The MANAGEMENT EXPENSE RATIO (MER) is the percentage of
the fund's average net assets that these expenses represent. For example, if a $100 million
fund has $2 million in costs for the year its MER will be 2%. MERs can range from under 1%
per year for some money market funds to almost 3% for some equity funds. The higher the
MER, the greater the impact on the fund's performance and the return to its investors because
these expenses are removed before the value is reported.

Sales Charges (Loads) are the commissions that you may have to pay when you buy or
redeem units of a fund. Sales charges may be applied when you buy units of the fund (A
front-end load), when you redeem your units (a back-end load), or there may be no sales
charges at all (no-load).Where front-end loads are charged, the rate can vary from dealer to
dealer and may be negotiable. Shop around, and remember that every dollar you pay up-front
in commissions a dollar that does not go to work for you in the fund. Many funds are sold on a
back-end load basis, meaning generally that the sales charges are applied only when you
redeem the fund. Back-end load fees are paid by the fund management company to your
mutual fund salesperson – you do not pay this fee. You do, however, pay a ‘redemption fee' If
you redeem your units in the fund before a certain time period typically 7 years. Redemption
fees decline each year that you hold the investment.
For example, you might have to pay a 6% fee if you redeem the fund after one year, 4% if you
redeem after three years, and no commission if you redeem after seven years .An increasing
number of funds are being sold on a no-load basis, in which investors pay no sales charges,
but before you decide that a no-load fund is right for you, consider the fund’s performance, its
management expense ratio and the level of service and advice you will receive.

1.2.3 IMPACT OF TECHNOLOGY:

Mutual fund, during the last one decade brought out several innovations in their products and
is offering value added services to their investors. Some of the value added services that are
being offered are:

1. Electronic fund transfer facility.

2. Investment and re-purchase facility through internet.

3. Added features like accident insurance cover, med claim etc.

4. Holding the investment in electronic form, doing away with the traditional form of
unit certificates.

5. Cheque writing facilities.

6. Systematic withdrawal and deposit facility.

1.2.4 ONLINE MUTUAL FUND TRADING:

The innovation the industry saw was in the field of distribution to make it more easily
accessible to an ever increasing number of investors across the country. For the first time in
India the mutual fund start using the automated trading, clearing and settlement system of
stock exchanges for sale and repurchase of open-ended de-materialized mutual fund units.

Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP) were options
introduced which have come in very handy for the investor to maximize their returns from
their investments. SIP ensures that there is a regular investment that the investor makes on
specified dates making his purchases to spread out reducing the effect of the short term
volatility of markets. SWP was designed to ensure that investors who wanted a regular income
or cash flow from their investments were able to do so with a pre-defined automated form.
Today the SW facility has come in handy for the investors to reduce their taxes.

1.3 LIMITATIONS OF MUTUAL FUNDS

 No Guarantees: No investment is risk free. If the entire stock market declines in

value, the value of mutual fund shares will go down as well, no matter how balanced
the portfolio. Investors encounter fewer risks when they invest in mutual funds than
when they buy and sell stocks on their own. However, anyone who invests through a
mutual fund runs the risk of losing money.

 Fees and commissions: All funds charge administrative fees to cover their day-to-day
expenses. Some funds also charge sales commissions or "loads" to compensate
brokers, financial consultants, or financial planners. Even if you don't use a broker or
other financial adviser, you will pay a sales commission if you buy shares in a Load
Fund.
 Taxes: During a typical year, most actively managed mutual funds sell anywhere from
20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its
 sales, you will pay taxes on the income you receive, even if you reinvest the money
you made.
 Management risk: When you invest in a mutual fund, you depend on the fund's
manager to make the right decisions regarding the fund's portfolio. If the manager does
not perform as well as you had hoped, you might not make as much money on your
investment as you expected. Of course, if you invest in Index Funds, you forego
management risk, because these funds do not employ managers.

1.4 INTRODUCING TO THE PROBLEM

An understanding of behavioral process and outcome is crucial for financial decision

makers. Theoretically in behavioral finance, demographic and socioeconomic
characteristics of market participants influence the investment decision. The behavioral
finance mainly focuses on how investors interpret and act on micro and macro information
to make investment decisions. According to Shleifer (1999) behavioral finance is a rapidly
growing area that deals with the influence of psychology on the behavior of financial
practitioners. The globalization of financial markets has been increasing the retail investors’
community over the past two decades by providing a wide variety of market and investment
options. However, it makes much more complexity in their investment decisions process.
The retail investors consider their investment needs, goals, objectives and constraints in
making investment decisions, but it is not possible to make a successful investment
decision at all times. Their attitude is influenced by various factors such as dividend, get
rich quickly strategy, stories of successful investors, online trading, investor awareness
program, experience of other successful investors etc (Bennet, 2011). The various studies
have been conducted in other countries but to the best of researchers’ knowledge no similar
studies has been found in Noida City. Hence this study attempts to find out the investors’
attitude towards mutual fund.
1.5 Need for the study

This study is to know the customer awareness about the mutual fund and how customers are
investing their funds in the different investment like equity market, fixed deposit, insurance
etc. Secondly to know how the customer are investing online or offline mode and how
frequently the customers are doing online transaction. And if they are not
Open-ended and close-ended questions may collect the primary data. Secondary data will be
collected from various journals, books and web sites.

1.6 OBJECTIVE OF THE STUDY

1. To study various investment alternatives and in particular investors preference towards

mutual funds.

2. To study the preference of investors in today’s scenario (less risk and more return).

3. To assess the risk of investors with reference to diversifiable risk & non- diversifiablc risk.

4. To study market potentiality of mutual fund among investors.

1.7 LIMITATIONS OF THE SYUDY:

Though the present study aims to achieve the above-mentioned objectives in full earnest and
accuracy, it may be hampered due to certain limitations. Some the limitations of this study may be
summarized as follows:
 Getting accurate responses from the respondents is difficult because of the sensitive nature of
the information.
 Locating the target customers of mutual funds is very time consuming.
 CHAPTER 2
REVIEW OF LITERATURE

Mutual funds have already attracted the attention of global practitioners and academicians but
most of the existing research available is on either accelerating the return on funds or
comparing it with benchmark fund schemes. Few studies are available that focus on investor’s
objective and considering risk orientation of investors that has been categorized as:
Studies pertaining to Investor’s Rationality: Risk -Return trade off
Investors are generally more careful while making investment decision and presence of
rationality in every investor demands higher return at minimum risk but when markets are
efficient it is not possible to gain abnormal returns. Risk is generally, associated with various
applications differently but in common it means negative connotation such as harm or loss or
some undesirable action. Risk expressed by Kaplan and Garrick (1981) demonstrates that risk
involves a factor of uncertainty and potential loss that might be incurred.
Elmiger and Kim (2003) elucidate risk as .the trade-off that every investor has to make
between the higher rewards that potentially come with the opportunity and the higher risk that
has to be borne as a consequence of the danger.
Although different literature available on risk define it variedly but in common the word risk
refers to situations in which a decision is made whose consequences depend on the outcomes
of future events having known probabilities(Lopes,1987). Risk from a strategic management
perspective has been defined as one that is often taken as manager’s subjective judgment of
the personal or organizational consequences and it may result from a specific decision or
action. Beta has been accepted as most appropriate measure of risk that describe the slope of
any regression line .i.e it reveals the volatility of a stock relative to a market benchmark
(Sharpe 1966).
Uncertainty in investment decision prevails when Mutual fund AMCs skills and knowledge
fail to have proper access of decision relevant information due to complexity of financial
markets. This incapacity forces decision makers to adopt a simplified approach where risk is
considered to be exogenous variable. Extensive literature available has proved that since
Markowitz (1952) attempts have been made to resolve the conflicts of how decision makers
should choose among composite alternatives that combine stochastic outcome as he was
strongly in favor that choice for portfolio of securities is entirely different from securities that
an individual investor holds (Bernstein 1996). Risk averse behavior of investors reflects the
choice of investors to avoid risk or take negligible risk that means whenever an individual
investor is given option to go for guaranteed return with probability one which are
comparatively less than gambling return with probability less than one, chances are that he
may go for guaranteed return.
2.2 Studies relating to investment expectations
Huge literature available on predicting stock market returns has proved that generally
investors think high past stock market return predict high future return (De Bondt, 1993) even
though there is no support for such belief in the data (Fama 1988). Further, evidence by Fisher
and Statman (2000) have shown that individual investor’s stock market return expectations
are positively correlated with past returns. An attempt to relate stock expected returns and
interrelated attributes can be well traced from Asset pricing Model that explains an assets
expected return is positively related to its systematic market risk (Black 1972). The crux of
these models is that risky portfolio yields higher return.
Although majority of investors who invest in mutual fund themselves are not clear with the
objective and constraints of their investment but in addition to this most important critical gap
that exist in this process is lack of awareness about presence of risk elements in mutual fund
investment. The new marketing philosophy and strategies place special emphasis on
recognition of customer needs in an effort to provide high level of quality services (Harrison,
2000). Study by Laukkanen (2006) explains that varied attributes present in a product or
service facilitate customer’s achievement of desired end-state and the indicative facts of study
show that electronic services create value for customers in service consumption.
Return ambiguity and changes in risk perception of individual investor affect action taken in
risky financial market. In a more complex situation taking rational decision is undoubtedly
difficult but certainly not impossible. Computational complexities are not only the reason why
rationality assumption is challenged rather challenges also come from cognitive reasoning
(Anderson 1991) where question is how optima human beings are. A more realistic notion of
rationality is bounded rationality defined by Simon (Simon 1957) that property of an agent
who behaves in a manner that is nearly as optimal with respect to its goals as resource will
allow. Here resource includes processing power, algorithm and time available to the agent.
2.3 Studies relating to Financial Innovations in mutual funds
New financial product and market designs, improved computer and telecommunication
technologies and advances in theory of finance during past quarter century have led to
dramatic changes in structure of mutual fund industry. Financial innovation is fighter
promoted when the financial authorities recognize the obsolescence of existing statutory
framework and deregulate the essential part of it (Suzuki 1986).
Financial system of any country comprises of regulatory bodies, financial institutions,
financial products and financial markets and whenever the regulatory bodies try to interfee
and restrict the actions of financial intermediaries, to sustain their position in the financial
market, mutual funds (FMI) are required to come up with innovative and more lucrative
solutions. Wide literature available on financial innovations has proved that regulatory
restraints encourage innovations (Ben-Horim, 1977).
Study by Kane (1978) has described the process of avoiding regulations, as “loophole mining”
which suggests that when regulatory constraints are so burdensome that large profits can be
made by avoiding them, financial innovations is more likely to occur. These financial
innovations may look for searching either entirely new product or making some structural
changes in already built financial products to focus on investor’s requirement. Financial
innovation in case of mutual funds is an ongoing process but innovation and success are not
parallel to each other. A large size of enterprise implies that product supported by adequate
innovation is more likely to yield greater return (Schumpeter 1950). Study contrast to this by
Scherer (1984) has suggested that smaller firms with only modest level of market power are
more likely to be rapid innovators.
Mutual fund managers have to use various investment styles depending upon investor’s
requirement. Most of the empirical evidences have shown that mutual fund investor’s
purchase decision is influenced by past performance (Patel, et al. 1992). Research study by
(Jones et al, 2007) has proved that a negative correlation exists between advertisement and
fund quality. A common investor may expect that mutual fund should opt strategies that have
been documented to produce superior returns in the past instead they follow to select
portfolios that don’t deviate markedly from market benchmarks (Lokonishok, Shleifer and
Vishny, 1997).
3. MF Service quality gaps: Loss Function
Investor’s satisfaction in case of mutual funds depends upon amount of trust and dependence
that an investor places with AMC and in turn the benefits that are actually delivered to them.
Although fund managers uses their expertise skills and diligence while investment but still
dissatisfaction prevail among the investors and their experiences show that majority of mutual
funds have shown underperformance in comparison to risk free return and reported that
mutual funds were not able to compensate them for additional risk they have taken by
investing in mutual funds (Anand, S. and Murugaiah, V.2004)
3.1 Ambiguity of Investor’s Expectations
Concept of investor satisfaction is gaining importance for every MF organization because in
addition to its contribution in a dominating way to the overall success of these organizations,
it also shows them roadmap to retain and grow their business. SERVQUAL expectations have
been variously defined as desires, wants, what a service provider should possess, normative
expectations, ideal standards, desired services and the level of service a customer hopes to
receive. Zeithaml, V (1993) expressed satisfaction of individual investor comprise of a range
of varied parameters and is not easy to define but in general it means positive assessment.
Where the growing demand of investor’s expectation is following the way most of researcher
admit the fact that working of customer’s mind is a mystery which is difficult to solve (Dash,
2006). Customer satisfaction is subjective and even difficult to measure. To draft an accurate
picture of customer satisfaction organizations should diligently use information - collecting
tools and market research that will finally enable an organization to identify critical elements
of customer satisfaction and further fine- tune their operations to achieve incremental
improvements. Significant gaps that exist between service expectations and perceptions is
right from the first step where AMCs are not found capable enough to translate investor’s
expectation, reason being financial intermediaries having inadequate knowledge and training
are not able to communicate the message to each player effectively.
3.2 Designing Gap
Given the financial and resource constraints, AMCs are under increasing pressure to design
services specifications in accordance to customer’s requirement. Lack of upward
communication from financial intermediaries to top management, inadequate commitment to
service quality, absence of goal setting, inappropriate standardization are few reasons that are
accountable for gaps that occur in designing of mutual fund services.
Minimizing risk and maximizing return are the two basic criteria that are given highest
weightage while designing services specifications, as a rational investor. The purpose of
designing quality services with improved quality from customer’s perspective is to discover
innovative ways that will provide value added services. Study by Ippolito (1992) documents
the reaction of investors to performance in mutual fund industry. His findings have shown that
poor relative performance results in investors shifting their assets into other funds. Therefore
investing in quality of a product should be considered important not only to sustain reputation
but to gain flow of profit that may come in the form of premium which investors will be
willing to pay on trusted funds. Mutual fund organizations need to be extremely conscious at
the time of designing and determining services standards. Service specifications designed by
AMCs should match with customer’s expected standards or with promised standards.
3.2.1 Tolerance Zone: Risk
Considering the level of income, constancy and stability of income etc investor’s frame their
own boundaries for risk bearing on any particular investment (Figure 1). Risk assumes wide
definitions and distinguished from uncertainty as risk is measurable uncertainty about
occurrence of an undesirable event. Williams (1964) proposed that sense of unpredictability of
actual results of an action differing from possible predicted results in a given situation. Risk
not only includes uncertainty and loss elements but time factor cannot be excluded from
probability of risk. Doubt concerning the outcome in a given situation before the event occurs
implies that there is something about the present situation that will be different in the future.
Tolerance Zone depicts the minimum and maximum specifications as described by investor
for his willingness to assume risk represented by Upper Specification Limit and Lower
Specification Limit. Investors based on his knowledge about the market volatility where he
accepts the minimum risk, which he will have to bear on his investment, design these
specification limits and maximum level is assumed depending upon his risk appetite and his
willingness to maximize his ROI. However, Lack of management’s commitment for services
performance may deviate AMCs to come up with different performance standards. This
deviation if less than the expected specification as proposed by investor will result in
indifferent attitude of investors but in case the controllable limit as performed and delivered
exceeds the upper specification limit of investors, it will certainly result in great
dissatisfaction among the investors as AMCs will be held liable for the loss that will accrue to
investors and that will lead investors think over incompetent professional management of
mutual funds.
3.2.2 Tolerance Zone: Return
Investor’s investment in any particular fund scheme of mutual funds depends upon anticipated
return that will accrue from that particular investment. Mutual funds also offer innovative
promising solutions for varied financial requirements of investors. Presently, Mutual fund
organizations are also considered mature enough to understand and translate return
requirement of individual investor’s depending upon their demographic requirements. Again,
mismatch between the boundaries as designed by investor’s and actual performance standards
may result in higher level of dissatisfaction among investors (Figure 2). Measurement criteria
for loss to investors in case of return is almost opposite of discussed above. If actual delivered
return from mutual funds exceeds the expected return it may provide positive reflections to
investor’s mind but will not satisfy them unless actually delivered return abnormally
outperform expected return as in this case higher returns are credited to financial markets
performances. Actual loss, if accrue to the investors through delivered return less than
specified return it will bring great level of dissatisfaction among the investors because in this
case investor’s trust on skills and diligence of mutual funds AMCs get trodden. The only
remedy to fill up these gaps is to create awareness among the investors that mutual funds
performance is subject to market risk and instead of tempting them towards stocky returns,
promises should be aligned with investor’s specifications.
3.3 Delivery Gaps
A rich diagnose for any mutual fund performance is evaluated through services they deliver in
the form of extra ordinary return if they are able to deliver. Most of consumers admit the fact
that increasing awareness have lead them to agree upon that despite of professional
knowledge and skills fund performance is subjective of market volatility. So unlike other gaps
that give a way to investor’s satisfaction delivery gaps don’t prevail in mutual fund services.
Mutual fund’s tendency to over promise however may push investor’s expectation but to
completely eliminate this particular gap mutual fund organization should show a true picture
to investors and fund scheme to be provided should be framed after a complete analysis of
risk appetite of investors. Among mutual funds delivering the promises are not only the
criteria to evaluate fund services but courtesy, communication, empathy, responsiveness and
reliability are some of the other parameters where mutual funds are found to be performing
exceptionally well.
Mutual funds have already attracted the attention of global practitioners and academicians but
most of the existing research available is on either accelerating the return on funds or
comparing it with benchmark fund schemes. Few studies are available that focus on investor’s
objective and considering risk orientation of investors that has been categorized as:
Studies pertaining to Investor’s Rationality: Risk -Return trade off
Investors are generally more careful while making investment decision and presence of
rationality in every investor demands higher return at minimum risk but when markets are
efficient it is not possible to gain abnormal returns. Risk is generally, associated with various
applications differently but in common it means negative connotation such as harm or loss or
some undesirable action. Risk expressed by Kaplan and Garrick (1981) demonstrates that risk
involves a factor of uncertainty and potential loss that might be incurred.
elmiger and Kim (2003) elucidate risk as .the trade-off that every investor has to make
between the higher rewards that potentially come with the opportunity and the higher risk that
has to be borne as a consequence of the danger.
Although different literature available on risk define it variedly but in common the word risk
refers to situations in which a decision is made whose consequences depend on the outcomes
of future events having known probabilities(Lopes,1987). Risk from a strategic management
perspective has been defined as one that is often taken as manager’s subjective judgment of
the personal or organizational consequences and it may result from a specific decision or
action. Beta has been accepted as most appropriate measure of risk that describe the slope of
any regression line .i.e it reveals the volatility of a stock relative to a market benchmark
(Sharpe 1966).
Uncertainty in investment decision prevails when Mutual fund AMCs skills and knowledge
fail to have proper access of decision relevant information due to complexity of financial
markets. This incapacity forces decision makers to adopt a simplified approach where risk is
considered to be exogenous variable. Extensive literature available has proved that since
Markowitz (1952) attempts have been made to resolve the conflicts of how decision makers
should choose among composite alternatives that combine stochastic outcome as he was
strongly in favor that choice for portfolio of securities is entirely different from securities that
an individual investor holds (Bernstein 1996). Risk averse behavior of investors reflects the
choice of investors to avoid risk or take negligible risk that means whenever an individual
investor is given option to go for guaranteed return with probability one which are
comparatively less than gambling return with probability less than one, chances are that he
may go for guaranteed return.
2.2 Studies relating to investment expectations
Huge literature available on predicting stock market returns has proved that generally
investors think high past stock market return predict high future return (De Bondt, 1993) even
though there is no support for such belief in the data (Fama 1988). Further, evidence by Fisher
and Statman (2000) have shown that individual investor’s stock market return expectations
are positively correlated with past returns. An attempt to relate stock expected returns and
interrelated attributes can be well traced from Asset pricing Model that explains an assets
expected return is positively related to its systematic market risk (Black 1972). The crux of
these models is that risky portfolio yields higher return.
Although majority of investors who invest in mutual fund themselves are not clear with the
objective and constraints of their investment but in addition to this most important critical gap
that exist in this process is lack of awareness about presence of risk elements in mutual fund
investment. The new marketing philosophy and strategies place special emphasis on
recognition of customer needs in an effort to provide high level of quality services (Harrison,
2000). Study by Laukkanen (2006) explains that varied attributes present in a product or
service facilitate customer’s achievement of desired end-state and the indicative facts of study
show that electronic services create value for customers in service consumption.
Return ambiguity and changes in risk perception of individual investor affect action taken in
risky financial market. In a more complex situation taking rational decision is undoubtedly
difficult but certainly not impossible. Computational complexities are not only the reason why
rationality assumption is challenged rather challenges also come from cognitive reasoning
(Anderson 1991) where question is how optima human beings are. A more realistic notion of
rationality is bounded rationality defined by Simon (Simon 1957) that property of an agent
who behaves in a manner that is nearly as optimal with respect to its goals as resource will
allow. Here resource includes processing power, algorithm and time available to the agent.
2.3 Studies relating to Financial Innovations in mutual funds
New financial product and market designs, improved computer and telecommunication
technologies and advances in theory of finance during past quarter century have led to
dramatic changes in structure of mutual fund industry. Financial innovation is fighter
promoted when the financial authorities recognize the obsolescence of existing statutory
framework and deregulate the essential part of it (Suzuki 1986).
Financial system of any country comprises of regulatory bodies, financial institutions,
financial products and financial markets and whenever the regulatory bodies try to interfee
and restrict the actions of financial intermediaries, to sustain their position in the financial
market, mutual funds (FMI) are required to come up with innovative and more lucrative
solutions. Wide literature available on financial innovations has proved that regulatory
restraints encourage innovations (Ben-Horim, 1977).
Study by Kane (1978) has described the process of avoiding regulations, as “loophole mining”
which suggests that when regulatory constraints are so burdensome that large profits can be
made by avoiding them, financial innovations is more likely to occur. These financial
innovations may look for searching either entirely new product or making some structural
changes in already built financial products to focus on investor’s requirement. Financial
innovation in case of mutual funds is an ongoing process but innovation and success are not
parallel to each other. A large size of enterprise implies that product supported by adequate
innovation is more likely to yield greater return (Schumpeter 1950). Study contrast to this by
Scherer (1984) has suggested that smaller firms with only modest level of market power are
more likely to be rapid innovators.
Mutual fund managers have to use various investment styles depending upon investor’s
requirement. Most of the empirical evidences have shown that mutual fund investor’s
purchase decision is influenced by past performance (Patel, et al. 1992). Research study by
(Jones et al, 2007) has proved that a negative correlation exists between advertisement and
fund quality. A common investor may expect that mutual fund should opt strategies that have
been documented to produce superior returns in the past instead they follow to select
portfolios that don’t deviate markedly from market benchmarks (Lokonishok, Shleifer and
Vishny, 1997).
3. MF Service quality gaps: Loss Function
Investor’s satisfaction in case of mutual funds depends upon amount of trust and dependence
that an investor places with AMC and in turn the benefits that are actually delivered to them.
Although fund managers uses their expertise skills and diligence while investment but still
dissatisfaction prevail among the investors and their experiences show that majority of mutual
funds have shown underperformance in comparison to risk free return and reported that
mutual funds were not able to compensate them for additional risk they have taken by
investing in mutual funds (Anand, S. and Murugaiah, V.2004)
3.1 Ambiguity of Investor’s Expectations
Concept of investor satisfaction is gaining importance for every MF organization because in
addition to its contribution in a dominating way to the overall success of these organizations,
it also shows them roadmap to retain and grow their business. SERVQUAL expectations have
been variously defined as desires, wants, what a service provider should possess, normative
expectations, ideal standards, desired services and the level of service a customer hopes to
receive. Zeithaml, V (1993) expressed satisfaction of individual investor comprise of a range
of varied parameters and is not easy to define but in general it means positive assessment.
Where the growing demand of investor’s expectation is following the way most of researcher
admit the fact that working of customer’s mind is a mystery which is difficult to solve (Dash,
2006). Customer satisfaction is subjective and even difficult to measure. To draft an accurate
picture of customer satisfaction organizations should diligently use information - collecting
tools and market research that will finally enable an organization to identify critical elements
of customer satisfaction and further fine- tune their operations to achieve incremental
improvements. Significant gaps that exist between service expectations and perceptions is
right from the first step where AMCs are not found capable enough to translate investor’s
expectation, reason being financial intermediaries having inadequate knowledge and training
are not able to communicate the message to each player effectively.
3.2 Designing Gap
Given the financial and resource constraints, AMCs are under increasing pressure to design
services specifications in accordance to customer’s requirement. Lack of upward
communication from financial intermediaries to top management, inadequate commitment to
service quality, absence of goal setting, inappropriate standardization are few reasons that are
accountable for gaps that occur in designing of mutual fund services.
Minimizing risk and maximizing return are the two basic criteria that are given highest
weightage while designing services specifications, as a rational investor. The purpose of
designing quality services with improved quality from customer’s perspective is to discover
innovative ways that will provide value added services. Study by Ippolito (1992) documents
the reaction of investors to performance in mutual fund industry. His findings have shown that
poor relative performance results in investors shifting their assets into other funds. Therefore
investing in quality of a product should be considered important not only to sustain reputation
but to gain flow of profit that may come in the form of premium which investors will be
willing to pay on trusted funds. Mutual fund organizations need to be extremely conscious at
the time of designing and determining services standards. Service specifications designed by
AMCs should match with customer’s expected standards or with promised standards.
3.2.1 Tolerance Zone: Risk
Considering the level of income, constancy and stability of income etc investor’s frame their
own boundaries for risk bearing on any particular investment (Figure 1). Risk assumes wide
definitions and distinguished from uncertainty as risk is measurable uncertainty about
occurrence of an undesirable event. Williams (1964) proposed that sense of unpredictability of
actual results of an action differing from possible predicted results in a given situation. Risk
not only includes uncertainty and loss elements but time factor cannot be excluded from
probability of risk. Doubt concerning the outcome in a given situation before the event occurs
implies that there is something about the present situation that will be different in the future.
Tolerance Zone depicts the minimum and maximum specifications as described by investor
for his willingness to assume risk represented by Upper Specification Limit and Lower
Specification Limit. Investors based on his knowledge about the market volatility where he
accepts the minimum risk, which he will have to bear on his investment, design these
specification limits and maximum level is assumed depending upon his risk appetite and his
willingness to maximize his ROI. However, Lack of management’s commitment for services
performance may deviate AMCs to come up with different performance standards. This
deviation if less than the expected specification as proposed by investor will result in
indifferent attitude of investors but in case the controllable limit as performed and delivered
exceeds the upper specification limit of investors, it will certainly result in great
dissatisfaction among the investors as AMCs will be held liable for the loss that will accrue to
investors and that will lead investors think over incompetent professional management of
mutual funds.
3.2.2 Tolerance Zone: Return
Investor’s investment in any particular fund scheme of mutual funds depends upon anticipated
return that will accrue from that particular investment. Mutual funds also offer innovative
promising solutions for varied financial requirements of investors. Presently, Mutual fund
organizations are also considered mature enough to understand and translate return
requirement of individual investor’s depending upon their demographic requirements. Again,
mismatch between the boundaries as designed by investor’s and actual performance standards
may result in higher level of dissatisfaction among investors (Figure 2). Measurement criteria
for loss to investors in case of return is almost opposite of discussed above. If actual delivered
return from mutual funds exceeds the expected return it may provide positive reflections to
investor’s mind but will not satisfy them unless actually delivered return abnormally
outperform expected return as in this case higher returns are credited to financial markets
performances. Actual loss, if accrue to the investors through delivered return less than
specified return it will bring great level of dissatisfaction among the investors because in this
case investor’s trust on skills and diligence of mutual funds AMCs get trodden. The only
remedy to fill up these gaps is to create awareness among the investors that mutual funds
performance is subject to market risk and instead of tempting them towards stocky returns,
promises should be aligned with investor’s specifications.
3.3 Delivery Gaps
A rich diagnose for any mutual fund performance is evaluated through services they deliver in
the form of extra ordinary return if they are able to deliver. Most of consumers admit the fact
that increasing awareness have lead them to agree upon that despite of professional
knowledge and skills fund performance is subjective of market volatility. So unlike other gaps
that give a way to investor’s satisfaction delivery gaps don’t prevail in mutual fund services.
Mutual fund’s tendency to over promise however may push investor’s expectation but to
completely eliminate this particular gap mutual fund organization should show a true picture
to investors and fund scheme to be provided should be framed after a complete analysis of
risk appetite of investors. Among mutual funds delivering the promises are not only the
criteria to evaluate fund services but courtesy, communication, empathy, responsiveness and
reliability are some of the other parameters where mutual funds are found to be performing
exceptionally well.

CHAPTER- 3
RESEARCH METHODOLOGY

Research methodology define as the systematic plan, design, collection, analysis and reporting
of data and findings relevant to a specific marketing situation facing the company.

3.1 RESEARCH DESIGN:-

The research requires developing the most efficient plan for gathering the needed information.
This involves decision on the data sources, research approaches, research instrument,
sampling plan and contact method.
There are three types of research design as follows:-

3.1.1 EXPLARATORY RESEARCH:-

Explaratory research is conducted when researcher does not know how and why certain
phenomenon occurs. The prime goal for this research is to know unknown, this research is
unstructured.

3.1.2 DESCRIPTIVE RESEARCH:-

Descriptive research is carried out to describe the phenomenon or market characteristics. This
study is done to understand buyer behavior and describe characteristics of the target market.
This study is done for evaluation of the customer preference.

3.1.3 CAUSATIVE RESEARCH:-

Causative research is done to establish the cause and effect relationship. I use the descriptive
research for my study
3.1.4 DATA SOURCES:-

PRIMARY DATA:-

Primary data are collected by a study specifically to fulfill the data needs of the problem
at hand. such data are original in character and are generated in large number of surveys
conducted mostly by government and also by individual, institution, and research bodies.

METHODS OF COLLECTING PRIMARY DATA:-

• Direct personal interviews.

• Indirect oral interviews.
• Information from correspondence.
• Mail questionnaire method.

SECONDARY DATA:-

Data which are not originally collected but rather obtained from published and
unpublished sources are known as secondary data.

SOURCES OF SECONDARY DATA:-

• Published sources

• Unpublished sources

3.1.5 SAMPLE:-

When secondary data are not available for the problem under study, a decision be made

may to collect primary data by different methods for information. The may be

information collected by either the census method or sample method.

 3.1.6 SAMPLING METHODS:-

1. Non probability sampling method.

2. Probability sampling method.

Non probability sampling method:-

■ Judgment sampling:-
In this method of sampling the choice of sample items depends on judgment of
the investigator. In other words, the investigator exercises his judgment in the
choice and includes those items in sample which he thinks are most typical of
universe with regard to characteristics under investigation.
■ Quota sampling:-
In a quota sample, quotas are set up according to some specified characteristics
such as so many in each of several income groups, so many in each age group etc.

■ Convenience sampling:-
A convenient sampling is obtained by convenient population. This is also called
as chunk.

Probability sampling method:-

■ Sampling or unrestricted random samples:-simple or restricted random sampling

technique refers to that sampling in which each and every unit of the population
has an equal opportunity of being selected in the sample.

■ Restricted random sampling:-

o Stratified sampling:- Stratified random sampling or simply stratified

sampling is one of the random methods which, by using the available
 information concerning the population, attempt to design a more efficient
sample than obtained by the simple random procedure.
Systematic sampling:- A systematic sample is formed by selecting one unit
at random and then selecting additional unit at evenly spaced intervals
until the samples has been formed.

Multi stage or cluster sampling:- Under this method, the random selection
is made of primary, intermediate and final (the ultimate) units given from
a given population or stratum.

SAMPLE SIZE: The sample size or this study has been 150 respondents.

SOURCES OF DATA

Primary sources for data collection will be used for the present study. A
reconnaissance survey will be made of the selected respondents to get acquainted with
the factors behind to start analysis. On the basis of the information gathered, a well
designed pretested interview schedule will be drafted and used in the field survey to
collect primary data, before undertaking the main survey a tentative.
Primary source:
Primary data had been collected by approaching the Investors.
Secondary source:
The sources of data are internet, magazines, newspapers, etc.
Types of data collection

There are two types of data collection methods available.

1. Primary data collection
2. Secondary data collection

1) Primary data collection method

The primary data is that data which is collected fresh or first hand, and for first time
which is original in nature. Primary data can collect through personal interview,
questionnaire etc. to support the secondary data.
2) Secondary data collection method
The secondary data are those which have already collected and stored. Secondary data
easily get those secondary data from records, journals, annual reports of the company etc.
It will save the time, money and efforts to collect the data. Secondary data also made
available through trade magazines, balance sheets, books etc. This project is based on
primary data collected through personal interview of head of account department, head of
SQC department and other concerned staff member of finance department. But primary
data collection had limitations such as matter confidential information thus project is
based on secondary information collected through five years annual report of the
company, supported by various books and internet sides. The data collection was aimed
at study of working capital management of the company

Demographic data: - demographic data is not there in report because of company has
not given the permission to collect demographic data.
 CHAPTER 4
DATA ANALYSIS & INTERPRETATION

Q1. Where do you invest your savings?

TABLE 1:
OPTIONS NO OF RESPONDENTS
Equity 59
Mutual fund 25
Fixed deposits 9
Insurance 7
DIAGRAM 1:
INTERPRATATIONS
This figure says that most people go for at 1st EQUITY investment then for MUTUAL
FUND, FIXED DEPOSITS AND INSURANCE. Because equity gives good return in
short time as well as long term as compared to mutual fund.
Q2. Which sectors give more return?
TABLE 2:
OPTIONS NO OF RESPONDENTS
Share market 23

Mutual fund 77
 DIAGRAM 2:

23%

77%

Sharemarket Mutual funds

INTERPRATATIONS:

This pie chart shows that share market give return 77% as compared to mutual fund at
23% return. It signifies mostly more people go for share market as compared to mutual
funds.
Q3. Your investment decisions are influenced by

TABLE 3:
Factor of Investment Decision
Options No of respondents
Oneself 24
Broker 36
Eco policies 20
Market research 12
Friends/relatives 8
Any other

DIAGRAM 3:
Factor of Investment Decision
 40
36
Oneself
35

30 Brokers
24
Percentage

25
20 Eco. Policies
20

15 Market Ramous
8
10
Friends/Relatives
5

0
Investment Decisions
INTERPRATATIONS:

How do Investors take their investment decisions is presented in this bar graph. In this graph it
is evident that mostly investment decision are taken on the insistence of the brokers firms and
companies and that percentage is 36%.
In this area has its own research report and that strike rate has 80%. This is an advantage to the
customers
Q4. Are you satisfied with your current investment?
TABLE 4:
OPTIONS NO OF RESPONENTS
YES 42
NO 58
 DIAGRAM 5:

42%
58%

Yes No

INTERPRATATIONS:
That chat is show the satisfaction level of current investment( in share) and long term
investment(mutual fund) than here shows that the satisfaction level in current investment (shares)
is 58% and satisfaction in long term investment (mutual fund) is 42%.

Q6.What is the factors which you considered before investing in particular

company?
TABLE 6:
OPTIONS NO OF RESPONDENTS
Financial potions 24
Current market position 36
Goodwill 20
Future prospects 12
Any other 08

DIAGRAM 6:
 40
​36 Financial Positions
35

30
Current market Positions
Percentage

​24
25
​20
20 Goodwill

15 ​12
Future Prospects
10 ​8

5 Any other
0
factors

INTERPRATATIONS:
What factors are necessary before the investment in company or in firm is show in
this bar graph. It is evident that in the current market position accounts for 36% ,
most investors go for investment after seeing the current market positions and
after that the financial position of company which is at 24%, then goodwill of
company at 20%,future prospects at 12%,and any other factors at 8%.
 CHAPTER- 5
FINDINGS

OBSERVATIONS & FINDINGS

Most people go for at 1st EQUITY investment then for MUTUAL FUND, FIXED
DEPOSITS AND INSURANCE. Because equity gives good return in short time as well as
long term as compared to mutual fund.

Market shows give return of 77% as compared to mutual fund at 23% return. It signifies
mostly more people go for share market as compared to mutual funds.

Mostly investment Decision are taken on the insistence of the brokers firms and companies
and that percentage is 36%.

The satisfaction level of current investment( in share) and long term investment(mutual fund)
than here shows that the satisfaction level in current investment (shares) is 58% and
satisfaction in long term investment (mutual fund) is 42%.

The investment in company or in firm is show in this bar graph. It is evident that in the
current market position accounts for 36% most investors go for investment after seeing the
current market positions and after that the financial position of company which is at 24%,
then goodwill of company at 20%,future prospects at 12%,and any other factors at 8%.

.
 CHAPTER- 6
RECOMMENDATIONS

 Various respondents were not aware of the mutual fund products and the type of mutual
fund schemes and the risk associated with mutual fund products. So Mutual fund
companies should provide complete information of various products to their investors.
 Customers i.e., investors fees should be reduced thereby increasing the number of
investors towards investment.
 The mutual fund companies to increase their market size by way of opening more
distribution centers at the various urban and semi-urban markets.
 If the company improves the categories of investment then customer will show the
interest to invest more.
 CHAPTER 7

CONCLUSION

It has been observed that the analysis that if there is more risk there is more return and we
can say that share market is totally dependent on the risk taken by the investors in investing in
shares. And in mutual funds there is less risk as the money of investors invested in different
sectors so it can divide the risk in different portfolio adopted by mutual funds companies.
At last I can say that money invested in this rise and fall market it is better to invest in
mutual funds for those investors who are risk adverse and for those who are risk taker it is better
for them to invest in share market.
We can also say that in share market customers is decision maker while in mutual funds
investors is totally dependent on assets management company, investors do not have active
control on money invested by him/her.
The results of the survey show that it has been found that investors are investing in
various avenues but the most preferred in equity but their level of satisfaction is less.
The present study endeavored to give a look on investor’s perceptions towards risk-return trade-
off for mutual fund services. Understanding of investor’s expectations from mutual funds has
become necessary issue to study due to mutual funds inability to accelerate the required pace of
growth. Moreover, volatility influencing stock market movements is turning most of investors to
hold stocks with calculated risk, in the shape of mutual funds. Thus mutual funds can prove to be
most preferred financial avenue provided it is put forth before investors in the desired form.
Facts revealed in this study highlight the preferences of varied inverters who desire to invest in
mutual funds but also require some innovations and added quality dimensions in existing
services. Survey findings of this study have got significant managerial implications that can be
used by AMCs in restructuring their existing practices and finally innovating new ways of
service delivery.
Mutual fund companies help investors by providing them with a qualified fund manager.
Increasingly, in India, fund managers are acquiring global certifications like CFA and MBA
which help them be at the cutting edge of the knowledge in the investing world. Since mutual
fund company collect money from millions of investors, they achieve economies of scale. The
cost of running a mutual fund is divided between a larger pool of money and hence mutual funds
are able to offer the investor a lower cost alternative of managing their funds. In India mutual
funds are regulated by the Securities and Exchange Board of India, which helps to provide
comfort to the investors. SEBI forces transparency on the mutual funds, which helps the investor
make an informed choice. SEBI requires the mutual funds to disclose their portfolios at least six
monthly, which helps the investors keep track whether the fund is investing in line with its
objectives or not.
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WEBOGRAPHY

 www.mutualfunds.com

 www.amfi.com

 www.google.com

 www.altavista.com

 www.dogpil.com
PERSONAL INFORMATION

A) Name:MD SALAMATULLAH AARFI

B) Ocuupation:
C) Address:
D) Mobile:
E) Email:

QUESTIONERE
Q1. Where do you invest your savings?
TABLE 1:
OPTIONS NO OF RESPONDENTS
Equity
Mutual fund
Fixed deposits
Insurance
Q2. Which sectors give more return?
TABLE 2:
OPTIONS NO OF RESPONDENTS
Share market

Mutual fund

Q3. Your investment decisions are influenced by

TABLE 3:
Factor of Investment Decision
Options No of respondents
Oneself
Broker
Eco policies
Market research
Friends/relatives
Any other