Professional Documents
Culture Documents
Chapter - 2 Research Methodology
Chapter - 2 Research Methodology
RESEARCH METHODOLOGY
Introduction
Hypothesis
Introduction:
There is a perceptible change in the Indian Economic scenario, especially
after the initiation of Liberalized Economic Policy in 1991. This can be seen from
the increasing rate of Gross Domestic Product (GDP) and Domestic Saving and
Investment. Since 1980s, rate of domestic saving and number of small investors are
growing rapidly. Investor‘s preferences are also shifting from physical assets to
financial assets and within the financial assets there is a gradual shift from bank
deposits to securitized instruments such as shares, debentures and units of UTI and
other Mutual Funds.
However small investors are still hesitant to enter the capital market directly
because of lack of information and knowledge about the capital market, fear of risk,
small size of savings available for investment, complicated nature of capital market
operation, etc. It is also rare to find investors investing their entire savings in a single
security. Under such conditions emergence and rapid growth of intermediaries like
mutual funds and asset management companies is quite natural. Emergence of
Mutual Funds and asset management companies can be said to be one of the
important factors to mobilize funds from small and household savers and to invest
them for obtaining maximum benefits with reduced risk.
Mutual funds offer the small unit holders the benefits of prudent and
professional fund management, collective investment and reduced risk through
diversification. Through, asset management companies, an investor can tend to
invest in a group of securities called portfolio. Creation of portfolio helps to reduce
risk without sacrificing returns. Asset management companies utilize the skills of
specialized portfolio managers in constructing the optimal portfolio for the investor
taking into consideration the risk-return characteristics of all possible portfolios.
Thus, current investment scenario has changed drastically and professional portfolio
management, backed by competent research, began to be practiced by mutual funds,
investment consultants and big brokers.
The origin of Indian Mutual Fund Industry can be traced with UTI which
was established in 1964. UTI enjoyed complete monopoly in the Mutual Fund
Research Methodology 63
Industry till 1987 and than other public sector mutual funds entered into the market.
Mutual funds industry has been made open to the private sector in 1992-93.
Although the Mutual Fund Industry in India is growing rapidly, it is still facing
some challenges such as building the perfect portfolio for the client, periodic review
and revision of investment portfolios of investors, constructing customized portfolio
in accordance with the risk-return appetite of the investor, etc. Thus, there seems a
vast potential for improvement in the working and mechanism of Mutual Funds and
portfolio management of asset management companies in India. This necessitates a
comprehensive study of portfolio management and services rendered by asset
management companies which would help in suggesting remedial measures for
improvement in the working of asset management companies.
There was a time when portfolio management was an exotic term, an elite
practice beyond the reach of ordinary people, in India. The scenario has changed
drastically. Portfolio management is now a familiar term and is widely practiced in
India. The theories and concepts relating to portfolio management now find their
way to the minds of investors in India.
Along with the spread of securities investment among ordinary investors, the
acceptance of quantitative techniques by the investment community changed the
investment scenario in India. Professional portfolio management, backed by
competent research, began to be practiced by mutual funds, investment consultants
and big brokers. The Securities and Exchange Board of India (SEBI), the stock
market regulatory body in India, is supervising the whole process with a view to
Research Methodology 66
To understand the concept of portfolio management and the role of the Asset
Management Companies in capturing maximum share of investor‘s markets.
To carry out analysis of the expected stock returns of various fund schemes
prevailing in the market.
To understand the problems faced by fund houses in managing the funds.
To analyze the benefits of Portfolio Management services to the investors
and fund houses.
To know whether investor‘s home is biased or not while selecting the Asset
Management companies to invest into?
To find out major fund management players in India and to study their
consciousness towards investors.
To study the influence of liberalization and globalization of the economy on
the flow of capital and their management thereof.
To study risk-returns mechanism and how it can be fruitfully achieved
through portfolio management.
To examine growth trail of mutual funds in India and their impact on the
common investor.
To study the scope for improvement in quality of portfolio management
provided by various Asset Management Companies (AMC‘s).
Research Methodology 68
Research defined:
Research in common refers to a search for knowledge. One can also define
research as scientific and a systematic search for pertinent information on specific
topic.
draw upon investors‘ rich personal opinion, experiences etc., which cannot find a
place in the reports and records. These questionnaires were distributed and
discussions were organized with the selected individuals and customers of asset
management companies and banks. Another method that was adopted for this study
is the collection of secondary data from various published data of asset management
data. The statistical analysis and data are supplemented by the information collected
as to derive effective and meaningful conclusions. The data and information were
Research Methodology 69
collected from various sources. Factual data were collected from the fact sheets,
journals, annual reports and other records of the companies. The study warranted a
number of trips to the different asset management companies, fund houses, banks,
stock exchange, etc. During these visits, various published literature and data of
asset management companies were made use of along with going through a number
mind is an essential requirement for any systematic study. This has a great relevance
not only for collection of reliable information but also for the final outcome of the
Few Asset Management companies in India i.e HDFC, Axis, Birla Sunlife
and ICICI Prudential have been selected for depth study. All the branches of these
companies situated in India are population or universe for this study. Both
“multistage sampling” and “stratified sampling” techniques have been used for
The present study contains a detailed study on the concurrent topic ―Portfolio
is divided into six major headings consisting nine chapters, which cover the various
secondary data has been collected from the reports, fact sheets, journals, official
this study is not only vital for the selected asset management companies but also
fruitful for the overall growth and development of investors‘ funds and financial
market.
Research Methodology 70
among individuals and investors of city branches of Axis, HDFC, ICICI Prudential
and Birla Sunlife Asset Management Companies and their associated bank branches.
The researcher personally went into the fund houses and associated bank branches of
sample of 600 persons was chosen to whom the questionnaire was given. The
research has got the reply of 412 (68.67%) respondents. A few individuals took keen
interest in these questionnaires and have duly completed them in all respect. In some
other cases, the researcher encountered with a lot of problems like ―not interested in
―they will fill up later on and taken the questionnaire along with them‖ or ―lost
questionnaire‖ and so on. Thus, the response was neither very much encouraging nor
Research Design:
A research design is the arrangement of the conditions for collecting ,
analysis of data in a manner that aim to combine relevance to the research process
and economy in the same process in order to save the valuable time.
Descriptive Research
Descriptive research describes phenomena as they exist. It is used to identify
and obtain information on the characteristics of a particular issue.
The data collected are often quantitative, and statistical techniques are
usually used to summarize the information. Descriptive research goes further than
exploratory research in examining a problem since it is undertaken to ascertain and
describe the characteristics of the issue. An undergraduate dissertation may include
descriptive research, but it is likely that it will also include one of the following two
types (explanatory or predictive) as we are required in our dissertation to go beyond
description and to explain or predict.
Predictive Research:
Predictive research goes further by forecasting the likelihood of a similar
situation occurring elsewhere. It aims to generalize from the analysis by predicting
certain phenomena on the basis of hypothesized, general relationships.
Research Methodology 72
Companies (AMC‘s in India) due to limitation of time, finance and other resources.
However the study of ―portfolio management‖ need not be conducted for all asset
namely HDFC, Birla Sunlife, ICICI and Axis were taken up for the study.
Data Collection:
While deciding about the method of data collection to be used for the study,
the researcher should keep in mind two techniques of Data Collection.
non-participant observation formed the tools and techniques of data collection from
tested of a pilot study conducted during Jan- March 2012 and in the light of
knowledge thus, obtained, necessary changes were made in order to serve the
Secondary data have been taken for the purpose of general understanding of
previous year‘s etc. The secondary data were collected from the reports, fact sheets,
Hypothesis:
The hypothesis of the present study is, “For optimizing the investment of
one’s funds, Portfolio Management of Asset Management Companies (AMC’s)
are of utmost importance.” In addition to above main hypothesis of the study, these
are the sub-hypothesis:
As the economic and financial environment keeps changing, the risk-return
characteristics of individual securities as well as portfolios also change.
For the success of the fund houses, the study of portfolio management and its
accurate application is essential in today‘s world of investment.
Financial investments cannot be conceived of without portfolio management.
Though, no effort was spared to make the study most accurate and useful, the
‗sample size‘ selected for the same may not be the true representative of the
industry, resulted in biased results.
Mutual fund industry has a vast panorama. Hence, physical constraints of an
individual researcher can obviously put some restrictions in the assembling
of the data.
This being the maiden experience of the researcher of conducting study such
as this, the possibility of better results, using deeper statistical techniques in
analyzing and interpreting data may not be ruled out.
Time constraint cannot be overlooked. There was shortage of time to
complete the survey as the mutual fund industry is a vast topic to study,
examine and analysis.