The significant outcome of the government policy of liberalization in industrial and financial sector has been the development of new financial instruments. These new instruments are expected to impart greater competitiveness, flexibility and efficiency to the financial sector. Growth and development of various mutual fund products in Indian capital market has proved to be one of the most catalytic instruments in generating momentous investment growth in the capital market. These is a substantial growth in the mutual fund market due to a high level of precision in the design and marketing of variety of mutual fund products by banks and other financial institution providing growth, liquidity and return. In this context, prioritization, preference building and close monitoring of mutual funds are essential for fund managers to make this the strongest and most preferred instrument in Indian capital market for the coming years. With the decline in the bank interest rates, frequent fluctuations in the secondary market and the inherent attitude of the Indian small investors to avoid risk, Mutual Funds are taking their place. Mutual funds combine various elements of liquidity, return and security in making themselves as the best possible alternative for the small investors in Indian market. I have attempted to study various need expectations of small investors from different types of mutual funds available in the Indian market and identify the risk return perception with the purchase of Mutual Funds. The Indian financial system in general and the mutual fund industry in particular continue to take turn around from early 1990s. During this period mutual funds have pooled huge investments for the corporate sector. The investment habit of the small investors particularly has undergone a sea change. Increasing number of players from public as well as private sectors has entered in to the market with innovative schemes to cater to the requirements of the investors, in India and abroad. For all investors, particularly the small investors, mutual funds have provided a better alternative to obtain benefits of expertise- based equity investments to all types of investors. 1


HDFC Asset Management Company Limited (AMC)
To be a dominant player in the Indian mutual fund space recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.

Sponsors Housing Development Financial Corporation Limited (HDFC)
HDFC was incorporated in 1977 as the first specialized housing finance institution in India. HDFC provides financial assistance to individuals, corporate and developers for the purchase or construction of residential housing. It also provide property related services (e.g. property identification, sales services and valuation), training and consultancy. Of course activities, housing finance remains the dominant activity. HDFC currently has a client base of over 800000 borrowers, 1200000 depositors, 92000 shareholders and 50000 deposit agents. HDFC raises funds from international agencies such as the World Bank, IFC (Washington), USAID, CDC, ADB and KFW, domestic term loans from banks and insurance companies, bonds and deposits. HDFC has received the highest rating for its bonds and deposits program for the 9 th year in succession. HDFC Standard Life Insurance Company Limited. Promoted by HDFC was the 1st life insurance company in the private sector to be granted a Certificate of Registration(on October 23, 2000) by the Insurance Regulatory and Development Authority to transact life insurance business in India.


Standard Life Investment Limited
The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. In 1998, Standard Life Investment Limited became the dedicated investment management company of The Standard Life Group and is owned 100% by the Standard Life Assurance Company. With the global assets under management of approximately US$186.45 billion as at March 31, 2005, Standard Life Investment Limited is one of the world’s major investment companies and is responsible for investing money on behalf of five million retail and institutional clients worldwide. With its headquarters in Edinburgh, Standard Life Investment Limited has an extensive and developing global presence with operations in the United Kingdom, Ireland, Canada, USA, China, Korea and Hong Kong. In order to meet the different needs and risk profiles of its clients, Standard Life Investment Limited manages a diverse portfolio covering all the major markets world-wide, which includes a range of private and public equities, government and company bonds, property investments and various derivative instruments. HDFC Trustee Company Ltd. A company incorporated under the Companies Act, 1956 is the Trustee to the Mutual Fund vide the Trust deed dated June 8, 2000, as amended from time to time. HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC Limited. HDFC asset Management Company (AMC) HDFC AMC was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the Mutual Fund by SEBI on July 3, 2000. The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020. 3

the Sponsor of Zurich India Mutual Fund. The present share holding pattern of AMC is as follows: Particulars HDFC Standard Life Investment Limited % of the paid up share capital 50. HDFC Sovereign Gilt Fund (HSGF) and HDFC Cash Management Fund (HCMF). The AMC had entered into an agreement with ZIC to acquire the said business. HDFC Top 200 Fund. subject to necessary regulatory approvals. following a review of its overall strategy. (HT200). HDFC Floating Rate Income Fund (HFRIF). HDFC Capital Builder Fund (HCBF). the Schemes of Zurich India Mutual Fund has now migrated to HDFC Mutual Fund on June 19. had decided to divest its Asset Management business in India. HDFC Liquid Fund (HLF). HDFC Growth Fund (HGF). The AMC is also managing the respective Plans of HDFC Fixed Investment Plan. 2003. The AMC has obtained 4 . The AMC is managing 18 open-ended schemes of the Mutual Fund viz. HDFC Tax Plan 2000 (HTP). HDFC High Interest Fund (HHIF).161 crore. HDFC Equity Fund (HEF). The paid up capital of the AMC is Rs. the Trustee has appointed HDFC Asset Management Company Limited to manage the Mutual Fund.In terms of the Investment Management Agreement. 75. HDFC Gilt Fund (HGILT).10 49. HDFC Income Fund (HIF). HDFC TaxSaver (HTS). HDFC Balanced Fund (HBF). HDFC Index Fund. HDFC Short Term Plan (HSTP). a closed ended Income Scheme. HDFC Prudence Fund (HPF). On obtaining the regulatory approvals.90 Zurich Insurance Company (ZIC). HDFC Children's Gift Fund (HDFC CGF).

2000 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations. The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund.PM / INP000000506 dated December 22. . 5 . 2001 to December 31. 1993. 2003.registration from SEBI vide Registration No. The Certificate of Registration is valid from January 1.

mindsets and risk taking ability. financial instrument’s nature. Mutual funds are indeed the best tool for wealth creation. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. in each case wants money to grow. debentures and other securities.What exactly is a Mutual Fund? A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. market information. Whatever other instruments can do. analytical skills and therefore their funds are lacking proper management and diversification to get market-linked return with flexibility as well as liquidity. mutual funds can do too – and more efficiently. but the solution. Most of the investors don’t have sufficient knowledge about different investment options. 6 . A security that gives small investors access to a well-diversified portfolio of equities. The Situation could vary as per age groups. Mutual Funds are the unique instrument that offers an individual professional management. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. The flow chart below describes broadly the working of a mutual fund. flexibility. professionally managed basket of securities at a relatively low cost. bonds and other securities. These kinds of investors should prefer mutual funds to channelise their funds properly. The money thus collected is then invested in capital market instruments such as shares. Each shareholder participates in the gain or loss of the fund. liquidity and a chance to get market linked returns. diversification. Shares are issued and can be redeemed as needed.

In spite of the stiff competition and losing market share. UTI still remains a formidable force to reckon with. a system of risk-reward has been created where the corporate sector is more transparent then before. and even the regulators have become more mature and responsible. which averaged at less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. While UTI has always been a dominant player on the bourses as well as the debt markets. while others have decided to close shop by either selling off or merging with others. the new generations of private funds which have gained substantial mass are now seen flexing their muscles. 7 . Total collection for the current financial year ending March 2000 is expected to reach Rs450bn. By rewarding honest and transparent management with higher valuations. Those directly associated with the fund management industry like distributors. Fund managers. New players have come in. Product innovation is now passé with the game shifting to performance delivery in fund management as well as service. The industry is also having a profound impact on financial markets. FMCG and technology sector. registrars and transfer agents. Funds have shifted their focus to the recession free sectors like pharmaceuticals. Funds performances are improving. by their selection criteria for stocks have forced corporate governance on the industry.MUTUAL FUND INDUSTRY Alone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players in the market. Funds collection. In the current year mobilization till now have exceeded Rs300bn. Last six years have been the most turbulent as well as exiting ones for the industry.

The Financial Express September 99) This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets. which improves liquidity and reduces risk.S. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. but this trend is beginning to change. It is just that Mutual Funds are going to change the way banks do business in the future. Their role as intermediaries cannot be ignored. The coming few years will show that the traditional saving avenues are losing out in the current scenario. The power shift towards mutual funds has become obvious. The basic fact lies that banks cannot be ignored and they will not close down completely.34 crore during the first nine months of the year as against a net inflow of Rs. In India. 7819. India is at the first stage of a revolution that has already peaked in the U.40 crore in the case of public sector funds. (Source: Thinktank.S. Indeed private MFs saw a net inflow of Rs. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way.604.What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sector mutual funds. The collection in the first half of the financial year 1999-2000 matches the whole of 1998-99. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. 8 . mutual fund assets are not even 10% of the bank deposits. Mutual funds are now also competing with commercial banks in the race for retail investor’s savings and corporate float money. boasts of an Asset base that is much higher than its bank deposits. The U.

1987-1993 (Entry of Public Sector Funds) Entry of non-UTI mutual funds. LIC in 1989 and GIC in 1990. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. Second Phase .HISTORY & BACKGROUND Four Phases Of Mutual Fund In India The mutual fund industry can be broadly put into four phases according to the development of the sector. First Phase . Punjab National Bank Mutual Fund (Aug 89). The end of 1993 marked Rs.1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. Bank of India (Jun 90). Each phase is briefly described as under. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India.47. Indian Bank Mutual Fund (Nov 89). SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87). 9 . 700 crores of assets under management.6. The first scheme launched by UTI was Unit Scheme 1964. 004 as assets under management. At the end of 1988 UTI had Rs. Bank of Baroda Mutual Fund (Oct 92).

10 . there were 33 mutual funds with total assets of Rs. 1993 was the year in which the first Mutual Fund Regulations came into being.1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993. a new era started in the Indian mutual fund industry. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.Third Phase . The Unit Trust of India with Rs.541 crores of assets under management was way ahead of other mutual funds. Also. functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. 1. It was bifurcated into two separate entities. Fourth Phase . 835 crores (as on January 2003). As at the end of January 2003. The number of mutual fund houses went on increasing. giving the Indian investors a wider choice of fund families. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29. except UTI were to be registered and governed.21. The Specified Undertaking of Unit Trust of India.since February 2003 This phase had bitter experience for UTI. with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. under which all mutual funds.44.805 crores. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

which manage assets of Rs. the mutual fund industry has entered its current phase of consolidation and growth. BOB and LIC. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. GROWTH IN ASSETS UNDER MANAGEMENT 11 . and with recent mergers taking place among different private sector funds.153108 crores under 421 schemes.76.The second is the UTI Mutual Fund Ltd. 000 crores of AUM and with the setting up of a UTI Mutual Fund. As at the end of September. PNB. It is registered with SEBI and functions under the Mutual Fund Regulations. 2004. sponsored by SBI. conforming to the SEBI Mutual Fund Regulations. there were 29 funds.

Closed-ended Funds A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. In order to provide an exit route to the investors. The key feature of open-end schemes is liquidity. Interval Funds Interval funds combine the features of open-ended and close-ended schemes. These do not have a fixed maturity.TYPES OF MUTUAL FUNDS Mutual fund schemes may be classified on the basis of its structure and its investments. They are open for sale or redemption during pre-determined intervals at NAV related prices. some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. The fund is open for subscription only during a specified period. By Structure: Open-ended Funds An open-end fund is one that is available for subscription all through the year. 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. 12 .

Balanced Funds The aim of balanced funds is to provide both growth and regular income. have outperformed most other kind of investments held over the long term. These schemes generally invest in safer shortterm instruments such as treasury bills. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. or fall equally when the market falls. 13 . Money Market Funds The aim of money market funds is to provide easy liquidity. the NAV of these schemes may not normally keep pace. preservation of capital and moderate income. In a rising stock market. certificates of deposit. corporate debentures and government securities. It has been proven that returns from stocks. Income Funds are ideal for capital stability and regular income. Growth Funds The aim of growth funds is to provide capital appreciation over the medium to long-term. 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. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time. Such schemes generally invest in fixed income securities such as bonds. commercial paper and inter-bank call money. Such schemes normally invest a majority of their corpus in equities. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market.By Investment Objective:Income Funds The aim of income funds is to provide regular and steady income to investors. These are ideal for investors looking for a combination of income and moderate growth.

Typically entry and exit loads range from 1% to 2%. The advantage of a no load fund is that the entire corpus is put to work. Special Schemes: Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. if the fund has a good performance history. 14 . It could be worth paying the load. each time you buy or sell units in the fund. a commission will be payable. The Act also provides opportunities to investors to save capital gains u/s 54EA by investing in Mutual Funds. Other Schemes: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. 2000 and the amount is invested before September 30.Load Funds: A Load Fund is one that charges a commission for entry or exit. The investment of these funds is limited to specific industries like InfoTech. No-Load Funds: A no-Load Fund is one that does not charge a commission for entry or exit. Investments made in Equity Linked Savings Schemes (ELSS) and pension Schemes are allowed as deduction u/s 88 of the Income Tax Act. 1961. That is. no commission is payable on purchase or sale of units in the fund. FMCG and Pharmaceuticals etc. 2000. That is. provided the capital asset has been sold prior to April 1.

which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings. Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sense or the NSE 50  Sectoral Schemes Sect oral Funds are those. 15 .

Govt. Securities include Equities. who is a person who takes the decisions where the money should be invested in securities according to the scheme’s objective.PROCESS OF MUTUAL FUND In the above graph shows how Mutual Fund works and how investor earns money by investing in the Mutual Fund. The fund manager passes beck return to the investor. Debentures. Investors put their saving as an investment in mutual fund. Bonds and Commercial Paper etc. 16 . securities. These securities generate returns to the fund manager. The fund manager.

17 . Receive information about the investment policies. Receive unit certificates or statements of accounts confirming the title within 6 weeks from the date of closure of the subscription or within 6 weeks from the date of request for a unit certificate is received by the Mutual Fund.Mutual Funds – Organization There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund: Organization of a Mutual Fund Rights of a Mutual Fund Unit holder A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations is entitled to: 1. 2. investment objectives. financial position and general affairs of the scheme.

Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase. 5. Change the Asset Management Company. 18 . Inspect the documents of the Mutual Funds specified in the scheme's offer document. 4. The dissenting unit holder has a right to redeem the investment. Vote in accordance with the Regulations to:a. which are likely to modify the scheme or affect the interest of the unit holder. Wind up the schemes. Approve or disapprove any change in the fundamental investment policies of the scheme. b. c.3.

Many funds provide anytime withdrawal enabling a big investor to take maximum benefits. They can manage the maturity of their portfolio by investing in instruments of varied maturity profile. On an average debt funds have posted returns over 10 percent over one year horizon. • Apart from liquidity. 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. Even some of the debt funds have generated superior returns at relatively low level of risk. • Liquid funds offer liquidity as well as better return than banks and so attract investors. • Mutual funds specialize in identification of stocks through dedicated experts in the field and this enables them to pick stocks at the right movement. 19 . • Moreover. Sector funds provide an edge and generate good returns if the particular sector is doing well. • One can minimize his risk by investing in mutual funds as the mutual fund managers analyze the companies’ financials more minutely than an individual can do as they have the expertise to do so. the funds provide very good post-tax returns on year-to-year basis. 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. • The benefits listed so far are essentially for the small retail investor but the industry can attract investments from institutional and big investors as well.Why should one invest in mutual funds……? • One can avail of the benefits of better returns with added benefits of anytime liquidity by investing in open-ended debt funds at lower risk.

Here is the risk. This limits him from diversifying his portfolio as well as benefiting from multiple investments. • Next problem is that of our funds or money. a good investment consultants and counselors will can investors take informed decision. Armed with the expertise of investment techniques. since their appetite for risk is also limited. An investor can see different kinds of funds where in he can get maximum benefit with utmost care. • Investing through MF route enables an investor to invest in many good stocks and reap benefits even through a small investment. This not only diversifies the portfolio and helps in generating returns from a number of sectors but reduces the risk as well.Moving up in the risk spectrum. they would rather have some exposure to debt as well. One might consider investing in a combination of schemes to achieve your specific goals. there are many people who would like to take some risk and invest in equity funds/capital market. A single person can’t invest in multiple high-priced stocks for the sole reason that his pockets are not likely to be deep enough. For these investors. 20 . they can invest in equity as well as in good quality debt thereby reducing risk and providing the investor with better returns than he could otherwise manage. • Investing in just one Mutual Fund scheme may not meet all investment needs. balanced funds provide an easy route of investment. return grid that shows how and where an investor can invest according to his risk. However. Through identification of the right fund might not be an easy task. returns appetite.

2. 26 in 1995. Then. This means that the buying power of rupee has decreased. 3. you can not buy as much for Rs. this often results in falling short of their expectations. Meddling with your account too often: You should have clear understanding of your investments so that you are comfortable with their behavior. You should decide whether you are interested in rice stability. Source: RBI report on Currency and Finance). The value of Rs.100 in 1980 was down to Rs. Even in the investment field.Common investment mistakes that people can make Knowing about some investment mistakes people can make. select mutual fund with objective similar to yours. people tend to forget the impact of inflation will have on investment in long-term. Determine your investment goals. may win over the “hare”. the “tortoise” that is more patient. depending on your age and your tolerance for risk. (Consumer price index for urban non-manual employees has grown by 9. While past performance does not necessarily guarantee future performance. you may miss the upturns as well.35% per annum between 1980-81 and 1994-95.You have to keep in mind that will eat into your savings faster than you can imagine. Investing without a clear plan of action: Many people neglect to take the time to think about their needs and long-term financial goals before investing. or a combination of these. 21 .100 now that you could back in 1980. If you keep transferring investments in response to downturns in prices. Unfortunately. Losing sight of inflation: While may be aware of the fact that the cost of goods and services are rising. growth. 1. your understanding of the behavior of various investments over a time can help prevent you from becoming shortsighted about your long-term goals.

if you do not place long-term investing among your top priorities. we often relate this concept to stocks and bonds. diversify: When it comes to investing. When you spread your holdings around. Do not put all your eggs into one basket. While we know that we should not “put all our eggs in one basket”. 22 . Regardless of age or income. The sooner you start. the less you have to save every month to reach your financial goals. Take the time to discuss the importance of diversifying investments among different assets categories and industries. and planning for your future often takes a backseat.4. you may not be able to meet your financial goals. Most people these days have too many bills to pay every month. most of us do not appreciate the importance of diversification. 5. you do not have to rely on the success of just one investment. Investing too little too late: People do not “pay themselves first”.

This diversification reduces the risk because seldom do 23 . Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. 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. Today mutual funds are fast emerging as the favorite investment vehical because of the many advantages they have over other forms and avenues of investing. The major advantages offered by mutual funds to all investors are: Professional Management Mutual Funds provide the services of experienced and skilled professionals.BENEFITS OF MUTUAL FUND Benefits of Mutual Funds Mutual funds serve as a link between the saving public and the capital markets. They mobilize savings from the investors and bring them to borrowers in the capital markets.

In closed-end schemes. Return Potential Over a medium to long-term. delayed payments and follow up with brokers and companies. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. it offers different types of schemes to investors with different needs and risk appetites. Mutual Funds save your time and make investing easy and convenient. an investor can invest his money in a Growth Fund ( equity scheme) and Income Fund (Debt scheme) depending on his risk appetite and thus creates balanced portfolio easily or simply just buy a Balanced scheme. both debt and equity. secondly it offers an opportunity to investors to invest sums across a variety of schemes. Variety Mutual funds offer a tremendous variety of schemes. custodial and other fees translate into lower costs for investors. Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. the units can 24 . Liquidity In open-end schemes. This variety is beneficial in two ways: first. Low Cost Mutual Finds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage. the investor gets the money back promptly at net asset value related prices from the Mutual Fund. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries.all stocks decline at the same time and in the same proportion. For example.

Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme. Regulations All Mutual Funds are registered with SEBI and they function within the provision of strict regulations designed to protect the interests of investors. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. However. Choice of schemes Mutual Funds offer a family of schemes to suit your varying needs over a lifetime. Flexibility Through features such as regular investment 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. the proportion invested in each class of assets and the fund manager's investment strategy and outlook. Affordability Investors individually may lack sufficient funds to invest in high-grade stock. Tax Benefits Any income distributed after March 31. you can systematically invest or withdraw funds according to your needs and convenience. 2002 will be subject to tax in assessment of all unit holders. The operations of Mutual Funds are regularly monitored by SEBI. regular withdrawal plans and dividend reinvestment plans. as a measure of concession to unit holders of open25 .

DRAWBACKS OF INVESTING IN MUTUAL FUNDS Potential loss Unlike a bank deposit.2003. the fund does not guarantee any minimum percentage of return. Apart from a few assured returns schemes. the investment in a mutual fund could fall in value. The Diversification Penalty While diversification reduces the risk of loss from holding a single security. Also.5%. income distributions for the year ending March 31. 26 . as the fund is nothing bur a portfolio of different securities. including income from units of the Mutual Fund. They can not made tailor made portfolio.ended equity-oriented funds.will be taxed at a concessional rate of 10. No tailor made portfolio Mutual fund portfolios are created and marked by AMCs. it also limits the larger gains if a single security increases dramatically in value. in to which investors invest. diversification does not protect the unit holders totally from an overall decline in the market. Units of the schemes are not subject to Wealth-Tax and Gift-Tax. In case of Individuals and Hindu Undivided Families a deduction up to Rs 9000 from the Total income will be admissible in respect of income from investments specified in Section 80L.

with the exception of Unit 64. The Securities & Exchange Board of India (SEBI) was formed in 1993 as a capital market regulator. administration and management of mutual funds in India were clearly laid down. 1998 and 1999. with over US$1trillion assets under management worldwide. 1996 have been further amended in 1997. The SEBI (Mutual Funds) Regulations. The rules for the formation. highest in the world. The UTI was regulated by a special Act of Parliament while funds promoted by public sector banks were subject to RBI Guidelines of July 1989. US based. One of its responsibilities was to regulate the mutual fund industry and it came up with comprehensive regulations for the industry in 1993. Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments. Net Asset Values and Pricing of Mutual Funds. Some facts for the growth of mutual funds in India  100% growth in the last 6 years. Efforts have been made to bring UTI schemes under SEBI's ambit with the result that all schemes. Regulations also prescribed disclosure requirements. all mutual funds are regulated by SEBI. Today. The regulations were thoroughly reviewed and re-notified in December 1996. The revised guidelines tighten the accounting and disclosure requirements in line with recommendations of The Expert Committee on Accounting Policies. are now regulated by the capital market regulator. Only channelizing these savings in mutual funds sector is required. Our saving rate is over 23%. 27   .MUTUAL FUND REGULATION There was no uniform regulation of the mutual funds industry till a few years ago.

 We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion. it cannot provide a guarantee without RBI permission. securities in which mutual fund invest. Since the AMC and trustee co. 'B' and 'C' class cities are growing rapidly.s they are regulated by the department of co affairs. If there is a bank sponsored find. Bank sponsored mutual finds are jointly regulated by SEBI and RBI permission. Trying to curb the late trading practices. are Co. Listed mutual funds are subject to the listing regulations of stock exchanges. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. SEBI is the regulator of all funds. RBI regulates money and govt. they have to send periodic report to the roc and the co law board is the appellate authority. 28 . except offshore funds. 1996. Soon they will find scope in the growing cities.      Legal and Regulatory Framework Mutual funds are regulated by the SEBI (Mutual Fund) regulations. Today most of the mutual funds are concentrating on the 'A' class cities. Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products.

UTI can borrow as well as lend and also engage in other financial services activities. UTI is governed by the UTI act. All stock exchanges are SROs. 29 . 1963 and is voluntarily under SEBI regulations. AMFI is an industry association of mutual funds. SROs cannot do any legislation on their own. AMFI is not yet a SEBI registered SRO. AMFI has created code for mutual funds. AMFI aims at increasing investor awareness about mutual finds. encouraging best practices and bringing about high standards of professional behavior in the industry.Investors cannot sue the trust. as they are the same as the trust and cant sure themselves. SROs are the second tier in the regulatory structure.

It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders. It functions under the supervision and guidelines of its Board of Directors.Association of Mutual Funds in India (AMFI) With the increase in mutual fund players in India. AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association. It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August. The objectives of Association of Mutual Funds in India The Association of Mutual Funds of India works with 30 registered AMCs of the country. Till date all the AMCs are that have launched mutual fund schemes are its members. 30 . a need for mutual fund association in India was generated to function as a non-profit organisation. The objectives are as follows: This mutual fund association of India maintains a high professional and ethical standards in all areas of operation of the industry. 1995. Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards.

At last but not the least association of mutual fund of India also disseminate information’s on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. Association of Mutual Fund of India do represent the Government of India. the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. 31 . It develops a team of well-qualified and trained Agent distributors.AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.

a conservative U. Swiss francs. Here too some of them will down their shutters in the near future to come. Silver. For Example. One important reason for it is that most major players already have presence here and hence these big names would hardly like to get left behind. close down or merge with stronger players in three to four years. Old Mutual etc. Permanent Portfolio Fund. The latter type of funds are preferred by corporate’s who want to hedge their exposure to the commodities they deal with. treasuries etc. short –term and long-term U. But this does not mean there is no room for other players. based fund invests a fixed percentage of it’s corpus in Gold. In the private sector this trend has already started with two mergers and one takeover.S. Principal. 32 . are looking at Indian market seriously. specific stocks on various bourses around the world. Some of the older public and private sector players will either close shop or be taken over. For instance. Some big names like Fidelity. Some like real estate funds and commodity funds also take an exposure to physical assets.S. There will be a large number of offers from various asset management companies in the time to come.S.FUTURE SCENARIO The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investor’s shift their assets from banks and other traditional avenues. In the U. most mutual funds concentrate only on financial funds like equity and debt. Out of ten public sector players five will sell out. The market will witness a flurry of new players entering the arena. a cable manufacturer who needs 100 tons of Copper in the month of January could buy an equivalent amount of copper by investing in a copper fund.

precious metal funds and real estate funds (investing in real estate and other related assets as well.In U. SEBI is working out the norms for enabling the existing mutual fund schemes to trade in Derivatives. The mutual fund industry is awaiting the introduction of DERIVATIVES in the country as this would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset Value (NAV). In developed countries like the U.S. so that the mutual funds can implement the changes that are required to trade in Derivatives. Importantly.S.In India. many market players have called on the Regulator to initiate the process immediately. 33 . the Canada based Dundee mutual fund is planning to launch a gold and a real estate fund before the year-end. apart from bullion funds there are copper funds.A.). but in India only the tip of the iceberg has been explored.A there are funds to satisfy everybody’s requirement. In the near future India too will concentrate on financial as well as physical funds.

Since market value of securities changes every day.Mutual fund invest the money collected from the investors in securities markets. Also called. It may include a sales load. Such prices are NAV related. NET ASSETS VALUE (NAV) The performance of a particular scheme of mutual fund is denoted by Net Assets Value (NAV). In simple word. Repurchase Price Repurchase price is the price at which a close-ended scheme repurchases its units and it may include a back-end load. The NAV per unit is the 34 . Redemption Price Redemption price is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Schemes that do not charge a load are called ‘No Load’ schemes. Sales Load Sales load is a charge collected by a scheme when it sells the units. NAV of a scheme also varies on day to day basis. Net Asset Value is the market value of the securities held by the scheme. Also called Offer Price.DIFFERENT TERMS Sale Price Sale price is the price you pay when you invest in a scheme. ‘Front-end’ load. This is also called Bid Price.

35 . vale of securities of a scheme divided buy the total no of units of the scheme of any particular date.10 each to the investors. SEBI requires that all expenses and incomes are accrued up to the valuation date and considered for NAV computation. for example management fees payable to the AMC. So NAV is equals toMarket / fair value of schemes (+) Receivables (+) Accrued income (+) Other assets (-) Accrued expenses (-) Payables (-) Other liability (/) Number of unit outstanding. The net assets value (NAV) is the actual value of one unit of a given scheme in any given business day. "other assets" includes any income due to the fund but not received as on the valuation date (for example. NAV is required to be disclosed by the mutual funds on a regular basis –daily of weeklydepending on the type of scheme. For example if the market value if securities of a mutual fund scheme is Rs. It is calculated by deducting all liabilities except unit capital of the fund from the realizable value of all assets and dividing it by number of units outstanding. 200 lakhs and mutual fund has issue 10 lakhs units of Rs. dividend announced by a company but yet to be received). Here. 20 . "other liabilities" includes expenses payable by the fund. then the NAV per unit of the fund is Rs. Similarly. The NAV reflect the liquidation value of the funds investments on that particular day after accounting for all expenses.

Notes: 1. 2. In other words. Calculated by dividing the total net asset value of the fund by its number of outstanding shares. Financial statements used in the NAV.Net Asset Value . the total value of the fund's portfolio less liabilities.NAVPS 1. A fundamental analysis indicator that gives an estimate of the value of a fund's shares after all assets are sold and all liabilities are paid off. The value of a mutual fund share. 36 . In terms of corporate valuations. This figure is affected by both its underlying value and market forces. 2. Notes: The NAV is usually below the market price because the current value of the fund’s assets is higher than the historical financial Net Asset Value Per Share . the book value of assets less liabilities.NAV 1. It is important to consider both these factors when buying a mutual fund because the price that the fund investors pay is based on them. NAVPS is the value of a single unit of a mutual fund. 2. The NAVPS is usually below the market price per share because the current value of the fund's assets is higher than the value appearing on the historical financial statements used in the NAVPS calculation. In the context of mutual funds. The NAV is usually calculated on a daily basis.

37 . The value of each changes depending on the performance of the fund. this is specified for tax saving schemes. They also have to make required disclosures to the investors in areas such as calculation of NAV and repurchase price. The AMC and its directors are answerable to the Trustees and must submit quarterly reports to them on AMC activities. The AMC has to act as the investment manager of the Trust under the Board supervision and direction of the Trustees. Asset Management Company (AMC) Making decisions regarding investment of the money of the unit holders is a tricky affair. One of the other objectives of forming an AMC is that of bringing about transparency in the working of a mutual fund. People at the helm of affairs need to have knowledge about investment alternatives and should also have up. Directors of the AMC should have adequate professional experience in financial services and should be individuals of high moral information. The AMC should also be approved and registered with the SEBI as an AMC. Each unit represents one undivided share in the assets of a scheme. Normally.Unit Unit means the interest of the holders in a This is where the role of an Asset Management Company comes into play. Lock in period: Lock-in-period is the minimum period for which investment made in new units of a scheme cannot be redeemed.

Systematic investments plan: Under these plans. quarterly. one ends up buying more units when the price is low. On the specified dates. falling or fluctuating. etc.Systematic transfer plan: This is a plan offered by some funds under which an investor may choose to transfer a specified amount from their investments in one scheme of the fund to another scheme of the same fund at periodic intervals (usually monthly or quarterly). 38 . As a result. additional units at the prevailing NAV are allotted to the investor. and fewer units when the price is high. By investing a fixed amount at regular intervals. This is highly convenient for a person who has a regular source of income and wishes to allocate a portion of the same towards savings. irrespective of whether the market is rising. the average unit costs will always be less than average market price per unit. over a period of time. the investor gives a mandate to the mutual fund to allot fresh units at specified intervals (monthly. It carries an additional advantage of Rupee Cost Averaging. The investor does not need to spend time and effort in evaluating investments in each time interval and probably ensures that the surplus funds do not remain idle.) against which the investor provides post-dated cheques. the cheques are realized by the mutual fund and.


it was a smooth sailing for the industry. designing a general product and expecting a good response will be futile. They had no other choice but to turn to MFs to reap the benefits of stock market investing. At the retail level. through UTI could do this nearly for three decades (1964-1987) due to its monopoly in the industry. Hence.Background &Need for the study: It is widely believed that MF is a retail product designed to target small investors. All this. This product is structured as a certificate of deposit. During the third phase (1992 hence) the industry was thrown open to the private sector and the stage got set for competition. in US. Hence. Now MF industry is facing competition not only from within the industry but also from other financial products that may provide many of the same economic functions. thus attempting to meet a common consumer requirement. the public sector banks and financial institutions entered the field. one saving institution has patented a product that promises to deliver consumers a pay off indexed to college tuition costs. salaried people and others who are intimidated by the stock market but nevertheless. heightens the consumer confusion in his selection of the product. but with the then existing boom condition. Further. Currently there are more than 477 schemes with varied objectives and AMCs compete against one another by launching new products or repositioning old ones. the globalization and liberalization measures announced by the government led to a paradigm shift in the mindset of investors and the capital market environment become more unfriendly to retail investors. but it could have been set up as a Mutual Fund. in aggregate. the need to be innovative in designing the product was not felt and investors had to choose from the limited schemes offered. For example. Other examples could be ULIP plans which are giving a good competition to MFs. like to reap the benefits of stock market investing. as MFs but are not strictly MFs. He is confused as to how to shift the grain from the 40 . Such products will shortly appear in the Indian market also. investors are unique and are a highly heterogeneous group. In the second phase of oligopolistic competition (1987-1992).

chaff? Unless the MF schemes are tailored to his changing needs, and unless the AMCs understand the fund selection/switching behavior of the investors, survival of the funds will be difficult in future. With this background an attempt is made in this project to study the factors influencing the fund/scheme selection behaviors of retail investors.

Objectives of the Study:
In order to examine the issues raised above, this survey has the following objectives before it: 1) To understand the savings avenue preference among MF investors 2) To identify the features the investors look for in Mutual Fund products. 3) To identify the schemes preference of investors. 4) To identify the factors that influencing the investor’s fund/scheme selection. 5) To identify the information sources influencing the scheme selection decision. 6) To identify the preferred communication mode.

Sample Plan:
Sampling Unit: Sample size: Sample Area: Sampling Method: Any individual above the age of 20 years and who is earning. 100 people from Ahmedabad. Maninagar, Vejalpur, Navarangpura, Sarangpur Random Sampling


Research Instrument:
The research instrument used for primary data collection is questionnaire. The questionnaire has close ended questions. (Questionnaire is attached as Annexure) The questionnaire is supposed to be given to an individual to fill up on his own.

Importance and Benefits:
Though many MF are giving nearly 100% returns in a year, only 2% of total population has invested in MF. The research would help to understand the reasons why people invest less in MF. This research would help AMCs to understand what steps can be taken to increase the investment in MF.

Limitation of the study:
1. Sample size is limited to 150 educated investors in Ahmedabad only. The sample size may not adequately represent the National market. 2. This study has not be conducted over an extended period of the time having both market ups and downs. The market state has significance influence on the buying patterns and preferences of investors. For example, the July 2001 fall has sent violent shock waves across the MF investor community and is bound to influence the scheme preference/ selection of the investors. The study has not captured such situations. 3. We have to depend on a small sample size of investors to find out the results of the study which may become biased and this sample might be small to gather an in depth knowledge of MF. 4. Investor’s behavior is affected by various factors and in a short span of time it is not possible to study all this factors. 5. It may not be possible to take proportional sample size from each area.


6. People might not reveal there true investment behavior in the interview. Therefore it might lead to error in judgment.

Method of Data Collection
For the purpose of understanding investor’s behavior we have collected data from both primary as well as secondary data. Survey sample is taken as 100.

Primary data-in order to collect direct information from investors we have designed a questionnaire. We have approached investors of different age and income groups. Secondary data -in secondary data we have collected articles related to investor’s behavior from different sources like internet, magazines, newspaper and documents provided by our company.

Framework of Analysis:
To understand the savings avenue preference, scheme preference, and objective for investment in MFs, and also to identify the information sources to influencing scheme selection, and the preferred mode of communication, the respondents were asked to rank their preferences on a ranking scale. The ranks were ascertained by obtaining the weighted mean value of the responses.

Characteristics and Attributes of Focused & Disciplined Investor • • Taking investment as serious study, research and monitoring work and not a casual game with hear-say and hope for the best. Understand investment is a matter of timing, not blindly in long term. 43

• Take care of every dollar of investment to ensure its value creation. These kinds of people invest heavily in mutual funds. They don’t understand the philosophy of Mutual Funds. Study risk / reward carefully and prepare to exit if faced with high uncertainty to acquired gain. Even if they know about the mutual funds they are not interested. who can manage their portfolio. Behavior about investing in Mutual Fund is pretty different. Debentures. • Those people who want to invest in equity market but don’t have knowledge and huge amount of money to invest in share market and don’t even have ability to take high risk. NSC. • Investors who are well aware of the knowledge of stock market. Bond. or preserve capital or cut loss. they don’t want invest in mutual funds because they get huge profits in stock market. They generally divide their investments into two parts i. PPF. Most of the people invest in MFs only for the purpose of tax benefits. mutual funds comes out to be the best option for them. These kinds of investors are very aggressive and high risk taking. 44 . not using diversification of mix-up good apples with bad fruits. Majority of their go in to the mutual funds. MFs is a kind of midway between these two. etc and Stock Market.e. Fixed income instruments like FDs.• • • Invest in market instrument that have potential to bring the best return. They are not very much concerned about the returns which ELSS schemes are giving but they are only concerned about getting the tax deductions. Make research on future scenarios of investment performance with monitoring to validate the assumptions and not to deal with uncertainty or unknown. • • Most of the people are unaware of MFs or they feel it is very complicated thing.

they find MF as a boaring. don’t have sufficient Funds and time to track the market and don’t want to take high risks. Those who enjoy investing in stock market.• Mutual Funds are attractive to only those people who don’t have knowledge about share market. Those who are unaware of mutual funds. • Some investors are very risk averse. Those who are very risk averse. 45 . People who don’t want to invest in mutual funds: • • • • Those who have never invested. They don’t want to invest in MFs just because it is an indirect investment in stock market.

The survey was done without gender bias. of respondents Female 20% Male Female Male 80% • The sample size of the survey is 100 people out of which 20 were males and 80 females.Bird’s Eye view of the Sample Taken No. The purpose of conducting the survey was to find out investment behavior of people who are preferably earning and have some money to invest. 46 .

47 .Age Group 24% 32% 20-35 35-50 above 50 44% • Out of these 100 people. 32 lie in the age group of 20-35 years. The age groups were selected in this manner because a considerable change in the knowledge and investment pattern was seen in these break-ups. 44 in the age group of 35-50 years and 24 above 50 years of age.

48 . Student (3%) and retired (2%)people were also included in the sample size but it was realized that they could not contribute much.Occupation 2% Service Student Business Retired 24% 3% 71% • The service class people capture the maximum share of 71%. The second largest share is of the businessman with 24%.

So it can be one of the reasons that they prefer safety in Investment so they invest in MF rather than stock market. Cource • Around 40% people are graduates and 34% people have completed their professional courses. We find from our survey that under graduate (3%) people are not more aware about MF product. Course are in service class. Here we can relate Qualification with Age group and Occupation. In our survey we found that the people who have done PG (23%) and Prof. 49 .Qualification 3% 34% 40% 23% 12th Graduate PG Prof.

43% Open Ended Close Ended 84. those people who want to invest for a long period of time prefer Close-ended schemes.Preferred Scheme 15.ended schemes (84. The main reason for more investment in Open-ended scheme is no entry and exit barriers.57% Interpretation: Based on the duration of operation of schemes. the 1st preference is for open.57%) and only 15. Generally. 50 .43% of the respondents favor close-ended schemes.

51 . From our survey of 100 respondents awareness of MF product is more in service class people. 70% of people are aware about Mutual Fund while 30% of people are not aware about Mutual Fund. A large group of business class people is aware about Mutual Fund as to take risk is the nature of business class people they invest in stock market for high returns.Que. 1 Are you aware about Mutual Funds? Awareness of people 30% aware unaware 70% Interpretation: The above graph shows that from the total 100 respondents.

8% people have Good knowledge.Que. Having average knowledge people are mostly aware about MF concept and they also invest in Mutual Fund for a long or short period of time. 5% people have excellent knowledge. Out of this 70 %. Here. 47% people have Average knowledge about mutual fund and remaining 40% people have poor knowledge about this financial product. 52 .2 How will you describe your investment knowledge of Mutual Funds? Investment Knowledge 5% 40% 8% Excellent Good Average Poor 47% Interpretation: Out of surveyed 100 people 70 % people are aware about Mutual fund. the service class people have average to good knowledge. As we also found in our survey that having poor knowledge people just know only about MF as an Investment tool and invest in it without knowing it. they want to know more about MF but because of time constraints they are unable to do so.

Que. 53 . The reason for investing for short period as they do not follow any long term planning investment with relation to their age and any time need of money.3 What is the purposes of your investments? Purpose Of Investment 6% 9% 28% 57% High Returns Tax Benefits Short-term Planning Others Interpretation: From the above graph we can analyze that 57% people want high returns in return of their investment while 28% people invest for the purpose of tax benefits. People having the age group of 20-35 and 35-50 want high returns from their investment. And the people having age above 50 years invest for the purpose short term planning (9%).

e.Que. Doctors. 54 . Having professional degrees like CA. Businessperson is investing more for the period of 3 to 5 years. 45% invest for 6 months while 32% invest for 6 months to1 year and only 3% prefer to invest for more than 5 years. are like to invest for the time period of 1 year to 3 years. From our survey we mostly find that service class people and age ranges between 20-35 invest mostly for the time period of 6 months to 1 year.4 For what time period do you normally invest? Time Period 7% 3% 45% 13% 32% 6 months 3 to 5 years 6 months to 1 year > 5 years 1 year to 3 years Interpretation: The above graph shows that more and more people i. MBA. CS etc. which are 13%. We have also found that under graduate people who invest in MF are don’t want to for more than 6 months. which are 7%.

Post office and Mutual Fund are also popular as an investment tool as share of both 15.5%) as they found it the safer one.5% and 13. &RBI bonds is 5% and Public Issues/IPO’S is 4. 55 .Que. While LIC is 3%.5 3 30 Fixed Deposits Post Office Stock Market Public Issues/ IPO's PPF Mutual fund Govt. Govt. But from our survey we find that because of safety reasons people mostly invest in Fixed Deposits and another reason we can say that from the surveyed 20% female they only go for savings for that’s why FDs (30%) have maximum 30%.5 15.5 Rank the investment options according to your preferences (i. Most Preferable-1.e.5%. Service related people are also investing in PPF(22.5 22. Least preferable-8) (Tick any one) Investment Options 6 13. & RBI bonds LIC Interpretation: People are habitual to invest and they have many investment options.5 54.5% in the total survey.

The proportion of savings in total income has also been increased. Now a days people are more aware about Mutual Fund and other investment tool. 56 . Another reason for more investment is that they are becoming more future conscious and so they invest more out of their total savings so that they can use their money whenever it will be needed. While 18% people have the share of 75-100%. what is the share of mutual fund in your total investments? Share of investment 75-100% 50-75% 25-50% 0-25% 0 7 18 40 35 20 40 60 Series1 Interpretation: Out 70 people 35% people said that their share of mutual funds in total investment ranges between 0-25percent. 6 If you invest in Mutual Funds.Que. Only 40% people were having share of 25-50% as mutual fund in their total investment.

Business class people invest more in Equity Funds because of high risk and high return. This shows that the people who give the 1st preference to Risk & Return factor. Generally. they invest in Equity Funds. People also give more importance to NAV because the people who have average to poor knowledge give more importance to NAV and the NAV of the Equity Funds are always more than any other funds. 30% invest in Debt funds while 25% and 5% people invest in Balanced funds and Monthly Income Fund respectively.Que. Out of remaining 60%. 57 . People who don’t want to take more risk on their investment they mostly invest in Debt Funds.7 What are the types of Mutual Fund schemes where you normally invest in? Investment Plans 30% 5% 40% 25% Monthly Income Funds Balanced Funds Equity Funds Debt Funds Interpretation: The above graph shows that out of 70 people 40% invest in Equity funds.

HDFC is assumed to be a bit conservative for short-term investments. Pru. As Reliance has a good image in the mind of people who have faith in Reliance.ICICI Franklin T empleton HDFC MF SBI Interpretation: Reliance Mutual Fund is having the 1st position among the 6 mutual fund companies. That’s why prefer Reliance over HDFC because of its aggressiveness. So when Reliance entered in Mutual Fund people invest more and it results in 1 st rank among the all MF Companies. ICICI & SBI HAVE 9% and 6% share respectively. Where HDFC MF is known for the its professionalism and for this reason CRISIL has given the 1st rank to HDFC MF. Franklin Templeton and Fidelity are on 2nd and 3rd position respectively while HDFC MF is on the 4th position with 15%. 58 .9 Which are the companies in which you invest the most? Investment in company 9 15 19 21 6 30 Reliance MF Fidelity Pru.Que.

10 What types of investing procedure do you normally follow? Investment Procedure 15% Lumpsum SIP 85% Interpretation: From our survey we find that people are investing in both Lump sum and SIP equally. The investor does not need to spend time and effort in evaluating investments in each time interval and probably ensures that the surplus funds do not remain idle. Reason in investing in SIP is also more units allocation. 59 . Another reason for the service class people is that they don’t have more money to pay at a time. But the people who are investing on large basis they prefer to invest in Lump sum.Que. While service class has a tendency to invest in SIP as it is benefited on certain ways like monthly installments.

In long run dividend reinvestment (17%) and growth fund becomes the same.11 In what type of plan do you normally invest in? Investment Options Indifferent among the plan Dividend Reinvest Dividend Payout Growth Fund 0 20 40 60 3 17 15 65 80 Series1 Interpretation: The people who have good knowledge about Mutual Fund invest in Growth Fund (65%) because they get interest on capital. In the matter of NAV growth funds are more beneficial than dividend related funds because it has very short portion of Equity.Que. 60 . It means their money is compounded annually.

1 lakh given to service class people.18%. they invest at the time of NFO i.12 At what time do you normally invest in mutual funds? Time Of Investment 18% 42% 16% 24% NFO Any time Year Ending Whenever sufficint saving Interpretation: From the above graph we can interpret that 42% people invest whenever they have sufficient savings on their hand.Que. The people who have excellent to good knowledge about MF. which is beneficial in Tax deduction. Mostly service class people are investing whenever they have sufficient saving on their hand.e. The reason for more percentage in Year Ending (24%) investment is the limit of Rs. 61 .

While the people having annual income of Rs. 2 to 3 lakh Rs. 1 to 2 lakh. It includes the Graduates and Post Graduates. 62 .13 What is your annual income (Approx) Annual Income 15% 7% 21% 57% < Rs. 1 lakh (21%) mostly includes under graduates and people having age of more than 50.1 to 2 lakh > Rs.1 lakh Rs. 3 lakh Interpretation: Here the highest group of people (57%) is earning annual income of Rs. We found that the annual incomes of more than Rs. 3 lakh are of business class and there are many professionals in this category. 2 to 3 lakh (15%) the people are mostly professionals and businesspersons. Income of less than Rs.Que.

11%. 1 lakh to 1.1lakh > Rs.50000-Rs.5 lakh Interpretation: Here 45% people are having the annual saving of Rs. 50000 to 1 lakh and 41% includes the people having annual saving of less than Rs. 50000.1 lakh-Rs.1.5 lakh i.1.5 lakh Rs.50000 Rs. We find that professionals and business class have annual saving of more than Rs.e.Que. The saving of retired person are not more because their income is also not more. 63 . The people having small family size can save more than large family size.14 What is your annual Savings (Approx) Annual Saving 11% 3% 41% 45% < Rs.

While 18% people get knowledge from Newspaper and 6% from Friends. through Internet. change in asset mix etc. 64 .Que.15 How do you normally get information about Mutual Fund? Sources of Information 6% 44% 18% 8% 24% Friends/Associates Advertisement Agents Newspaper Internet Interpretation: The main source of information for people is the Agents with 44% because they directly approach to the customers. dividend. Now a day the Internet users are increasing day by day and therefore 24% people are getting information through Internet. bonus. The respondents prefer to get the routine special information like daily NAV..

bonus.ANALYSIS & INTERPRETATION The survey reveals that among the 100 respondents only 70 people were aware about the name of mutual funds. followed by Income schemes and Balanced schemes. Tax Benefits. Friends suggestions in that order. The survey further reveals that the scheme selection decision is made by respondents on their own and the other sources influencing their selection decision are Brokers and Agents Direct Mail. Further. the 1 st preference is for open-ended schemes (84. It could be hardly 5% of investor invests in MF.57%) and only 15.. But the actual investors in MF were even more less. with MFs ranking 4th in the order among 8 choices given.71% prefer personal communication and 8. Television . liquidity and capital appreciation in MF products.43% of the respondents prefer to get the routine special information like daily NAV. But out of 70 people 40% people did not know about the concept of mutual funds. Only 7-8 % people had good knowledge of mutual funds. Based on the duration of operation of schemes.43% of the respondents favor close-ended schemes. 65 . Average time period for investing in MF ranges between 1 to 3 years. Maximum investors invest for 1 year. through automated response system while 53.86% have no preference. Growth schemes are ranked first. Further 24% of the respondents reported that they use Internet facility to know more about MFs while 76% reported that they do not have access to Internet. 37. Remaining 48 % people had average to poor knowledge about MFs. It was also revealed that the most preferred investment vehicle is Fixed Deposits. The investors look for good returns. change in asset mix etc. News papers and Magazines. dividend.

HDFC rank 4th among all the given choices. SBI. Insurance: high confidence.four out of five prefer funds that guarantee returns. That’s why prefer Reliance over HDFC because of its aggressiveness. with savings following at 23%. Most of the investors prefer 1015% minimum expected returns. then. Only 40% people were having share of 2550% as mutual funds in their total investment. that only. These are schemes heading towards extinction. 7% said they were ‘very confident’ of choosing a fund. Here we see that the fruits of familiarity-barring banks. Pru ICICI. with just 7% ‘not confident’. 66 . Most preferred companies in Mutual fund comes out to be Reliance Mutual Fund.Out of 100 people only 35% people said that their share of mutual funds in total investment ranges between 0-25%. with two out of five investors feeling ‘not confident’. Mutual Funds: assured returns. It is no surprise.10. Out of every 10 people who invest in mutual funds at least 5 have invested in HDFC. Franklin Templeton. the survey shows that investors are stuck in an “assured returns” time warp. The survey indicates that the awareness of financial products in India is poor. it is disheartening to note that just 29% people buy insurance for securities against death. insurance has the highest number of people (38%) saying they were ‘very confident’ of choosing life insurance. While only 12 % believe that the government provides a guarantee to investors in mutual funds and just 13 % believe that the value of one’s investment in a mutual fund can not fall below Rs. HDFC is assumed to be a bit conservative for short-term investments. HDFC mutual fund. Fidelity. Much of the credit for this confidence must go to LIC. However.

this confidence is misplaced. This is untrue: only Rs. Sociological trends are too: a third of all people surveyed expect their children will take care of them post retirement.Banks: blind faith.1 lakh worth of deposits per bank are guaranteed. this sector truly has the trust of investors. While 65% of the people feel that they will retire between 55 and 65. With almost half the people ‘very confident’ about choosing a banking product and just 3% of them ‘not confident’. only 44% believe they will have enough savings to ensure their current standards of living post retirement. Almost three out of five people believe that the unfortunately government guarantee full deposits in nationalized banks. while an equal number expect they will not. 67 . Retirement: worrying. India’s approach to financing its retirement is a cause for worry. This faith extends to financial institutions too-61% people believe the bonds of dithering institutions like IFCI and IDBI are “always safer than mutual funds”. anything beyond that is not.

RECOMMONDATION: Suggestions The survey reveals that the investors are basically influenced by the intrinsic qualities of the product followed by efficient fund management and general image of the fund / scheme in their selection of fund schemes.transparent has led to the July 2001 UTI scam. Now the scale is in favor of income schemes. We have to wait and see the impact of such non-disclosures on future fund mobilization by UTI. So it is suggested that AMCs should react in 68 . • The falling interest rates and a reasonably good performance of many growth schemes might have been the reason for the high performance of Growth schemes during the period under study. Hence it is suggested that AMCs should design products consciously to meet the investors’ needs and should be alert to capture the changing market moods and be innovative. Some suggestions are: • The investors are influenced by the extent and quality of disclosure of information subsequent to their investment regarding disclosure of NAV. is a must to attract and retain this market segment. Hence AMCs should take steps to be as transparent as possible and follow the disclosure norms spelt out by SEBI and AMFI in this connection. portfolio of investment and disclosure of deviation of investment from the stated objectives and the attached fringe to the scheme in their selection of the scheme. Continuous product development and introduction of innovative products. The investors were kept in dark when its income schemes portfolio of debt to equity as 70:30 got slowly tilted to 20:80. UTI’s unique place in the industry that allowed it to be non.

• Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments. inspite of their lack of knowledge about the sophisticated market environment. • As we have seen that there is 100% growth in last 6 years. It is one of the challenge for HDFC Mutual Fund and they should have to try to come 1st among all Indian MFs. Information dissemination through all possible routes which will reach the investors should be tapped in a cost effective manner by AMCs. Safety of capital subject to market risk. should be assured to the MF investor. Deviation from the stated investment objectives without authority should be dealt seriously by the regulatory bodies. with over US$1trillion assets under management worldwide. reflects their reluctance to believe the available quality of service provided by the agents. And so they should have to take some steps in this direction. US based. financial consultants and investment advisors. the fact that the investors prefer to make their own scheme selection decision. In long run it will help both the investors and the investment advisors. Diagnostically looking.time to the changing market moods by launching new products or repositioning old ones. so it is one of the opportunities for HDFC Mutual Fund. thus strengthening the link between the individual investors and the Mutual Funds. These agencies and persons engaged in giving investment advice should gear up now to win the confidence of the investors. • Since the survey reveals priority to self decision in scheme selection. 69 .

Nevertheless. surveys similar to the present one need to be conducted at intervals to develop useful models. Hence. This study has made an attempt to understand the financial behavior of MF investors in connection with the scheme preference and selection.Conclusion: Running a successful MF requires complete understanding of the peculiarities of the Indian stock market and also the psyche of the small invesor. it is hoped that the survey findings will have some useful managerial implication for the AMCs in their product designing and marketing. 70 . The post survey developments are likely to have an influence on the findings. Behavioral trends usually take time to stabilize and they get disturbed even by a slight change in any of the influencing variables.

Ltd we were also comparing the mutual fund of various companies and suggesting the customer which one he should buy. shares so that customer can understand benefits of mutual fund over the other financial product. which we used while discussing with customer regarding mutual fund:  Briefing about the mutual fund and its importance in detail. Second part was real job experience. (Popular House) Ashram Road. Ltd. And also to help them to sell the mutual fund. HBL is on the pay roll of HDFC. We have also trained the selling Agents of HBL as well as help them in operations. Ltd.  We use to compare mutual fund with other types of financial product such as Fixed deposits..  When we go on calls with the sales person of HBL Global Pvt. its importance and the main focus was how to sell a mutual fund in a bank and how to interact with the customer regarding mutual fund as a part of investment. Following are the important points.JOB PROFILE DETAIL: We have done our summer training in two parts. During this period we were interacting with customer through individual calls. Ahmedabad as an ambassador of HDFC MF.  Basically our job was to train the employees of HBL Global Pvt. We had been sent HBL Global Pvt. 71 . First we were given in house training by HDFC Mutual Fund for one week during which we learned about basic of Mutual Fund.

 We also come to know how to interact with customers. We have to report to HDFC AMC Assistant Manager Of Sales Ms.Area Assigned We were assigned HBL Global Pvt. Difficulty Faced: We faced difficulty while selling a mutual fund as  Many of the customers do not have knowledge of mutual fund and its importance. Day to Day job experience During our summer training we experienced following things:  We learned about the mutual fund.Ekta Hariyani regarding daily sales of HDFC mutual fund. Ashram Road. Ltd.  We also come to know how AMC work. its benefits and its importance as a major investment part. 72 . after completion of our 45 Days training we have done a Market Research to know the investing habits of people.  We had also a good experience to train the employees/sales person. Where we have to deal with HBL’s employees and customers.  We also come to know customer preferences.  We also come to know about market situation in the field of mutual fund. Ahmedabad to work with their selling agents as well as customers. Target Assigned We have been given monthly target to sell HDFC Mutual Fund.

rather they believe on the government’s schemes like UTI. Some customer don’t want to take risk as there is no guaranteed return in a mutual fund. prefer to invest their money in stock market.  Many of the customers do not want to block money for long period. because it will give high return than mutual fund.  They don’t have faith in the private AMC. 73 . because mutual fund depends upon market. who want to take a risk. Major Limitation: Following are the major limitation we faced:  There is a big volatility in the market and so customer is afraid of investing mutual fund as they feel if market falls by more points they will have to face heavy losses. they only want to invest in fixed deposits and government bond as there is guarantee of return.  The customers.

com   www.mutualfundindia.hdfcfund.indiaonline.nseindia.BIBLIOGRAPHY Internet:      74 .com   www.altavista.

LIC d. Are you aware about Mutual Funds? □ □ □ □ Yes □ No 2.e. Fixed Deposits c. Post Offices b. Mutual Funds h. Least preferable-8)(Tick any one) a. Stock market □ □ □ □ □ □ □ □ 75 . What are the purposes of your investments? □ High Return □ Short Term Planning Tax Benefits □ Good □ Poor □ If Others ________ 4. How will you describe your Investment Knowledge of mutual funds? Excellent Average 3. & RBI bonds e. PPF f. Govt. Most Preferable-1. For what time period do you normally invest? □ □ □ Less than 6 months 1 year to 3 years More than 5 years □ □ □ 6 months to 1 year 3 years to 5 years If Others ________ 5.ANNEXURE A study on the investment behavior of people… Questionnaire for investors 1. Rank the investment options according to your preferences (i. Public issues/ IPO’s g.

In what type of plan do you normally invest in? □ Growth Fund □ Dividend Payout □ Dividend Reinvest □ Indifferent among the plans 12. □ HDFC MF _______ □ □ □ □ □ □ Franklin Templeton SBI MF Reliance MF Pru ICICI Fidelity If. Which are the companies in which you invest the most (Rank according to Preferences). If you invest in Mutual Funds. 1lakh to Rs. What is your annual income (Approx) □ Less than Rs. What types of investing procedure do you normally follow? (Tick) □ Payment in Lumpsum (One Time) □ Payment in Systematic Investment Plan 11. The minimum return that you normally expect in a year is _______% 9. 2 lakh 76 . At what time do you normally invest in mutual funds? □ At the time of NFO □ At year ending (31st March) □ Any time of the year □ Whenever sufficient savings have 13. what is the share of mutual funds in your total Investments? □ □ 0% -25% 50% -75% □ □ 25% -50% 75% -100% 7. What are the types of mutual fund scheme where you normally invest in? □ Monthly Income Funds □ Equity Funds □ Balanced Funds □ Debt Funds 8.6. Others _______ _______ _______ _______ _______ _______ 10. 1 lakh □ Rs.

Can you suggest any other facilities HDFC mutual fund can provide you / facilities you want HDFC mutual fund to provide you. 18.5 lakh □ More than Rs.50000 to Rs.1. 1 lakh □ Rs. _______________________________________________________ _______________________________________________________ _________________________. 50000 □ Rs.1. 2 lakh to Rs. Name: ____________________ Age:____ Gender:_______ Family Size:____________Marital status:_______________ Occupation:________________Education:______________ Phone:_____________ Address:______________________ 77 . What is your annual Savings (Approx) □ Less than Rs.5 lakh 15. Remarks: _______________________________________________________ _______________________________________________________ _______________________________________________________ _________________________.□ Rs. How do you normally get information about Mutual Fund? □ Friend / Associates □ Newspapers □ Advertisements □ □ Internet which sites please specify _______________________ Agents 16.3lakh □ More than Rs. 3 lakh 14. Do you invest in HDFC Mutual Fund? □ Yes □ No …….1 lakh-Rs. 19. In which Fund of HDFC mutual fund have you invested? ______________________________________________________. To be filled if the response of Question16 is Yes 17.

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