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Analysis Of Investment Pattern Of Mutual Funds Investors – An Empirical

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 ANALYSIS OF INVESTMENT PATTERN OF MUTUAL FUNDS INVESTORS – AN
EMPIRICAL STUDY IN ORISSA

First Author:

SUMAN CHAKRABORTY
Assistant Professor
Gandhi Engineering College,
Orissa, India
Bhubaneswar, PIN-751019,
Email ID: sumanchaks@yahoo.com
Mobile: +91-95831-00406

Second Author:

DR.SABAT KUMAR DIGAL

Lecturer, P. G. Department of Commerce,
Utkal University, Bhubaneswar, PIN-751 004,
ORISSA, INDIA.
Email ID: sabat03@yahoo.com
Phone- Mobile-+91-88952-22288
 ANALYSIS OF INVESTMENT PATTERN OF MUTUAL FUNDS INVESTORS – AN
EMPIRICAL STYDY IN ORISSA

Abstract:
Mutual fund industry in India has developed rapidly and gained a lot of popularity from the past
couple of decade, especially after incorporation of Unit Trust of India in 1964. There has
concomitantly evolved a rich plausible academic literature consisting of numerous topics related
to mutual funds. One of the most frequently addressed topics in the current literature is
Investor’s perception and preferences about various mutual funds schemes and the factors which
influences different class of investors to invest in mutual funds. With this background, a survey
was conducted among 200 mutual fund investors in nine urban and semi-urban cities of Orissa
(India).On the basis of literature review, nine factors are chosen and grouped into four major
components by applying Principal Component Analysis. Study reveals, safety, past return and
liquidity are the most influencing factors in inducing most of the investors to opt for the mutual
fund schemes. For the purpose of the study, parametric and non-parametric statistical methods
have been employed. From the research point of view, such a study will help in developing and
expanding knowledge in this field of personal investment.

Key words: Mutual funds, financial market, savings, investments

1. INTRODUCTION
A Mutual Fund is promoted by a sponsor and run by a trust that pools the savings of a number of
retail investors who share a common financial goal. The money collected by selling units of
mutual funds is invested by the fund manager in different types of securities depending
according to the objective of the scheme. These could range from shares to debentures to money
market instruments. For an individual investors a Mutual Fund offers diversified, professionally
managed portfolio at a relatively low cost. Anybody with an investible surplus of as little as a
few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined
investment objective and strategy.
From its inception the growth of Indian mutual funds industry was very slow and it took really
long years to evolve the modern day mutual funds. Primary motive behind mutual fund
investments is to deliver a form of diversified investment solution. Over the years the idea
developed and people received more and more choices of diversified investment portfolio
through the mutual funds. The credit goes to unit trust of India (UTI) for introducing the first
mutual fund in India. Recent years, Indian money and capital market has shown tremendous
growth and expanded its reach to wider geographical limits. Indian regulators in money and
capital market have actively participated in framing regulations which gives confidence to both
individual and institutional Institutions for participation. Progressive reforms have taken place
with the initiative of Security Exchange Board of India (SEBI), capital market regulator in India
which facilitates savings. As a financial intermediary mutual fund has played a significant role in
the development and growth of capital markets in India. According to the various surveys,
conducted in India by SEBI, National Council of Applied Economic Research (NCAER) and
asset management companies (AMCs), small salaried investors generally goes for bank deposits,
government sponsored small savings schemes or endowment life policies for tax saving purpose,
which do not provide hedge against inflation and often land up earning negative real returns.
With the passage of time, India has witnessed many new and innovative mutual funds. However,
there has been a paradigm shift in the methods and ways of selling these funds also changed with
time. It is continuing to evolve to a better future, where the investors will get newer
opportunities. In this era of globalization and competition, the success of this industry is
determined by the market performance of its stock. During the period of this study, performance
of mutual fund industry was not as per the expectation, because of the underperformance of the
secondary market and imposition of ceiling on the expense ratio and entry load charges by
capital market regulator. With regenerated combined efforts of the brokerage houses and the
fund managers and with the backing of market regulators, and extensive awareness program for
investors, investments in mutual funds schemes bound to get boost.

2. LITERATURE REVIEW
Mutual funds as an area of knowledge has drawn interest from academic as well as practitioner
communities. Literature reviews have been done related to Fund Selection Behaviour.
Kahneman and Tversky (1979) found in their work, “Prospect Theory - An Analysis of Decision
under Risk”, individuals make decisions based on the potential value of losses and gains rather
than the final outcome, and people evaluate these losses and gains using interesting heuristics.
Phillip (1995) reported changes in financial decision-making and investor behaviour as a result
of participating in investor education programs sponsored by employees. In India, SEBI started
such awareness program for small investors, which has started giving benefits, in terms of value
investing and informed investing from retail investors.
Ippolito (1992) and Bogle (1992) reported that fund selection by investors is based on past
performance of the funds and money flows into winning funds more rapidly than they flow out
of losing funds.
Kavita Ranganathan’s (2004) conducted a survey in Mumbai revealed that investors prefers
performance records, brand name, expense ratio, portfolio of investment, reputation portfolio
manager, withdrawal/exit facility, products with tax benefits and load charges for taking decision
on investment.
Singh and Chander (2004) study reveals that salaried investors prefer daily disclosure of NAV
by funds and also wished for higher tax rebates on investment in Mutual Funds.
Madhusudhan (1996) conducted a study and revealed that income schemes and open-ended
schemes are preferred over growth schemes and close-ended schemes during the prevalent
market conditions. Investors look for Safety of Principal, Liquidity and Capital Appreciation in
order of importance in the selection of mutual funds.
Sikidar and Singh (1996) carried out a survey of the investors of the North Eastern region
towards equity and mutual funds investment portfolio. The survey revealed that the salaried and
self-employed formed the major investors in MFs primarily due to tax concessions.
NCAER in its survey of three lakhs individual investors in 2010 revealed, Bank Deposit has an
appeal across all income class; 43% of the non-investor households lack awareness about stock
markets; It also reveals that mutual funds have not truly become the investment vehicle for small
investors; the number of households owning units of mutual funds is merely 9%.
Chalam , G.V. (2003), used the primary data of about 200 investors to know the determinants of
investment in various types of assets including in mutual funds for the five years period (1997-
2002). He observed that the return, capital appreciation and Tax savings are the most influencing
factors in inducing most of the investors to opt for the MF schemes.

3. OBJECTIVE OF THE STUDY

The study has been conducted with the following objective:
3.1 To explore the preferred investment avenue of retail investors.
3.2 To determine the investor’s preference for different mutual fund schemes.
3.3 To evaluate fund qualities that affects the selection of mutual funds.

4. METHOD OF STUDY
The study is empirical in nature. The scope of the study covers nine urban and semi-urban cities
Orissa state of India. Various statistical tools like mean, standard deviation, rank correlation, chi-
square, factor analysis were applied. Primary data has been collected for a period of
January’2012 to June’2012.

4.1: Explanation of techniques and equations used:

(a) Chi-Square Test: The Chi-square test is used in this paper with discrete data in the form of
frequencies. It is used to check the independence/dependence of demographic profile such as
age, occupation and income on saving objectives. Test of homogeneity has been applied using
chi-square to find out the preferences of male and female on various mutual funds schemes.
n
The formula for Chi-square (X2) is: ∑ (Observed values – Expected values)2
i=1 Expected values
(b) The Spearman Rank Correlation Test: Spearman rank order correlation (ρ) is used to find out
the preference of various investment options by male and female respondents. With a sample of
size of 200, male constitute 140 and 60 females are converted to ranks R1 and R2 respectively,
and ρ is computed as follows:
Ʃi (Xi – X) (Y – Y)
ρ=
√Ʃi ((Xi – X)2 Ʃ(Y – Y)2
Where “X” and “Y” is ranks of male and female respectively, “i” is the number of observation.

(c) Factor analysis: It is a statistical tool, which enables to bring in multiple factors that affect a
single variable to a few factors, which had a direct association to the variable(s). In doing so it
reduces the number of pointers, which lead to a definitive association to the variables or cases.
Factor analysis has been carried out to formulate the coefficient of correlation between each
variable. In this study, factor analysis has been used to reveal out of nine selected variables,
which affect most in taking investment decision on mutual funds by individual investors.

4.2 Hypothesis
For analyzing the pattern of investment in various schemes of mutual fund on the basis of
gender, the following hypotheses are taken into consideration:

H0: There is no significant difference in selecting mutual fund schemes as an investments avenue
among the male and female investors.
H1: There is a significant difference in selecting mutual fund schemes as an investments avenue
among the male and female investors,

H1a: There is a significant difference in selecting growth mutual fund amongst the male and
female investors.
H1b: There is a significant difference in selecting balanced mutual fund amongst the male and
female investors.
H1c: There is a significant difference in selecting tax saving mutual fund amongst the male and
female investors.
H1d: There is a significant difference in selecting income/debt mutual fund amongst the male and
female investors.
H1e: There is a significant difference in selecting index mutual fund amongst the male and female
investors.
H1f: There is a significant difference in selecting money market mutual fund amongst the male
and female investors.

4.3 Type and sources of data:

The study deals with the financial behaviour as well as their preferences towards mutual funds of
Individual Investors in the state of Orissa (India). The required data was collected through a pre-
tested questionnaire administered on a combination of simple random and judgment sample of
200 financially literate individual investors. Out of the 200 respondents, 140 were male and rest
60 was female respondents. An individual who has currently invested in any MF scheme and
whose yearly income is under Indian rupees ten lakhs has been considered for the study.
Respondents included salaried investors, self employed professionals and entrepreneurs, who
were screened and inclusion was purely on the basis of their knowledge about financial markets,
mutual funds and various savings options. This study covers nine major cities in Orissa which
includes Bhubaneswar, Cuttack, Rourkela, Berhampur, Jajpur, Bhadrak, Sambhalpur, Balasore
and Jharsuguda as shown in Table 1.1). Primary data has been collected through a personal
interview and structured questionnaire between January’2011 and June’2012. For the above
purpose, respondents are grouped according to their demographic profile as shown in Table no.
1.0

Table No. 1.0: Age, Gender, occupation and Income wise Demographic Pattern of
Individual Investors.
Demographic Category of Parameters Number of Representatives
investor Total (200) (%)
Male 140 70%
Gender
Female 60 30%
Up to 30 years 50 25%
Age
31 to 45 years 50 25%
 46 to 60 years 50 25%
61 years & above 50 25%
Self employed Professional 43 21%
Occupations Entrepreneurs 37 19%
Salaried employees 120 60%
up to Rs 3 Lakhs per annum 40 20%
Rs 3 – 5 Lakhs per annum 70 35%
Annual Income
Rs 5 – 7 lakhs per annum 60 30%
more than Rs 7 Lakhs per annum 30 15%
Source: compiled

Table No. 1.1: Area profile of Respondents

Place of Orissa state (India) Number Percentage
Bhubaneswar 40 20%
Cuttack 36 18%
Rourkela 20 10%
Berhampur 26 13%
Jajpur 18 9%
Bhadrak 24 12%
Sambhalpur 16 8%
Balasore 14 7%
Jharsuguda 6 3%
200 100%
Source: Compiled

5. LIMITATIONS OF THE STUDY:

Sample size is limited to 200 educated individual investors. Respondents those who are aware
about financial market and investment options and invested in mutual funds have been
considered for the study. Sample has been collected only from Bhubaneswar, Cuttack, Rourkela,
Berhampur, Jajpur, Bhadrak, Sambhalpur, Balasore and Jharsuguda. Simple Random and
judgment sampling techniques is used due to time and financial constraints. This study has not
been conducted over an extended period of time having both ups and downs of stock market
conditions which influences investor’s saving and investing pattern.

6. ANALYSIS AND INTERPRETATION

Investment options preference among Individual Investors (gender wise):
Driving Old Car Now = Peace of Mind Later On. One of the key mantra for disciplined
investing is not to let those hard earned paychecks slip through our hot little hands. Asset
preference pattern of an individual investor provides an insight into the investment attitude of
investors, which influences the policy formation for garnering the individual savings. Every
individual investor should decide where to invest and how much to invest and when to invest,
depending on their risk profile and saving objective they set. To find out preference pattern of
investors on selected investment options, Spearman Rank Correlation Test has been used. For the
study, ten investment options were selected on the basis of various surveys and literature reviews
(NCAER 2010). The selected investment options are, a) secured deposits in commercial banks,
b) endowment policies floated by insurance companies which are linked to equities and debt, c)
State or central government of India sponsored saving schemes such as public provident fund,
employees provident fund, various pension schemes etc. d) bonds debentures, public deposits by
corporate, e) equity stocks, preference stocks, f) mutual funds, unit liked saving schemes (ULIP),
equity linked saving schemes (ELSS), g) gold, silver, ornaments, precious stones or utensils etc.,
h) real estate includes purchase of land and building for personal use or for investment purpose,
i) Indian postal saving schemes for small individual investors, which includes various time
deposits and recurring deposits, Kisan Vikas Patra (KVP), National Saving Certificate (NSC)
etc., floated by Indian Postal department, j) Other, includes various forms of Art, handicraft etc.
Respondents were requested to rank each of the 10 selected investment options on ten point scale
as 1 be the most preferred and 10 be the least preferred option. The raw scores are converted to
ranks and the differences between the ranks of each observation on the two variables have been
calculated. Calculated value of rank correlation coefficient between male and female on various
saving options is 0.5545, which shows that there is a moderate similarity between the ranks
given by male and female. It can be concluded that the investment decision on various
investment avenues on which the rank was sought (Table no 3.0), shows equal strength of
direction and there is not much difference between rank preference given by mail and female
respondents.

Table no. 3.0: Showing the ranks given my male and female on various investment options
Rank given by Rank given by
Investment options
male respondents female respondents
1. Secured Deposits (Fixed Deposits etc) 1st rank (14.07%) 3rd rank (15.03%)
2. LIC Policies 5th rank (10.03%) 5th rank (9.78%)
3. Public Provident fund / EPF / Pension schemes 6th rank (9.9%) 7th rank (8.21%)
4. Bonds / Debentures 9th rank (7.28%) 9th rank (4.75%)
5. Equity Shares 4th rank (10.54%) 8th rank (8.15%)
6. Mutual funds / ULIP / ELSS 3rd rank (11.92%) 4th rank (9.78%)
7. Bullion (gold, silver, ornaments) 8th rank (9.15%) 1st rank (16.33%)
8. Real Estate 2nd rank (13.96%) 2nd rank (16.24%)
9. Postal savings schemes 7th rank (9.58%) 6th rank (9.69%)
10. Others 10th rank (2.8%) 10th rank (2.12%)
Source: Calculated

Graph G-1: Showing preference for investment options by Investors (category: self-employed)

Source: compiled from survey

Self employed males investors are preferring to invest more in real estate, term deposit in banks
and also in endowment insurance plans, whereas female self-employed investors keeping more
faith in bank term deposits, investing in real estate and bullion (Graph G-1).
Graph G-2: Showing preference for investment options by Investors (category: entrepreneurs)

Source: compiled from survey

Male investor under entrepreneur category has ranked investment in real estate as no.1 and also
shown almost equal interest in bullion and equity related instruments, whereas female investors
under this category investment in bullion as their top choice and simultaneously shown interest
in real estate, equity shares and mutual funds.

Graph G-3: Showing preference for investment options by Investors (category: salaried class)

Source: compiled from survey

Salaried employees both male and female have given real estate as their first choice and unlike
male counterparts female investors are relying more in bullion. But in this category, male and
female are trusting fixed deposits, LIC endowments plans including ELSS, ULIP and pension
plans as options to invest their hard earned incomes.
6.1: Mutual Fund Scheme Preference among Individual Investor: Study attempts to find out the
investor’s preferences on various schemes of mutual funds (table 2.0). For this study, six
different types of fund have been selected. Growth schemes, Income schemes, Balance schemes,
Index schemes, Tax saving schemes, money market schemes. For each schemes, chi-square test
of homogeneity has been applied to determine the respondent’s (gender wise) preferences.

Table no. 2.0: Gender wise preferences for different schemes of mutual funds
Growth / Balanced Tax Income / Index Money
Equity Schemes Saving Debt Schemes Market
RATINGS
Schemes Schemes Schemes Schemes
M F M F M F M F M F M F
Highly 55 9 46 28 63 14 30 27 5 2 13 16
Favourable
(Rating-1)
Favourable 38 14 38 16 50 17 28 15 4 2 14 14
(Rating-2)
Somewhat 30 18 30 8 18 21 26 7 36 2 25 12
favourable
(Rating-3)
Not very 12 10 20 5 6 5 37 8 49 24 30 10
favourable
(Rating-4)
Not at all 5 9 6 3 3 3 19 3 46 30 58 8
favourable
(Rating-5)
140 60 140 60 140 60 140 60 140 60 140 60
Source: Compiled. (M for male, F for female).
Table no. 2.1: Showing chi-square results on mutual funds schemes
Table value at
Degree of Chi-square Significant /
Demographic Profile 5% significance
freedom Value Not significant
level
Growth / Equity Schemes 4 20.08 9.49 Significant
Balanced Schemes 4 4.71 9.49 Not Significant
Tax saving Schemes 4 22.579 9.49 Significant
Income / Debt Schemes 4 15.65 9.49 Significant
Index Schemes 4 13.67 9.49 Significant
Money Market Schemes 4 25.77 9.49 Significant
Source: Calculated

Null hypothesis Ho1(a): Preferences of male and female respondents regarding growth mutual
fund scheme are same. Calculated value of chi-square is 20.08 and the table value with a degree
of freedom 4 is 9.49. Therefore, null hypothesis Ho1(a) is rejected. So it can be concluded that in
case of growth mutual fund schemes, preference of male & female is significantly different.

Null hypothesis Ho1(b): Preferences of male and female respondents regarding balanced mutual
fund scheme are same. Investors with moderate risk taking capability invest in balanced schemes.
The calculated chi-square value on balance scheme for 200 respondents is 4.71 and the table
value with 4 df is 9.49 at 5% significance level. Here null hypothesis Ho1(b) is accepted. It is
concluded that there is no significant difference of preferences between male and female.

Null hypothesis Ho1(c): Preferences of male and female respondents regarding tax saving scheme
are same. Tax saving schemes offer tax incentives to the investors under tax laws as prescribed
from time to time and promote long-term investments in equities through Mutual Funds. For tax
savings schemes, chi-square value as calculated is 22.579, whereas table value with df of 4 is
9.49 with 5% level of significance. So the null hypothesis Ho1(c) is rejected, and it can be
concluded that there is significant difference in opinion among male and female.
Null hypothesis Ho1(d): Preferences of male and female respondents regarding income scheme
are same. Income schemes invest in fixed income securities such as bonds and corporate
debentures. Such schemes are ideal for Investors who need some income to supplement their
earnings. Chi-square value of the responses of male and female is 15.65 whereas the table value
with 4 df is 9.49 at 5% significance level. Null hypothesis is Ho1(d) for income scheme is
rejected. So it can be concluded that there is significant difference between the preference of
male and female on income schemes.

Null hypothesis Ho1(e): Preferences of male and female respondents regarding index scheme are
same. Index schemes that attempt to replicate the performance of a particular index. Index fund
schemes are ideal for investors who are satisfied with a return approximately equal to that of an
index. In case of Index scheme, calculated value of chi-square is 13.67 and the table value with 4
df with 5% level of significance is 9.49. So null hypothesis Ho1(e) is rejected. There is significant
difference in the preference of male and female with respect to index scheme.

Null hypothesis Ho1(f): Preferences of male and female respondents regarding index scheme are
same. Money market mutual fund schemes aim to provide easy liquidity, preservation of capital
and moderate income. Null hypothesis Ho1(f) here is rejected because the calculated chi-square
value is 25.77 and the table value with 4 degree of freedom with 5% level of significance is 9.49.
So there is significant difference between preference of male and female on money market
mutual schemes.

6.5: Scheme Preference by Operation among Individual Investors

Analysis of scheme preference by nature of operation reveals the popularity of ‘Open-Ended’
scheme. Out of total respondents 78% across age, occupation and income level have voted for
open-ended schemes. Remaining 15% and 7% have opted for close ended & interval schemes
respectively. The preference to Open-Ended scheme also gives due importance to ‘Liquidity’.

6.6: Preferential Feature in Mutual Funds influencing the scheme selection by Individual
Investors. The information was collected through a designed instrument on a five-point scale
where one was taken for strongly disagree and five was taken as strongly agree. Factor Analysis
have been used to look at the nine selected variables that tend to relate to each other and estimate
what underlying reasons might cause these variables to be more highly correlated with each
other. For this study, tool of SPSS was extensively used. Variables were analysed using the
Varimax with Kaiser Normalization, resulting in constructing and naming of the factors which is
largely subjective. Bartlett's test of sphericity and Kaiser-Meyer Olkin (KMO) measure of
sampling adequacy were used to examine the appropriateness of factor analysis. The
approximate chi-square statistic is 232.768 with 36 degrees of freedom, which is significant at
.000 levels. The KMO statistic (0.663) is large (>0.5), hence, factor analysis can be considered
for further analysis of data (table3.0).

Table no. 3.0: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .663

Bartlett's Test of Sphericity Approx. Chi-Square 232.768

Df 36

Sig. .000
Table no. 3.1: Communalities
Initial Extraction

Safety 1.000 .717

Liquidity 1.000 .669

Flexibility 1.000 .583

good return 1.000 .570

capital appreciation 1.000 .694

professional management 1.000 .680

tax benefit 1.000 .640

diversification benefit 1.000 .811

reputation of the sponsor 1.000 .581

Source: calculated. Extraction Method: Principal Component Analysis.

Table no. 3.2: Communalities, Initial Eigen values, Extraction Sums of Squared Loadings
and Rotation Sums of Squared Loadings
Extraction Sums of Squared Rotation Sums of Squared
Initial Eigen values Loadings Loadings
Compo % of Cumulative % of Cumulative % of Cumulative
nent Total Variance % Total Variance % Total Variance %
1 2.087 23.184 23.184 2.087 23.184 23.184 1.996 22.174 22.174

2 1.394 15.487 38.671 1.394 15.487 38.671 1.336 14.840 37.014

3 1.289 14.320 52.991 1.289 14.320 52.991 1.334 14.817 51.831

4 1.178 13.086 66.078 1.178 13.086 66.078 1.282 14.247 66.078

5 .842 9.357 75.435

6 .778 8.643 84.077

7 .573 6.368 90.445

8 .472 5.248 95.693

9 .388 4.307 100.000

Source: calculated. Extraction Method: Principal Component Analysis.

Retaining only the variables with Eigen values greater than one (Kaiser's criterion) (table 3.2),
we can infer that 23.184% of variance is explained by factor one; 15.487% of variance is
explained by factor two and 14.32% of variance is explained by Factor three and 13.086% by
factor four. Together, all the factors contributed to 66.078% of variance. Therefore, Varimax
Rotation (table 3.4) was done to obtain factors that can be named and interpreted.

Table no. 3.3: Factors Affecting Choice of a Scheme (Rotated Component Matrixa)
Component
Factors
1 2 3 4

Safety .820 .177 -.076 -.089

Liquidity .763 .099 .045 -.275

Flexibility .172 -.120 .526 -.112

Good return -.264 .323 .730 .007

Capital appreciation -.657 .184 -.020 -.201

Professional management -.050 .080 -.333 .749

Tax benefit -.002 .772 .087 -.192

Diversification benefit -.105 -.107 .528 .514

Reputation of the sponsor .096 .197 -.064 .727

Source: calculated. Extraction Method: Principal Component Analysis. Rotation Method:

Varimax with Kaiser Normalization. a. Rotation converged in 5 iterations.

The factor loading measures which variable is involved in which factor, to what degree and in
what direction? Interpreting the above in this line (which is close to correlation coefficient) it has
been observed that factor one (Secured investment) is a combination of the two original variables
which are safety and liquidity. It is heartening to see that, in a volatile market, investors are not
ready to take risk. Instead, retail investors want to ensure safety of their initial investments and
independency to redeem units of mutual funds. Factor loading for the second factor (Tax saving
benefit) commands strong preference among male and female. The factor loading for the third
factor (Past performance) reveals that individual investors reacted positively to good incremental
returns in net asset value (NAV). This is quite telling as we can presume that investors give
adequate significance to the trends of past returns while deciding on the investment. Finally, the
fourth factor loading (Professionalism and reputation of fund house) is idiosyncratically agreed
by investors that reputation of the sponsors and professionalism of AMC is relevant in taking
investment decision.

FINDINGS:
Under the study, an effort has been made to sketch the behavioral pattern of retail investors
towards various investment opportunities. A couple of hypothesis in this regard have been
selected and tested to reach to conclusions. And the research concludes with some important
findings that will be valuable for both the investors and the companies having such investment
opportunities.
1. Investors have not shown very positive sentiments on mutual funds during the phase of the
study conducted, primarily due to underperformance of the secondary market and highly volatile
fixed income securities market.
2. For various schemes of mutual funds, study found significant difference in the opinion of male
and female in case of growth and income funds. The study reveals, female investors prefers the
income schemes and balance schemes whereas male counterparts prefer Growth Schemes and
tax saving schemes [Madhusudhan V Jambodekar (1996)].
3. It is has been observed that the safety and liquidity are the most influencing factors in inducing
most of the investors to opt for the MF schemes. Past return and tax savings is another major
determinant of the choice [Chalam, (2003)]. Professional management and reputation of the fund
is also among important determinants in influencing the investment decision.

CONCLUSION AND SUGGESTION:

It is widely believed that mutual fund is a retail product designed to target individual investors,
who are intimidated by the stock market but, like to take advantage of stock market investing.
Hence, an appropriate crafting of a mutual fund product and expecting a good response from the
investors is the need of the hour. A successful fund manager should study investor saving and
investment behaviour based on the demographic profile and understands their needs and
expectations, to gear up the performance to meet investor requirements. Since the investors need
for liquidity is found to be high and showed interest for open ended funds in various surveys, we
suggest that more of the new schemes opening for subscription be Open-ended. AMCs should
open more service branches to provide over-the-counter redemption facility. As in various
empirical researches, it is concluded that Agents play a vital role in spreading the mutual funds
culture [Syama Sunder (1998)], to accelerate investment in mutual fund, SEBI should introduce
entry load to motivate the distributers of mutual funds.
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Prasanthinilayam.

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Annexure –I (Questionnaire)
QUESTIONNAIRE FOR SURVEYING INVESTOR’S PREFERENCE REGARDING
MUTUAL FUND IN BHUBANESWAR

1) Name (Optional) :

2) Sex : Male Female

3) Age in completed years: Below 30 years 31 – 45 years

46 – 60 years Above 61 years

4) Marital Status: Married Unmarried

5) Occupation: Self Employed Professional Entrepreneurs

Salaried Employees

6) How much percentage of your investible fund you invest in mutual funds per year:
______%
a) Less than 5% b) 6 % to 10% c) 11% to 15%
d) 16 to 20 %% e) More than 21%

7) Please rank your current preference of Savings Avenue, giving rank (1) to the least
preferred investment and rank (10) the most preferred
Investment Options Rank Rank
1. Secured Deposits (Fixed Deposits 6. Mutual funds / ULIP / ELSS
etc)
2. LIC Policies 7. Bullion (gold, silver, ornaments)
3. Public Provident fund / EPF / 8. Real Estate
Pension schemes
4. Bonds / Debentures 9. Postal savings schemes
5. Equity Shares 10. Others (please specify)

8) Do you prefer investment in Mutual funds as an avenue for savings for wealth creation?
Please tick any one option.
a) Yes\ b) No\

9) Please tick one or more than one of the following mutual funds schemes mentioned
below you have opted for investment.
a) Growth schemes \ b) Income Schemes (FMP, debt schemes) \
c) Balanced Schemes \ d) Money Market (short term debt) Schemes \
e) Tax saving Schemes (ELSS, ULIP) \ f) Index Schemes \

10) Which following scheme of mutual fund suits you most for making investment? Please
tick any one of the following option.
a) Open ended Schemes \ b) Close Ended Schemes \ c) Interval Schemes \
 11) Which of the following factors would influence you most in taking an investment
decision in Mutual funds? Please rank the following factors according to your preference.
Rank 5 is most favourable and rank 1 is not at all favourable.

Financial assets Highly Favourable Somewhat Not very Not at all

Favourable favourable favourable favourable
RANK - 5 RANK – 4 RANK – 3 RANK – 2 RANK – 1
a) Safety of capital
b) Liquidity (quick
redemption facility/trading
of units through stock
exchange)
c) Flexibility (switching
of schemes between
different schemes under
the same fund
management)
d) Past Good Return (In
terms of dividend returns)
e) Capital appreciation
f) Professional
Management
g) Tax Benefit
h) Diversification Benefit
(Asset allocation across
the sectors)
i) Reputation of the
sponsor

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