A PROJECT REPORT ON

AWARENESS AND SCOPE OF MUTUAL FUNDS IN

INDIA

SUBMITTED BY

Ridhima Achaliya
T.Y.M.S. [SEMESTER VI] DIV.: B
ROLL NO.: 001

ACADEMIC YEAR
2021 – 2022

UNDER THE GUIDANCE OF

MS. Loveena Atwal

DATE OF SUBMISSION
28th February 2022

1
 SVKM’S NARSEE MONJEE COLLEGE OF
COMMERCE AND ECONOMICS
(AUTONOMOUS)
VILE PARLE (W), MUMBAI - 400 056

AFFILIATED TO
UNIVERSITY OF MUMBAI DECLARATION
I, Ridhima Achaliya, of SVKM’s Narsee Monjee College of Commerce and
Economics (Autonomous) of
TYBMS [Semester VI] hereby declare that I have completed my project, titled
‘AWARENESS AND SCOPE OF MUTUAL FUNDS IN INDIA’ in the Academic
Year 2021
– 2022. The information submitted herein is true and original to the best of my
knowledge.

RIDHIMA ACHALIYA

2
 CERTIFICATE

I, MS. Loveena Atwal, hereby certify that Ridhima Achaliya of SVKM’s Narsee
Monjee College of Commerce and Economics (Autonomous) of TYBMS [Semester
VI] has completed the project on ‘AWARENESS AND SCOPE OF MUTUAL
FUNDS IN INDIA’ in the academic year 2021 – 2022 under my guidance. The
information submitted herein is true and original to the best of my knowledge.

MS. Loveena Atwal Dr. Parag Ajagaonkar

Project Guide Principal

External Examiner

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 ACKNOWLEDGEMENT

It has always been my sincere desire as a management student to get an opportunity to

express my views, skills, attitude and talent in which I am proficient. A project is one
such avenue through which a student who aspires to be a future manager does
something creative. This project has given me the chance to get in touch with the
practical aspects of management.

I am extremely grateful to SVKM’s Narsee Monjee College Of Commerce And

Economics (Autonomous) for having prescribed this project work as part of the
academic requirement in the Bachelor of Management (BMS) course.

I wish to appreciate the SVKM management and the college for providing all the
required facilities. I would like to thank the Principal and the Vice Principal, for their
dynamic leadership. I would also like to thank the BMS Coordinator, Mr. Conrad
Coelho, for all his support and help.

I sincerely thank my Project Guide, Mr. Sameer Dave, for guiding me throughout the
project and without whose support; the project may not have taken shape.

I wish to extend my special thanks to the following members for providing me all the
necessary information regarding the topics, related to their companies and guiding me
during my internship:

•
•

I also appreciate all the support provided by the library staff and the teaching and
supporting staff of the college for providing all the necessary academic content and
resources to enable the completion of my project.

Finally, I thank all my friends and family members who have directly or indirectly
helped me towards the completion of this project.

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 TABLE OF CONTENTS
Page
No.

EXECUTIVE SUMMARY 06

1. INTRODUCTION 08

2. OBJECTIVES OF THE STUDY 39

3. RESEARCH METHODOLOGY 40

4. LITERATURE REVIEW 42

5. DATA ANALYSIS 54

6. FINDINGS 69

7. CONCLUSION & SUGGESTIONS 72

8. BIBLIOGRAPHY 77

9. ANNEXURE - QUESTIONNAIRE 79

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 EXECUTIVE SUMMARY

As per my research work awareness and scope of mutual fund is a type of financial intermediary

that pools the funds of investors who seek the same general investment objective and invests

them in a number of different types of financial claims (e.g. equity shares, bonds, money market

instrument). These pooled funds provide thousands of investors with proportional ownership of

diversified managed by professional investment managers. Growth of mutual funds is very slow

and it took really long years to evolve the modern day mutual funds. Mutual Funds emerged for

the first time in Netherlands in the18th century and then got introduced to Switzerland, Scotland

and then to United States in the 19th century. The main motive behind mutual fund investments is

to deliver a form of diversified investment solution. A mutual fund is an investment vehicle made

up of a pool of money collected from many investors for the purpose of

investing in securities such as stocks, bonds, money market instruments and other assets. Mutual

funds are operated by professional money managers, who allocate the fund's investments and

attempt to produce capital gains and/or income for the fund's investors. A mutual

fund's portfolio is structured and maintained to match the investment objectives stated in

its prospectus.

Mutual funds pool money from the investing public and use that money to buy other securities,

usually stocks and bonds. The value of the mutual fund company depends on the performance of

the securities it decides to buy. So when you buy a share of a mutual fund, you are actually

buying the performance of its portfolio. The average mutual fund holds hundreds of different

securities, which means mutual fund shareholders gain important diversification at a very low

price. Consider an investor who just buys Google stock before the company has a bad quarter.

They stand to lose a great deal of value because all of their dollars are tied to one company. On

the other hand, a different investor may buy shares of a mutual fund that happens to own some

Google stock. When Google has a bad quarter, they only lose a fraction as much because Google

6
is just a small part of the fund's portfolio.

As per my research it can be concluded that mutual fund industry is growing rapidly in India and

awareness about the same is also increasing. Although there is lesser know information regarding

the different funds available to the respondents, still around 50% of the respondents invest in

some kind of mutual fund or SIP.

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 CHAPTER 1: INTRODUCTION

As per my research work its inception the growth of mutual funds is very slow and it took
really long years to evolve the modern day mutual funds. Mutual Funds emerged for the
first time in Netherlands in the18th century and then got introduced to Switzerland,
Scotland and then to United States in the 19th century. The main 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. In India, the mutual fund concept emerged in 1960.
The credit goes to UTI for introducing the first mutual fund in India. Monetary Funds
benefited a lot from the mutual funds.

Earlier investors used to invest directly in the stock market and many times suffered from
loss due to wrong speculation. But with the coming up of mutual funds, which were
handled by efficient fund managers, the investment risks were lowered by a great extent.
The diversified investment structure of mutual funds and diversified risk contributed
tremendously in the growth of mutual funds. With the passage of time many new mutual
funds emerged. Not only this, the methods and ways of selling these funds also changed
with time. But, the growth of mutual funds has not stopped.

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 an industry is
determined by the market performance of its stock. The investors too like to invest only
in the stock of those companies from which they can get maximum gains. In early years
of growth of mutual fund industry, investors were available only with few investment
avenues to invest their money. But with the passage of time a lot of opportunities are
available to the investors for investing their money in different investment channels. One
such channel is to invest in mutual funds along with effective financial management.
Mutual funds have seen a tremendous growth in the last few years. This is the result of
combined efforts of the brokerage houses and the fund managers who come to one’s
rescue by educating the investors and making them aware of the mutual fund schemes by
different modes of promotion.

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The currently common mode of community investments, mutual funds have taken time in
coming to India, while these have been a dominant feature for the last several years in the
investment markets in the west and in the country of their origin, in USA they have
become as ancient as money itself. Their slow coming into the country is due essentially
to the Unit Trust of India having dominated the scene as the only institution of its kind all
this time. After two decades of UTI monopoly some public sector organizations like LIC
(1989), GIC (1991), SBI (1987), Can Bank (1987), and India Bank (1990) have been
permitted to set up mutual funds.

The important characteristics of mutual funds are:

1. Investors purchase mutual fund shares from the fund itself (or through a broker for the
fund) instead of from other investors on a secondary market, such as the New York Stock
Exchange or Nasdaq Stock Market.

2. The price that investors pay for mutual fund shares is the fund's per share net asset
value (NAV) plus any shareholder fees that the fund imposes at the time of purchase
(such as sales loads)

3. Mutual funds generally create and sell new shares to accommodate new investors. In
other words, they sell their shares on a continuous basis, although some funds stop selling
when, for example, they become too large.

4. The investment portfolios of mutual funds typically are managed by separate entities
known as "investment advisers" that are registered with the SEC.

The present study analyses the mutual fund investments in relation to investors’ behavior.
Investors’ opinion and perception has been studied relating to various issues like type of
mutual fund scheme, main objective behind investing in mutual fund scheme, role of
financial advisors and brokers, investors’ opinion relating to factors that attract them to
invest in mutual funds, sources of information, deficiencies in the services provided by
the mutual fund managers, challenges before the Indian mutual fund industry etc.

This study is very important in order to judge the investors’ behavior in a market like

9
India, where the competition increases day by day due to the entry of large number of
players with different financial strengths and strategies.

The Indian mutual fund industry is a very large industry consisting of number of
investors. In this era of competition different investor’s have different investment
objectives. As the human behavior is unpredictable, this study helps in finding out the
necessary facts regarding investors’ opinion and perceptions regarding mutual fund
investment.

The scope of the study is to track out the investors’ preferences, priorities and their
awareness towards different mutual fund schemes. Keeping in view the various
constraints the scope of the study is limited only to the investors residing in Delhi NCR.

Generally the offer documents and reports of various mutual fund companies are not free
from technicalities. So the investors opinioned that the information contained in the offer
documents should be simple and free of technicalities so that a lay investor can easily
understand them. The periodical statements of mutual fund companies are considered as
a very important source of information to the investors. So it is very essential that these
periodical statements should contain all the relevant information in a compiled form and
managers must ensure that these statements should reach the investors in time. Mostly a
lay person doesn’t have enough knowledge to invest in mutual funds. So they depend
on the fund managers who are experts in managing efficient portfolios.

The fund managers should be the person of integrity and financial experts. They should
have clear cut knowledge of when to invest and in which securities to invest .They should
mobilize the investor’s savings in such a way that they can get maximum benefits out of
them. Due to changing scenario, the need for online trading of securities is felt. Efforts
should be made to promote or enhance online trading of mutual funds. This will save
time and cost. On a click of button investors get all the required information quickly.
They can easily sell or purchase any number of funds whenever they want.

Some investors suggested that the fund values of fund should be informed to the investors
through SMS on fortnightly basis. This will help the investors in keeping themselves up

10
to date with the latest information and latest NAV’s of different funds. Winning the
investor’s confidence and protecting their rights is the common objective of all the
mutual fund companies. In this context the AMFI and SEBI should make strict rules and
regulations for safeguarding the interests of the common investors. If these rules are not
being followed properly, a provision of punishment should be made who violates the
same.

Some investors complained that the brokers/sub brokers are more interested in their
incentives provided to them by the companies for selling more schemes. So it is very
necessary that they should perform their duties with full care and diligence and should
not misguide the investors. The brokers, sub brokers and agents should provide right and
timely information to the investors. They must keep themselves aware of the latest
happenings in the market for the sake of investors. Steps should be taken to boost the
confidence and morale of the investors. This can be done through appropriate
communication and by educating investors to invest in mutual funds. Timely and right
information should be provided to them by different communication modes so that they
come to know about the latest trends in the market.

Due to the falling Rate of Interest on Bank deposits, it is obvious that Investment in
Mutual Fund will grow in year to come. However lack of Awareness of Mutual Fund is a
hindering factor in expected growth of Mutual Fund Business.

Under noted problems are envisaged in this area:

1) Difficult in convincing people for investment.
2) Difficult to change mind of the investor according to age and Profession.
3) Difficult to take an appointment with professional people.
4) Difficult to get the documents required for formalities from investors
5) Difficult to overcome an impassionate person who wants return in less time.
6) Difficult to follow up the people whose names are being stored in a data.
7) Difficult to remove the fear of risk from the minds of investors.

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Costs
Costs are the biggest problem with mutual funds. These costs eat into your return, and
they are the main reason why the majority of funds end up with sub-par performance.
Fees can be broken down into two categories:
1. ongoing yearly fees to keep you invested in the fund.
2. Transaction fees paid when you buy or sell shares in a fund.
The Expense Ratio
The ongoing expenses of a mutual fund are represented by the expense ratio. This is
sometimes also referred to as the management expense ratio (MER). The expense ratio is
composed of the following:
1. The cost of hiring the fund manager(s) - Also known as the management fee,
this cost is between 0.5% and 1% of assets on average. While it sounds small,
this fee ensures that mutual fund managers remain in the country's top echelon of
earners. Think about it for a second: 1% of 250 million (a small mutual fund) is
$2.5 million - fund managers are definitely not going hungry! It's true that paying
managers is a necessary fee, but don't think that a high fee assures superior
performance.
2. Administrative costs - These include necessities such as postage, record
keeping, customer service, cappuccino machines, etc. Some funds are excellent
at minimizing these costs while others (the ones with the cappuccino machines in
the office) are not.
3. The last part of the ongoing fee is known as the 12B-1 fee. This expense goes
toward paying brokerage commissions and toward advertising and promoting the
fund. That's right, if you invest in a fund with a 12B-1 fee, you are paying for the
fund to run commercials and sell itself!
On the whole, expense ratios range from as low as 0.2% (usually for index funds)
to as high as 2%. The average equity mutual fund charges around 1.3% - 1.5%.
You'll generally pay more for specialty or international funds, which require more
expertise from managers.

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Diversification
A risk management technique that mixes a wide variety of investments within a portfolio.
The rationale behind this technique contends that a portfolio of different kinds of
investments will, on average, yield higher returns and pose a lower risk than any
individual investment found within the portfolio. Diversification strives to smooth out
unsystematic risk events in a portfolio so that the positive performance of some
investments will neutralize the negative performance of others. Therefore, the benefits of
diversification will hold only if the securities in the portfolio are not perfectly correlated.
Dividend
1. A distribution of a portion of a company's earnings, decided by the board of directors,
to a class of its shareholders. The dividend is most often quoted in terms of the dollar
amount each share receives (dividends per share). It can also be quoted in terms of a
percent of the current market price, referred to as dividend yield.
Also referred to as "Dividend per Share (DPS)."
2. Mandatory distributions of income and realized capital gains made to mutual fund
investors.

No Guarantees:

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

Fees and commissions:

All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or "loads" to compensate brokers, financial consultants, or
financial planners. Even if you don't use a broker or other financial adviser, you will pay
a sales commission if you buy shares in a Load Fund.

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Taxes:

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

Management risk:

An investor should consider certain drawbacks before investing in MF. Unlike a fixed
deposit, MF does not give any guarantee on returns. If the entire stock market declines in
value, the value of MF shares will go down as well. An investor has to shell out an entry
and exit load.

ROLE OF MUTUAL FUND IN INDIA

A mutual fund is a type of financial intermediary that pools the funds of investors who
seek the same general investment objective and invests them in a number of different
types of financial claims (e.g. equity shares, bonds, money market instrument). These
pooled funds provide thousands of investors with proportional ownership of diversified
managed by professional investment managers.
Where do mutual funds invest?
Broadly, mutual funds invest basically in three types of asset classes:
Stocks: Stocks represent ownership or equity in a company. These are also called as
shares.
Bonds: These represent debt from companies, financial institutions or government
agencies.
Money Market Instruments: These include short-term debt instrument such as treasury
bills, certificates of deposits and inter bank money.

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CONCEPTS OF MUTUAL FUNDS IN INDIA:
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realized is shared by its unit holders in
proportion to the number of units owned by them. Thus, a Mutual Fund is the most
suitable investment for the common person as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. The
Security and Exchange Board of India (Mutual Funds) Regulations,1996 defines a mutual
fund as a " a fund establishment in the form of a trust to raise money through the sale of
units to the public or a section of the public under one or more schemes for investing in
securities, including money market instruments."

Mutual Funds have been a significant source of investment in both government and
corporate securities. It has been for the decades the monopoly of the state with UTI being
the key player with invested funds exceeding Rs. 300 bn. (US $ 10 bn.). The state owned
insurance companies also hold a portfolio of stocks. Presently, numerous mutual funds
exist, including private and foreign companies. Banks - mainly state owned too have
established Mutual Funds (MFs). Foreign participation in mutual funds and asset
management companies permitted on a case-by-case basis.

ADVANTAGE OF MUTUAL FUND: -

There are numerous benefits of investing in mutual funds and one of the key reasons for
its phenomenal success in the developed markets like US and UK is the range of benefits
they offer, which are unmatched by most other investment avenues. We have explained
the key benefits in this section. The benefits have been broadly split into universal
benefits, applicable to all schemes and benefits applicable specifically to open-ended
schemes.

15
The advantages of investing in a Mutual Fund are:

• Diversification: The best mutual funds design their portfolios so individual

investments will react differently to the same economic conditions. For example,
economic conditions like a rise in interest rates may cause certain securities in a
diversified portfolio to decrease in value. Other securities in the portfolio will
respond to the same economic conditions by increasing in value. When a portfolio
is balanced in this way, the value of the overall portfolio should gradually
increase over time, even if some securities lose value.

• Professional Management: The services of experienced and skilled professionals

who are backed by a dedicated investment research team which analyses the
performance and prospects of companies and selects suitable investments to
achieve the objectives of the scheme.
• Convenient Administration: Investing in a Mutual Fund reduces paperwork and
helps you avoid many problems such as bad deliveries, delayed payments and
unnecessary follow up with brokers and companies. Mutual Funds save your time
and make investing easy and convenient.
• Return Potential: Over a medium to long-term, Mutual Funds have the potential
to provide a higher return as they invest in a diversified basket of selected
securities.
• Low Costs: Mutual Funds are a relatively less expensive way to invest compared
to directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.
• Liquidity: In open-ended schemes, you can get your money back promptly at Net
Asset Value (NAV) related prices from the Mutual Fund itself. With close-ended
schemes, you can sell your units on a stock exchange at the prevailing market
price or avail of the facility of repurchase through Mutual Funds at NAV related
prices which some close-ended and interval schemes offer you periodically.
• Transparency: You get regular information on the value of your investment in
addition to disclosure on the specific investments made by your scheme, the

16
 proportion invested in each class of assets and the fund manager’s investment
strategy and outlook.
• Flexibility: Through features such as Systematic Investment Plans (SIP),
Systematic Withdrawal Plans (SWP) and dividend reinvestment plans, you can
systematically invest or withdraw funds according to your needs and convenience.
• Choice of Schemes: Mutual Funds offer a variety of schemes to suit your varying
needs over a lifetime.
• Well Regulated: All Mutual Funds are registered with SEBI and they function
within the provisions of strict regulations designed to protect the interests of
investors. The operations of Mutual Funds are regularly monitored by SEBI.

STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY:

The Indian mutual fund industry is dominated by the Unit Trust of India, which has a
total corpus of Rs700bn collected from more than 20 million investors. The UTI has
many funds/schemes in all categories i.e. equity, balanced, income etc with some being
open-ended and some being closed-ended. The Unit Scheme 1964 commonly referred to
as US 64, which is a balanced fund, is the biggest scheme with a corpus of about
Rs200bn. Most of its investors believe that the UTI is government owned and controlled,
which, while legally incorrect, is true for all practical purposes.

The second largest category of mutual funds is the ones floated by nationalized banks.
Canara bank Asset Management floated by Canara Bank and SBI Funds Management
floated by the State Bank of India are the largest of these. GIC AMC floated by General
Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of
the other prominent ones.

17
 Figure 1.1 The Structure of a Mutual Fund

Shareholders

Board of Directors
Overseas the fund
activities, including
approval of the
contract with the
management
company and certain
other service
providers.

MUTUA
L FUND

Investmen Principal Administrat Transfer custodian Independe

t Advisor underwriter ion agents nt public
holds the fund
Execute assets
account
Manage the Sells funds Overseas the
funds portfolio shares either performances of shareholder maintaining Certifies the
according to directly to the other companies transaction them separately fund’s
the objectives public or that provide the maintains record to protect financial
and policies through other service to the of transactions shareholders statement
described in firms. fund and ensure and other interest
the funds that fund shareholders
prospects operation account
comply with activities and
applicable send account
federal statement and
requirements. other documents
to the
shareholders

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 MUTUAL FUNDS IN INDIA

In India the setting up of Unit Trust of India (UTI) in 1963 marked the advent of mutual
fund industry. Unit Trust of India was set up by an Act of Parliament. The purpose of
establishing of Unit Trust of India was to give a fillip to the equity market. In the wake of
Indo-China war of 1962, there was shortage of savings going into industrial investment
for economic development. There was a need to mobilize adequate amount of risk capital
for industrial enterprise. The household savings were sought to be channelized into
primary and secondary market through units. However, in the initial years, the emphasis
in UTI was on income product. Master Share launched in 1986 ushered in the equity-
oriented schemes in India. Unit Trust of India launched a variety of innovative products
suited to meet diverse needs of investors, virtually the complete life cycle of investors.
Evolution of mutual fund in India :
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history of
mutual funds in India can be broadly divided into four distinct phases.
First Phase: 1964-1987
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6, 700 crores of assets under management.
Second Phase: 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987 followed by Canra bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set
up its mutual fund in December 1990.

19
At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004
crores.
Third Phase: 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, giving the Indian investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered
in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996
Fourth Phase: Since 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of Rs.29, 835 crores as at the end of January
2003, representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, 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.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of
assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes.

20
TYPES OF MUTUAL FUNDS: -
Mutual Funds have specific investment objectives such as growth of capital, safety of
principal current income or tax exempt income, one can select one fund or any number of
different funds to help one meets ones specific goals. In general mutual fund fall under 3
general categories: -
➢ Equity fund invest in shares of common stocks.
➢ Fixed income funds invest in government or corporate securities which offer fixed
rate of returns.
➢ Balanced fund invest in a combination of both stocks and bonds.
AGGRESSIVE GROWTH FUNDS :-
These funds seek to provide maximum growth of capital with secondary emphasis on
dividend or interest income. They invest in common stocks with a high potential for rapid
growth and capital appreciation.
Aggressive growth funds are suitable for those investors who can afford to assume the
risk of potential loss in value of their investment in the hope of achieving substantial and
rapid gains. They are not suitable for investors who must conserve their principal or who
must maximize their current income.
GROWTH FUNDS:-
Like aggressive growth funds, growth fund generally invests in stocks for growth rather
than income. They are considered more conservative in their approach because they
usually invest in established companies to achieve long-term growth. Growth fund
provides low current income but the investor principal is more stable then it would be in
an aggressive growth fund. While the growth potential may be less over the short term,
many growth funds have superior long-term performance records. These funds are
suitable for growth oriented investors but not investors who are unable to assume risk or
who are dependent on maximizing current income from there investments.

GROWTH AND INCOME FUNDS:-

Growth and income funds seek long-term growth of capital as well as current income.
The investments strategies use to reach these goals vary among funds. Growth and
income funds have low to moderate stability of principal and moderate potential for

21
 current income and growth. They are suitable for investors who can assume some risk to
achieve growth of capital but want to maintain a moderate level of current income.
FIXED INCOME FUNDS:-
The goal of fixed income fund is to provide high current income consistent with the level
of capital. Growth of capital is of secondary importance.
Fixed income funds offer a higher level of current income than money market funds, but
a lower stability of principal. Fixed income funds are suitable for investors who want to
maximize current income and who can assume a degree of capital risk in order to do so.
EQUITY FUNDS:-
Funds that invest in stocks represent the largest category of mutual fund. Generally the
investment objective of this class of fund is long-term capital growth with some income.
There are however many type of equity funds.
• Capital appreciation funds seek capital appreciation; dividends are not a primary
consideration.
• Total return funds seek a combination of current income and capital appreciation.
• World equity funds invest primarily in stocks of foreign companies.

BALANCED FUNDS:-
The Balanced funds aims to provide both growth and income. These funds invest in both
shares and fixed income securities in the proportion indicated in their offer documents. It
is an idea for investors who are looking for the combinations of income and moderate
growth.
MONEY MARKET FUNDS/ LIQUID FUNDS:-
For the cautious investors these funds provide a very high stability of principal while
seeking a moderate to high current income. They invest in highly liquid; virtually risk
free, short-term debt securities of agencies of the Indian government, banks and
corporation and treasury bills. Because of their short-term investments, money market
mutual funds are able to keep a virtually constant unit price; only the yield fluctuates.
Money market funds are suitable for those investors who want high stability of principal
and current income withimmediateliquidity.

22
SPECIALITY / SECTOR FUNDS:-
These funds invest in securities of a specific industry or sector of the economy such as
health care, technology, leisure, utilities or precious metals. The funds enable investor to
diversify holding among many companies within an industry, a more conservative
approach than investing directly in one particular company.
Sector funds offer a opportunity for sharp capital gains in cases where the fund’s industry
is “in favor” but also entail the risk of capital losses when the industry is out of favor.
While sectors funds restrict holdings to a particular industry, other specialty funds such as
index funds gives investors a broadly diversified portfolio and attempt to mirror the
performance of various market averages.
HYBRID FUNDS:-
• Hybrid funds may invest in a mix of equity and fixed-income securities.

TAXABLE BOND FUNDS:-

• Corporate bond funds seek current income by investing in high quality debt
securities issued by U.S. corporations.
• High-yield funds invest two-thirds or more of their portfolios in lower-rated U.S.
corporate bonds (Baa or lower by Moody’s and BBB or lower by Standard and
Poor’s rating services).
• Government bond funds invest in U.S. government bonds of varying maturities.
They seek high current income.
• Strategic income funds invest in a combination of U.S. fixed-income securities to
provide a high level of current income.
• World bond funds invest in debt securities offered by foreign companies and
governments. They seek the highest level of current income available worldwide.

TAX-EXEMPT BOND FUNDS:-

• National municipal bond funds invest primarily in the bonds of various municipal
issuers in the United States. These funds seek high current income free from
federal tax.

23
 • State municipal bond funds invest primarily in municipal bonds issued by a
particular state. These funds seek high after-tax income for residents of individual
states.

MONEY MARKET FUNDS:-

• Taxable money market funds invest in short-term, high-grade money market
securities and must have average maturities of 90 days or less. These funds seek
the highest level of income consistent with preservation of capital (i.e.,
maintaining a stable share price).
• Tax-exempt money market funds invest in short-term municipal securities and
must have average maturities of 90 days or less. These funds seek the highest
level of income—free from federal and, in some cases, state and local taxes—
consistent with preservation of capital.
OPEN ENDED SCHEMES:
Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units
at NAV- related prices from and to the mutual fund on any business day. These schemes
have unlimited capitalization, open-ended schemes do not have a fixed maturity, there is
no cap on the amount you can buy from the fund and the unit capital keep growing. These
funds are not generally listed on any exchange.
Open-ended schemes are preferred for their liquidity. Such funds can issue and
redeem units any time during the life of schemes. Hence unit capital of open-ended funds
can fluctuate on a daily basis. The advantages of open ended schemes are: -
1. Any time exit option
2. Any time enter option.
CLOSE ENDED SCHEMES:-
Close-ended schemes have fixed maturity periods. Investors can buy into these funds
during the period when these funds are open in the initial issue. After that such scheme
cannot issue new units except in case of bonus or right issue.

24
FREQUENTLY USED TERMS ARE EXPLAINED HERE BELOW:
Net Asset Value (NAV)
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The
per unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the valuation date.
Sale Price
It is the price you pay when you invest in a scheme. Also called Offer Price. It may
include a sales load.
Repurchase Price
It is the price at which units under open-ended schemes are repurchased by the Mutual
Fund. Such prices are NAV related.
Sales Load
It is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load.
Schemes that do not charge a load are called ‘No Load’ schemes.
Repurchase or ‘Back-end’ Load
It is a charge collected by a scheme when it buys back the units from the unit holders.

25
 FUTURE OF MUTUAL FUND IN INDIA
By December 2014, Indian mutual fund industry reached Rs 1, 50,537 crore. It is
estimated that by 2017 March - end, the total assets of all scheduled commercial banks
got Rs 40, 90, 000 crore.

The annual composite rate of growth is expected 13.4% during the rest of the decade. In
the last 5 years we have seen annual growth rate of 9%. According to the current growth
rate, by end of year 2017-18 the asset will be double.

Some facts for the growth of mutual funds in India:-

➢ 100% growth in the last 6 years.

➢ Numbers of foreign AMC’s are in the queue to enter the Indian markets like
Fidelity .Investments, US based, with over US$1trillion assets under management
worldwide.

➢ Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required.

➢ We have approximately 29 mutual funds which is much less than US having more
than 800. There is a big scope for expansion.

➢ 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
Concentrating on the 'A' class cities. Soon they will find scope in the growing
cities.

➢ Mutual fund can penetrate rural like the Indian insurance industry with simple and

Limited products.

➢ SEBI allowing the MF's to launch commodity mutual funds.

➢ Emphasis on better corporate governance.

26
HOW TO JUDGE A MUTUAL FUND:-
Consider this – The Indian mutual fund (MF) industry reached Rs. 1,50,537 crore in
December 2004. The industry witnessed a 100% growth in the last six years. By year
2016-17, MF assets are expected to double. India has 29 MF’s compared to 800 in the
US.
In the last one year, the number of retail investors in India has increased steadily. The big
question is how to judge a MF before investing? It is important for an investor to consider
a fund's performance over several years. Different fund managers adopt different
strategies to improve performance. While one fund manager may have played it cautious
by investing in good quality stocks over the years and given a return of 30% over a five-
six year period, another one who invested in speculative stocks may have struck gold in
that year, thereby outperforming tits counterpart by a long way. Thus it is important to
look at consistency of returns over a period of time rather than going by absolute returns
generated in the short term.
To begin with, you don't have to make your investment decisions. Your money is handled
by top professionals hired by fund houses who decide what securities the fund will buy
and sell. Moreover, MF industry is highly regulated, thus, protecting investors from
fraud. Regulators block funds from having more than a certain percentage of the fund in
any one firm. This prevents from over exposure in one particular industry or stock. It's
easy to get your money out of a MF. It is very convenient to buy a MF unit over phone or
Internet.

UNDERSTANDING AND MANAGING RISK

All investments whether in shares, debentures or deposits involve risk: share value may
go down depending upon the performance of the company, the industry, state of capital
markets and the economy; generally, however, longer the term, lesser the risk; companies
may default in payment of interest/principal on their debentures /bonds/ deposits; the rate
of interest on an investment may fall short of the rate of inflation reducing the purchasing
power.
• There is great opportunity for Mutual Fund companies as there is a is a rise in
number of people who want to invest in share market but don’t have time and
knowledge to do so, also these people want to take less risk .

27
 • With booming market and falling interest rate of bank deposits, people see mutual
funds as an attractive financial tool which provide a high return rate at lower risk
as compared to equity market.
• Young people these days are particularly more interested in mutual funds because
they see mutual fund as safe bet. Also these people have large disposable incomes
and risk taking capability too.
• The bad part is people are still ignorant about mutual funds and different schemes
about mutual funds, hence it is very necessary to educate them about mutual funds
• Advertising can also play a major part as it has been seen that people buy mutual
fund looking at the brand name.
As at the end of March 2017-18, there were 33 mutual funds, which managed assets of
Rs. 65, 05,152 crores (US $ 126 Billion)* under 956 schemes.
This fast growing industry is regulated by the Securities and Exchange Board of India
(SEBI).
It is very necessary before investing that you know some basics of investing

The flow chart describes broadly the working of a mutual fund:

Figure 1.2

28
Investments and you:
Investment is never an easy process. However, a sound understanding of some basic
concepts make the process of investment decision-making much easier and the
experience much more enjoyable. The following step can help you get started on your
path to becoming a successful investor:
1. Identify your financial needs and goals:
The first step is to get a clear understanding of your own financial needs and goals. Ask
yourself the question –When do I need money and for what purpose? List down your
financial goals and when they will materialize (daughter’s higher education after 6
years, purchase of a house after 10 years), and how much money you will need for the
same. The answer will help you arrive at the time frame for your investment – short term,
medium term or long term.
Table 2.1
Identify your financial needs and goals

Financial Goals Amount required Year’s to achieve Investment

at today’s price your goal horizon

Retirement Rs. 25 Lakhs 20 years Long term

Daughter’s higher Rs. 2 Lakhs 6 years Long term

Education

Buying a car Rs. 4 Lakhs 2 years Medium term

Son’s computer course Rs. 0.5 Lakhs 6 months Short term

2. Understand your tolerance to risk:

Before making an investment decision, it is very necessary for an investor to know his
risk tolerance limits. Will he be comfortable with fluctuations in the value of his
investments? Or would he prefer to settle down for a lower return without many ups and

29
downs. By knowing risk tolerance limit of himself an investor can decide his portfolio
and also choose from a variety of financial investment tools , one which suit his portfolio
the most.
3. Estimate your required rate of return:
Your required rate of return depends on your financial goals and the time you have to
achieve them. Take an example that your retirement goal at 58 years is Rs. 20 Lakhs and
your monthly savings is Rs. 5000, your required rate of return depending on your current
age would be:

Table 2.2
Estimate your required rate of return

Present Age Returns

43 years 9.5 %

48 years 21.2%

30
 As you can see, the later you start, the higher will be your required rate of return; hence
as your investment horizon reduces, for the same level of saving you may need to take
higher risk. Alternatively, if you were not willing to take a higher risk, you would have to
save a higher amount every month- Rs 9800, almost twice the original savings required to
achieve your target accumulation.
These three steps give a very basic idea about how to invest, when an investor is seeking
investment in different financial tools. Though there are different steps of investment in
each financial tool, these acts as blue print for them too.

How to Read a Mutual Fund?

Figure 1.3

Columns 1 & 2: 52-Week High and Low - These show the highest and lowest prices the
mutual fund has experienced over the previous 52 weeks (one year). This typically does
not include the previous day's price.
Column 3: Fund Name - This column lists the name of the mutual fund. The company
that manages the fund is written above in bold type.

31
Column 4: Fund Specifics - Different letters and symbols have various meanings. For
example, "N" means no load, "F" is front end load, and "B" means the fund has both front
and back-end fees. For other symbols see the legend in the newspaper in which you found
the table.
Column 5: Dollar Change -This states the dollar change in the price of the mutual fund
from the previous day's trading.
Column 6: % Change - This states the percentage change in the price of the mutual fund
from the previous day's trading.
Column 7: Week High - This is the highest price the fund traded at during the past
week.
Column 8: Week Low - This is the lowest price the fund traded at during the past week.
Column 9: Close - The last price at which the fund was traded is shown in this column.
Column 10: Week's Dollar Change - This represents the dollar change in the price of
the mutual fund from the previous week.
Column 11: Week's % Change - This shows the percentage change in the price of the
mutual fund from the previous week.

32
 WAYS TO INVEST INMUTUAL FUNDS:

Step One: Identify your investment needs.

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

1. What are my investment objectives and needs?

Probable Answers: I need regular income or need to buy a home or finance a wedding or
educate my children or a combination of all these needs.

2. How much risk am I willing to take?

Probable Answers: I can only take a minimum amount of risk or I am willing to accept
the fact that my investment value may fluctuate or that there may be a short term loss in
order to achieve a long term potential gain.

3. What are my cash flow requirements?

Probable Answers: I need a regular cash flow or I need a lump sum amount to meet a
specific need after a certain period or I don’t require a current cash flow but I want to
build my assets for the future.
By going through such an exercise, you will know what you want out of your investment
and can set the foundation for a sound Mutual Fund Investment strategy.

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

1. The track record of performance over the last few years in relation to the
appropriate yardstick and similar funds in the same category.

33
 2. How well the Mutual Fund is organized to provide efficient, prompt and
personalized service.
3. Degree of transparency as reflected in frequency and quality of their
communications.

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

34
Figure 1.4 AGGRESSIVE PLAN

35
 MODERATE PLAN
Figure 1.5

36
 CONSERVATIVE PLAN
Figure 1.6

37
Step Four: Invest regularly
For most of us, the approach that works best is to invest a fixed amount at specific
intervals, say every month. By investing a fixed sum each month, you get fewer units
when the price is high and more units when the price is low, thus bringing down your
average cost per unit. This is called rupee cost averaging and is a disciplined investment
strategy followed by investors all over the world. With many open-ended schemes
offering systematic investment plans, this regular investing habit is made easy for you.

Step Five: Keep your taxes in mind

As per the current tax laws, Dividend/Income Distribution made by mutual funds is
exempt from Income Tax in the hands of investor. However, in case of debt schemes
Dividend/Income Distribution is subject to Dividend Distribution Tax. Further, there are
other benefits available for investment in Mutual Funds under the provisions of the
prevailing tax laws. You may therefore consult your tax advisor or Chartered Accountant
for specific advice to achieve maximum tax efficiency by investing in mutual funds.

Step Six: Start early

It is desirable to start investing early and stick to a regular investment plan. If you start
now, you will make more than if you wait and invest later. The power of compounding
lets you earn income on income and your money multiplies at a compounded rate of
return.

Step Seven: The final step

All you need to do now is to get in touch with a Mutual Fund or your advisor and start
investing. Reap the rewards in the years to come. Mutual Funds are suitable for every
kind of investor whether starting a career or retiring, conservative or risk taking, growth
oriented or income seeking.

38
 CHAPTER 2: OBJECTIVES OF THE STUDY

• To know the awareness of mutual fund among people.

• To know the different aspects of mutual fund according to different age, profession
etc.
• To know the future of mutual funds in India.
• To know the different attitudes of people regarding risk, rate of return, period of
investment etc.
• To give a holistic and a comprehensive view of mutual fund industry in India.
• To understand the risk profile of the customer.
• To know the awareness of investors about schemes provided by various AMCs.

39
 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. It

includes the various steps that are generally adopted by a researcher in studying his
research problem along with the logic behind them.
1. Research Plan:
a) Research Type: Qualitative exploratory research.
b) Research Tool: Structured questionnaire.
(Including both open ended & close ended questions)
2. Sampling :
a) Sample Design: probability purposive Random sampling.
b) Sample Size: 100
c) Target Population : Students, Business & service sector people
3. Data Collection:
• Primary
• Secondary
4. Data Collection Method:

• Primary data collection method: Primary data involved a structured

questionnaire with questions that focuses on covering all the aspects of
the survey. There were different types of questions, which makes it
easy to analyze and interpret data. A total of 100 respondents were
been taken for better analysis.
• Secondary data sources: Books, Journals, Magazines, Newspapers, websites
and other sources.
5. Data Analysis Tools:
Coding and data entry
The following are the tools used here in analysis of data-
(a) Pie Charts
(b) Point and Line Charts

40
 Limitations of the Study

Limitations are extent to which the process should not exceed. The following
limitations for the project are:
1) Duration of project was not enough to make our conclusion on such a
vast subject. The time constraint was one of the major problems.
2) The study is limited to the different schemes available under the
mutual funds selected.
3) The study is limited to the different schemes available under the
mutual funds selected.
4) The study is limited to selected mutual fund schemes.
5) The lack of information sources for the analysis part.
6) The sample size taken for drawing the conclusion was not sizeable.
7) Investor ignorance was faced during discussions with respondents.
8) Information provided by the respondents might be biased. As human
nature is very dynamic, so, the view are giving today may not be same
tomorrow.

41
 CHAPTER 3: LITERATURE REVIEW

As per my research mutual fund is an American concept and the terms ‘Investment
Trust’, ‘Investment Company’, ‘Mutual Fund’, ‘Money Fund’ etc. are used
interchangeably in American literature. Mutual Funds are cooperation which accepts
dollars to buy stocks, long term bonds and short term debt instruments issued by business
or government units. These corporation pool funds and thus reduces risk by
diversification.

Mutual fund is a form of collective investment brought in by a large number of investors

for the mutual benefits of savers as well as investors. It is used as a generic term for
various types of collective investment vehicles, such as regular income plan, open-ended
investment with dividend or growth option, index funds, tax saving schemes etcetera.
Indian mutual fund industry has two distinct types of sponsors, public-sector and private-
sector. With the emphasis in increase in domestic savings and improvement in
deployment of investment through markets, the need and scope for mutual fund
operation has increased tremendously.

The mutual fund is a vehicle that enables millions of small and large savers spread across
the country as well as internationally to participate in and derive the benefit of the capital
market growth. It is an alternative vehicle of intermediation between the suppliers and
users of investible resources. The vehicles is becoming increasingly popular in India and
abroad due to higher invests or return relatively lower risk and cost. Thus the
involvement of mutual funds in the transformation of Indian economy has made it urgent
to view their services not only as financial intermediary but also as pace setter as they are
playing a significant role in spreading equity culture.

Awareness of the industry is the major factor for pushing the growth of industry. Post
liberalization, the industry has been growing at a rapid pace and has crossed Rs. 100000
crore size in terms of its assets under management. However, due to the low key investor
awareness, the inflow under the industry is yet to overtake the inflows in banks. Rising
inflation, falling interest rates and a volatile equity market make a deadly cocktail for the
investor for whom mutual funds offer a route out of the impasse. The investments in

42
mutual funds are not without risks because the same forces such as regulatory
frameworks, government policies, interest rate structures, performance of companies etc.
that rattle the equity and debt markets, act on mutual funds too. There is, therefore, a
strong need for improving the awareness in a big way. It is important to study about the
returns given by AMC Mutual Funds and perform a comparative analysis. Remember,
every problem has several researches involved in it, each backed by study.

The Private Sector Mutual Funds have recorded much better performance as compared to
the Public sector Mutual Funds mainly due to better Funds allocation, better Management
and efficient performance of Portfolio Manager. In recent times the important trends in
the mutual fund industry is the aggressive expansion of foreign owned Mutual Fund
companies and the decline of the companies floated by nationalized banks and smaller
private sector player .

In spite of the apparent opportunities in a country of our size and scope, Mutual Funds in
India have not delivered anywhere close to potential. The corporate-centric focus still
rules the roost in spite the retail-rich demographics of the country. Retail money in the
industry still languishes far behind when compared to the US, where almost 85 percent
of the total assets managed by fund managers come from individual investors.

The figures bear testimony to the huge untapped potential in India. And yet, the state of
MFs is enigmatic at best. Competition is firming up too. Banks may soon offer 3.5
percent daily interest on savings account instead of monthly. This could adversely affect
investments in MF liquid schemes .The IRDA has been aggressively promoting ULIPs as
one of the best investment options in recent times. One may argue that the job of a
regulator is to regulate, not to promote schemes. But it does make for a comparison of
approaches adopted by the two regulators. The writing on the wall is obvious. India needs
to encourage MF investments in a big way. And the initiative should be fuelled by
design, not default. Fund houses seem rather casual in launching umpteen schemes by the
hour, instead of creating tailored solutions in line with the real investment needs. And the
retail market needs to be addressed through personalized marketing. Therein lies the big
opportunity but sadly, we have not seen due acknowledgement of this fact from the
supply-side forces as yet. MFs can take their cues from the insurance industry in reaching

43
out to the common man by all means.

Despite the monopoly of LIC and its humungous network, the private players took their
campaigns to the remotest corners of India. Distributors seem to be daunted by a common
concern of lack of adequate investor education, impacting all these models, as their
success will depend extensively on the levels of financial literacy among investors.

Investors are generally more careful while making investment decision and the presence
of rationality in every investor demands higher return at minimum risk but when markets
are efficient it is not possible to gain abnormal returns. Risk is generally, associated with
various applications differently but in common it means negative connotation such as
harm or loss or some undesirable action.

According to Puneet Bhushan & Yajulu Medury (2013) concluded that women are
more conservative and takes less risk and significant gender differences occur in
investment preferences for health insurance, fixed deposits and market investments
among employees.

According to V.R.Palanivelu & K.Chandrakumar (2013) highlights that certain factors

of salaried employees like education level, awareness about the current financial system,
age of investors etc. make significant impact while deciding the investment avenues.

According to Lalit Mohan Kathuria & Kanika Singhania (2012) concluded that
private sector banking employees were investing a larger portion of their savings into
safe and risk-free investment avenues, like employee provident fund, public provident
fund and life insurance policy and only forty per cent of the respondents had high level of
awareness regarding various investment avenues.

According to D. Harikanth & B. Pragathi (2012) indicated that there is a significant

role of income and occupation in investment avenue selection by the male and female
investors. Geographical horizon of the investors, risks bearing capacity, educational level,
age, gender and risk tolerance capacity etc, also impacts their selection.

According to Sanjay Kanti Das (2012) summarized that the bank deposits remain the
most popular instrument of investment followed by insurance and small saving scheme to

44
get benefit of safety and security of their life and investment. It was found that there is a
need for increasing the financial literacy among the middle class households.

According to Meenakshi Chaturvedi & Shruti Khare (2012) revealed that most
investor preferred Bank Deposits as their first choice of investment, secondly small
saving scheme followed by the life insurance policies.

According to Giridhari Mohanta & Sathya Swaroop Debasish (2011) states that
people were ready to invest for meeting their financial, social and psychological need.
But the investor always had a mindset of safety and security, higher capital gain, secured
future, tax benefit, getting periodic return or dividends, easy purchase and meeting future
contingency.
Vidyashankar (1990), Agarwal (1992), Gupta (1992) Atmaramani (1996) and Jambodkar
(1996) have conducted extensive research regarding investor expectations, protection,
awareness and fund selection behaviour. Few striking ones among the other studies are
given below.
Jambodekar (1996) conducted a study to assess the awareness of mutual funds among
investors, to identify the information sources influencing the buyer decision and the
factors influencing the choice of a particular fund. The study 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; newspapers and magazines are
the first source of information through which investors get to know about mutual funds
schemes and investor service is the major differentiating factor in the selection of mutual
funds.
Shanmugham (1990) examined the factors affecting investment decision and found that
the investors are high risk takers. The investors possessed adequate knowledge of
government regulations, monetary and fiscal policy.
SyamaSunder (1998) conducted a survey to get an insight into the mutual fund operations
of private institutions with special reference to Kothari Pioneer. The survey revealed that
the awareness about mutual funds concept was poor during that time in small cities like
Vishakapatnam. Agents play a vital role in spreading the mutual funds culture; open-end

45
schemes were much preferred. Age and income are the two important determinants in the
selection of fund; brand image and return are their prime considerations. The role of
uncertainty and lack of knowledge about return on investment avenues are important
components of any investment. Bajtelsmit et. al. (1996), Hariharan et. al. (2000)
concluded that males are more risk tolerant than females.
A further look at behavioural data shows that non-professional investors might be
classified into two groups based on knowledge, sophisticated and unsophisticated
investors. Unsophisticated investor‟s focus their investments on funds based advertising
and advice from brokers (Gruber, 1996). A main reason for this is their lack of
knowledge and low level of involvement (Foxall et. al., 1998). Kaniel et al., (2007) and
Gallaher et al., (2006) finds that media coverage of mutual funds has a significant effect
on investor flows to funds.
Kannadhasan (2006) examined the factors that influence the retail investors‟ decision in
investing. The decision of the retail investors is based on various dependent variables
viz., gender, age, marital status, educational level, income level, awareness, preference
and risk bearing capacity.
Shanmugham (2000) conducted a survey of 201 individual investors to study the
information sourcing by investors, their perception of various investment strategy
dimensions and the factors motivating investment decisions, and reported that,
psychological and sociological factors dominated economic factors in investment
decisions.
There is evidence that women are more risk averse than men in general and this translates
to investing in less risky assets in their investment plans (Agnew, 2003). Differences in
financial literacy between men and women may also explain differences in their
investment decisions.
The research article by Giessen et. al. (2009) titled “Sex Matters: Gender Differences in
the Mutual Funds Industry", investigates gender differences between female and male.
The research was carried along three broad dimensions of: risk taking, investment styles,
and trading activity. The primary data was gathered from the CRSP (Collaborative
Research Support Program) Survivor Bias Free Mutual Funds Database. The data for
analysis was only of actively managed equity funds that invest more than 50 percent of

46
their assets in stocks and excludes bond, money market and index funds. Performance
measures of the study are obtained by using various statistical tools like regressions,
significance testing, Fame‟s regression models etc. The findings of the study are that 1.
Female are moderately more risk averse than male: 2. Female follow significantly less
extreme investment styles as compared to male: 3. Female investment styles are more
stable over a period of time: 4. Male trade more than female.
SEBI-NCAER survey (2000) was carried out to estimate the number of households and
the population of individual investors, their economic and demographic profile, portfolio
size, and investment preference for equity as well as other savings instruments. This was
a unique and comprehensive study of individual investors, for which data were collected
from 300000 geographically dispersed rural and urban households.
Some of the relevant findings of the study were: households preference for instruments
match their risk perception; bank deposit has an appeal across all income class; 43
percent of the non-investor households apparently lack awareness about mutual funds and
compared with low income groups, the higher income groups have a higher share of
investments in mutual funds signifying that mutual funds does not truly become the
investment vehicle for small investors;
Survey also observed that the majority of investors prefer mutual funds as the optimal
tool of investing. It is therefore important that all aspects related to the functioning of the
mutual fund market are optimally regulated. This survey clearly suggests that investors
expect SEBI to put in place a set of mechanisms that would enable investors to
effectively access the mutual funds market. SEBI has put in place a large number of
disclosure and corporate governance norms that are related to transparency, conflict of
interest, etc. Even then, nearly 80 per cent of all participants think that the regulator must
take additional steps related to transparency and conflict between shareholders and firms.
Since such conflict can affect share prices, they will have a cascading effect on the value
of the unit of mutual funds held by the investors. The survey participants expect the
regulator to correctly articulate the source of fluctuations of unit prices. It is puzzling to
find a persistently high degree of lack of knowledge about the role of the regulator in the
mutual funds markets.
Sikidar et. al. (1996) carried out a survey with an objective to understand the behavioural

47
aspects of the investors towards equity and mutual funds investment portfolio. The
survey revealed that the salaried and self-employed formed the major investors in mutual
funds primarily due to tax concessions. Unit trust of India and state bank of India‟s
schemes were popular and other funds had not proved to be a big hit during the time
when the survey was done.
Shukla et. al. (1994) attempted to identify whether portfolio manager‟s professional
education brought out superior performance. They found that equity mutual funds
managed by professionally qualified managers were riskier but better diversified than the
others. Though the performance differences were not statistically significant, the three
professionally qualified fund managers reviewed outperformed others.
Siggelkow (2003) studies the diversification of fund offerings by mutual funds families.
He discovers that funds belonging to more focused fund families outperform similar
funds in more diversified families. However, he finds that diversification improves the
fund family's cash inflow. So he argues that there exist conflicts of interests between the
shareholders and fund family owners in terms of focusing and diversification.
Engstrom et. al. (2004) examined Swedish data and found that, in mutual funds, the
management fees have a stronger impact on selection decision of mutual funds, in that
they avoid high-fee funds. Furthermore, they document evidence to suggest that indirect
costs, due to unfamiliarity, matters when investor choose funds. With respect to load
structure Wilcox (2003) found that investors appear to be more sensitive to load charges
than to expense ratios.
An internally commissioned study by the NSE shows that the knowledge and
understanding of financial products and services and their impact is important for
investor‟s selection decision making process. Studies also found that investor expertise
and knowledge is important to the decision-making process for the purchase of financial
products or services (Perry et. al., 2005).
With respect to marketing and distribution efforts of fund managers, according to Capon
et. al. (1996) marketing efforts and advertisements have a positive effect on subsequent
flows. Jain et. al. (2000) provides direct evidence of the effect of marketing on fund
purchase. They examined a sample of equity mutual funds that advertised in various

48
magazines during the period 1994-96 and documented that advertised funds attracted
approximately 20 percent more money than funds that did not advertise.
Chakarabarti et. al. (2000) stressed the importance of brand effect in determining the
competitive position of the asset management companies. Their study reveals that brand
image factor, influences investors perception and hence his fund or scheme selection.
Ranganathan (2006) studied fund selection behavior of individual investors towards
mutual funds. The study found along with the fund performance record, sponsor‟s
expertise in managing money, which is closely, followed by reputation of the sponsoring
firm are the most influencing factors in mutual funds selection.
Hussein (2006) identified the factors influencing the UAE investors‟ behaviour. Six
factors were found as the most influencing factors on the UAE. The most influencing
factors include corporate earnings, get rich quick and past performance of the stock.
Neo-classical economic theory tells us that investor are rational and that their behavior is
driven by wealth maximization and self-interest. However, as suggested by the somewhat
mixed empirical evidence presented above, there seem to be investors that consider other
factors as well when forming their investment decisions, i.e. social, moral and ethical
concerns.
Sahadevan et. al. (1997) stated that, mutual funds provide opportunity for the middle and
lower income groups to acquire shares. The savings of household sector constituted more
than 75 percent of the GDS along with a shift in the preference from physical assets to
financial assets and also identified that, savings pattern of households shifted from bank
deposits to shares, debentures, and mutual funds.
Gangadhar (1992) identified mutual funds as the prime vehicle for mobilization of
household sectors‟ savings as it ensures the triple benefits of steady return, capital
appreciation and low risk. He identified that open-end funds were very popular in India
due to its size, economies of operations and for its liquidity. Investors opted for mutual
funds with the expectation of higher return for a given risk, greater convenience and
liquidity.
Saha et. al. (1993-94) identified that return, liquidity, safety and capital appreciation
played a predominant role in the preference of the schemes by investors. The preference
of the households towards shares and debentures was 7 percent by 1989-90. Mutual funds

49
being an alternative way for direct purchase of stocks should be managed effectively
adopting investment analysis, valuation models, and portfolio management techniques.
The study suggested that, fund managers could adopt portfolio selection techniques to
make more informed judgments rather than making investments on an intuition basis.
According to Dilipsingh Chauhan, Manager, Reliance Asset Management Company,
mutual funds give investors the benefit of diversification if the fund is actively managed
by professional money management. Many large, well-known mutual funds provide these
services at low prices. But how can unsophisticated investors know whether they are
paying a reasonable price? A premise of current mutual funds regulation is that the
market should set fees, but those fees should be transparent. However, it would be a
mistake for researchers and regulators to focus only on what could be done with new
rules, to the exclusion of what might be done by relaxing or altering existing rules.
Unlike most of securities regulation, mutual funds regulation is not focused principally
on disclosure, but tightly constrains compensation and governance practices. Regulators
should consider whether those constraints have frozen non optimal practices into place.
To the extent new rules are needed, the traditional focus on disclosure and transparency
may work best. The Securities and Exchange Commission has tried to draw investor
attention to fees and other expenses in mutual fund prospectuses and on its own website.
It is therefore curious that the Security and Exchange Commission has resisted calls for
investor specific disclosure of the amount of fees and expenses in the quarterly account
statements sent to investors. Given that industry wide investor costs are measured in the
tens of billions of dollars annually, even a modest increase in investors' sensitivity to
costs could result in enormous aggregate savings.
According to Mr. Pritesh Patel, NJ Investment, individual investors increasingly use
mutual funds to invest in the equity market instead of trading individual stocks.
Shiller (1993) reported that many investors do not have data analysis and interpretation
skills. This is because, data from the market supports the merits of index investing,
passive investors are more likely to base their investment choices on information received
from objective or scientific sources.
Hirshleifer (2001) categorized different types of cognitive errors that investors make i.e.
self-deception, occur because people tend to think that they are better than they really are;

50
heuristic simplification, which occurs because individuals have limited attention, memory
and processing capabilities; disposition effect; individuals are prone to sell their winners
too quickly and hold on to their losers too long.
Venugopalan (1992) opined that India (15 million) ranks third in the world next to U.S.A.
(50 million) and Japan (25 million) in terms of number of shareholders ensuring the
spread of equity cult. However, many investors face hardships in the mutual funds market
due to lack of professional advice, inability to minimize risk, limited resources and
information.
Ansari (1993) stressed the need for mutual funds to bring in innovative schemes suitable
to the varied needs of the small savers in order to become predominant financial service
institution in the country.
Ippolito (1992) found that investors are sensitive to the form in which funds expenses are
charged though investors are less likely to buy funds with high transaction fees (e.g.
broker commission or front-end load fees). Barber et. al. (2000) found that investors react
differently to various fund expenses. They have added that investors are less likely to buy
funds that incur salient fees, such as a brokerage commissions or front-end loads.
Irissappane (2000) evaluated the investment pattern and performance of 34 close-ended
schemes from 1988-98 and elicited the views of investors and managers belonging to
Chennai, Mumbai, Pune and Delhi. The survey identified that the investors desired a
return equivalent to market.
Bansal (2003) survey of 2819 respondents revealed that, the percentage of investors
holding only unit trust of India schemes reduced. The unit holders‟ loyalty seemed to
have become a myth as investors were looking for performance. Unit-holders spread their
holdings over two or more funds with an urge to diversify increasing competitive mutual
funds environment.
Due to the great number of funds in existence, evaluating manager‟s performance and
selecting funds with relatively high risk-adjusted returns can be difficult and challenging
task. The growth of data companies such as Lipper, Morningstar, and Micropal and the
explosion in the publication of books and articles on mutual funds both reflect investors'
tremendous demand for detailed mutual funds information and investment advice. This
huge demand suggests that many investors are making mutual funds investment decisions

51
themselves and many of them study current and historical information about funds
carefully during the decision-making process.
A handful of previous papers have examined specific dimensions of the mutual funds
choices of individual investors. Barber et. al. (2005) finds that investors are more
sensitive to salient fees such as front-end loads, but not as sensitive to hidden
management fees. Zhu (2005) shows that busy investors are more likely to invest in funds
instead of individual stocks.
Malhotra et. al. (1997) reported that the preoccupation of mutual funds investors with
using performance evaluation as selection criteria is misguided because of volatility of
returns, which may be due to superior management or just good luck is difficult to
determine. The findings are consistent with the findings for Ferris et. al. (1987).
Lu Zheng (1998) examined the fund selection ability of mutual funds investors and found
that the investor‟s decisions are based on short-term past performance and investors use
fund specific information in their selection decision.
Campenhout (2007) documented that, while selecting mutual funds considering the past
performance of the fund, the investors interpret high performance as evidence of superior
managerial ability.
It is well documented that investors chase past positive performance and that
performance persists on a short-term basis. Patel et. al. (1990), Ippolito (1992), Sirri et.
al. (1998), Goetzmann et al. (1997), Chevalier et. al. (1997), Roston (1997), and others
have reported that money flows into past good performers and flows out of past poor
performers. Researchers have also provided strong evidence for performance persistence:
Hendricks et. al. (1993), Goetzmann et. al. (1994), Carhart (1997), Brown et. al. (1995),
Elton et. al. (1996), and Grinblatt et. al. (1992) all suggest that performance persists.
Extant research shows that mutual funds investors respond to past performance, which is
typically measured as raw returns, market-adjusted returns or alphas defined by
individual models (Sirri et. al. 1998 and Chevalier et. al. 1997). This approach is
restrictive because it assumes that investors behave as if they use a single mutual funds
return generating model to measure past performance. A more plausible assumption is
that investors behave as if they employ a variety of models to measure past performance.

52
A number of recent papers studied the investment performance of mutual funds
managers, yet only Gruber (1996) studies the ability of investors to select funds.
Beginning with Jensen (1969), many researchers have examined the performance of
different groups of mutual funds managers using various methods. Most find that
managers on average underperform the market, but others find that managers display
some management skill.
A fundamental aspect of investments is the inherent risk involved. As investors make
risky decisions, there is a need for them to know what information are necessary as well
as the possibility to obtain that particular information (Jacoby et al., 2001). Their
aptitude, stimulus and opportunity to collect this information are determinants for what
the investor can reasonably expect in terms of return on their investment. However, there
is such a vast magnitude of information on and about the market that it becomes virtually
impossible for investors to assess and process the information regarding the mutual funds
on the market (e.g., Aldridge, 1998; Sandler, 2002). This affects the involvement of
investors which has been confirmed by other studies that shows that investors have low
levels of involvement in situations regarding investment decision-making (e.g., Foxall et.
al. 1998, Benartzi et. al. 1999).

53
 CHAPTER 4: DATA ANALYSIS & INTERPRETATION

4.1 Age of Investors

CATEGORY NO. OF
RESPONDENTS
18 - 22 Years 42

23-26 Years 10

27-30 Years 11

31-35 Years 11

36 Years or Above 26

Interpretation: Out of 100 respondents, 42 are between the ages of 18 and 22,
ten are between the ages of 23 and 26, and twenty are between the ages of 27 and
30. Twenty-six people are over the age of 36.

Analysis: The majority of those investing, according to the poll, are between the ages of
18 and 22, which could be attributed to increased awareness and education on the
significance of saving and investing in colleges and elsewhere. The next big age group is
adults over the age of 36, who are likely already aware of the need of investing and
saving.

54
 4.2. Educational Qualification

CATEGORY NO. OF
RESPONDENTS
Under – Graduate 48
Graduate 29

Post - Graduate 23

Interpretation: Out of the 100 responders, 48 have not completed or are

still pursuing their undergraduate degrees. 29 persons have received their
diplomas, while 23 are post-graduates.

Analysis: Most Indian investors are undergraduates who are likely still
pursuing education while investing, demonstrating that a higher degree of
education is not required to invest. Surprisingly, post-graduates with the
highest degree of education have the smallest number of investors.

55
4.3 Occupation

CATEGORY NO. OF
RESPONDENTS
Student 50

Businessman 16

Job 12

Self – 11
Employed
Homemaker 11

Interpretation: Half of the respondents are students while 39 are working

professionals in business, job or are self – employed and 11 are
homemakers.

Analysis: Most of the investors in India interested in investment are students.

The next best category is of businessmen who are investing their income in
different instruments.

56
4.4 Do you invest regularly?

CATEGORY NO. OF RESPONDENTS

Yes 54

No 46

Interpretation: Close to half of the respondents, 46 in number do not invest

regularly. While 54 respondents are regular investors.

Analysis: While most of the students are interested in investing and are
aware about the same, only a few have enough resources to invest regularly.
Since students do not earn and have little pocket money it is fairly justified
in the responses that 46 people are irregular with investing. However, on the
other side 54 people invest regularly which can be attributed to their
independence, age and regular sources of income.

57
4.5 Method of investment –

CATEGORY NO. OF RESPONDENTS

Apps ( WazirX, Zerodha, etc) 55

By intuition 14

Brokers 31

Interpretation: According to the survey, 55 people are dependent on

scientific tools and apps like WazirX, Zerodha etc, while 31 respondents
choose to take a financial broker’s advice. It is also inferred from the survey
that 14 respondents invest by their intuition.

Analysis: The above data represents that 86 respondents take investment

seriously out of which 55 people invest by their own using tools and apps
while 31 of them take financial advice. This also shows financial literacy
amongst the above 86 people. On the other hand 14 people who invest by
intuition attribute to the segment of citizens who are not aware about
financial trends or on how the investment sector works.

58
4.6 Preferred form of investment –
CATEGORY NO. OF RESPONDENTS

Insurance 2

Fixed Deposit ( Bank FD) 19

Bonds & Debentures 1

Mutual Funds/ SIP 33

Equity/Share Market 31

PPF 5

Post office Savings 2

others 7

Interpretation: The data in the pie chat above shows people are almost
equally likely to invest in equity/ share market or mutual funds. However, the
maximum number of respondents, i.e. 33, invest in mutual funds. Next major
form of investment chosen by 19 people is Fixed Deposit ( Bank FD). Other
10% of the respondents choose other form of investments.

Analysis: From the data above it is observed that major chunk of people

59
choose mutual funds and share market as the most preferred form of
investment.

The second most preferred method of investment by the respondents is share

market and equity. From the data collected in the survey it can be inferred
that with the growing knowledge of mutual funds and share market most of
the youngsters prefer investing in the above-mentioned methods of
investment. The third most preferred method is bank FDs, considering
around 40% of the respondents being more than 30 in age, investing in
mutual funds, share market or equity is fairly new to them. They still choose
to go ahead with bank FDs as a safe investment.

Bonds, debentures, post office savings, PPFs etc are lesser preferred methods
which could be attributed to the reasons like lower returns, lesser awareness
etc.

60
4.7 What is your investment expenditure ratio?
CATEGORY NO. OF
RESPONDENTS
Less than 20% 50

20 – 80% 19

30 – 70% 11

40 – 60% 11

50 – 50% 9

Interpretation: 9 people invest more or equal to 50% of their income while

50 people invest less than 20% of their income and 41 people combined
save between 20% - 40% of their income.

Analysis: 50% of the investors invest less than 20% of their income which
is a huge potential base which needs to understand the importance of
investing and start saving more.
Around 20% of the investors' ratio is 20-80% which is considered to be the
ideal investment- expenditure ratio. 11% of the investors are highly
investing in investment avenues as they invest equal to or more than 50%
of their income.

61
4.8 Are you aware of mutual funds?

CATEGORY NO. OF RESPONDENTS

Yes 94

No 6

Interpretation: As per the survey conducted 6 respondents were completely unaware of

mutual funds while 94 of them were aware.

Analysis: Only 6% of correspondent said they don’t know any thing about mutual fund
and 94% said they know about mutual funds but what we found that they have just a
primary or very negligible knowledge about mutual funds and not really aware of the
concept called MUTUAL FUND.

62
4.9 Your perception about Mutual Funds?

CATEGORY NO. OF
RESPONDENTS
Safe 52

Risky 16

Not Sure 32

Interpretation: Out of the 100 people who were surveyed, 52 consider mutual funds as a
safe investment option, 16 consider it to be risky while 32 of them are not sure.

Analysis: 52% of the respondents consider mutual funds as a safe investment option.
This can be attributed to the growing financial awareness and convenience of investing in
mutual funds. 16% of the respondents who consider it to be risky might not be aware of
the investment market and have limited knowledge on how it works. While 32% who are
not sure if it is safe or risky are the people who have had mixed experiences with
investing in mutual funds.

63
4.10 Do you invest in Mutual Funds?

CATEGORY NO. OF RESPONDENTS

Yes 52

No 48

Interpretation: 52 of the respondents invest in Mutual Funds while 48 of them do not.

Analysis: Out of the total correspondents asked about 41% have said that they had invested in
mutual funds before while 59% said NO. Out of the total people who have said yes a majority of
them are young, having disposable income and willingness to take risk.

64
4.11 Are you aware of different types of mutual funds in the market?

CATEGORY NO. OF
RESPONDENTS
Yes 57

No 26

Maybe 17

Interpretation: More than half, 57% of the respondents are aware of different types of
Mutual Funds available in the market.

Analysis: Out of total corresponds only 57% said that they know about various mutual schemes
as this number is small it explains that people still don’t know about various schemes in the
market. It also shows that even those who have bought mutual funds are still ignorant about the
different schemes.

65
4.12 How do you choose a mutual fund?

CATEGORY NO. OF
RESPONDENTS
BRAND NAME 50
HIGH NAV 19
HIGH RETURNS 11
ADVERTISING 11
OTHERS 9

Interpretation: 48% of the respondents consider high returns before choosing the fund,
while 17% and 20% consider NAV and brand respectively. 15% of the respondents
consider other factors such as their advisors, advertisements, performance analysis etc.

Analysis: It has been observed that high returns is the most important criteria before
someone invests in a mutual fund. Only 20% of the respondents consider the brand name.
This is a sign of increasing awareness about mutual funds and market analysis. This also
shows that people have become more literate about managing their finance.

66
4.13 Discomfort you face while investing in Mutual Funds?
CATEGORY NO. OF
RESPONDENTS
Uncertainty 24

Less 36
Awareness
Low Returns 11

Inconvenient 11
to Operate
No 18
Discomfort

Interpretation: Out of the 100 investors – 36 of them have less awareness

about mutual funds, 24 are uncertain and unsure about mutual funds,

Analysis: Only 18% of the people face no discomfort while investing in

mutual funds. All rest of them face some or the other difficulties such as
less awareness, uncertainty, low returns or inconvenient to operate.

67
4.14 Would you recommend investing in Mutual Funds to someone who
is looking for an investment option?

CATEGORY NO. OF
RESPONDENTS
Yes 61

No 11

Maybe 28

Interpretation: 61 respondents would recommend mutual funds to someone who is

looking for an investment option while around 39% people might not recommend it.

Analysis: Based on the survey conducted the maximum respondents are more aware of
mutual funds than any other mode of investments due to its higher popularity, ease of
investment and growing awareness through media. Hence, 61% of the respondents would
recommend someone to invest in Mutual Funds.

68
 CHAPTER 5: FINDINGS & ANALYSIS
• It is found that the most important trend in the mutual fund industry is the
aggressive expansion of the foreign owned mutual fund companies and the
decline of the companies floated by nationalized banks and smaller private sector
players.

• It is found that many nationalized banks got into the mutual fund business in the
early nineties and got off to a good start due to the stock market boom prevailing
then. These banks did not really understand the mutual fund business and they just
viewed it as another kind of banking activity. Few hired specialized staff and
generally chose to transfer staff from the parent organizations.

• It is found that the performance of most of the schemes floated by these funds was
not good. Some schemes had offered guaranteed returns and their parent
organizations had to bail out these AMCs by paying large amounts of money as
the difference between the guaranteed and actual returns. The service levels were
also very bad. Most of these AMCs have not been able to retain staff, float new
schemes etc. and it is doubtful whether, barring a few exceptions, they have
serious plans of continuing the activity in a major way.

• The experience of some of the AMCs floated by private sector Indian companies
was also very similar. They quickly realized that the AMC business is a business,
which makes money in the long term and requires deep-pocketed support in the
intermediate years. Some have sold out to foreign owned companies, some have
merged with others and there is general restructuring going on. They can be
credited with introducing many new practices such as new product innovation,
sharp improvement in service standards and disclosure, usage of technology,
broker education and support etc. In fact, they have forced the industry to upgrade
itself and service levels of organizations like UTI have improved dramatically in
the last few years in response to the competition provided by these.

69
Performance of Mutual Funds in India

It is found that the performance of mutual funds in India from the day the concept of
mutual fund took birth in India. The year was 1963. Unit Trust of India invited investors
or rather to those who believed in savings, to park their money in UTI Mutual Fund. The
performance of mutual funds in India in the initial phase was not even closer to
satisfactory level. People rarely understood, and of course investing was out of question.
But yes, some 24 million shareholders were accustomed with guaranteed high returns by
the beginning of liberalization of the industry in 1992. This good record of UTI became
marketing tool for new entrants. The expectations of investors touched the sky in
profitability factor. However, people were miles away from the preparedness of risks
factor after the liberalization.

The performance of mutual funds in India suffered qualitatively. The 1992 stock market
scandal, the losses by disinvestments and of course the lack of transparent rules in the
whereabouts rocked confidence among the investors. Partly owing to a relatively weak
stock market performance, mutual funds have not yet recovered, with funds trading at an
average discount of 1020 percent of their net asset value. The measure was taken to make
mutual funds the key instrument for long-term saving. The more the variety offered, the
quantitative will be investors. At last to mention, as long as mutual fund companies are
performing with lower risks and higher profitability within a short span of time, more and
more people will be inclined to invest until and unless they are fully educated with the
dos and don'ts of mutual funds.

70
Market Trends

Comparison of Mutual Funds with Other Instrument

It is found that the product innovation is now passé with the game shifting to
performance delivery in fund management as well as service. Those directly associated
with the fund management industry like distributors, registrars and transfer agents, and
even the regulators have become more mature and responsible.

The industry is also having a profound impact on financial markets. While UTI has
always been a dominant player on the bourses as well as the debt markets, the new
generations of private funds, which have gained substantial mass, are now flexing their
muscles. Fund managers, by their selection criteria for stocks have forced corporate
governance on the industry. Rewarding honest and transparent management with higher
valuations has created a system of risk-reward created where the corporate sector is more
transparent then before. Funds have shifted their focus to the recession free sectors like
pharmaceuticals, FMCG and technology sector. Funds performances are improving.

71
 CHAPTER 6: CONCLUSION & SUGGESTIONS
CONCLUSION:

It is concluded that today a lot of investment opportunities are available to the investors
in the financial markets. Investors can invest in corporate bonds, debentures, bank
deposits, post office schemes etc. But nowadays investors opt for portfolio managers to
invest money on their behalf. These portfolio managers are experts in stock market
operations and invest the money in such a way that the investors would get minimum
assured returns. Today many institutions are busy in providing wealth management
services to the investors. But these services are very costly. Thus in order to help the
investor’s mutual funds provide a protective shed to the small and big investors. The
present study analyses the mutual fund investments in relation to investor’s behavior.
Investors’ opinion and perception has been studied relating to various issues like type of
mutual fund scheme, main objective behind investing in mutual fund scheme, level of
satisfaction, role of financial advisors and brokers, investors’ opinion relating to factors
that attract them to invest in mutual funds, sources of information, deficiencies in the
services provided by the mutual fund managers, challenges before the Indian mutual fund
industry etc.

Mutual funds are funds that pool the money of several investors to invest in equity or
debt markets. Mutual Funds could be Equity funds, Debt funds or balanced funds.

Fund are selected on quantitative parameters like volatility, FAMA Model, risk adjusted
returns, and rolling return coupled with a qualitative analysis of fund performance and
investment styles through regular interactions / due diligence processes with fund
managers.

• A mutual fund brings together a group of people and invests their money in
stocks, bonds, and other securities.
• The advantages of mutual are professional management, diversification,
economies of scale, simplicity and liquidity.

72
 • The disadvantages of mutual are high costs, over-diversification, possible tax
consequences, and the inability of management to guarantee a superior return.
• There are many, many types of mutual funds. We can classify funds based on
asset class, investing strategy, region, etc.
• Mutual funds have lots of costs.
• Costs can be broken down into ongoing fees (represented by the expense ratio)
and transaction fees.
• The biggest problems with mutual funds are their costs and fees.
• Mutual funds are easy to buy and sell. We can either buy them directly from the
fund company or through a third party.
• Mutual fund ads can be very deceiving.

As should now be apparent, there are many challenges in creating effective public
relations for the multi-national entity. Those, just listed really are just a few of the major
organizational challenges. It is not as easy as extending traditional domestic activities
into the global realm. To be effective, as described, multi-national public relations
presupposes qualified personnel. A team leader should be well versed in international
issues and events, skilled in cultural integration and knowledgeable about public
relations. Local officers should be experienced in local public relations.

Price for any product is fixed the general average of both high and low quotations. The
selling price is the total of cost of production or cost of purchase and the level of project
margin.
The price paid should be equal to the satisfaction obtained, a per the concept of
“consumer’s surplus”. The pricing decision depends upon environment, especially the
political environment. A “price-marker” in the domestic market is the “Price-taker” in
export market. Various trade agreements help the global community to help each other in
international trade. International marketing strategy depends what types of products are to
be served, which needs are to be satisfied and what technologies are to be used to satisfy
the needs.
.

73
Personal selling is the best way to promote high sales. Salesmanship becomes a key-
factor in personal selling, because salesmanship is the art of influencing people. A
salesman’s top quality is “enthusiasm”. The global or international public relation creates
a good situation for maximum international business. Language presents a peculiar
problem. Corporate slogans, marketing themes and translation in other local language -
all these are necessary. On the label of the product – both the local language of the
importing country and the international language must be printed.

74
 SUGGESTION:
• India is passing through a tremendous growth phase with an average growth rate
of 12-15% per annum. With this growth phase there is growth in each and every
sector, hence there is rush to by shares and equities. It is also a very good time
for mutual fund companies but it is advisable for them and their brokers that they
don’t just sell mutual funds but sell the right kind of scheme which is
comfortable to a person nature of taking risk and need,

• There is a general ignorance and questions about, what are mutual funds? What
are different schemes of mutual funds? How to invest in a mutual? And many
more. This thing should be handled by mutual fund companies and their brokers
to provide knowledge to their clients.

• It has been seen that there is a major increase in the percentage of young
investors who have large amount of disposable income with them and want to
invest, these types of prospective clients should be tapped at an early stage.

• Small towns, villages are still untapped and can also acts as an business area of
very huge potential.

• Now even co-operative society can invest up to 10% of their capital in mutual
funds which open the door to new and very important client base.

This study is very important in order to judge the investors’ behavior in a market
like India, where the competition increases day by day due to the entry of large
number of players with different financial strengths and strategies. The present
investigation outlined that mostly the investors have positive approach towards
investing in mutual funds. In order to maintain their confidence in mutual funds
they should be provided with timely information relating to different trends in
the mutual fund industry. For achieving heights in the financial sector, the
mutual fund companies should formulate the strategies in such a way that helps
in fulfilling the investors’ expectations. Today the main task before mutual fund
75
industry is to convert the potential investors into the reality investors. New and
more innovative schemes should be launched from time to time so that investor’s
confidence should be maintained. All this will lead to the overall growth and
development of the mutual fund industry.

This study is very important in order to judge the investors’ behavior in a market
like India, where the competition increases day by day due to the entry of large
number of players with different financial strengths and strategies. The present
investigation outlined that mostly the investors have positive approach towards
investing in mutual funds. In order to maintain their confidence in mutual funds
they should be provided with timely information relating to different trends in
the mutual fund industry. For achieving heights in the financial sector, the
mutual fund companies should formulate the strategies in such a way that helps
in fulfilling the investors’ expectations.
Today the main task before mutual fund industry is to convert the potential
investors into the reality investors. New and more innovative schemes should be
launched from time to time so that investor’s confidence should be maintained.
All this will lead to the overall growth and development of the mutual fund
industry.

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 BIBLIOGRAPHY
BOOKS & JOURNALS
• Aggarwal, N and Gupta, M (2012) “Performance of Mutual Funds in India: An
Empirical Study”, The Icfai Journal of Applied Finance, Vol.13, No.9, pp.5-16.
• Bansal, L.K (2014), “Mutual Funds Management and Working” Deep and Deep
publications, New Delhi, pp 34-39.
• Bharma, S (2015), “Myths Of Systematic Investment Plan”, Mutual Funds In
India (ed.by Dutta Abhijit), Wisdom Publications, New Delhi, pp.91-92.
• Bodla, B S and Bishnoi, S (2016), “Emerging Trends of Mutual Funds in India: A
Study across Category and type of schemes, “Journal of Indian Management and
Strategy, Vol.13, p-15.
• Chandra, P (2012) “The Investment Game: How to Win?” Tata Mc Graw Hill,
New Delhi Gilkar, N.A (2013), “Investors Perceptions of Mutual Funds: An
Investigation”, The Business Review, Vol.9, No.1, pp 26-35.
• Gupta, A (2013)," Investment Performance of Indian Mutual Funds: An Empirical
Study", Finance India, Vol.XIV, No.3, pp.833-866.
• Mishra (2011) “The Dawn of Mutual Funds: Exciting Investment Opportunities
Ahead” Journal of commerce, September, pp.12-18.
• Panda, T.K and Tripathy, N.P (2001),"Customers Orientation In Designing
Mutual Fund Products", The ICFAI Journal Of Applied Finance, Vol.7, No.4,
pp.20-28.
• Pasricha, J.S and Jain, S (2015) “Performance Evaluation of Mutual Funds”,
Punjab Journal of Business Studies, Vol.1, No.1, pp.102-110.
• Singh, Y.P and Vanita (2014), “Mutual Funds Investors Perceptions and
Preferences: A Survey”, The Indian Journal Of Commerce”, Vo55, P-8.
• Sudalaimuthu, S and Kumar, P S (2012), “A Study On Investors Perceptions
Towards Mutual Fund Investments”, Management Trends, Vol.5, No.1, p-106.
• Tripathy, N.P (2013) “An Empirical Analysis of Performance Evaluation of
Mutual Funds In India: A Study of Equity Linked Saving Schemes”, The ICFAI
Journal of Applied Finance, Vol.10, No.7, pp.36-54.

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 • Vanniarajan, T et.al (2011)"Factors Leading To Mutual Funds Purchases; A
customer segment Analysis, Indian Journal of Accounting, Vol. XXXVII(2),
PP.66-76.

NEWSPAPERS AND PERIODICALS

• The Economics Times, Jan 20, 2018
• The Times of India, Feb 23, 2018
• Business World, 16 March, 2018
• Business India, 25 April, 2018
WEBSITES:
• http://www.mutualfunds-india.co.in
• http://www.mutualfunds-awareness_investment.com
• http://www.moneycontrol.com
• http://www.nseindia.com
• http://www.bseindia.com
• http://www.sebi.com
• http://www.rbi.org
• http://www.indiainfoline.com
• http://www.etintelligene.com

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 ANNEXURE - QUESTIONNAIRE

1. Your age?

a. 18 – 22 Years b. 23- 26 Years c. 27 – 30 Years d. 31 – 35 Years

e. Above 36 years

2. Educational Qualification

a. Under – Graduate b. Graduate c. Post – Graduate

3. Occupation?

a. Student b. Businessman c. Job d. Self – Employed e. Homemaker

4. Do you invest regularly?

a. Yes b. No

5. What do you use for investment – ?

a. Scientific Tools b. By Intuition c. Brokers

6. What are your preferred investment priorities?

Name of Investment
Insurance
Bank
Bonds & Debentures
Equities & Share Market
PPF (Public Provident Fund)
Mutual Funds/ SIP

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Post Office Saving Schemes
Others

7. What is your investment expenditure ratio?

a. Below 20% b. 20% - 80%
c. 30% - 70% d. 40% - 60% e. 50 – 50%

8. Are you aware about Mutual Funds?

a. Yes b. No

9. What is your perception about Mutual Funds?

a. Safe b. Risky
c. Not sure

10. Do you invest in Mutual Funds?

a. Yes b. No

11. Do you know different type of Mutual Fund scheme present in the market?
a. Yes b. No

12. How do you choose a Mutual Funds?

a. Brand Name b. High NAV
c. High Returns d. Advertisement
e. Others

13. Discomfort you face while investing in mutual funds?

a. Uncertainty b. Less Awareness
c. Low Returns d. Inconvenient to operate
e. No Discomfort

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 14. Would you recommend investing in Mutual Funds to someone who is looking for
an investment option?
a. Yes b. No c. Maybe

Demographics

1. NAME: _____________________________________________

2. AGE: SEX: M / F

3. MARTIAL STATUS:

4. PROFESSION:

5. ANNUAL INCOME:
a. Less than Rs. 1, 00,000/-

b. 1, 00,000 - 1, 50,000/-

c. 1, 50,000 - 2, 50,000/-

d. 2, 50,000 - 5, 00,000/-

e. Above 5,00,000/-

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