hdfc investment avenues a comparative analysis of

Investment Avenues: A comparative analysis of

Business class and Service class people

With a special reference to Mutual fund

- A Final Project Report -

Submitted in partial fulfilment of requirements

For the award of the degree of

Master of Business Administration

To

PUNJAB TECHNICAL UNIVERSITY,

JALANDHAR

BY:

RAJ KUMAR

University Roll No.: 80701317142

(2008-10)

ACKNOWLEDGEMENT

This humble endeavour bears the imprints of many-a-person who were closely or

remotely associated with its successful completion. It gives me immense pleasure in

acknowledging the valuable assistance and co-operation I received from various people

around me in this regard.

First and foremost, I thank the almighty for bestowing me with favourable circumstances

and keeping me in high spirits.

I am thankful to Dr. Janardhanan K.P. our Director, whose untiring efforts helped me get

the opportunity to undergo my Final Project at HDFC Asset Management Co. Ltd. I also

thank Mr. Guninderjit Singh Jawandha, Our College Dean for his critical evaluation,

guidance and direction at every step, which enabled the completion of my project on

time.

I would be failing in my task, if I do not acknowledge the constant moral support and co-

operation extended by my family (especially my mother) and the backing of my friends,

without which this project would not have seen the light of the day.

Thanks to all those people, who spared their valuable time to fill-up the questionnaires

and who furnished vital information and gave suggestions, which

Proved to be very useful in the course of the project work.

21st MARCH 2010

SANGRUR (RAJ KUMAR)

UNIT - IINDUSTRY PROFILE

THE CONCEPT OF MUTUAL FUND

The basic concept of Mutual Funds can be explained with the help of a simple flowchart:

A mutual fund is a common pool of money in to which investors with common

investment objective place their contributions that are to be invested in accordance with

the stated investment objective of the scheme. The investment manager further invests

the money collected from the investor into assets that are defined/permitted by the stated

objective of the scheme. For example, an equity fund would invest equity and equity

related instruments and a debt fund would invest in bonds, debentures, gilts etc. The

INVESTORS

INVEST/POOL THEIR MONEY

MUTUAL FUND CO. (POOL OF MONEY)

INVESTS FURTHUR IN A NUMBER OF

STOCKS/BONDS

MARKET FLUCTUATIONS

PROFIT/LOSS FROM INDIVISUAL INVESTMENTS

PROFITS/LOSSES DISTRIBUTED TO

INVESTORS IN THEIR PROPORTIONAL

INVESTMENT AMOUNT

income earned through these investments and the capital appreciation realised are shared

by its unit holders in proportion to the number of units owned by them. Thus a Mutual

Fund is the most suitable investment for the common man as it offers an opportunity to

invest in a diversified, professionally managed basket of securities at a relatively low

cost.

Advantages of Mutual Funds

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: Mutual Funds provide the services of experienced

and skilled professionals, backed by a dedicated investment research team that

analyses the performance and prospects of companies and selects suitable

investments to achieve the objectives of the scheme.

Regulatory oversight: Mutual funds are subject to many government regulations

that protect investors from fraud.

Liquidity: In open-end schemes, the investor gets the money back promptly at

net asset value related prices from the Mutual Fund. In closed-end schemes, the

units can be sold on a stock exchange at the prevailing market price or the

investor can avail of the facility of direct repurchase at NAV related prices by the

Mutual Fund.

Convenience: You can usually buy mutual fund shares by mail, phone, or over

the Internet.

Low cost: 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.

Investors individually may lack sufficient funds to invest in high-grade stocks. A

mutual fund because of its large corpus allows even a small investor to take the

benefit of its investment strategy.

Transparency: You get regular information on the value of your investment in

addition to disclosure on the specific investments made by your scheme, the

proportion invested in each class of assets and the fund manager's investment

strategy and outlook.

Flexibility: Through features such as regular investment plans, regular

withdrawal plans and dividend reinvestment plans, you can systematically invest

or withdraw funds according to your needs and convenience. One can also easily

transfer his/her investment to other schemes of the same Mutual Fund company

either at no cost or at a very nominal cost.

Choice of schemes: Mutual Funds offer a family 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.

Tax Benefits: Some Mutual Fund schemes are also accompanied by tax

benefits in the form of deductions.

Drawbacks of Mutual Funds

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

value, the value of mutual fund shares will go down as well, no matter how

balanced the portfolio. Investors encounter fewer risks when they invest in

mutual funds than when they buy and sell stocks on their own. However, anyone

who invests through a mutual fund runs the risk of losing money.

Management risk: When you invest in a mutual fund, you depend on the fund's

manager to make the right decisions regarding the fund's portfolio. If the manager

does not perform as well as you had hoped, you might not make as much money

on your investment as you expected. Of course, if you invest in Index Funds, you

forego management risk, because these funds do not employ managers.

GROWTH IN ASSETS UNDER MANAGEMENT

Note: Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.

Types of Mutual Funds Schemes in India

A wide variety of Mutual Fund Schemes exist to cater to the needs such as financial

position, risk tolerance and return expectations etc. The table below gives an overview

into the existing types of schemes in the Industry.

TYPES OF MUTUAL FUND SCHEMES

By Structure

Open - Ended Schemes

Close - Ended Schemes

Interval Schemes

Open-end Funds

An open-end fund is one that is available for subscription all through the year. These do

not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset

Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15

years. The fund is open for subscription only during a specified period. Investors can

invest in the scheme at the time of the initial public issue and thereafter they can buy or

sell the units of the scheme on the stock exchanges where they are listed. In order to

provide an exit route to the investors, some close-ended funds give an option of selling

back the units to the Mutual Fund through periodic repurchase at NAV related prices.

SEBI Regulations stipulate that at least one of the two exit routes is provided to the

investor.

Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are

open for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective

Growth Schemes

Income Schemes

Balanced Schemes

Money Market Schemes

Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term.

Such schemes normally invest a majority of their corpus in equities. It has been proved

that returns from stocks, have outperformed most other kind of investments held over the

long term. Growth schemes are ideal for investors having a long term outlook seeking

growth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate debentures

and Government securities. Income Funds are ideal for capital stability and regular

income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes

periodically distribute a part of their earning and invest both in equities and fixed income

securities in the proportion indicated in their offer documents. In a rising stock market,

the NAV of these schemes may not normally keep pace, or fall equally when the market

falls. These are ideal for investors looking for a combination of income and moderate

growth.

Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and

moderate income. These schemes generally invest in safer short-term instruments such as

treasury bills, certificates of deposit, commercial paper and inter-bank call money.

Returns on these schemes may fluctuate depending upon the interest rates prevailing in

the market. These are ideal for Corporate and individual investors as a means to park

their surplus funds for short periods.

Other Schemes

o Tax Saving Schemes

o Special Schemes

Industry Specific Schemes

Index Schemes

Sector Specific Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian

Income Tax laws as the Government offers tax incentives for investment in specified

avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension

Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also

provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing

in Mutual Funds.

Special Schemes

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer document.

The investment of these funds is limited to specific industries like Infotech, FMCG,

Pharmaceuticals etc.

Index Schemes

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

Sensex or the NSE 50

Sector Specific Schemes

Sector Specific Schemes or Sectoral Funds are those which invest exclusively in a

specified sector. This could be an industry or a group of industries or various segments

such as 'A' Group shares or initial public offerings or funds being invested only in

FMCG companies or only in Oils and Natural gas companies.

Mutual Funds: Frequently Used Terms

New Fund Offer (NFO)NFO is the offer of sale of a particular scheme of mutual fund in the open market for the very first time. This term is akin to the term Initial Public Offer (IPO) which is used in case of securities.

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.

Net asset Value = Market Value of assets - Liabilities Units Outstanding

It is actually the realisable value of one unit of the Fund.

Sale PriceIt is the price you pay when you invest in a scheme. They are also called Offer Price. It may include a sales load.

Repurchase PriceIt is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Sales Load / Front-End Load / Entry LoadIt is a charge collected by a scheme when it sells the units. They are also called ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.

Repurchase / Back-End Load / Exit LoadIt is a charge collected by a scheme when it buys back the units from the unit holders.

Redemption PriceIt is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.

http://finance.indiamart.com/markets/mutual_funds/latest_mf_navs.html

Mutual Fund Companies in India

Major Mutual Fund Companies in India:

ABN AMRO Mutual Fund

Birla Sun Life Mutual Fund

Bank of Baroda Mutual Fund (BOB Mutual Fund)

HDFC Mutual Fund

HSBC Mutual Fund

ING Vysya Mutual Fund

Prudential ICICI Mutual Fund

Sahara Mutual Fund

State Bank of India Mutual Fund

Tata Mutual Fund

Kotak Mahindra Mutual Fund

Unit Trust of India Mutual Fund

Reliance Mutual Fund

Standard Chartered Mutual Fund

Franklin Templeton India Mutual Fund

Morgan Stanley Mutual Fund India

Escorts Mutual Fund

Alliance Capital Mutual Fund

Benchmark Mutual Fund

Canbank Mutual Fund

Chola Mutual Fund

LIC Mutual Fund

GIC Mutual Fund

http://finance.indiamart.com/india_business_information/abn_amro.html

UNIT - IICOMPANY PROFILE

HISTORICAL BACKGROUND

HDFC was incorporated in 1977 with two primary objectives - to enhance housing stock

in the country through housing finance systematically and professionally and promote

home ownership. Today HDFC is the largest residential mortgage finance institution in

India. It also aims to increase the flow of resources to the housing sector by integrating

the housing finance sector with the overall domestic financial markets.

Over a span of 25 years, HDFC has become the pioneer in housing finance in India and

made it possible for over two million families to own their homes, through housing loans

worth over Rs. 42,000 crores.

HDFC has turned the concept of housing finance for the growing middle class in India

into a profitable, professionally managed, world class enterprise. It has also co-promoted

financial intermediaries in various fields such as banking, realty services, asset

management, securities trading, life Insurance as well as general Insurance, call centre

and BPO services.

HDFC has demonstrated the viability of market oriented housing finance in a developing

country. The World Bank considers HDFC a model private sector housing finance

company in developing countries and a provider of technical assistance for new and

existing institutions, in India and abroad.

It’s re-engineering has always centered around the customer in retail markets on both

sides of the balance sheet, i.e. loans are given to individuals and deposits are accepted

from individuals. A positive personalized approach towards its customers' needs has

been HDFC's goal and motto.

HDFC is also the largest mobiliser of retail deposits in the private sector outside the

banking circle. Its deposits have been awarded the highest safety credit rating 'FAAA' &

'MAAA' by CRISIL and ICRA respectively for eight consecutive years.

Today, its deposit base is over 10,000 crores - a depositor base of over 13 lacs and a

network of over 50000 deposit agents. A wide geographical spread of activities in India,

through its branch network of over 130 offices, over 80 outreach locations and the HDFC

BANK branch network enables us to offer loans and deposit services to individuals in

over 2400 towns and cities across the country. It also has an international office in

Dubai, U.A.E. and service associates in Kuwait, Oman, Qatar, Saudi Arabia and Bahrain

to service Non-Resident Indians.

While being a household name in India and the undisputed market leader in the field of

housing finance, its social responsibilities have remained in focus. It continues to make

consistent efforts towards economic and social up-liftment of the marginalized sections

of society by offering customized financial assistance. This is done through strong

associations and partnerships with several NGO’s, voluntary agencies and other

development institutions ensuring effective implementation of projects and improved

sustainability at community levels.

HDFC has been voted the second 'Best Managed Company in India' after Infosys in a

poll conducted by Asia money for the year 2000. The book, Global Cases in

Benchmarking by Robert Camp includes a case study on HDFC.

Group Companies

HDFC Limited

HDFC was incorporated in 1977 with the primary objective of meeting a social need -

that of promoting home ownership by providing long-term finance to households for

their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.

HDFC Bank Limited

The Housing Development Finance Corporation Limited (HDFC) was amongst the first

to receive approval from the Reserve Bank of India to set up a bank in the private sector.

The bank was incorporated in August 1994 in the name of HDFC Bank Limited, with its

registered office in Mumbai.

HDFC Securities Limited

HDFC Securities Ltd was promoted by the HDFC Bank & HDFC with the objective of

providing the diverse customer base of the HDFC Group and other investors, a capability

to transact in the Stock Exchanges & other financial market transactions. HDFC

securities provides you with the necessary tools to allocate, select and manage your

investments wisely, and also support it with the highest standards of service,

convenience and hassle-free trading tools.

HDFC Asset Management Company Limited

HDFC Fund is a dominant player in the Indian mutual fund space, recognized for its high

levels of ethical and professional conduct and a commitment towards enhancing investor

interests.

HDFC Realty Limited

HDFC Realty is a new, organized marketplace for properties. HDFC Realty provides the

entire gamut of real estate services, bringing together the "clicks world" and the "bricks

world" in a revolutionary and user-friendly way, making available the best guidance and

the most professional, transparent, efficient service to the real estate customer.

HDFC Standard Life Insurance

HDFC and Standard Life first came together for a possible joint venture, to enter the

Indian Life Insurance market, in January 1995.

Business Objectives

The primary objectives of HDFC are to:

Enhance residential housing stock in the country through the provision of housing

finance in a systematic and professional manner

To promote home ownership

To increase the flow of resources to the housing sector by integrating the housing

finance sector with the overall domestic financial markets

Organizational Goals

The goals of HDFC are:

Develop close relationships with individual households.

Maintain its position as the premier housing finance institution in the country.

Transform ideas into viable and creative solutions.

Provide consistently high returns to shareholders.

To grow through diversification by leveraging off the existing client base.

HDFC ASSET MANAGEMENT COMPANY LIMITED

VISION

To be a dominant player in the Indian mutual fund space, recognized for its high levels

of ethical and professional conduct and a commitment towards enhancing investor

interests.

HDFC Mutual Fund was set up on June 30, 2000 with two sponsors namely Housing

Development Finance Corporation Limited and Standard Life Investments Limited.

Sponsors

Housing Development Finance Corporation Limited (HDFC)

HDFC was incorporated in 1977 as the first specialised housing finance institution in

India. HDFC provides financial assistance to individuals, corporates and developers for

the purchase or construction of residential housing. It also provides property related

services (e.g. property identification, sales services and valuation), training and

consultancy. Of these activities, housing finance remains the dominant activity. HDFC

currently has a client base of over 8,00,000 borrowers, 12,00,000 depositors, 92,000

shareholders and 50,000 deposit agents. HDFC raises funds from international agencies

such as the World Bank, IFC (Washington), USAID, CDC, ADB and KFW, domestic

term loans from banks and insurance companies, bonds and deposits. HDFC has received

the highest rating for its bonds and deposits program for the ninth year in succession.

HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first life

insurance company in the private sector to be granted a Certificate of Registration (on

October 23, 2000) by the Insurance Regulatory and Development Authority to transact

life insurance business in India.

Standard Life Investments Limited

The Standard Life Assurance Company was established in 1825 and has considerable

experience in global financial markets. In 1998, Standard Life Investments Limited

became the dedicated investment management company of the Standard Life Group and

is owned 100% by The Standard Life Assurance Company. With global assets under

management of approximately US$126 billion as at May 15, 2003, Standard Life

Investments Limited is one of the world's major investment companies and is responsible

for investing money on behalf of five million retail and institutional clients worldwide.

With its headquarters in Edinburgh, Standard Life Investments Limited has an extensive

and developing global presence with operations in the United Kingdom, Ireland, Canada,

USA, China, Korea and Hong Kong. In order to meet the different needs and risk

profiles of its clients, Standard Life Investments Limited manages a diverse portfolio

covering all of the major markets world-wide, which includes a range of private and

public equities, government and company bonds, property investments and various

derivative instruments. The company's current holdings in UK equities account for

approximately 2% of the market capitalization of the London Stock Exchange.

Housing Development Finance Corporation Limited Registered Office:

Ramon House, 3rd Floor, H.T. Parekh Marg,

169, Backbay Reclamation, Churchgate,

Mumbai 400020

Telephone: 56316300

Fax: 22821144

Website: www.hdfcfund.com

Standard Life Investments Limited Registered Office:

Standard Life Investments Ltd.,

1, George Street, Edinburgh, EH2 2LL

United Kingdom

HDFC Mutual Fund: Prominent Schemes

HDFC Growth Fund HDFC Equity Fund HDFC Top 200 Fund HDFC Core & Satellite Fund HDFC Tax Saver

Systematic Investment Plan

Talking of Mutual Funds, Systematic Investment Plan or SIP as it is popularly known,

deserves a special mention.

This scheme was introduced to encourage small investors to invest in Mutual Funds.

Under this scheme the minimum investment to be made is Rs 6,000 payable in 6 equal

monthly or bi-monthly instalments.

The investors have the convenience to make the payment in the following two ways:

Post-dated-cheques: An investor can make the payment by issuing post-dated cheques

in advance to the AMC. Investment money is withdrawn by the AMC from the bank

account of the investor on the stipulated dates.

Auto-debit-facility: It is a very convenient method of making payment under SIP. An

investor makes the payment for first instalment through a cheque/demand draft and all

the payments for subsequent instalments are automatically debited from his/her bank

account which is possible as a result of prior arrangement between the AMC and various

banks (HDFC has this arrangement with almost all the banks who issue cheques with a

MICR number).

UNIT - IIIRESEARCH PROJECT

INTRODUCTION TO INVESTMENT

Meaning of Investment

In a layman’s language, investment is said to be made when a person buys a non-

consumption commodity. For instance, when a person foregoes his consumption, saves a

part of his money and uses that money to create a bank deposit or to buy some shares in a

company, or a plot of land etc., he is said to be investing. But in economic analysis,

investment does not have this meaning.. In a real sense, investment means a net increase

in the capital of the commodity capital.

According to JM Keynes, “Investment refers to the increment of capital

equipment”.

Criteria for Investment

While choosing a particular investment scheme, one should always take the following

factors into consideration:

Safety and Reliability

One should check the genuineness and reliability of the scheme by as many means as

possible. e.g. by consulting financial experts, relatives/friends or by taking in account the

financial background and performance the institution floating that scheme.

Liquidity

Liquidity means, how quickly and promptly one can withdraw the money from the

investment avenue or how fast the invested money be converted back into liquid form.

Return

Those investment proposals should be chosen which are expected to give good returns

vis-à-vis money invested, risk involved and time factor.

Tax Benefits

Many investment proposal come with some tax-benefits such as rebates or deduction in

income for computation of income tax.

Procedural Formalities

Procedural Formalities are the formal paper work or any other procedure that is required

to make an investment. e.g. filling up and signing of forms, making cheques, furnishing

proofs of genuineness of personal details and income, getting legal sanctions etc.

A person making investment in any investment avenue should always try to strike a

balance between all these factors.

Investment Avenues: A Glace

Today there are numerous investment avenues available to investors. Each come up with

different set of features in terms of risk involved, liquidity of money, returns, tax-

benefits and implications etc. The various available prominent investment avenues in

India are discussed below briefly:

Equities

Investing in equities (shares) is a popular way of investing money. Private and public

companies bring out their public issues which are later also traded in the open market.

They collect huge sums of monies in this way, which they use to expand and diversify

their business. Dividend is declared by these companies (as per the discretion of its board

of directors). The shareholders of these shares are the real owners of the company as

these shares carry voting rights. But the dividend on these shares is not certain. There is

also a risk of sinking of the money invested if the rate of the share drops.

Debt

A debt is an acknowledgement of money borrowed by a concern, which carries a fixed

rate of interest. Debenture and bonds is a form of debt. Money invested with local

companies comes under the definition of debt. They have a fixed maturity time and carry

a fixed rate of interest which is to be paid irrespective of whether the concern, to which

the money has been endorsed, earns profits or incurs losses.

Real Estate

Real Estate refers to investment in permanent, fixed immoveable property like a land,

house, building, complex etc. This investment avenue generally involves huge sums of

money and there is relatively less liquidity in it as a lot of legal formalities need to be

fulfilled.

Gold/Jewellery/Precious Stones

This is yet another investment avenue. The rate of gold, silver and other precious stones

and metals keep on fluctuating. People invest in them when they expect a rise in their

price in future. The biggest advantage of this investment avenue is that it is possible to

buy and sell these easily across political boundaries. These also involve huge sums of

monies. People invest in gold, silver, diamonds, platinum, emerald, turquoise, jade,

pearls etc.

Post office Schemes

Government also offers many investment avenues to the public. These are usually sold

through the post-offices located across the country. There are some long term investment

avenues like the Kisan Vikas Patra’s, National Saving Certificates, Public Provident

Fund etc. There are also some short term schemes like the Monthly Income Scheme,

Saving Account, Recurring deposits etc. All these investment avenues are considered

extremely safe despite low rates of interest, as the chances of sinking of the invested

money is almost negligible. They are also good for small investors, who cannot afford to

invest large sums of money and whose risk taking capacity is very less. They also

involve very less amount of procedural formalities.

Mutual Fund

Mutual Funds as an investment option have been discussed in detail in earlier part of

this project report.

Bank Deposits

Investing in various investment schemes offered by banks is a very old and a very

popular avenue, which ha lately come of age. Banks provide avenues such as saving

account (for individuals), current account (for corporates), recurring deposits, Fixed

Deposits etc. Now a lot of private banks have also come into the foray which also give

custom based services and a variety of Value Added Services.

Insurance

Insurance is the money paid to an insurance (called premium) which covers the risk for

the insured person either on his life, or on the life of this family or any of his assets.

Insurance industry is growing by leaps and bounds these days. The premium paid

depends upon the amount of the policy and for the number of years the policy has been

drawn for. The premium is paid at regular intervals for a stipulated period of time. At the

end of a pre-disclosed time period, the entire money is returned to the interest along with

the interest thereon. Different companies come up with different schemes. Owing to a

large number of players in this sector, there are schemes galore in the market which have

different target customers. Most of these schemes come with tax-benefits.

REVIEW OF LITERATURE

Mutual Funds have been introduced in India in order to facilitate both the small and large

investors. The capital market universally has a tendency to fluctuate and its efficient

management is a matter of concern for the managers, administrators and the policy

makers. The research workers are equally interested in watching the working and results

of the mutual funds. In this chapter, the work done by various researchers in the area of

mutual funds and allied activities have been reviewed to understand the problem in its

entirety and to know some appropriate analytical techniques as used by them. Thus,

some of the earlier studies conducted on the performance of mutual funds are reviewed

below:

The Securities and Exchange Commission (1971) in its institutional investors study

report, as a part of its institutional investor’s study, found that the mutual funds

performed very poorly in the market. The least volatile funds for five years were

compared with the most volatile funds for the same period in their empirical study.

Based on the findings it opined that the more the volatility, the more profit yielding is the

fund scheme. It was concluded that the volatile funds performed better.

Batra (1991) in his article, ‘Growth and Performance of Mutual Funds in India’,

concluded that the encouraging public response to the mutual fund revealed the potential

of mobilizing the savings of the masses for the industrial finance. The mutual funds need

amendments and modifications with a view to having a uniform rules and regulations for

governing themselves. Rules should also be framed for disclosure of information, listing

of mutual funds on stock exchanges, disallowing private corporate sector in entering

mutual funds business and removing urban biasness. Limit of investment of a mutual

fund company should also be lowered. He suggested that the managers of the funds have

to accept the challenges to analyse the needs and investment preferences of the small

investors and devise schemes to suit their needs.

Fischer and Jorden (1993), in their book, ‘Security Analysis & Portfolio Management’,

examined a number of alternative types of managed portfolios available to the investor.

These have included closed-end investment companies, open-end investment companies

or mutual funds, dual funds, index funds, pension funds, ERISA, Trust Agreements and

professional investments council. They discussed the characteristics of these alternative

investment opportunities as well as advantages of such professionally managed

portfolios. They analysed a number of alternative measures of performance evaluation

including the Sharpe’s, Treynor’s and Jenson’s approaches.

Dhakshayani (1995), in his study ‘Market Boosters’, studied the performance in capital

markets of public and private sector mutual funds. He discovered that most of the mutual

fund schemes were quoted at an average discount of 35 percent to their Net Asset Value

(NAV). The investors in India preferred individual scripts rather than a basket of scripts

and that the market was driven by lack of knowledge. There had been no uniform

practice in terms of valuation of assets or provision for doubtful assets by various mutual

funds.

Mathur (1996), in her work, ‘Trying to Fight the Mutual Trust’, conducted a study of

Mutual Funds, and estimated, that at least 60 percent of the funds were quoted below

their par value. And on a total corpus of Rs. 2840 crores private mutual funds posted a

net loss of Rs 276 crores, in the first half of 1995-96. The BSE 200 index comprising 95

percent of the largest listed companies, which accounts for the 50 percent of the total

market capitalization, has given a return of over 21.7 percent per annum from January

1991 to 1996.

Carhart (1997), in his study ‘Persistence in Mutual Funds Performance’, demonstrated

that common factor in stock returns and investment expense almost completely explained

persistence in equity based mutual fund-mean and risk adjusted return. The individual

funds did not earn higher returns from following the momentum strategy in stocks. The

only significant persistence not explained was concentrated in strong under performance

by the worst return mutual funds. The results did not support the existence of skilled or

informed mutual fund portfolio managers.

Pritpal et al. (1998), in their paper on ‘Determinants of Mutual Funds of Performance:

A Factor Analysis Approach’, attempted to identify the factors affecting the performance

of mutual funds for the period 1990 – 1996 by selecting the sample using stratified

random sampling with proportional representation to each strata of the population. They

used correlation matrix analysis and calculated correlation coefficients for various

variables measuring annual performance of different categories of mutual funds. It

indicated that the dividend was highly positively correlated with income, unit capital,

and total assets as well. Correlation between NAV and Market Price was remarkably

high. The factor loadings were extracted by using Principal Axes Method and then

rotated using Varymax rotation. They based their study on four factors, viz.,

Fundamental factor, Market Performance factor, Profitability factor, Growth factor and

found that four factors jointly accounted for 53 percent to 97 percent of variation in all

variables under consideration for the years under study. It was further concluded that

variation amongst the variables over different mutual funds could adequately be

described uniformly over time with the help of four factors.

Heaton et al (2004) in their research paper titled ‘Heterogeneity and Portfolio Choice:

Theory and Evidence’, summarized and added to the evidence on the large and

systematic differences in portfolio compositions across individuals with varying

characteristics, and evaluated some of the theories that have been proposed in terms of

their ability to account for these differences. Variation in background risk exposure -

from sources such as labour and entrepreneurial income or real estate holding, and from

factors such as transactions cost, borrowing constraints, restricted pension investments

and life cycles considerations appeared necessary to explain the lack of stock market

participation by young and less affluent households. Remaining challenges for

quantitative theories include the apparent lack of diversification in some unconstrained

individual portfolios, and non-participation in the stock by some households with

significant financial wealth.

Roper (2006) of in her survey commissioned by Consumer Federation of America

observed that investors’ mutual fund purchase practices bear little resemblance to those

recommended by investor educators.

Rajni (2008) in her study on mutual fund has found that people are investing more in

mutual fund to get a diversified investment

It has been observed from the foregoing studies that the mutual funds have shown a

dismal performance during the years in which the studies were undertaken. They had not

delivered the benefits as expected by the investors and others interested in them. But

some studies have suggested that mutual funds were beneficial for income-tax planning,

wealth-tax planning and other similar gains. These are a powerful tool to mobilize the

household savings which is a major source of capital in a developing country. They are

instrumental in bringing out and subsequently channelising the small savings the

ordinary and small investors which is beneficial for the growth and development of a

developing economy like India. Some of the research workers have employed very

useful and sound analytical tools and techniques to arrive at the conclusions. Some of

these techniques have been used for the purpose of this study as well.

OBJECTIVES

The present research is guided by the following three objectives:

1. To find out the factors that guide the choice of investment avenues of people.

2. To study the perception of people regarding mutual funds as an investment option.

3. To check the basic awareness level of people regarding mutual funds as an

investment option.

RESEARCH METHODOLOGY

Research Design

The research design is the conceptual structure within which research is conducted; it

constitutes the blueprint for the collection, measurement and analysis of data. The

present research is a descriptive research.

Sample Selection

Primary data was used to find various facts needed for the research. First-hand

information was collected from the concerned individuals. Secondary data was also used

from varied sources such as books, magazines, journals, websites etc.

Data Collection Method

The Primary data was collected by way of a structured questionnaire which contained

both open and close-ended questions.

Sampling Plan

Sampling is an effective step in the collection of Primary data and has a great influence

on the quality of results. The sampling plan includes universe, population, sampling unit

and sample size.

Universe: All the residents of Ludhiana city.

Population: All the residents of Ludhiana city who either run their own

business or serve in any organization.

Sampling unit: A single resident individual of Ludhiana city who either

runs his/her own business or serves in any organization.

Sampling Technique

Convenience sampling method was used to identify the individuals who provided

primary data needed for this research.

Sample Size

The Sample size consisted of 100 resident individuals of Ludhiana city out of which:

50 were entrepreneurs, and

50 were serving in an organization

Data Analysis

For the purpose of analysing, the raw primary data that was collected by way of a

structured questionnaire was analysed question by question. For closed-ended questions,

data was first converted into percentages and then those figures were converted into

tables. From those tables, graphs/pie charts were prepared (wherever felt necessary) for

greater clarity and for better and quicker comparisons. For open-ended questions,

responses of similar nature (according to pre-decided criteria) were clubbed together and

the percentages were found.

LIMITATIONS OF THE RESEARCH

No work is perfect and there is always a room for improvement. This research work, too,

has its own set of limitations.

1. Due to time constraints, a small sample size was taken to conduct the

research.

2. Convenience sampling was used to identify the respondents. These few

respondents may or may not represent the entire population of the

research. So the findings and the conclusions may not be true for the

entire population.

3. Inability on the part of the respondents to understand the questions

may have led them to leave some questions un-answered or answer some

questions wrongly.

4. Some respondents might have answered a few questions incorrectly either

out of sheer ignorance, casual approach, personal biasness or due to

unwillingness on their part to divulge correct information.

5. Although, a lot of care has been taken in compilation of facts and figures,

still, since this research is a human work, some human errors might

have crept in.

ANALYSIS AND INTERPRETATION

This chapter attempts to analyse the questions posed to the respondents through a

structured questionnaire. The questionnaire was prepared in line with the objective of the

research and it contained both open-ended and close-ended questions.

The analyses and interpretation of the questions is supported by graphs/diagrams/ pie-

charts etc., wherever felt necessary, in order to facilitate better clarity and quicker

comparisons.

People making Investments:

Class of respondents Business Class (n1=50)

Service Class (n2=50)

No. of people who make investments 48 42

No. of people who do not make investments 2 8

Table 1

(in percentage)Class of respondents Business class Service class

% of people who make investments 96 84

% of people who do not make investments 4 16

Table 2

0

20

40

60

80

100

120

% of people who makeinvestments

% of people who do not makeinvestments

Perc

enta

ge

Business class Service class

Graph 1: People making Investments

96% of respondents from business class and 84% from service class make

investments in various available investment avenues. The remaining respondents from

both the class do not make any investments.

Frequency of making investments:

Class of Respondents Business Class (n1 = 48) Service Class (n2 = 42)R

egul

ar B

asis

Monthly 0 8

Quarterly 0 8

Bi-Annually 8 4

Annually 4 4

After more than a year 0 0

Irregular basis 36 18

Table 3

(in percentage)Class of Respondents Business Class Service Class

Reg

ular

Bas

is

Monthly 0 16

Quarterly 0 16

Bi-Annually 16 8

Annually 8 8

After more than a year 0 0

Irregular basis 72 36

Table 4

01020304050607080

Business Class Service Class

Perc

ent

Monthly QuarterlyBi-Annually AnnuallyAfter more than a year Irregular basis

Graph 2: Frequency of making investments

72% of respondents from business class make their investments on an

irregular basis. While 36% of respondents from service class also make their investments

on an irregular basis, another 36% make their investments on a regular basis, half of

them on a monthly basis and another half of them on quarterly basis.

Factors/people influencing choice of investment avenue:

Factors/People Business Class (n1=50) Service Class (n2=50)Parents 4 6

Spouse 2 8

Children 2 0

Relatives / Friends 8 6

Future Needs 6 16

Money Available 24 10

Any other factor 2 0

“No Answer” 2 0

Table 5

(in percentage)Factors/People Business Class Service Class

Parents 8 12

Spouse 4 16

Children 4 0

Relatives / Friends 16 12

Future Needs 12 32

Money Available 48 20

Any other factor 4 0

“No Answer” 4 0

Table 6

0102030405060


Perc

ent

Parents Spouse ChildrenRelatives / Friends Future Needs Money AvailableAny other factor “No Answer”

Graph 3: Factors/people influencing choice of investment avenue

In case of 48% of business class respondents, the money available for

investment makes maximum influence on their choice of the investment avenue. And for

32% of the respondents from service class, their future needs make influence on the

investment avenue the most. Relatives/friends influence 16% of business class and 12%

of service class respondents in this regard.

Awareness level towards various investment avenues:

Investment Avenue Business ClassNo. of responses

Service Class No. of Responses

Real Estate 44 38

Post Office Schemes 45 44

Equites (Share Market) 46 47

Gold/Jewellery etc. 44 42

Mutual Fund 36 44

Banks 44 44

Insurance 42 44

Any other 0 2

“No Answer” 0 2

Table 7

(in percentage)Investment Avenue Business class Service Class

Real Estate 88 76

Post Office Schemes 90 88

Equites (Share Market) 92 94

Gold/Jewellery etc. 88 84

Mutual Fund 72 88

Banks 88 88

Insurance 84 88

Any other 0 4

“No Answer” 0 4

Table 8

020406080

100

Business class Service Class

Perc

ent

Real Estate Post Office SchemesEquites (Share Market) Gold/Jewellery etc.Mutual Fund BanksInsurance Any other

Graph 4: Awareness level towards various investment avenues

91% of respondents from business class and 94% of respondents from service

class are aware of Equities as an invest avenue.

Most important factor that guides/would guide the choice of investment

avenue:

FactorsBusiness Class

(n1=50)Service Class

(n2=50)Liquidity 2 4

Safety 26 24

Return 16 14

Tax Benefits / Implications 2 6

Procedural formalities 0 0

“All factors equally important” 2 2

“No Answer” 2 0

Table 9

(in percentage)Factors Business Class Service Class

Liquidity 4 8

Safety 52 48

Return 32 28



“All factors equally important” 4 4

“No Answer” 4 0

Table 10

0102030405060


Perc

ent

Liquidity SafetyReturn Tax Benefits / ImplicationsProcedural formalities “All factors equally important”“No Answer”

Graph 5: Most important factor that guides/would be the choice of investment avenue for investors

For 52% of respondents from business class people and for 48% from service

class people, safety of their invested money was/would be the most important factor,

before they made a choice for their investment avenue. For, 32% of the respondents from

business class and 28% from service class, the return on their invested money was most

important.

Least important factor that guides/would guide the choice of

investment avenue:

Factors Business Class (n1=50)


Liquidity 2 10

Safety 0 0

Return 0 0



“No Answer” 2 4

Table11 (in percentage)

Factors Business Class Service Class

Liquidity 4 20

Safety 0 0

Return 0 0



“No Answer” 4 8

Table12

01020304050607080


Perc

ent

Liquidity SafetyReturn Tax Benefits / ImplicationsProcedural formalities “No Answer”

Graph 6: Least important factor that guides/would guide the choice of investment avenue

Procedural formalities involved while making and investment was/would be

the least important to 72 % of the respondents of business class and 44% of that of

service class people.

People investing in Mutual Fund:

Class of respondents Business Class (n1 = 48) Service Class (n2 = 42)

Investing in Mutual Fund(s) 20 26

Not Investing in Mutual fund(s) 28 22

No Answer 2 2

Table 13

(in percentage)Class of respondents Business Class Service Class

Investing in Mutual Fund(s) 40 52

Not Investing in Mutual fund(s) 56 44

No Answer 4 4

Table 14

Business Class

Investing in MutualFund(s)Not Investing inMutual fund(s)No Answer

Pie-diagram 1: Percentage of business class people investing in Mutual Fund

Service Class

Investing in MutualFund(s)Not Investing inMutual fund(s)No Answer

Pie-diagram 2: Percentage of service class people investing in Mutual Funds

The above table and pie-diagrams reveal that, while 56% of Respondents from

business class invest in mutual funds, only 44% of respondents from service class do so.

Recall of names Mutual Funds:

Class of respondents Business Class (n1 = 20)

Service Class (n2 = 26)

Able to recall 18 24

Not able to recall 2 2

Table 15

(in percentage)Class of respondents Business Class Service Class

Able to recall 90 92.69

Not able to recall 10 7.31

Table 16

0102030405060708090

100

Able to remember Not able to remember

Perc

ent


Graph 7: Recall of names of Mutual Funds

Out of the respondents who do invest their money in Mutual Fund, 90% from

business class and 92.69% from service class were able to recall the name of the mutual

fund they had invest in. Rest of them, from both the classes were not able to recall the

name of the mutual fund they had invested in.

Responses of people when asked to tell that where the money invested in Mutual Funds is further invested:

BUSINESS CLASSInvestment Avenues Percentage of respondents

Equity only 4

Equity & Debt 24

Equity, Debt & Post office schemes 4

Equity, Debt & Bank Deposit 4

Real Estate, Gold, Post office schemes &

Bank deposits4

Equity & Real Estate 4

“No idea” 56

Table 17

SERVICE CLASSInvestment Avenues Percentage of respondents

Equity only 40

Equity & Debt 16

Equity, Debt & Bank deposits 12

Equity, Debt, Real Estate & Bank deposits 4

Equity, Debt & Real Estate 4

“No idea” 24

Table 18

The above tables show the combinations of various investment avenues that

the respondents of both business class and service class people marked, when asked to

tell that where the money invested in Mutual Funds is further invested. From the

respondents of business class, 56% had no idea in this regard, while 24% thought that

money invested in mutual funds was further invested in equities and debt. Similarly, 40%

of service class.

Respondents thought that the money invested in mutual funds is further invested only in

equities. 24% of them had no idea in this regard.

Recall of names of ANY 5 Mutual Funds:

No. of schemes Business Class (n1=50)


None 38 34

Only one 4 6

2-3 6 2

More than 3 4 8

Table 19

(in percentage)No. of schemes Business class Service class

None 76 68

Only one 8 12

2-3 12 4

More than 3 8 16

Table 20

01020304050607080

None Only one 3-Feb More than 3

Perc

ent


Graph 8: Recall of names of ANY 5 Mutual Funds

76% of business class and 68% of respondents from service class people were

not able to recall the name a single scheme of mutual fund. 8% of the respondents of

business class and 16% of that of service class people were able to name more than 3

schemes of mutual fund.

Identification of Mutual Funds:

No. of schemes Business Class (n1=36)


None 4 2

1-5 10 14

5-10 18 16

10-15 4 12

Table 21

(in percentage)No. of schemes Business class Service class

None 12 4

1-5 28 32

5-10 48 36

10-15 12 28

Table 22

0

10

20

30

40

50

60

None 1--5 5--10 10--15

Perc

ent


Graph 9: Identification of Mutual Funds

48% of business class and 36 % of service class respondents were able to

identify 5-10 mutual funds, when presented with a list of 15 mutual funds running in the

Indian financial market. 28% and 32% respondents, respectively, of business class and

service class were able to identify 1-5 mutual funds. Only 12% of business class and

28% of respondents of service class were able to identify the entire list of 15 mutual

funds.

Awareness towards common terms:

Terms Business class

Service class

Entry Load / Sale Load / Front-End Load 11 15

Exit Load / Repurchase Load / Back-End Load 11 15

New Fund offer 7 4

Net Asset Value 8 10

Systematic Investment Plan (SIP) 8 13

Fund Manager / Portfolio Manager 10 11

All of the above 2 5

Neither of the above 12 7

Table 23 (in percentage)

Terms Business class Service classEntry Load / Sale Load / Front-End Load 44 60

Exit Load / Repurchase Load / Back-End Load 44 60

New Fund offer 28 16

Net Asset Value 32 40

Systematic Investment Plan (SIP) 32 52

Fund Manager / Portfolio Manager 40 44

All of the above 8 20

Neither of the above 48 28

Table 24

0

10

20

30

40

50

60

70


Perc

ent

Entry Load / SaleLoad / Front-EndLoadExit Load /Repurchase Load /Back-End LoadNew Fund offer

Net Asset Value

SystematicInvestment Plan (SIP)

Fund Manager /Portfolio Manager

Graph 10: Awareness towards common terms

Only 44% and 60% respectively of business class and service class

respondents were found to be aware of the common terms like Entry load and Exit load,

(in context to mutual funds), according to Table13 and Graph 10. Also, a majority of

respondents from service class said they were aware of the term ‘Systematic Investment

Plan’ (SIP).

Awareness regarding availability of tax-benefits:

Response regarding tax-benefits Business Class (n1=36)


Yes 9 14

No 6 4

Not sure 17 19

On some schemes 4 7

Table 25

(in percentage)Response regarding tax-benefits Business class Service class

Yes 24 32

No 0 8

Not sure 48 44

On some schemes 12 16

Table 26

0

10

20

30

40

50

60


Perc

ent Yes

NoNot sureOn some schemes

Graph 11: Awareness regarding availability of tax-benefits

48% and 44% of the respondents from business and service class respectively

are not sure of availability of tax-benefits which arise on investment in mutual fund.

Around a quarter from business class and a third of respondents from service class give a

positive reply in this regard.

Perception, as regards Liquidity:

Level of Liquidity Business Class (n1=36)


Very High 4 2

High 14 15

Moderate 7 23

Low 2 2

Very Low 2 0

“No-idea” 7 2

Table 27

(in percentage)Level of Liquidity Business class Service class

Very High 12 4

High 40 36

Moderate 20 52

Low 4 4

Very Low 4 0

“No-idea” 20 4

Table 28

0

10

20

30

40

50

60


Perc

ent

Very HighHighModerateLowVery Low“No-idea”

Graph 12: Perception, as regards Liquidity

40% of respondents from business class and 36% from service class perceive

‘High’ liquidity of money invested in mutual fund. But more than half of the respondents

from service class believe that there exists just a ‘moderate’ degree of liquidity of money

invested in mutual funds.

Perception regarding Risk involved:

Risk level Business Class (n1=36)


Highly risky 3 0

Risky 2 7

Moderate 11 19

Safe 11 16

Highly safe 2 0

“No-idea” 7 2

Table 29

(in percentage)Risk level Business Class Service Class

Highly risky 8 0

Risky 4 16

Moderate 32 44

Safe 32 36

Highly safe 4 0

“No-idea” 20 4

Table 30

05

101520253035404550


Perc

ent

Highly riskyRiskyModerateSafeHighly safe“No-idea”

Graph 13: Perception regarding Risk involved

Around a quarter of respondents from business think that mutual fund is a

‘safe’ investment avenue and an equal no. of respondents say that they are just

‘moderately’ safe. As far as service class people are concerned, 44% of the respondents

perceive investment in mutual fund as ‘moderately’ safe.

Perception regarding Procedural Formalities:

Nature of procedural formalities Business Class (n1=36)


Elaborate 0 2

Moderate 10 19

Not many 14 19

“No-idea” 12 4

Table 31

(in percentage)Nature of procedural formalities Business class Service class

Elaborate 0 4

Moderate 28 44

Not many 40 44

“No-idea” 32 8

Table 32

05

101520253035404550


Perc

ent Elaborate

ModerateNot many“No-idea”

Graph 14: Perception regarding Procedural Formalities

The above table and graph disclose that 40% of the respondents from business

class think that ‘not many’ procedural formalities are involves while investing money in

mutual fund. A quarter of respondents from this class does not have any idea in this

regard. In case of respondents from service class, 44% each think that a ‘moderate’

degree and ‘not many’ procedural formalities are involved while making investment in

mutual fund.

FINDINGS AND CONCLUSION

In this chapter, the interpreted results from the analysis of data have been generalised on

the entire population of the research. As a result of the interpretation of the data collected

through the questionnaire, the answers to pre-decided objectives have been arrived at.

General inferences on the entire population have been drawn, as regards their awareness

and perception towards mutual fund as an invest option as well as the factors that guide

the choice of people before they choose a particular investment avenue(s).

Findings

1. A good majority of both business class and service class people invest in various

available investment avenues. There are just a handful of people who do not make any

investments.

2. Most of the business class people make their investments on an irregular basis.

However, the no. of people with this attribute is far less (half) in service class.

3. A majority of people of service class make investments on a regular basis- either

monthly, quarterly, bi-annually or on annual basis. This nature of this class can be

attributed to the fact that this class has a regular source of income, unlike the business

class, the income of which is either partially or fully dependent upon trade cycles of

boom, depression, recession etc. Just a quarter of the business class people make

investments on regular basis.

4. As far as various investment avenues are concerned, maximum awareness was found

for equity and debt (for both the class). A good majority of both these classes was aware

of almost all the investment avenues. However, relatively less awareness was found for

Mutual Fund, in case of business class people and for Real Estate in case of service class

people.

5. For a little less than half of the business class people, money available for investment

affects their choice of investment avenue. Around a third of them are influenced by their

immediate family, relatives and friends.

6. Around a third of the service class people take into account their future needs before

making a choice of their investment decision. For one-fifth of them, money available for

investment is the most important consideration.

These factors (discussed in point no. 5 & 6 are concerned / related to the person,

who is making the investment, i.e. the investor.

7. Safety of the invested money was the most important concern of people from both the

classes. However, a good no. of people were also concered about the return on the

invested money. Here, both the classes did not exhibit much difference in their attributes.

But, in case of service class people, more people are found to be bothered about tax

benefits and implication which arise as a result of making investments.

8. For most of the business class people, procedural formalities involved while making

investments was the least important issue. For the service class, both procedural

formalities and tax benefits and implications were quite un-important; the former being a

little more un-important. Surprisingly, for a fifth of the service class people, liquidity of

their invested money was least important.

These two factors (discussed in point no. 7 & 8) are related to the investment

avenues available.

9. As far as investment in mutual fund is concered, both the classes gave opposite

responses. While a majority of business class did not invest in mutual funds, a majority

of service class did invest in mutual fund.

10. From those who had invested in mutual fund, around a tenth could not recall the

name of the mutual fund they had invested in. This figure was slightly more in case of

business class people than in service class.

11. A variety of responses were received from both the classes, when asked, where the

money invested in mutual fund is further invested. Although a majority of business class

admitted that they did not have any idea in this regard, a quarter of them rightly believed

that the money invested in mutual funds was further invested in Equities and Debt.

12. Service class gave more varied responses to this question (discussed in point no.11).

While two-fifths of them believed that it was ‘Equity’, a quarter of them admitted that

they did not have any idea of the same. Others, (from both the classes), gave

combination of different investment avenues as possible avenues for the money invested

in mutual fund.

13. When asked to write the names of any five mutual fund schemes running in the

Indian financial market, a majority of both the classes could not recall a single name; the

response of business class being worse than the service class in this regard. Many of the

investors just gave the names of Mutual Funds which they had heard of, whereas they

had been asked to name specific schemes. The no. of respondents who could name 5

schemes of mutual fund were extremely few in both the classes of people.

14. Next, the respondents of both the classes were presented with the list of 15 mutual

funds presently running in the Indian financial market. Here, both the classes were found

to be a little more aware. A majority of them were able to recognise 5-10 names of

mutual funds. And here too, the service class was found to be more aware then the

business class.

15. The respondents were also presented with a list of five commonly used terms in

context to mutual funds and they were asked to identify these terms. Here too, service

class gave more satisfactory responses. A majority of them said that they were aware of

the terms like Entry load, Exit load and Systematic Investment Plan. ‘New Fund Offer’

was the term for which the least no. of people were aware in this class. There was no

such term, of which more than half of the business class was aware. A majority of

people, from both the sections said that they aware of the terms ‘Entry Load’, ‘Exit

Load’ and ‘Fund Manager’.

16. A majority of service class people were aware of the term ‘Systematic Investment

Plan’ (SIP). A close analysis of questionnaires also disclosed that those people who were

aware of the term ‘Entry Load’ were also aware of the term ‘Exit Load’.

17. A little less than half of the business class and 44% of service class did not know

whether tax-benefits exist on investment in mutual fund or not. A quarter of people from

both the classes said that tax benefits do exist on investment in mutual fund.

18. When asked about their perception about Liquidity of the money invested in mutual

funds, once again business class did not present a very clear picture. While 40% of them

perceive high liquidity for the money invested in mutual fund; a fifth of them perceive it

to be moderately liquid and another fifth of them say that they did not have any idea in

this regard. But as far as the service class is concerned, more than half of them say that

money invested in mutual funds has moderate liquidity. More than one-third of them say

that it is highly liquid.

19. As far as Risk involved in investment in mutual fund is concerned, business class

people had varied perception. While, about a third of them perceive them to be safe,

another third of them perceive them to be moderately safe. One fifth of them said they

had no ideal about it. A majority of service class people believe them to be moderately

safe.

20. Two-fifth of business class people believe that “not many” Procedural Formalities

are involved while making investment in mutual fund. But one-third of this class does

not have any idea in this regard. An equal no. of people from service class (44% each)

believe that a “moderate” degree of procedural formalities and “not-many” procedural

formalities, respectively, are involved while making investment in mutual fund.

Conclusion

Mutual Fund is a relatively new found investment avenue as compared to other

investment avenues. The mutual fund industry is still a growing industry in India; it is far

from the level of achieving maturity. A lot of awareness still needs to be created in about

this investment avenue.

As far as the present research is concerned, by and large, the Service class people of

Ludhiana were found to an aware lot; at least more aware than the business class people.

No wonder, then, the no. of people investing in mutual fund are more from the service

class than from the business class. There is great need to create awareness among the

people about Mutual Funds. Many people, from both the classes were found to be

holding misconceptions about the working of mutual funds, which need to be removed.

UNIT - IVANNEXURE

BIBLIOGRAPHY

http://www.hdfcindia.com

http://www.hdfcfund.com

http://www.indiacapital.com

http://www.moneycontrol.com

Investment Analysis and Portfolio Management by Prasanna Chandra.

(Tata McGraw Hill)

Research Methodology by C.R. Kothari (New Age International Publishers)

QUESTIONNAIRE

1. Do you invest your money in various investment avenues?

Yes No

2. How often do you make investments?

Regular Basiso Monthlyo Quarterlyo Bi-annuallyo Annuallyo After more than one year

Irregular Basis

3. Which of these investment avenues are you aware of?

Real Estate Post office schemes Share market Gold/Jewellery/Precious stones Mutual Funds Bank Deposits (FD’s etc.) Insurance Any Other (please specify)______________________

4. Who/What influences your investment decision(s) the most?

Parents Spouse Children Relatives/Friends Your future needs Money available for investment Any other (please specify) ______________________

5. Which of these factors is most important for you while choosing an investment avenue?

Liquidity Safety Return Tax benefits/implications Procedural Formalities involved Any other (please specify) _______________

6. Which of these factors is least important for you before you choose an investment avenue?

Liquidity Safety Return Tax benefits/implications Procedural formalities involved Any other (please specify) ________________

7. Have you ever invested your money in Mutual Funds?

Yes No

If YES, then which Mutual Fund(s) did you invest in? i) __________________________________________

ii) __________________________________________

iii) __________________________________________

iv) __________________________________________

8. Where do you think the money invested in Mutual Funds is further invested? (You can tick more than one option).

Equities Debt (debentures etc.) Real Estate Gold/Jewellery/Precious stones etc. Post office schemes (MIS, KVP’s etc.) Bank Deposits (FD’s etc.) Any other (please specify)_____________________ “No idea”

9. How do you rate the risk level associated with investment in Mutual Funds?

Highly risky Risky Moderate Safe Extremely safe “Don’t know”

10. According to you, how much is the liquidity in investment in Mutual Funds?

Very high High Moderate Low Very low “Don’t know”

11. According to you, do tax benefits exist on investment in Mutual Funds?

Yes No Not sure On some schemes

12. According to you, how much procedural formalities are involved when one invests money in Mutual Funds?

Elaborate formalities Moderate Not many “Don’t know”

13. List the names of any 5 prominent schemes of Mutual Funds that you can recall. (Those presently running in the Indian market).

i) ______________________________

ii) ______________________________

iii) ______________________________

iv) ______________________________

v) _______________________________

14. Which of the following Mutual Funds are you aware of?

Prudential ICICI Mutual Fund HDFC Mutual Fund Franklin Templeton India Mutual Fund Reliance Mutual Fund Birla Sunlife Mutual Fund Fidelity India Mutual Fund UTI Mutual Fund

SBI Mutual Fund LIC Mutual Fund ING Vyasa Mutual Fund HSBC Mutual Fund Sundaram Mutual Fund Cholamandalam Mutual Fund Escort Mutual Fund Tata Mutual Fund Kotak Mahindra Mutual Fund Morgan Stanley Mutual Fund India

Personal Information:

Name: _____________________________________

Age: ______ Contact No.: ____________________

Occupation: Business Service

Organization: _______________________________

Designation: ________________________________

Thank you for sparing your valuable time.

hdfc investment avenues a comparative analysis of

Documents

money mutual fund

mutual fund shares

best mutual funds

equity fund

debt fund

investment avenues

proportional investment

investment manager