investers preference towards mutual funds

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A Project Reporton

INVESTORS PREFERENCE TOWARDSMUTUAL FUND

Submitted to

Punjab Technical University, Jalandhar

In partial fulfilment of the requirement for the

Award of degree of

Master of Business Administration (MBA)

Submitted By: Project Guide:

Ritika Arora Ms.Ashima Kalia

130622 (Asst. Professor)

Session (2013- 2015)

APEEJAY INSTITUTE OF MANAGEMENT TECHNICAL CAMPUS ,

JALANDHAR


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TABLES OF CONTENTS

S.NO PARTICULARS PAGE.NO

1. INTRODUCTION 1 - 3

2. REVIEW OF LITERATURE 4

3. NEED,SCOPE AND OBJECTIVES 5 - 6

4. RESEARCH METHODOLOGY 7 - 8

5. DATA ANALYSIS ANDINTERPRETATION

9 - 20

6. FINDINGS OF THE STUDY 21

7. CONCLUSION ANDRECOMMENDATIONS

22

8. REFERENCES 23


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CHAPTER 1- INTRODUCTION

MUTUAL FUNDS

The mutual fund is structured around a fairly simple concept, the mitigation of risk

through the spreading of investments across multiple entities, which is achieved by

the pooling of a number of small investments into a large bucket. Yet, it has been the

subject of perhaps the most elaborate and prolonged regulatory effort in the history of

the country.The mutual fund industry has grown to gigantic proportions in countries

like the USA, in India it is still in the phase of infancy.

The origin of the Indian mutual fund industry can be traced back to 1964 when the

Indian Government, with a view to augment small savings within the country and to

channelise these savings to the capital markets, set up the Unit Trust of India (UTI).

The UTI was setup under a specific statute, the Unit Trust of India Act, 1963. The

Unit Trust of India launched its first open-ended equity scheme called Unit 64 in the

year 1964, which turned out to be one of the most popular mutual fund schemes in the

country. In 1987, the government permitted other public sector banks and insurance

companies to promote mutual fund schemes.

Securities Exchange Board of India, better known as SEBI, formulated the Mutual

Fund (Regulation) 1993, which for the first time established a comprehensive

regulatory framework for the mutual fund industry. This proved to be a boon for the

mutual fund industry and since then several mutual funds have been set up by the

private sector as well as the joint sector. Kothari Pioneer Mutual fund became the first

from the private sector to establish a mutual fund in association with a foreign fund.

Since then several private sector companies have established their own funds in the

country, making mutual fund industry one of the most followed sector by critics and

investors alike. The share of private sector mutual funds too has gone up rapidly.


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Global Scenario of Mutual Funds

The money market mutual Fund segment has a total corpus of $1.48 million in the

U.S. against a corpus of $100 million in India. Out of the top 10 Mutual Funds worldwide, 8 are bank sponsored. Only Fidelity & capital are non-bank Mutual Funds in

this group. In U.S. the total number of schemes is higher than that of the listed

companies while in India we have just 277 Schemes.

Internationally, Mutual Funds are allowed to go short. In India fund managers do

not have such leeway. In about 9.7 million households will manage their assets online.

By the year 2004, such a facility is not available in India. Online trading is a great

idea to reduce management expenses from the current 2% of total assets to about0.75% of the total assets. Around 72% of the core customer base of Mutual Funds in

the top 50 broking firms in the U.S. is expected to trade online.

Asset Management Company

The sponsor or the trustees are required to appoint an AMC to manage the assets of

the mutual fund. Under the Mutual Fund Regulations, the applicant must satisfy

certain eligibility criteria in order to qualify to register with SEBI as an AMC The sponsor must have at least 40% stake in the AMC

The directors of the AMC should be persons having adequate professional

experience in finance and financial services related field and not found guilty of

moral turpitude or convicted of any economic offence or violation of any securities

laws

The AMC should have and must at all times maintain, a minimum net worth of Rs.

10 Crores

The board of directors of such AMC has at least 50% directors, who a re not

associates of or associated in any manner with, the sponsor or any of its subsidiaries

or the trustees

The Chairman of the AMC is not a trustee of any mutual fund.

Types of Mutual Fund Schemes

There are a wide variety of Mutual Fund schemes that cater to investors need,

whatever your age, financial position, risk tolerance and return expectations.


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Whether as the foundation of your investment program or as a supplement, Mutual

Fund schemes can help you meet your financial goals.

By Structure Schemes can be classified into 3 types Open-Ended Schemes

These do not have a fixed maturity. Investors deal directly with the Mutual Fund for

their investments and redemptions. The key feature is liquidity. They can

conveniently buy and sell their units at Net Asset Value ("NAV") related prices.

Close-Ended Schemes

Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are

called close-ended schemes. Investors can invest directly in the scheme at the time of

the initial issue and thereafter they can buy or sell the units of the scheme on the stock

exchanges where they are listed. The market price at the stock exchange could vary

from the scheme's NAV on account of demand and supply situation, unit holders'

expectations and other market factors. One of the characteristics of the close-ended

schemes is that they are generally traded at a discount to NAV; but closer to maturity,

the discount narrows.Some close-ended schemes give them an additional option of

selling their units directly to the Mutual Fund through periodic repurchase at NAV

related prices. SEBI Regulations ensure that at least one of the two exit routes is

provided to the investor.

Interval Schemes

These combine the features of open-ended and close- ended schemes. They may be

traded on the stock exchange or may be open for sale or redemption during pre-

determined intervals at NAV related prices.

RISKS OF INVESTING IN MUTUAL FUNDS

Market / Interest Risk

Volatility of prices leading to floating returns

Largely mitigated with a holding period of over 6 months

Credit Risk

Potential default of bonds on the portfolio.

Equity Risk

Possibility of the fund manager not able to meet redemptions.


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CHAPTER 2 - REVIEW OF LITERATURE

Rajeswari and Ramamoorthy (2001) have conducted a study to understand the factorsinfluencing the fund selection behaviour of 350 MF investors in order to provide

some meaningful inferences for Asset Management Companies (AMC) to

innovatively design the products. The analysis was done on the basis of product

qualities, fund sponsor qualities and investor services using questions framed on a

five point Likert scale. Singh and Vanita (2002) have examined the investors'

preferences and perception towards MF investments by conducted a survey of 150

respondents in the city of Delhi. The findings of the study were that the investors' preferred to invest in public sector MFs with an investment objective of

getting tax exemptions and stayed invested for a period of 3-5 years and the investors

evaluated past performance. The study further concludes by stating that majority of

the investors were dissatisfied with the performance of their MFs and belonged to

the category who held growth schemes. Sankaran (2004) proposes the future direction

for investors will be to invest in pension funds, as government is envisaging a policy

to cover all kinds of investors. He further opined that MF industry will continue to

grow in spite of competition and will be propelled in the right direction because of the

investor friendly financial markets. Aggarwal et al. (2009) have examined the

performance of these funds relative to hedge funds and traditional MFs and found that

despite using similar trading strategies, hedged MFs underperform hedge funds. Singh

(2012) conducted an empirical study of Indian investors and observed that most of the

respondents do not have much awareness about the various function of mutual funds

and they are bit confused regarding investment in mutual funds. The study found that

some demographic factors like gender, income and level of education have their

significant impact over the attitude towards mutual funds. On the contrary age and

occupation have not been found influencing the investors att itude. The study noticed

that return potential and liquidity have been perceived to be most lucrative benefits of

investment in mutual funds and the same are followed by flexibility, transparency and

affordability .


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CHAPTER 3 NEED, SCOPE AND OBJECTIVES OF THE STUDY

3.1 NEED OF THE STUDY

Indian Mutual Fund (IMF) industry provides reasonable options for an ordinary man

to invest in the share market. Financial markets are constantly becoming more

efficient by providing more promising solutions to the investors. As of now big

challenge for the MF industry is to mount on investor awareness and to spread further

to the semi-urban and rural areas. These initiatives would help towards making theIMF industry more vibrant and competitive. Therefore a need is there to study

investors perception regarding the MFs. In this context, the need of study has been

aroused in order to see the preference, awareness and the investors perception

regarding the MFs in public and private sectors. The study at first tests whether there

is any relation between demographic profile of the investor and MFs and

the factors that influences the selection of MF schemes. For the purpose of analysis

perceptions of selected small investors from public and private sector MFs are taken

into consideration.

3.2 SCOPE OF THE STUDY

The research study undertaken does not probe too much about whether the

respondents have a very fine insight into mutual funds. The research would reveal

results regarding the investment attitude of various investors about mutual funds and

thus in turn helps the organization to identify the attitude of various investors and to

improve the marketing of mutual funds. The study has helped the researcher to gain

real time experience by interacting with the inve stors and has helped to analyse The

attitude of the investors towards Mutual Funds. The study will help the concern to

work on the areas of importance for further planning. The study has been done with a

motive to change the attitude of the investors and help them gain more knowledge on

their investment.


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3.3 OBJECTIVES OF THE STUDY

To study various investment alternatives and in particular investors preference

towards mutual funds.

To study the preference of investors in todays scenario (less risk and more

return).

To assess the risk of investors with reference to diversifiable risk & non

diversifiable risk.

To study market potentiality of mutual fund among investors.


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CHAPTER 4 RESEARCH METHODOLOGY

It makes the right platform to the researcher to mapping out the research work in

relevance to make solid plans. The Merriam-Webster Online Dictionary definesresearch as A studious inquiry or examination, especially : investigation or

experimentation aimed at the discovery and interpretation of facts, revision of

accepted theories or laws in the light of new facts, or practical application of such new

or revised theories or laws". Research is thus an original contribution to an existing

stock of knowledge making for its advancement. It involves systematic collection,

analysis and reporting of data and finding relevant solution to a specific situation or

problem.

4.1 Research Design

The study was descriptive in nature. Descriptive research includes surveys, facts,

finding and inquiries of different kinds. The major purpose of descriptive research is

description of the state of affairs as it exists at present. Descriptive research is that

kind of research where the researcher has no control over the variables.

All published and unpublished available on the subject matter was consulted. Primary

and secondary data available regarding the organization was also used for this project

study.

4.2 Sampling Design

The following factors have to decide within the scope of sample design:

4.2.1 Universe

The researcher collected primary data from the small investors living in Jalandhar

through a structured questionnaire.

4.2.2 Sample size

Data for the study is collected from a sample of 25 investors.


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4.2.3 Sampling units:

It indicates who is to be surveyed. The researcher must define the target populationthat will be sampled .

4.2.4 Sampling techniques

Sampling technique used is convenience sampling.

4.3 Data collection and Analysis

For the purpose of the study two sets of data has been used.

4.3.1 Primary Data :

The first set of data is the primary data. This type of data has been collected from theinvestors with the help of a Questionnaire. The questionnaire also consists of open-

ended questions.

The first section of questionnaire is prepared mainly for collecting the personal

information about the respondents. The second section contains multiple choice

questions. It is prepared to collect the information about customer perception.

4.3.2 Secondary Data :The second set of data used for the study is the secondary data. The secondary data

relating to net resources mobilized by banks and financial institution sponsored

mutual funds, assets under management, investors mix etc is collected for a period of

1999-2008. This type of data is collected from different investment periodicals,

magazines, various newspapers, RBI reports, annual reports etc.


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Chapter 5 DATA ANALYSIS AND INTERPRETATION

TABLE -1:AGE WISE CLASSIFICATION OF RESPONDENTS

Interpretation:

According to the survey the respondents were of different age groups. There are no

respondents of age below 20 are in no number. The investors of age 20-30 is 5 in

number with 20%. The investors of age 30-40 are 12 with 48%, 40-50 there are 7investors with 28% and above there is 1 investor with 4% .

20

48

28

4

AGE WISE NO. OF RESPONDENT

20 - 30

30 - 40

40 - 50

Above 50

AGE NO. OFRESPONDENT

PERCENTAGE

20 - 30 5 2030 - 40 12 4840 - 50 7 28Above 50 1 4


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TABLE 2

GENDER OF THE RESPONDENT

GENDER NO. OF

RESPONDENT

PERCENTAGE

MALE 21 84%

FEMALE 4 16%

Interpretation:

In the survey number of male respondents are more in number that is

about 84% & the next position has been occupied by female respondents they are

about 16% of the sample so, mainly men are preferring to go for investments.

0

1020

30

40

50

60

70

80

90

MALE FEMALE

PERCENTAGE P E R C E N T A G E


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TABLE 3

OCCUPATION OF THE RESPONDENT

OCCUPATION NO. OF

RESPONDENT

PERCENTAGE

SEVICES 10 40

BUSINESS 7 28

PROFESSIONAL 6 24

OTHERS 2 8

Interpretation:

According to the survey the respondents were of different occupations. Most of

respondents are from service sector is about 40% of the sample. Respondents from the

business are occupying 28 %, then comes professional with 24%, Others occupy 8%.

40%

28%

24%

8%

OCCUPATION OF THE REPONDENT

SERVICES

BUSINESS

PROFESSIONAL

OTHERS


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TABLE 4

ANNUAL INCOME OF THE RESPONDENTS

INTERPRETATION :

According to the survey, the respondents of the income group of less than 3 lakhs are

of 8%. They were about 20% of the respondents are of the income group between 3-5

lakhs. 40% of the respondents were of the income group 5-7 lakhs. 32% respondents

wereof the income group more than 7 lakhs.

0

5

10

15

20

25

30

35

40

45

Below 3 lakh 3 - 5 Lakh 5 - 7 Lakh Above 7 Lakh

PERCENTAGE

PERCENTAGE

ANNUAL INCOME NO. OF

RESPONDENT

PERCENTAGE

Below 3,00,000 2 8

3 to 5 lakh 5 20

5 to 7 lakh 10 40

Above 7 lakh 8 32


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TABLE 5

DO YOU INVEST ANY PART OF YOUR SAVINGS?

INTERPRETATION :

All the respondents considered in the sample, do invest their savings.Out of the totalsample the respondents going for investments are total in numbers with all the 25respondents considered in sample are going for complete investments with100% .

0

20

40

60

80

100

120

YES NO

PERCENTAGE

P E R C E N T A G E

NO. OF REPONDENTS WHO SAVE ANY PART OF INVESTMENT

NO. OF

RESPONDENT

PERCENTAGE

YES 25 100%

NO NIL NIL


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TABLE 6

NORMALLY WHAT INVESTMENT OPPORTUNITIES YOU

PREFER TO INVEST YOUR SAVINGS?

INTERPRETATION :

It is observed from the above chart that 32% of the individuals prefer to bank deposits, 8% of

the individuals prefer to shares, respondents preferring bonds are16% of with respondents preferring mutual funds are 20%, followed by insurance and real estate with 20% and 4%.

16

8

20

32

4

20

BONDS

SHARES/DEBENTURES

MUTUAL FUNDS

BANK DEPOSITS

REAL ESTATE

INSURANCE

NO.OF

RESPONDENTS

PERCENTAGE

BONDS 4 16%

SHARES/DEBENTURES 2 8%

MUTUAL FUNDS 5 20%

BANK DEPOSITS 8 32%

REAL ESTATE 1 4%

INSURANCE 5 20%


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TABLE 7

AWARENESS OF MUTUAL FUNDS ?

INTERPRETATION :

According to the survey, most investors are aware of mutual funds. It can be

observed from the above table that 100% of respondents are aware of Mutual

Funds and the rest are not aware of Mutual Funds..

OPTIONS NO. OF

RESPODENTS

PERCENTAGE

YES 25 100%

NO NIL NIL

0

20

40

60

80

100

120

YES NO

PERCENTAGE

P E R C E N T A G E

AWARENESS OF MUTUAL FUNDS


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TABLE 8

AWARENESS OF MUTUAL FUNDS IS THROUGH

OPTION NO. OFRESPONDENTS

PERCENTAGE

ADVERTISEMENTS 6 24

FRIENDS 2 8

FAMILY MEMBERS 2 8

FINANCIAL ADVISOR 11 44

RELATIVES 4 16

Interpretation:

According to the survey, the respondents are more aware of mutual funds through

Financial Advisors who occupy 44%, followed by Advertisements 24%, Friends 8%,Relatives 16% & Family Members 8%

ADVERTISEMENTS24%

FRIENDS8%

FAMILY MEMBERS8%

FINANCIALADVISORS

44%

RELATIVES16%

INFLUENCE OF INVESTMENT DECISION ISTHROUGH

ADVERTISEMENTS

FRIENDS

FAMILY MEMBERS

FINANCIAL ADVISORSRELATIVES


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TABLE 9

MUTUAL FUND IS A GOOD INVESTMENT OPTION

OPTION NO. OFRESPONDENTS

PERCENTAGE

YES 25 100%

NO NIL NIL

Interpretation:

Many of the individuals are of the view that mutual fund is a good investment option.

Of the total sample survey around 100% of the respondents feel that mutual fund is a

good investment option & None of the respondents feel that it is not a good

investment option.

0

20

40

60

80

100

120

YES NO

PERCENTAGE

P E R C E N T A G E


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TABLE 10

TYPE OF MUTUAL FUNDS YOU CAN INVEST

Interpretation:

According to the survey, 32% of the respondents are aware of kotak mahindra asadistributor of mutual funds & these 32% of the investors would like to invest inkotak mahindra mutual fund option. The rest 68% of the respondents would like to

prefer HDFC, Birla Sun Life, UTI and Others .

0

5

10

15

20

25

30

35

PERCENTAGE N O

. O F

R E S P O N D E N T S

/ P E R C E N T A G E

OPTION NO. OF RESPONDENTS PERCENTAGE

BIRLA SUNLIFE 4 16%

HDFC 5 20%

KOTAK MAHINDRA 8 32%

UTI 6 24%

OTHERS 2 8%


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TABLE 11 :

REASONS FOR THE PREFERENCE OF INVESTMENT INMUTUAL FUNDS

OPTION NO.OFRESPONDENTS

PERCENTAGE

IPO 3 12%

PERFORMANCE 5 20%DIVERSIFICATION 6 24%

INVESTMENTSTRATEGY

3 12%

FUND MANAGER 8 32%

Interpretation :

The respondents Preferred the present brands of Mutual Fund because of the

investment strategy which occupies 32%, then comes Diversification with 24%,

IPO10%

PERFORMANCE16%

DIVERSIFICATION20%

INVESTMENTSTRATEGY

27%

FUND MANAGER27%

REASONS GOVERNING CHOICE OF INVESTMENT INMUTUAL FUNDS

IPO

PERFORMANCE

DIVERSIFICATION

INVESTMENT STRATEGY

FUND MANAGER


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Performance with 20%, Fund manager & IPO both with 12% respectively.

CHAPTER 6- FINDINGS

The majority of respondents were of the age group in 30 - 40 Major part of the respondents belong to service sector. Annual income of the respondents between 5 - 7 lakhs prefers more of investments. Respondents irrespective of major investment or small are investing in some or

other sources of investments.

Investor s preference when going for an investment in primarily for security. Respondents prefer Bank Deposits as most secured avenue for investment, & then

preference is given to shares, Mutual funds & then to Bonds and Debentures.

The role of fund manager play a key role in making investors educated . About mutual fund. Around 44% of the respondents choose Financial advisors for

guidance.

From the Survey conducted it is clear that 100% of the respondents feel that Mutual

fund is a good investment option.

Out of total respondents, many of them prefer the current brand of mutual fund

because of investment strategy.

From the survey it is clear that most of the respondents feel Kotak Mahindra as a

better option for mutual fund.

32% of the Respondents are recommending Kotak mahindra as a better investment

opportunity.


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investers preference towards mutual funds

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