simran saini final 2(1)

8/6/2019 Simran Saini Final 2(1)

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Prospects and Problems Faced By

Mutual Fund Investors

Final Project Report

Submitted to Punjab Technical University in partial fulfillment ofthe requirements for the degree

Of

Master of Business Administration(Specialization: Finance)

By: -

SIMRAN SAINI

616221123

GIAN JYOTI INSTITUTE OF MANAGEMENT & TECHNOLOGY

MOHALI

2008

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Prospects and Problems Faced By

Mutual Fund Investors

Final Project Report

Submitted to Punjab Technical University in partial fulfillment ofthe requirements for the degree

Of

Master of Business Administration(Specialization: Finance)

By: -

SIMRAN SAINI

616221123

GIAN JYOTI INSTITUTE OF MANAGEMENT & TECHNOLOGY

MOHALI

2008

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CERTIFICATE - I

This is to certify that the Project entitled Prospects and Problems Faced By

Mutual Fund Investors submitted for the degree of MBA, in the subject

of Finance (Minor Subject: Marketing) for the Punjab Technical

University, Jallandhar, is a bonafide work of Ms. Simran Saini

(616221123) under my supervision and that no part of this project has been

submitted for any other degree.

This assistance and help received during the course of investigation

have been fully acknowledged.

(Major Advisor)

CERTIFICATE II

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This is to certify that the project entitled Prospects And Problems Faced By

Mutual Fund Investors submitted by Simran Saini (616221123) to the

Punjab Technical University, Jallandhar in partial fulfillment of the requirements

for the degree of MBA in the subject ofFinance (Minor Subject: Marketing)

has been approved by the Students Advisory Committee after an oral

examination on the same, in collaboration with an External Examiner.

______________________ _____

(Ms Aarti Singh) EXTERNAL ADVISOR

MAJOR ADVISOR

________________________

(Dr. Navneet Baweja)

Minor Adviser I

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ACKNOWLEDGEMENT

Appreciation can make a day, even change a life. Your willingness to put it into

words is all that is necessary.

Often words are too inadequate to serve as a mode of expression of ones inner

feelings, specially the sense of indebtedness and gratitude to all those who

have helped in accomplishing the goals one has set before him. Yet I shall be

failing in my duty if I dont formally acknowledged to all those who assisted and

guided me in completing my final project report.

I take this opportunity to thank Ms Aarti Singh my project incharge for her able

guidance, continuous support and cooperation, constantly pushing the upper

limits of my capabilities and encouraging me to deliver more throughout my

project.

I would also like to thank Dr Navneet Baweja and Dr. R. P. Gupta for their

support and guidance throughout.

And I sincerely thank my family and friends for their constant support and help

in the successful completion of my project.

SIMRAN SAINI

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TABLE OF CONTENTS

Chapter No. Name of the Chapter Page No.

11.1 Introduction

1.2 Objectives1 - 19

2 Review of Literature20

3 Research Methodology21 - 25

4 Analysis and Discussion26-53

5 Conclusion & Suggestions54-55

6

Bibliography

56

7Annexure

59-64

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1.1) INDUSTRY PROFILE

Mutual funds have been around for more than half a century but they remain a

marginal investment vehicle in India until the beginning of the 90's. Ever since,

we have observed a real boom in their development and academics have begun

to pay great attention to them. Mutual Funds fascinate because of the High

Return provided by them along with the benefits ofProfessional Management

and Risk Diversification. Various researches have been conducted to explore

the different facets of Mutual Funds such as returns and risk factors and the

Drivers of Performance. Now there exist several powerful Brands in mutual fund

industry such as S.B.I Mutual Funds , Reliance Mutual Funds and Franklin

Templeton and S.B.I Mutual Funds.

Definition: Mutual Fund

A mutual fund is a trust that pools savings of investors who share a common

financial goal and then invests in market instruments such as shares, debentures

and other securities. The income earned through these investments are shared

by its unit holders in proportion to the number of units owned by them making it

highly suitable investment option for the common man. A mutual fund provides

for an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost.

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Acc to SEBI guidelines

Mutual fund is a mechanism for pooling the resources by issuing units to the

investors and investing in securities in accordance with the objectives as

disclosed in offer document. The profits or losses are share by investors in

proportion to their investments.

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

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. The flow chart below describes broadly the

working of a mutual fund:

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Figure 1.1.1) Mutual Fund Operation Flow Chart

MF is a retail product designed to target small investors, salaried people and

others who are intimidated by the mysteries of stock market but, nevertheless,

like to reap the benefits of stock market investing. At the retail level, investors

are unique and are highly heterogeneous groups. Hence, their fund/scheme

selection also widely differs. Investors demand inter-temporal wealth shifting as

he or she progresses through the life cycle. This necessitates the Asset

Management Companies (AMCs) to understand the fund/scheme

Selection/switching behaviour of the investors to design suitable products to

meet the changing financial needs of the investors. With this background a

Survey was conducted among 350 Mutual Fund Investors in 10 Urban and Semi

Urban centers to study the factors influencing the fund/scheme selection

Behaviour of Retail Investors. This paper discusses the survey findings. It is

hoped that it will have some useful managerial implication for the AMCs in their

product designing and marketing.

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ORGANISATION STRUCTURE OF MUTUAL FUND

There are four constituents of a mutual fund in India,

1. The Sponsor,

2. The Board of Trustees or Trustee company,

3. The Asset Management Company and

4. The Custodian.

Figure 1.1.2) :Organisation Structure

The sponsor is the Settler of the Trust which holds Trust property on behalf of

investors who are the beneficiaries of the Trust. The sponsor is also required to

contribute at least 40% of the capital of the asset management company which is

formed for managing the assets of the Trust. The assets of the Trust comprise of

properties of the schemes which are floated by the asset management company

with the approval of the Trustees. Schemes may have different characteristics -

they may be open or closed ended or may have a particular investment focus or

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portfolio composition. Finally, the safe custody of assets of the Trust is entrusted

to one or more custodians

HISTORY OF THE MUTUAL FUND INDUSTRY

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 1963-87

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 Canbank Mutual Fund (Dec

87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov

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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.

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.

The number of mutual fund houses went on increasing, with many foreign mutual

funds setting up funds in India and also the industry has witnessed several

mergers and acquisitions. As at the end of January 2003, there were 33 mutual

funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with

Rs.44,541 crores of assets under management was way ahead of other mutual

funds.

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Fourth Phase since February 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.

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Table 1.1.3): History At A Glance

1963 1987 UTI sole player in the industry, created by an Act of Parliament ,

1963

UTI launches first product Unit Scheme 1964

UTI creates products such as MIP's, children plans ,offshore funds

etc

UTI managed assets of 6700 Cr at the end of this phase

1987 1993 In 1987 Public Sector Banks and FI's

SBI mutual fund was the first non -UTI mutual fund

UTI's corpus grew to Rs.38,247 Cr & public Sector Funds got Rs

8750 Cr

1993 1996 In 1993, Mutual Fund Industry was open to private players.

SEBI's first set of regulations for the industry formulated in 1993

Significant innovations, mostly initiated by private players

1996 1999 Implementation of new SEBI regulations led to rapid growth

Bank mutual funds were recast as per SEBI guidelines

UTI came under voluntary SEBI supervision.

1999 2000 Rapid growth, significant increase in corpus of private players

Tax break offered created arbitrage opportunities

Bond funds and liquid funds registered highest growth

UTI's market share drops to nearly 50%

.

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. GROWTH IN ASSETS UNDER MANAGEMENT!!

GRAPH NO.1.1.4)

COMMON TYPES OF MUTUAL FUNDS

Money Market Funds:

Invest in short-term (less than one year to maturity) corporate and

government debt securities such as treasury bills, bankers acceptances and

corporate notes. Some money market funds specialize in Canadian or US

money market instruments or invest only in treasury bills. These are

generally very low-risk funds offering low returns.

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Growth or Equity Funds:

Invest primarily in common shares (equities) of Canadian or foreign

companies, but may hold other assets as well. The goal is typically long-

term growth because the value of the assets held increases over time.

Some growth funds focus on large 'blue-chip' companies, while others

invest in smaller or riskier companies. Performance will be affected by the

success or failure of specific investments and by the performance of the

stock markets generally.

Balanced Funds:

Invest in a 'balanced' portfolio of equities, debt securities and money

market instruments with the objective of providing reasonable returns with

low to moderate risk.

Global and Foreign Funds:

May be fixed income, growth or balanced funds that invest in foreign

securities.These funds can offer investors international diversification and

exposure to foreign companies, but are subject to risks associated with

investing in foreign countries and foreign currencies.

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Specialty Funds:

May invest primarily in a specific geographical area (eg., Asia) or a specific

industry (e.g., high technology companies).

Index Funds:

Invest in a portfolio of securities selected to represent a specified target

index or benchmark such as the S&P/TSX Composite Index.

PLAYERS IN THE MARKET

Cholamandalam mutual fund

Dsp merrill lynch

Deutsche mutual

Franklin templeton

HDFC mutual fund

HSBC mutual fund

ING mutual fund

JM Financial

Kotak Mahindra

Principal Mutual

Prudential ICICI

Reliance mutual

Standard Chartered

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Sundaram

Tata Mutual

Birla Sunlife

ABN Amro

Bob mutual fund

Taurus

Canbank

Escort

Sahara India

GIC mutual fund

SBI- State bank of India

UTI- Union trust of India

LIC mutual fund

PNB mutual fund

THE LEGAL FRAMEWORK

The mutual fund industry in India comes under the perview of securities

exchange board of India (SEBI). The SEBI has laid down various guidelines that

have to be adhered to all the mutual funds in India. The guidelines range from

the initial process of filling up the relevant applications for setting up a mutual

fund to levying penalties for non-conformance to the regulations as laid down by

the SEBI. There are certain points relating to proper keeping of accounts so as to

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ensure transparency, there by helping to protect the investors. These are broadly

divided into three categories as shown below:-

General obligations

Inspection and audit

Procedure for action an case of default

General Obligations :- the general obligations of mutual fund as per the SEBI

guidelines are mentioned below-

To maintain proper books of accounts and records, etc

Limitation on fees and expenses on issue of schemes

Dispatch of warrants and proceeds

, Auditors Report

Mailing of annual report and summary thereof

Annual Report to be forwarded to the board

Periodic and continual disclosures

Hal;f yearly disclosures

Disclosures to the investors

The final obligation regarding disclosures to the investors requires that the

trustees shall be bound to the unit holders as are essential in order to keep

them informed about any information which may have adverse bearing on

their investments.

Inspection and Audit:- The provisions under this clause are mentioned below-

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Boards right to inspect and investigate

Notice before inspection and investigation

Obligation on inspection and investigation

Submission of report to the board

Communication of findings

Appointment of auditor

Payment of inspection fees to the board

Procedure for action in case of default: The SEBI is empowered to

undertake the following procedures in the event of default by a mutual

fund company.

Suspension of certificate

Cancellation of certificate

Manner of making order of cancellation

Manner of holding enquiry before suspension and cancellation

Show cause notice and order

Effect of suspension or cancellation of certificate and registration

Publication of order of suspension or cancellation

The legal framework is thus extensive and is framed to make sure that

investors are protected. This is necessary since only if investors are

confident would they invest in mutual funds, which, in turn is crucial to

the future of the capital markets.

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RIGHTS OF A MUTUAL FUND UNITHOLDER

A unit holder in a mutual fund scheme governed by the SEBI(Mutual funds)

regulations is entiteled to

1. Receive unit certificates or statements of accounts confirming the titles within 6

weeks from the date of closure of the subscription or within 6 weeks from the

date of request for a unit certificate is revieved by the Mutual Fund.

2. Receive information about the investment policies, investment objectives,

financial position and general affairs of the scheme.

3. Receive dividend within 42 days of their declaration and receive the

redemption or repurchase proceeds within 10 days from the date of redemption

or repurchase.

4. vote in accordance with the regulations to:-

Approve or disapprove any change in the fundamental investment policies of

the scheme, which are likely to modify the scheme or affect the interest of the

unit holder. The dissenting unit holder has the right to redeem the investment.

Change the Asset Management Company

Wind up the scheme.

5. Inspect the documents of the mutual funds specified in the schemes offer

document.

INVESTING IN A MUTUAL FUND SCHEME

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The investor has the option to use brokers or agents service for filling up the

application form. In the alternative an investor may submit his application form

directly at the collection centers listed in the offer document. Some fund requires

applications to be routed only through specified brokers. The forms may also be

deposited directly with the asset management company offices.

Companies are generally required to submit their Board Resolutions and other

documents such as certified copies of memorandum & Articles of association

along with their application forms. The forms may then be signed by the

companies authorized signatories and have to be file with office of the Registrars

used by the fund for the purpose of accepting the application forms, within a

specified number of days from the closure of subscription list. Other type of

corporate bodies or associations is also required to submit their constituent

documents equivalent to the companies.

The application form has to be accompanied by payment of the amount to be

invested. The Mode of Payment is usually by:

Cheque

Demand draft or

Cash (in certain cases)online transfer of funds and submission of

application forms can also be done

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1.2) OBJECTIVES OF STUDY

This study aims at tracking investors preferences and attitudes towards

Mutual Fund Industry.

The search is for identification of determinant attributes which are defined as

certain features of a product offering that are closely associated with

preferences.

It also tries to uncover various need expectations of investors from mutual

funds available in Indian market and identify the risk return perception with

the purchase of mutual funds.

Identify important characteristics being considered by the Indian investors in

the purchase decision.

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Review of literature

By Rajan (2004) The investment objectives of schemes are different. The

inventors has to identify the schemes depending on his requirements of funds to

meet his day-to-day expenses or accumulate funds for purposes of buying a

house or for the marriage of their children. Depending on this the investors will

have to choose the schemes. Companies are generally required to submit their

Board Resolutions and other documents such as certified copies of

memorandum & Articles of association along with their application forms. The

forms may then be signed by the companies authorized signatories and have to

be file with office of the Registrars used by the fund for the purpose of accepting

the application forms, within a specified number of days from the closure of

subscription list.

By Anuradha(1999) Invest primarily in common shares (equities) of

Canadian or foreign companies, but may hold other assets as well. The goal is

typically long-term growth because the value of the assets held increases over

time. Some growth funds focus on large 'blue-chip' companies, while others

invest in smaller or riskier companies. Performance will be affected by the

success or failure of specific investments and by the performance of the stock

markets.

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RESEARCH DESIGN

The objectives of the study give a clear indication about the nature of the study.

The study was concerned with the determination of the attitutudes and

perception of investors while investing in mutual. the objective for investment in

mutual funds was also studied.. hence the study was descriptive and diagnostic

in nature. also, the study was concerned with predictions, narration of facts and

characteristics concerning individuals and groups. such studies fall under the

category of descriptive research. hence a descriptive research design was

used for conducting the study.

DATA COLLECTION

Two types of data were required for the purpose of a descriptive research--

Primary and Secondary. Both Primary and Secondary Data were collected for

meeting the objectives of the research using the following methods:-

PRIMARY DATA

The basic requirement of the study was to determine the attitudes and perception

of the respondents. Such data could be best collected through the use of

Questionnaires. So for the purpose of collection of primary data an unbiased,

undisguised structured questionnaire was prepared which was administered to

the respondents for the purpose of getting the information. Personal interviews of

respondents were conducted.

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SECONDARY DATA

Secondary data provides a lot of information for understanding the factors

underlying the study. Secondary data is also helpful in the formulation of

hypotheses and testing the results of the research. For the purpose of collecting

secondary data, a perusal of secondary sources of information had been

conducted. The sources of secondary data comprised of magazines,

newspapers, journals, studies conducted in the past, concerned websites, etc.

SAMPLE DESIGN

The population for the study was spread over a large geographical area and also

due to time constraint, conducting a census survey was not possible. So a

sample of respondents was selected from the whole population. This sample was

supposed to represent the whole population in terms of characteristics relevant to

the study. A Sample Design consisting of the following factors was prepared for

the purpose of the study.

POPULATION

Investors of Mutual Funds of selected region who have invested in mutual funds

formulated the population.

SAMPLING UNIT

Investors of Mutual Funds of selected region who have invested in mutual funds

formulated the population.

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SAMPLE SIZE

A sample size of hundred respondents was considered appropriate for the

purpose of the study.

SAMPLING TECHNIQUE

All respondents were not available for or willing to share information. So all the

respondents who were easily accessible and willing to share the information

were administered the structured questionnaire to get the desirable information.

These respondents were selected randomly on the basis of convenience of the

researcher. Thus a non-probability sampling technique i.e. Convenience

Sampling was used.

STATISTICAL TOOLS USED:

Different statistical tools have been used in the study. For. Ex. Chi-Squarer, Test

of significance for large samples, percentage, bar graphs and pie charts.

Mean or Average: Average is an attempt to find one single figure to describe

whole of figures. An average is sometimes describes as a number which is

typical of the whole group. An average is easy to understand, easy to

compute and based on all terms.

The formula for calculating mean is:

Mean = fX

N

Where, f = Frequency;

X = the variable in question

N = Total number of observations.

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Percentages.

Percentages have been known as proportion of given data. It helps in givingdetails of % of the data in total information. It is calculated as:

x * 100.Total

Chi-square.Chi Square distribution. Square of a Standard normal variable is called a Chi Square (Ki, Sky) variate with one degree of freedom (d. f.). Thus if X is a randomvariable following normal distribution with mean and standard deviation then

2

Xis a standard normal variate and

2

Xis a Chi Square variate

with 1 d.f.

If X1 X2 Xv are v independent random variables following normal

distribution with mean v .........., 21 and standard deviations

v .........., 21 respectively the variate.

2

1

112

=

Xis sum of the squares of v independent standard normal

variates following 2 distribution with v d.f.

Application of 2 Distribution:1) Chi Square test of goodness of it

2) 2 Test of independence of Attributes.

Test of significance for large samples

If sample size exceeds the size of thirty then it will be considered as a largesample. While testing the significance of a statistics in case of large samples, theconcept of standard error is used; standard error can be calculated as:

S.E=

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nn

sp

x

==

whether the hypothesis is accepted or rejected. For this we will apply the

formulae for Z test and compare that calculated value with the table value of ZFormulae for computing Z value:

Z=n

XX

ErrorStd

XX psps

=

.

After computing the value of Z we will then compare this calculate d value withthe table value of Z at level of significance. If calculated value is greater than the

table value the hypothesis is rejected and vice versa.

ANALYSIS AND INTERPETITION

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Since the objective was to study the prospects and preferences of investors while

investing in mutual funds, so the research was conducted with the help of

questionnaire containing ten questions asking them various questions that

directly or indirectly influence their investment pattern in mutual funds.

4.1) It was asked to them that what is their mode of saving & investment.

Table 4.1.1: investors mode of saving & investment

Often Sometimes RarelyFixed deposits 20% 50% 30%

Government

bonds& securities

1% 39% 60%

Insurance policies 70% 20% 10%

Commodity

(gold,etc)

60% 35% 5%

Equity market 30% 50% 20%

Mutual funds 50% 40% 10%

Real estate 10% 20% 20%

ANALYSIS:-

Here we have applied Z test

Z test is applied to find out the significance of each factor as an objective for

investment in mutual funds.

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Z TEST SHOWS-

(a) fixed deposits

Null hypothesis states that perception of all the investors towards this mode of

saving and investment is same, i.e. they carry same opinion about this mode

of investment., hence P = 1/3

Null hypothesis Ho : P = 1/3

Alternate hypothesis Hi : P is not = 1/3

Observed (sample) proportion, p = 50/100, i.e. 0.5

Standard error of p = sqrt PQ/n

Where Q = 1- P and n = sample size

S.E = sqrt [ ( 1/3*2/3) / 100 ]

= 0.047

Assuming Ho is true test statistics is =

(p-P)

S.E

i.e. 0.5 0.33 = 3.60.047

Interpretation:

3.6 > 1.96, Z value is greater than table value at 5 % level of significance.

Hence Ho i.e. null is rejected and we conclude that perception of investors

towards this mode of investment is not same As the data shows that 20% of

investors often go for fixed deposits, 50% sometimes and rest 30% rarely.

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(b) Government bonds& securities

Z statics = (p-P) = 0.6-0.33S.E 0.047

= 5.7

Interpretation:

5.7 > 1.96, Z value is greater than table value at 5 % level of significance. Hence

Ho i.e. null is rejected and we conclude that perception of investors towards this

mode of investment is not same As the data also shows that 1% of investors

often go for Government bonds and securities, 39% sometimes and rest 60%

rarely

(c) Insurance policies

Z statics = (p-P) = 0.7-0.33S.E 0.047

= 7.87

Interpretation:



towards this mode of investment is not same As the data also shows that 70% of

investors often go for Government bonds and securities, 20% sometimes and

rest 10% rarely.

(d) Equity market

Z statics = (p-P) = 0.5-0.33S.E 0.047

= 3.6

Interpretation:

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often go for Direct equity market investment , 35% sometimes and rest 5% rarely.

(e) Commodity (gold,etc)

Z statics = (p-P) = 0.5-0.33S.E 0.047

= 3.6

Interpretation:




often go for commodities, 40% sometimes and rest 10% rarely.

(f) Mutual funds

Z statistic = (p-P) = 0.6-0.33S.E 0.047

= 5.7

Interpretation:




often go for , 35% sometimes and rest 5% rarely.

(g) Real estate

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Z statistics = (p-P) = 0.7-0.33S.E 0.047

= 7.87

Interpretation:



towards this mode of investment is not same As the data also shows that 10% of

investors often go for Real estate, 20% sometimes and rest 70% rarely

4.2) It was asked to them that what their objectives for investment in mutual

funds are. Their response to this question comes like:

Table 4.2.1 : investors objective for investment

high neutral Low

Saving and protecting money 60% 30% 10%

Wealth creation 80% 15% 5%

Secure future of family 20% 50% 30%

Buying property 5% 60% 35%

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Providing for future of kids 30% 40% 30%

Parking spare capital 65% 32% 3%

ANALYSIS-

Here we have applied Z test. Z test is applied to find out the significance of each

factor as an objective for investment in mutual funds.

Z TEST SHOWS-

( a) Saving and protecting money

Null hypothesis states that perception of all the investors towards this objective is

same, i.e. nether they consider it as a main nor a insignificant reason to invest,

hence P = 1/3






S.E = sqrt [ ( 1/3*2/3) / 100 ]

= 0.047


(p-P)S.E i.e.

0.6 0.33 = 5.70.047

Interpretation:

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objective for investment is not same As the data also shows that 30% of

investors has an neutral opinon, 10% rated as low and rest 60% agreed with

high opinion.

Similarly for rest of the factors

(b) Wealth creation

Z statics = (p-P) = 0.8-0.33S.E 0.047

=10

. Interpretation:

10 > 1.96, Z value is greater than table value at 5 % level of significance. Hence



investors has an neutral opinon, 5% rated as low and rest 80% agreed with high

opinion.

(c) Secure future of family

Z statics = (p-P) = 0.5-0.33S.E 0.047

= 3.6

Interpretation:

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investors has an neutral opinon, 30% rated as low and rest 20% agreed with

high opinion.

(d) Buying property

Z statics = (p-P) = 0.6-0.33S.E 0.047

= 5.7

Interpretation:




investors has an neutral opinon, 35% rated as low and rest 5% agreed with high

opinion.

(e) Providing for future of kids

Z statics = (p-P) = 0.4-0.33S.E 0.047

= 1.48

Interpretation:



towards this objective for investment is not same As the data also shows that

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40% of investors has an neutral opinon, 30% rated as low and rest 30% agreed

with high opinion.

(f) Parking spare capital

Z statics = (p-P) = 0.65-0.33 = 6.8S.E 0.047

Interpretation:




investors has an neutral opinion, 3% rated as low and rest 65% agreed with high

opinion.

4.3) It was asked to them to state what %age of their total investment is

invested in mutual funds. Their response to this question comes like:

17 investors said that they invest 10% -20% of their total income in mutual funds,

while 70 investors said that they invest 20% -30% of their income in mutual

funds, subsequently 11 investors said they invest 30% -40%, 1 investor said he

invest 40% -50%, and 1 investor said he invest 50% (or above) of their income in

mutual funds.

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F r e q u e

1 0 - 2 0 %

2 0 - 3 0 %

3 0 - 4 0 %

4 0 - 5 0 %

5 0 % a b

GRAPH 4.3.1: %age of Investors total investment invested in mutual funds

ANALYSIS-

ANALYSIS-

Null hypothesis There is no significant difference in the percentage of total

income invested by investors in mutual funds.

Alternate hypothesis - There is a significant difference in the percentage of total


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Test Statistics

165.600

4

.000

Chi-Squarea

df

Asymp. Sig.

q3,

0 cells (.0%) have expected frequencies less than

5. The minimum expected cell frequency is 20.0.

a.

Interpretation:

Here compare calculated value with table value at 5% degree of freedom i.e,

here chi- test value is greater than table value as 165 > 9.49

Null is rejected i.e. there is a significant difference in the percentage of total


4.4) It was asked to them to state with which option in mutual funds do they

like to enter. Their response comes like:

30% of investors said that they would like to enter mutual fund market with

Growth option. 40% said Dividend option, 9% said Dividend reinvestment option

and rest 21% said they would like to enter with Bonus option.

ANALYSIS-.

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Null hypothesis - There is no significant difference in the different option available

for investment in mutual funds.

Alternate hypothesis - There is a significant difference in the different option

available For investment in mutual funds.

Test Statistics

20.880

3

.000

Chi-Squarea

df

Asymp. Sig.

Q4



a.

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4.5) It was asked to them to state the most important factor that influence

their investment in mutual fund. Their response comes like:

A funds investment style 15%

Performance of the fund 50%

The fund managers judgment 30%

None of the above 5%

ANALYSIS-

Null hypothesis All the above stated factors are equally important in an

investors eye.

Alternate Hypothesis - All the above stated factors are not equally important in

investors eye.

.

zzz

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50


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52


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Test Statistics

46.000

3

.000

Chi-Squarea

df

Asymp. Sig.

Q5



a.

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Chart4.5.1

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1-A funds investment style

2 -Performance of the fund

3 -The fund managers judgment

4 -None of the above

Interpretation:

Compare calculated value with table value at 5% degree of freedom. Here chi test value

is greater than table value- as 46 > 9.49 .Null is rejected i.e All the above stated factors

are not equally important in an investors eye.

4.6) It was asked to them to state the various problems faced by them while investing in

mutual funds. Their response comes like:

TABLE 4.6.1: Various problems faced by investors

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Factors Never Sometimes Often Frequently

Inadequate Information of

market forces

60 30 5 5

Risk Factor 30 20 20 30

Reliable information regarding

company performance

66 24 5 5

Late dividend 9 33 28 30

Reliability of Rating 9 5 21 65

Manipulation / mis-information

by the agent

70 14 4 12

Entry load/ Exit load 18 50 26 26

ANALYSIS-

Here we have applied z test to test the significance of all the problems individually.

Z test shows-

1) Inadequate Information of market forces

We asked 100 investors and asked them that do they feel that Inadequate

Information of market forces is a problem faced by them while investing their

money in mutual funds. And calculated their opinion on the scale of- never,

sometimes, often, and frequently.

Null hypothesis states that perception of all the investors towards this problem

is same. Nether they consider it as a main nor a insignificant factor to take

worry of hence P = 1/4



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S.E = sqrt [ ( 1/4*3/4) / 100 ]

= 0.043


(p-P)S.E

i.e. 0.6 0.25 = 8.1

0.043

Interpretation:

8.1 > 1.96, Z value is greater than table value at 5 % level of significance, Hence

Ho i.e. null is rejected and we conclude that most of the investors i.e 60% of

them think that it is not the main problem faced by them.

Similarly for rest of the factors

2) Risk Factor

Z statistics = (p-P) = 0.3-0.25S.E 0.043

= 1.162

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Interpretation:

Z value is less than table value at 5 % level of significance, Hence Ho i.e. null is

accepted and we conclude that the investors holds same views regarding risk

problem associated with mutual funds.

3) Reliable information regarding company performance

Z statics = (p-P) = 0.6-0.25S.E 0.043

= 8.1

Interpretation:

Z value is greater than table value at 5 % level of significance. Hence Ho i.e. null

is rejected and we conclude that the according to investors they never face any

problem in obtaining reliable information regarding company performance.

4) Late dividend

Z statics = (p-P) = 0.61-0.25S.E 0.043

= 8.3

Interpretation:

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Z value is greater than table value at 5 % level of significance, Hence Ho i.e. null

is rejected and we conclude that the according to investors they often face the

problem of receiving late dividends for their investments.

5) Reliability of Rating

Z statics = (p-P) = 0.65-0.25S.E 0.043

= 9.3

Interpretation:


is rejected and we conclude that the according to investors they frequently face

the problem of false ratings.

6) Manipulation / mis-information by the agent

Z statics = (p-P) = 0.7-0.25

S.E 0.043

= 10.46

Interpretation:


is rejected and we conclude that the according to investors they never face the

problem Manipulation / mis-information by the agent.

7) Entry load/ Exit load

Z statics = (p-P) = 0.51 -0.25S.E 0.043

= 6.04

Interpretation:

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Yes 80%

No 20%

ANALYSIS-

st, We asked 100 investors and asked them do they do they have recourse to

their agent in case of any error or problem regarding the investments calculated

their opinion as yes or no.






S.E = sqrt [ ( 1/2*1/2) / 100 ]

= 0.05

Assuming Ho is true test statics is =

= (p-P)S.E

i.e. 0.8 0.5 = 60.05

20% says no

20 %

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2

1

20% says no

80% says yes

GRAPH 4.7.1 : Investors opinion on having recourse to agents if problem

occurs

Interpretation:

6 > 1.96, Z value is greater than table value at 5 % level of significance. Hence

Ho i.e. null is rejected and we conclude that most of the investors are of they

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opinion that theyhave recourse to their agent in case of any error or problem

regarding the investments.

4.8) It was asked to them how do they access the performance of mutual

fund. Their response comes like:

36% saidby comparing it with the performance of other mutual funds, 11% said

by comparing it with the performance of the stock market. 4% said by comparing

it with the performance of other financial products and rest 49% said by

comparing it with the performance of all of the above.

ANALYSIS-

Here we have applied chi-square test

Null- all factors are equally significant.

Alternate- all factors are not equally significant.

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Test Statistics

53.360

3

.000

Chi-Squarea

df

Asymp. Sig.

Q10

0 cells (.0%) have expected frequencies less than5. The minimum expected cell frequency is 25.0.

a.

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GRAPH 4.8.1: Different ways to access the performance of mutual fund

1. By comparing it with the performance of other mutual funds

2. By comparing it with the performance of the stock market

3. By comparing it with the performance of other financial products

4. By comparing it with the performance of all of the above

Interpretation:

Compare calculated value with table value at 5% degree of freedom. Here chi

test value is greater than table value- as 53 > 9.49, Hence Null is rejected i.e all

factors are not equally significant investers think that to access the performance

of mutual fund they should compare it not only with other mutual funds but also

with stock market and other financial products.

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4.9) it asked to them to state their agreement or disagreement with the

following statements. Their response comes like:

TABLE 4.9.1): investors agreement or disagreement on various

Statements

AgreeStrongly

Agree Indifferent Disagree DisagreeStrongly

Mutual funds are safe investments 50 20 10 15 5

I invest in mutual funds as they givebetter returns

10 30 40 10 10

The brand name is important inmutual funds

25 45 10 5 15

Private mutual funds are riskier than

public sector mutual fund companies

45 20 10 15 10

I will definitely recommend investingin mutual funds to my friends

40 30 25 5 0

Debt funds are better than equityfunds

30 15 40 10 5

I dont like funds with lock in periods 10 50 12 8 20

I invest in mutual funds because mybanker / broker asks me to

45 30 20 3 2

You are ready for sharp ups anddowns in the short-term value of yourinvestments in return for long-termgains.

60 20 5 2 13

I use the SIP route to invest in mutualfunds

18 17 5 40 20

I make the choice of funds myself 2 3 20 30 45

I invest on the basis of views ofexperts

40 35 15 8 2

I read economic newspapersregularly and watch financialchannels and programs regularly

30 40 10 10 10

Service from AMCs is an importantfactor

30 40 8 15 7

I prefer investing in AMCs which havespeedy and efficient customer care

25 35 20 10 10

ANALYSIS:

Mean was calculated for each factor to know where the majority opinion for that

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factor lie on the scale does.

Table 4.9.2.) : investors agreement or disagreement on various

Statements

Factor Total Mean MajorityOpinion

Mutual funds are safe investments 95 0.95 Agree

I invest in mutual funds as they give better returns 20 0.2 Indifferent

The brand name is important in mutual funds 60 0.6 Agree

Private mutual funds are riskier than public sector

mutual fund companies

75 0.75 Agree

I will definitely recommend investing in mutual fundsto my friends

105 1.05 Agree

Debt funds are better than equity funds 55 0.55 Agree

I dont like funds with lock in periods 22 0.22 Indifferent

I invest in mutual funds because my banker / brokerasks me to

113 1.13 Agree

You are ready for sharp ups and downs in the short-term value of your investments in return for long-term gains.

112 1.12 Agree

I use the SIP route to invest in mutual funds -27 -0.27 IndifferentI make the choice of funds myself -113 -1.13 Disagree

I invest on the basis of views of experts 103 1.03 Agree

I read economic newspapers regularly and watchfinancial channels and programs regularly

110 1.10 Agree

Service from AMCs is an important factor 71 0.71 Agree

I prefer investing in AMCs which have speedy andefficient customer care

55 0.55 Agree

4.10) It was asked from them which age segment do they belong to

Up to 20 - 2%

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21-40 - 40%41-60 - 45%Above 60 - 13%

ANALYSIS:

Null hypothesis: all age groups are equally interested in investing in mutual

funds.

Alternate Hypothesis: all age groups are not equally interested in investing in

mutual funds.

Table 4.10.1: investors belonging to different age segments

Age Group ObservedFrequency (O)

ExpectedFrequency (E)

(O-E)22/E

Up to 20 2 25 21.16

21-40 40 25 9

41-60 45 25 16

Above 60 13 25 5.76

Total 100 100 51.92

Chi square(Df= 4-1=3 at 5% level of significance) =7.82 (Tabular value)

Since 51.92 > 7.82 therefore all age groups are not equally interested in

investing in mutual funds.

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O b s e r ve d F r e q u

U p t o

2 1 - 4 0

4 1 - 6 0

A b o v e

Graph 4.10.2: investors belonging to different age segments

As we can see in above table and graph maximum people who invest in mutual

funds belong to 41-60 years age group & Since 7.82 > 6.80 therefore all

newspapers are equally significant.

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CONCLUSIONS

Every individual is now a day believes in parking their spare capital in some

sort of investments to earn good returns. On an average an investor invest

approx 20% of his income in mutual funds.

While investing their money, the first preference of investors is Insurance

Policies, after that comes Mutual Funds.

The main objective behind investing money in mutual funds is easy and

speedy wealth creation.

Most of the investors want to enter mutual fund market with dividend option

that is dividend option seems more attractive to investors.

Performance of fund is an important factor for investment in mutual funds.

Investors face many problems while investing their money in mutual funds like

inadequate market information, confusion regarding entry & exit load, late

dividends and many more.

According to investors the best way to access the performance their of mutual

fund is not by merely comparing it with other mutual funds, infact it should be

compared with stock market and other financial products.

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SUGGESTIONS

After studying the various the responses to questionnaire of investors, few

suggestions are given which will help an AMC to increase its market share in the

field of Mutual Fund Industry. These suggestions are as follows:

Brand name plays an important role in this industry so a stress should be

made in building a good brand.

Word of mouth is one of the best ways to advertise a particular product in

the market. So, every effort should be made to keep the existing investors

happy.

Investors services and operations are consider second to sales but in a

competitive environment where investors are actively seeking a Quality

Service so an AMC can use this as major unique marketing preposition.

Retail segment is the key to increase asset under management and should

be aggressively pursued.

A warm and cordial relation should be maintained with distributors and especially

with the Banks because banks form the most crucial factor of distribution.

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LIMITATIONS OF THE STUDY

The study is based only on 100 investors of Chandigarh, Mohali &

Panchkula.Study is not exhaustive & has a scope of further research

The present study will relate to urban people only.

Influence of certain variables like culture, experts views & suggestions of

brokers etc on investors behavior and satisfaction can not be studied in

detailed due to time factor.

Non availability of adequate published data has also restricted the scope

of the present study to some extent.

Some respondents may have shared biased information.

Due to time & money constraints the study was limited in extent.

Due to the use of Convenience sampling technique the sample might not

represent the actual preferences of the population.

.

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BIBLIOGRAPHY

WEBSITES

www.sebi.govt.co.in

http://amfiindia.com/

www.indiainfoline.com

www.valuresearchonline.com

www.icicidirect.com

www.ssrn.com

Research Methodology By C. R. Kothari

Statistical techniques By S. P. Gupta

84
http://www.indiainfoline.com/http://www.valuresearchonline.com/http://www.icicidirect.com/http://www.ssrn.com/http://www.indiainfoline.com/http://www.valuresearchonline.com/http://www.icicidirect.com/http://www.ssrn.com/


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QUESTIONNAIRE

The study on prospects & problems of mutual fund investors is for academic purpose.

All the information would be kept confidential. Please tick () the answer (s) for each

question in the appropriate place or write in the space provided for your opinion.

Q. 1 What is your mode of saving & investment?

Often Sometimes Rarely

Fixed depositsGovernment

bonds& securitiesInsurance policiesCommodity

(gold,etc)Equity marketMutual fundsReal estate

Q.2 What are your objectives for investment in mutual funds?

High Neutral low

Saving and protecting moneyWealth creationSecure future of familyBuying propertyProviding for future of kidsParking spare capital

Q.3 What %age of your total investment is invested in mutual funds?

10% -20%

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20% -30%

30% -40%

40% -50%

50% as above

Q.4 With which option (given below) in mutual funds do you like to enter?

Growth

Dividend

Dividend reinvestment

Bonus option

Q5 Which is the most important factor for investment in mutual fund?

A funds investment style

Performance of the fund

The fund managers judgment

None of the above

Q.6 Problems faced while investing in mutual funds:

Factors Never Sometimes Often Frequently

Inadequate Information of

market forcesRisk FactorReliable information regarding

company performance

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Late dividendReliability of RatingManipulation / mis-information

by the agent

Entry load/ Exist load

Q.7 Do you have recourse to your agent in case of any error or problem

regarding the investments?

Yes

No

Q.8 How you access the performance of mutual fund?

By comparing it with the performance ofother mutual funds

By comparing it with the performance of the stock market

By comparing it with the performance of other financial products

By comparing it with the performance ofall of the above

Q.9 Please indicate your agreement or disagreement to these statements

regarding mutual funds:

Agree

Strongly

Agree Indifferent Disagree Disagree

Strongly

Mutual funds are safe

investmentsI invest in mutual funds as they

give better returnsThe brand name is important in

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mutual fundsPrivate mutual funds are riskier

than public sector mutual fund

companiesI will definitely recommend

investing in mutual funds to my

friendsDebt funds are better than

equity fundsI dont like funds with lock in

periodsI invest in mutual funds

because my banker / broker

asks me toYou are ready for sharp ups

and downs in the short-term

value of your investments in

return for long-term gains.I use the SIP route to invest in

mutual fundsI make the choice of funds

myselfI invest on the basis of views of

expertsI read economic newspapers

regularly and watch financial

channels and programs

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regularlyService from AMCs is an

important factorI prefer investing in AMCs

which have speedy and

efficient customer care

Personal Profile of the Respondent:

Name : __________________________________________________________

Address : __________________________________________________________

Phone (m) : __________________________________________________________

E mail : __________________________________________________________

Q10 Specify your Age group?

Below 20 years

21 to 40 years

41 to 60 years

above 60 years

Thanks

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simran saini final 2(1)

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