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CHAPTER 1INTRODUCTIONThe term investment is used to describe the
process of investing money in shares, debentures, fixed deposits,
gold, real assets, life policies, mutual funds, and money market
instruments. These outlets where the money is invested are known as
investment assets. By investing, an investor commits the present
funds to one or more assets to be held for some time in expectation
of some future return in terms of interest or capital gain.
Individual investor considers a number of factors before deciding
to invest their funds in various securities involving varying
degrees of risk and return. In the present economic scenario, the
option available to them is different and the factor motivating the
investors to invest is governed by their socio-economic profile
including expected return and risk tolerance.In short, the
investment decision making process is a multi-faceted subject to
change over a period of time. An attempt has been made in this
study to identify the perceptual factors which influence the
investors to invest in mutual funds. There are a number of
investment opportunities available to an investor. Each of these
investments has its own risk and return features. The proverb never
put all the eggs in the same basket guides the investor to
diversify the risk. Diversification refers to the process whereby
an investor invests his funds in more than one investment
opportunity. An investor must learn to analyze and measure the risk
and return of the portfolio. All investors may not be in a position
to undertake fundamental and technical analysis before they decide
about their investment options. Neither do they have the resources
nor the expertise to do so. Instead of investing directly, the
investors particularly, small investors may go for indirect
investment through the mutual funds. Instead of becoming the share
holder or bondholder of a company, these investors would become the
unit holders of mutual funds. In almost all the capital markets
throughout the world, mutual funds have gained a significant
position.The mutual fund industry plays a significant role in the
development of the economy as well. Its buoyant growth leads to
lower intermediation costs, more efficient financial markets, and
increased vibrancy of the capital markets and higher local
ownership of financial assets. If retail investment is directed
through the mutual fund route, it will lead to greater wealth
creation in the long run. Thus, the industry can be one of the
causative factors for a healthy economy.Mutual fund 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 investment.
SEBI has played a vital role in regularizing the mutual fund
business. From time to time it has tried to plug the loopholes
prevailing in the system and safeguard the interest of investors
who has been backbone of this unprecedented growth. As of now big
challenge of mutual fund industry is to mount on investor awareness
and to spread further to the semi urban and rural areas. Since the
need of this study has been aroused in order to see the preference
awareness and the investors attitude regarding the mutual
funds.Investment is a commitment of funds made in the expectation
of some positive return. If the investment is properly undertaken,
the return will be commensurate with the risk the investor assumes.
Investment goals vary from person to person business to business.
While some want security, others give more weightage to returns
alone. With objectives defying any range, it is obvious that the
products required will vary as well.Investments generally involve
real assets. Real assets are tangible, material thing such as
buildings, automobiles, and gold etc. financial assets are pieces
of paper representing an indirect claim to real assets held by
someone else.
MUTUAL FUNDS:A mutual fund is an investment vehicle that pools
in the monies of several investors, and collectively invests this
amount in either the equity market or the debt market, or both,
depending upon the funds objective. This means you can access
either the equity or the debt market, or both, without investing
directly in equity or debt.
INVESTING IN MUTUAL FUNDS:Diversification is a major advantage
of investment through Mutual Funds, as investors get the benefit of
various instruments through a single avenue. Professionally
qualified people manage the funds. Mutual Funds offer flexibility
in options and choice of schemes to match individual needs.
Transparency of operations as well as investment pattern and
philosophy by disclosures of portfolio also add to the advantages
of investing in Mutual Funds. The Mutual Fund industry is very well
regulated by SEBI Mutual Funds offer tax benefits. Dividend income
received from investing in Mutual Funds is tax free in the hands of
the investor. Investments in the growth option will be subject to
long term or short-term capital gains tax as applicable.
ADVANTAGE OF MUTUAL FUNDS1. Professional Fund Management 2.
Services 3. Diversification 4. Affordability5. Cost effectiveness
6. Liquidity 7. Tax breaks 8. Transparency.There are wide varieties
of mutual fund schemes and are classified on the basis of its
structure and its investment objective.
BASED ON STRUCTURE
OPEN ENDED FUNDSAn 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 this scheme is
liquidity.
CLOSED-ENDED FUNDSThe fund is open for subscription only during
a specific 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.
The objective of the fund is to declare regular dividend.
BASED ON INVESTMENT OBJECTIVE
GROWTH FUNDSThe aim of growth funds is to provide capital
appreciation over the medium to long-term. Such schemes normally
invest a majority of the stock exchanges where they are listed. The
fund may declare dividend but the main objective is only capital
appreciation.
INCOME FUNDSThese are also known as debt funds since they invest
in debt instruments issued by the government, private companies
banks and financial institutions. These funds target low risk and
stable income to the investors. While returns in these funds may be
regular, their scale may fluctuate depending on the prevailing
interest rates and the credit quality of the debt securities.
BALANCED FUNDSThese funds, as the name suggests, are a mix of
both equity and debt funds. They invest in both equities and fixed
income securities in line with pre-defined investment objectives.
The aim at providing a balanced mix of capital appreciation through
investments in equities coupled with investments in stable
instruments like bonds etc.
LIQUID FUNDSAlso know as Money market funds as they invest in
securities of short term nature, typically securities of less than
one-year maturity like Treasury Bills issued by the government,
Certificate of Deposits issued by banks and Commercial Paper issued
by companies as well as in the inter- bank call money market. These
funds are considered to be at the lowest rung in the hierarchy of
risks.
1.1 COMPANY PROFILEReliance Mutual Fund ('RMF'/ 'Mutual Fund')
isone of Indias leading Mutual Funds, with Average Assets Under
Management (AAUM) of Rs. 78,112 Crores and an investor count of
over 64.65 and 70.99 Lakh folios. (AAUM and investor count as of
Jan - Mar '12 ) Source : http://www.amfiindia.com/ Reliance Mutual
Fund, a part of the Reliance Group, is one of the fastest growing
mutual funds in India. RMF offers investors a well-rounded
portfolio of products to meet varying investor requirements and has
presence in 179 cities across the country. Reliance Mutual Fund
constantly endeavors to launch innovative products and customer
service initiatives to increase value to investors. Reliance
Capital Asset Management Limited (RCAM) is the asset manager of
Reliance Mutual Fund. RCAM a subsidiary of Reliance Capital
Limited, which holds 92.93% of the paid-up capital of RCAM, the
balance paid up capital being held by minority
shareholders.Reliance Capital Ltd. is one of Indias leading and
fastest growing private sector financial services companies, and
ranks among the top 3 private sector financial services and banking
companies, in terms of net worth. Reliance Capital Ltd. has
interests in asset management, life and general insurance, private
equity and proprietary investments, stock broking and other
financial services.Sponsor : Reliance Capital Limited
Trustee : Reliance Capital Trustee Co. Limited
Investment Manager / AMC: Reliance Capital Asset Management
Limited
Statutory Details: The Sponsor, the Trustee and the Investment
Manager are incorporate under the Companies Act 1956.
Vision Statement
To be a globally respected wealth creator with an emphasis on
customer care and a culture of good corporate governance.
Mission Statement
To create and nurture a world-class, high performance
environment aimed at delighting our customers
Our Corporate Governance Policy: Reliance Capital Asset
Management Limited has a vision of being a leading player in the
mutual fund business and has achieved significant success and
visibility in the market. However, an imperative part of growth and
visibility is adherence to good conduct in the marketplace. At
Reliance Capital Asset Management Limited, the implementation and
observance of ethical processes and policies has helped us in
standing up to the scrutiny of our domestic and international
investors.Management:The management at Reliance Capital Asset
Management Limited is committed to good corporate governance, which
includes transparency and timely dissemination of information to
its investors and unit holders. The Board of Directors of RCAM is a
professional body constituting inter-alia of, well-experienced and
knowledgeable independent members.Employees: Reliance Capital Asset
Management Limited has at present, a code of conduct for all its
officers. It has a clearly defined prohibition on insider trading
policy and regulations. The management believes in the principles
of propriety and utmost care is taken while handling public money,
making proper and adequate disclosures. All personnel at RCAM are
made aware of their rights, obligations and duties as part of the
Dealing Policy laid down in terms of SEBI guidelines. They are
taken through a well-designed HR program, conducted to impart work
ethics, the Code of Conduct, information security, Internet and
e-mail usage and a host of other issues. One of the core objectives
of RCAM is to identify issues considered sensitive by global
corporate standards, and implement policies/guidelines in
conformity with the best practices as an ongoing process. RCAM
gives top priority to compliance in true letter and spirit, fully
understanding its fiduciary responsibilities.SponsorsReliance
Capital Limited: Reliance Mutual Fund schemes are managed by
Reliance Capital Asset Management Limited, a subsidiary of Reliance
Capital Limited, which holds 86.80% of the paid-up capital of
Reliance Capital Asset Management Limited, the balance paid up
capital being held by minority shareholders. Reliance Mutual Fund
(RMF) has been sponsored by Reliance Capital Ltd (RCL). The
promoter of RCL is AAA Enterprises Private Limited. Reliance
Capital Limited is a Non Banking Finance Company and is one of the
Indias leading and fastest growing financial services companies,
and ranks among the top three private sector financial services and
banking companies in India, in terms of networth. Reliance Capital
Limited has interests in asset management and mutual funds, life
and non-life insurance, private equity and proprietary investments,
stock broking and other activities in the financial services
sector. The net worth of RCL is as follows:Particulars(Rs.in
crores) 2009-10 2008-09 2007-08 Net Worth 6885.70 6687.30 5927.50
Total Income 2366.62 2974.85 2079.79 Profit After Tax 339.42 968.02
1025.45 Reliance Capital Limited has contributed Rupees One Lac as
the initial contribution to the corpus for the setting up of the
Reliance Mutual Fund. Reliance Capital Limited is responsible for
discharging its functions and responsibilities towards the Fund in
accordance with the Securities and Exchange Board of India (SEBI)
Regulations.The Sponsor is not responsible or liable for any loss
resulting from the operation of the Scheme beyond the contribution
of an amount of Rupees one Lac made by them towards the initial
corpus for setting up the Fund and such other accretions and
additions to the corpus.AMC:About Reliance Capital Asset Management
Limited.Reliance Capital Asset Management Limited (RCAM) is an
unlisted Public Limited Company incorporated under the Companies
Act, 1956 on February 24, 1995. RCAM has been appointed as the
Asset Management company of Reliance Mutual Fund by the Trustees of
Reliance Mutual Fund vide Investment Management Agreement (IMA)
dated May 12, 1995 and executed between Reliance Capital Trustee
Co. Limited and Reliance Capital Asset Management Limited and
amended on August 12, 1997 and amended on August 12, 1997, January
20, 2004 and February 17, 2011 in line with SEBI (Mutual Funds)
Regulations, 1996. Pursuant to this IMA, RCAM is acting as the
Investment Manager of the Mutual Fund. The net worth of the Asset
Management Company based unautdited financials statements as on
September 30, 2011 is Rs. 1,228.89 Crore. RCAM is also registered
as a Portfolio Manager vide SEBI Registration Number
PM/INP000000423 and renewed with effect from August1, 2009. The AMC
is also rendering advisory services in respect of Emergent India
Investment Limited, an offshore fund for investment in India. RCAM
has ensured that key personnel of the AMC, the systems, back
office, bank and securities accounts are segregated activity wise
and there exists systems to prohibit access to inside information
of various activities. As per SEBI Regulations, it will further
ensure that AMC meets the capital adequacy requirements, if any,
separately for each such activity. However, there is no conflict of
interest between various business activities carried on by RCAM.
The mutual fund:About RMF has been registered with the Securities
& Exchange Board of India (SEBI) vide registration number
MF/022/95/1 dated June 30, 1995. The name of Reliance Capital
Mutual Fund was changed to Reliance Mutual Fund effective 11th
March 2004 vide SEBI's letter no. IMD/PSP/4958/2004 date 11th March
2004. Reliance Mutual Fund was formed to launch various schemes
under which units are issued to the Public with a view to
contribute to the capital market and to provide investors the
opportunities to make investments in diversified securities.The
main objectives of the Reliance Mutual Fund are: To carry on the
activity of a Mutual Fund as may be permitted at law and formulate
and devise various collective Schemes of savings and investments
for people in India and abroad and also ensure liquidity of
investments for the Unit holders. To deploy Funds thus rose so as
to help the Unit holders earn reasonable returns on their savings.
To take such steps as may be necessary from time to time to realise
the effects without any limitation.Awards and achievements:CNBC
TV18 - CRISIL Mutual Fund of the Year Award for 2009: Reliance
Mutual Fund has won the CNBC TV18 - CRISIL Mutual Fund of the Year
Award in the Category Mutual Fund House of the Year (Awarded by
CRISIL Fund Services, CRISIL Limited). In total 37 fund houses were
considered as the award universe. Fund Houses winning at least one
award for their schemes in the category level awards for 2009 were
eligible to be in contention for the award. The award is based on
consistency of fund houses performance across various scheme
categories in the four quarterly CRISIL Composite Performance
Rankings (CPRs) released during the calendar year 2009. The
individual CRISIL CPR ranks for their schemes were aggregated on a
weighted average basis to arrive at the final ranks for fund
houses. The mutual fund house with the highest final score is the
Mutual Fund House of the Year. The award has been granted for the
year 2009 and will be in vogue till the announcement of the award
for the next year in the same category. A detailed methodology of
the CRISIL CPR is available at www.crisilfundservices.com. Past
performance is no guarantee of future results.Rankings and Award
Source: CRISIL Fund Services, CRISIL Limited.
1.2 OBJECTIVES OF THE STUDY:
To study the investors attitude towards the mutual funds. To
find out the factors which influencing the investors to prefer the
investment in mutual funds. To suggest the suitable measures for
extending the scope for investment in mutual funds based on
findings of the study.
1.3 SCOPE OF THE STUDY:
The present study is an attempt to study the investors attitude
towards mutual fund of Chennai city. it involves understanding the
basic concept of mutual fund, various concepts of mutual fund,
various schemes of mutual fund, investment alternatives. Factor
influencing to investment in mutual funds, investors expectations
regarding the mutual fund and investors attitudes of different
mutual funds. The analysis would help how much importance investors
giving to the mutual funds comparing to the other investments.
1.4 NEED OF THE STUDY: This study gives information about mutual
fund industry and as well as awareness level among the people for
mutual funds. And this study deals with the investors attitude and
how the mutual funds are performing in the current market
situation. This study facilitates the general people who can
understand the importance and explore the new option for investment
in the mutual funds
1.5 LIMITATIONS OF THE STUDY
For the research work, data was collected and interpreted with
utmost reliability and consistency but due to prejudices of a few
respondents, certain limitations of the study are as follows:
The study depicts the present scenario in the selected city of
Chennai and hence the result may not be applicable to another
period of time. The study is limited to 150 respondents of the
selected city of Chennai. Answer to the questionnaire depends upon
the beliefs and prejudices of investors. It is assumed that
respondents are true and honest in expressing their views and have
filled the questionnaire honestly and without any bias. The present
study is restricted to information collected about the Mutual Fund
Investors with the help of questionnaire.
CHAPTER 2 REVIEW OF LITERATURE
Investors are generally more careful while making investment
decision and presence of rationality in every investor demands
higher return at minimum risk but when markets are efficient it is
not possible to gain abnormal returns. Risk is generally,
associated with various applications differently but in common it
means negative connotation such as harm or loss or some undesirable
action.
2.1 Factors influencing the retail investors to prefer
investment in mutual funds in Puducherry: An Emprical
study*D.Kandavel*Asst. Professor of Commerce, DDE, Annamalai
University, AnnamalaiNagar, Tamil Nadu, India.
Mutual funds have emerged as an important segment of financial
marketsand so far have delivered value to the investors. It has
grown by leaps and bounds in last couple of years. But no industry
can flourish without a proper regulatory mechanism in the place.
These initiatives would help towards making the Indian mutual fund
industry more vibrant and competitive. Since, the need of study has
been aroused in order to see the factors influencing the retail
investors to prefer investment regarding the mutual funds in
Puducherry. The study is based on the formulation of the following
null hypotheses:There is no significant relationship among the
acceptance level of the retail investors belonging to different
demographic profile towards factors influencing to invest in mutual
funds. In order to study the factors influencing the retail
investors to prefer investment in mutual funds in Puducherry, chi
square test, analysis of one-way variance, student t-test, analysis
of co-efficient of variation, multiple regression analysis, and
percentage analysis have been employed. Chi square test was
employed to measure the association between the demographic profile
of the respondents and their satisfaction with investment in mutual
funds and type of fund preferred. The present study looks at the
small investors purchase behavior does not have a high level of
coherence due to the influence of different purchase factors. If
the study provokes the authority concerned to take some positive
measures for expanding the scope of mutual funds investment.
2.2 Investors perception towards investment in mutual
fundsKaplan and Garrick (1981), Rajeshwari TR and Rama moorthy VE
(2002)The investment decision making process is a multi-faceted
subject to change over a period of time. Mutual Funds have become
an important portal for the small investors. The objectives of the
study are to know investors motivational factors, investment
preference and problems faced by investors in Mutual Funds. The
study reveals that 1) The motivational factors to invest in mutual
funds are Portfolio diversification, Risk minimization and greater
tax benefits; 2) Lack of knowledge is the primary reason for not
investing in mutual fund.Risk expressed by Kaplan and Garrick
(1981) demonstrates that risk involves a factor of uncertainty and
potential loss that might be incurred. Rajeshwari TR and Rama
moorthy VE (2002) studied the financial behavior and factors
influencing fund/scheme selection of retail investors by conducting
factor analysis using principal component analysis, to identify the
investors underlying fund scheme selection criteria, so as to group
them into specific market segment for designing of the appropriate
marketing strategy. Although majority of investors who invest in
mutual fund themselves are not clear with the objective and
constraints of their investment but in addition to this most
important critical gap that exist in this process is lack of
awareness about presence of risk elements in mutual fund
investment. The new marketing philosophy and strategies place
special emphasis on recognition of customer needs in an effort to
provide high level of quality services (Harrison, 2000).
2.3 Learn how to invest in Mutual FundsMustafa
SoleimanzadehMustafa Soleimanzadeh in his article, Learn how to
invest in Mutual Funds had discussed about the risk and return in
mutual funds. He stated that the risk and return depend each other,
the greater the risk, the higher the potential return; the lower
the risk, the lower the expected return. Mutual funds try to reduce
their risk by investing in a diversified group of individual
stocks, bonds, or other securities. He concluded that the
investment in stocks can get more return than mutual funds but
investment in mutual funds the risk is lower. Mutual funds are
great for funding retirement plans and investors that don't have
the time or energy to consider individual stocks.(2006) Kum Martin
in his article, Basics about Mutual Funds had discussed about
different types of mutual funds. He stated that the equity funds
involve just common stock investments. They are extremely risky but
can end up earning a lot of money. Fixed income funds are
government and corporate securities. Fixed income funds offer fixed
returns and the risk associated with these funds is very low.
Balanced mutual funds are a combination of bonds and stocks. He
concluded that the low risk in investment will not earn a lot of
returns. (2007) Mutual fund managers have to use various investment
styles depending upon investors requirement. Most of the empirical
evidences have shown that mutual fund investors purchase decision
is influenced by past performance (Patel, et al. 1992). Research
study by (Jones et al, 2007) has proved that a negative correlation
exists between advertisement and fund quality. A common investor
may expect that mutual fund should option strategies that have been
documented to produce superior returns in the past instead they
follow to select portfolios that dont deviate markedly from market
benchmarks.
2.4 Investors Preference towards Mutual Funds in Coimbatore
CityA. Vennila, Author, Assistant Professor, Sri Krishna College of
Technology, Coimbatore.R. Nandhagopal, Co-Author, Director, PSG
Institute of Management, CoimbatoreThere are a lot of investment
avenues available today in the financial market for an investor
with an investable surplus. He can invest in Bank Deposits,
Corporate Debentures, and Bonds where there is low risk but low
return. The recent trends in the Stock Market have shown that an
average retail investor always lost with periodic bearish tends. If
the invests in Index Funds, they foregoes management risk, because
these funds do not employ managers. In the present study an attempt
has been made to study the attitude of the investors towards
investment in mutual funds in Coimbatore City. The study aims at
finding out the attitude of the investors towards investment in
mutual funds in Coimbatore city. The primary data was collected
from the investors of mutual funds with help of the questionnaire.
The secondary data were collected from the books, records and
journals. By adopting convenience sampling, 250 respondents were
selected for this study.
2.5 .An Analysis of Investors' Attitude towards Tax Saving
Mutual Funds in IndiaN. S. Santhi, Assistant Professor, Department
of Business Administration, KSR College of Engineering,
Tiruchengode.K. Balanaga Gurunathan, Professor, Department of
Management Studies, KSR College of Technology,
Tiruchengode.Investment is saving money and engaging them with the
expectation of earning profit in future. Mutual fund is supposed to
be a better avenue for the individual investor. Tax saving mutual
funds is also known as Equity Linked Saving tax saving mutual funds
which provides all the benefits along with tax exemption on their
investment. This study makes an attempt to analyze the investors
attitude towards their investment on Tax saving mutual funds. The
study finds that the participation of investors in Tax saving
mutual funds is comparatively less than other safer investment
areas like Insurance, Postal Deposit Schemes and Fixed Deposits.
The dynamic relationship between investors biographical information
and their behavior has been examined by using relevant statistical
techniques.The investors Knowledge and satisfaction on Tax saving
mutual funds and awareness on regulating bodies also has been
analyzed. The study finds that majority of the investor doesnt have
the knowledge on schemes and awareness on controlling authorities
and they are satisfied with the overall benefits on Tax saving
mutual funds.For the purpose of research, Primary data have been
collected from the Tax saving Mutual fund Investors in Tamil Nadu,
India through well structured questionnaire schedule.
2.6 Investors attitude towards Mututal Funds Project ReportThe
research was done on the topic Investors Attitude towards UTI
Mutual Funds. The study aims at analysing the attitude of the
investors towards UTI Mutual Funds. The data was collected with the
help of a questionnaire. The sample size considered for the study
was 100 wherein all the samples were investors of UTI Mutual Funds
in Coonoor.The tools used for the analysis include Percentage
Analysis and Mean Score Values. The analysis was divided into 2
phases which are Personal Factors and Investment Factors. The study
revealed that the investors have a positive attitude towards their
investments in UTI Mutual Funds. The investors mainly look into the
returns earned from the investment. It was found that the awareness
towards the risk related to the investment was relatively low.
Based on the analysis Suggestions for improvement are provided.
2.7 Perceptions of investors, brokers and fund managers on the
indian mutual fund industryFinancial system comprises of financial
institutions, services, market and instruments. Financial
institutions mobilize resources, purchase and sell instruments and
render various services in accordance with the practices and
procedures of law. Investing in financial securities is a complex
one involving knowledge of various investment tools, terms,
concepts, strategies and process. The success of a financial
investment activity depends on the knowledge and ability of
investors to invest theright amount, in the right type, at the
right time. Investor has to use his intellect, which is an art to
acquire by learning and experience.Knowledge of financial
investment principles and the art of investment management are the
basic requirements for a successful investment. The financial
securities include ownership securities (like shares, mutual fund
units) and creditorship securities (like debentures, bonds).
Ownership securities are more risky than creditorship securities.
Investment decisions relating to ownership securities involve
planning of investment strategies according to the extent of
diversification desired by individuals. Investors can reduce risk
and maximize returns by way of mutual fund investments, enjoying
the expertise of professional fund management. In India, Mutual
fund industry is an organised financial system, accessible to
individual investors having varied needs and options. In order to
identify the preferences of brokers and investors for mutual funds,
a careful collection of primary data through questionnaire was
made. Schedules were used to collect data from fund managers on
mutual funds.
2.8 Investors Preference for Investment in Mutual Funds: An
Empirical EvidenceSince interest rates on investments like PPF,
NSC, bank deposits, etc., are falling, the question to be answered
is: What investment alternative should a small investor adopt?
Direct investment in capital market is an expensive proposal, and
keeping money in saving schemes is not advisable. One of the
alternatives is to invest in capital markets through mutual funds.
This helps the investor avoid the risks involved in direct
investment. Considering the state of mind of the general investor,
this article figures out: (i) the preference attached to different
investment avenues by the investors; (ii) the preference of Mutual
Funds schemes over others for investment; (iii) the source from
which the investor gets information about Mutual Funds; and (iv)
the experience with regard to returns from mutual funds. The
results show that the investors consider gold to be the most
preferred form of investment, followed by NSC and Post Office
schemes. Hence, the basic psyche of an Indian investor, who still
prefers to keep his savings in the form of yellow metal, is
indicated. Investors belonging to the salaried category, and in the
age group of 20-35, years showed inclination towards close-ended
growth (equity-oriented) schemes over the other scheme types. A
majority of the investors based their investment decision on the
advice of brokers, professionals and financial advisors. The
findings also reveals the varied experiences of respondents
regarding the returns received from investments made in mutual
funds. The masses in India generally prefer to save in those
instruments that are safe. The safety of the money invested is not
compromised, and at times, they do not mind accepting lesser
returns on their investment. An average small investor generally
advocates the phenomenon of risk aversity. But, return on
investment in capital markets comes with the associated risk.
2.9 An Empirical Study of Retail Investors Attitude Towards
Investment in Mutual FundsAshok Khurana, Guru Nanak Khalsa College,
YamunanagarVikas Chaudhary In the financial industry, Mutual Funds
have become a hot favourite of millions of people all over the
world. A mutual fund is a special type of institution, a trust or
an investment company which acts as an investment intermediary and
invests the savings of large number of people to the corporate
securities in such a way that investors get steady returns, capital
appreciation and a low risk. It is essentially a mechanism of
pooling together the savings of a large number of investor for
collecting investment with an avowed objective of attractive yields
and appreciation in their values. The concept of 'Mutual Fund' is a
new feature in Indian capital market but not to international
capital markets. A mutual fund in the most suitable investment for
the retail investors as it offers an opportunity to invest in a
diversified, professionally managed portfolio at a relatively low
cost. At the retail level, investors are unique and are a highly
heterogeneous group. A large number of investment options are
available to investors. Currently there are large numbers of
schemes available and asset management companies (AMCs) compete
against one another by launching new products or repositioning old
ones. Unless mutual fund schemes are tailored to the changing
needs, and the AMCs understand the fund selection behaviour of the
investors, survival of funds will be difficult in future. With this
significance an attempt is made to study the attitude of mutual
fund investors.
2.10 A study on investors attitude towards mutual funds as an
investment option Dr. Binod Kumar Singh, Faculty Member,Amity
Global Business School,Patna.In this paper, structure of mutual
fund, operations of mutual fund, comparison between investment in
mutual fund and bank and calculation of NAV etc. have been
considered. In this paper, the impacts of various demographic
factors on investors attitude towards mutual fund have been
studied. For measuring various phenomena and analyzing the
collected data effectively and efficiently for drawing sound
conclusions, Chi-square () test has been used and for analyzing the
various factors responsible for investment in mutual funds, ranking
was done on the basis of weighted scores and scoring was also done
on the basis of scale. Key words: Hypothesis, Chi-square () test,
Rank, Weighted score and Scaling.
CHAPTER 3RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve a problem.
It may be understood as a science of study where research is done
scientifically. It includes various steps that are generally
adopted by a researcher in studying his research problem.
3.1 Type of research:The type of research carried out was
Descriptive. Descriptive research, also known as statistical
research, describes data and characteristics about the population
or phenomenon being studied. Descriptive research answers the
questions who, what, where, when, "why" and how.
3.2 Data collection methods:
3.2.1 Primary data:Questionnaire was used as a tool for primary
data collection.
3.2.1 Secondary data:Secondary data were collected from books,
journals, websites and magazines.
3.3 Sampling design:Collection of data from a sample of units
that have been selected from the target universe with the intention
that they may be representative of that universe. This is referred
to as purposive sampling or judgemental sampling. Sample size taken
for this study is 150. Convenience sampling technique was used.
Accidental sampling (sometimes known as grab, convenience or
opportunity sampling) is a type of non-probability sampling which
involves the sample being drawn from that part of the population
which is close to hand. That is, a population is selected because
it is readily available and convenient. It may be through meeting
the person or including a person in the sample when one meets them
or chosen by finding them through technological means such as the
internet or through phone.3.4 Statistical tool for analysis:
3.4.1 Percentage analysis:Percentage method refers to a
specified kind which is used in making comparison between two or
more series of data. Percentages are based on descriptive
relationship. It compares the relative items. Since the percentage
reduces everything to a common base and thereby allow meaning
comparison. Percentage = Number of respondents x 100 Total no of
respondents
3.4.2 Cross tabulation:Cross tabulation tables (contingency
tables) display the relationship between two or more categorical
(nominal or ordinal) variables. The Cross tabs procedure forms
two-way and multiway tables and provides a variety of tests and
measures of association for two-way tables. The structure of the
table and whether categories are ordered determine what test or
measure to use.
3.4.3 Chi-square:The Chi square test procedure tabulates a
variable into categories and computes a chi square statistic. This
goodness-of-fit test compares the observed and expected frequencies
in each category to test that all categories contain the same
proportion of values or test that each category contains a
user-specified proportion of values.Statistical method to test
whether two (or more) variables are: (1) independent or (2)
homogeneous. The chi-square test for independence examines whether
knowing the value of one variable helps to estimate the value of
another variable. The chi-square test for homogeneity examines
whether two populations have the same proportion of observations
with a common characteristic.
CHAPTER 4DATA ANALYSIS AND INTERPRETATION4.1 Univariate
Percentage AnalysisTable showing classification of respondents
based on Gender
FrequencyPercentValid PercentCumulative Percent
ValidMALE9362.062.062.0
FEMALE5738.038.0100.0
Total150100.0100.0
Table 4.1
Chart showing classification of respondents based on Gender
Chart 4.1INTERPRETATION:Out of 150 respondents 62% were male and
38% were female.
Table showing classification of respondents based on
Occupation
FrequencyPercentValid PercentCumulative Percent
ValidSTUDENT128.08.08.0
GOVT.EMP6442.742.750.7
PRI.EMP5939.339.390.0
BUSINESS117.37.397.3
RETIRED42.72.7100.0
Total150100.0100.0
Table 4.2Chart showing classification of respondents based on
Occupation
Chart 4.2INTERPRETATION: 8% are the students 42.7%are the
government employees 39.3% are the private employees 7.3%are the
business 2.7% are the retired peoples.
Table showing classification of respondents based on Age
FrequencyPercentValid PercentCumulative Percent
Valid< 2053.33.33.3
21 TO 409865.365.368.7
41 TO 604630.730.799.3
> 601.7.7100.0
Total150100.0100.0
Table 4.3Chart showing classification of respondents based on
Age
Chart 4.3INTERPRETATION: 3.3% of the respondents are at the age
less than 20. 65.3% are at the age 21 to 40 30.7% are at the age 41
to 60 0.7% are at the age above 60.
Table showing classification of respondents based on Annual
income
FrequencyPercentValid PercentCumulative Percent
Valid< 1LAC96.06.06.0
1 TO 3LAC9261.361.367.3
3 TO 5LAC3120.720.788.0
>5LAC1812.012.0100.0
Total150100.0100.0
Table 4.4Chart showing classification of respondents based on
Annual income
Chart 4.4INTERPRETATION: 6% of the respondents earn less than
1lakh annually. 61.3% earn 1 to 3lakh. 20.7% earn 3 to 5lakh 12%
earn above 5lakh
Table showing classification of respondents based on Amount
invested
FrequencyPercentValid PercentCumulative Percent
Valid100008456.056.0100.0
Total150100.0100.0
Table 4.5
Chart showing classification of respondents based on Amount
invested
Chart 4.5INTERPRETATION: 44% of the respondents are invested
less than 10000. 56% of the respondents are invested above
10000
Table showing classification of respondents based on reason for
investment in mutual funds
FrequencyPercentValid PercentCumulative Percent
ValidCHILD EDU3221.321.321.3
RETIREMENT1610.710.732.0
HOUSE4832.032.064.0
VACATION ABROAD2617.317.381.3
OTHER2818.718.7100.0
Total150100.0100.0
Table 4.6
Chart showing classification respondents based on reason for
investment in mutual funds
Chart 4.6INTERPRETATION: 21.3% of the respondents are invested
for their child education. 10.7% are invested for retirement 32%
are invested for house 17.3% are invested for vacation abroad.
18.7% are invested for other purposes.Table showing classification
of respondents based on how long they are investors of mutual
funds
FrequencyPercentValid PercentCumulative Percent
Valid< 1YR74.74.74.7
1 TO 3YR10368.768.773.3
>5yr4026.726.7100.0
Total150100.0100.0
Table4.7
Chart showing classification of respondents based on how long
they are investors of mutual funds
Chart 4.7INTERPRETATION:
4.7% of the respondents are investing in less than one year
68.7% are invested one to 3 year. 26.7% are invested above 5
year.Table showing classification of respondents based on reason
for choosing mutual funds
FrequencyPercentValid PercentCumulative Percent
ValidSAVINGS7348.748.748.7
returns4429.329.378.0
diversification2013.313.391.3
risk tolerance138.78.7100.0
Total150100.0100.0
Table 4.8
Chart showing classification of respondents based on reason for
choosing mutual funds
Chart 4.8INTERPRETATION: 48.7% are chosen mutual funds for
savings. 29.3% are chosen mutual funds for returns. 13.3% are
chosen mutual funds for diversification. 8.7% are chosen mutual
funds for risk tolerance.
Table showing classification of respondents based on number of
plans they have invested in mutual funds.
FrequencyPercentValid PercentCumulative Percent
Valid16543.343.343.3
25436.036.079.3
32416.016.095.3
>374.74.7100.0
Total150100.0100.0
Table 4.9
Chart showing classification of respondents based on number of
plans they have invested in mutual funds.
Chart 4.9
INTERPRETATION: 43.3% of the respondents invested in one scheme.
36% of the respondents invested in 2 schemes. 16%of the respondents
invested in 3 schemes. 4.7% of the respondents invested in more
than 3 schemes.
Table showing classification of respondents based on the reason
for selecting a particular mutual fund company.
FrequencyPercentValid PercentCumulative Percent
ValidREPUTATION2718.018.018.0
GOOD RETURNS8858.758.776.7
EXPERT ADVICE3322.022.098.7
OTHER21.31.3100.0
Total150100.0100.0
Table 4.10Chart showing classification of respondents based on
the reason for selecting a particular mutual fund company.
Chart 4.10INTERPRETATION: 18% are chosen the mutual fund company
for the company reputation. 58.7% chosen for the good returns. 22%
chosen for the expert advice. 1.3% chosen for the other
reasons.Table showing classification of respondents based on the
option they prefer for investment in mutual fund
FrequencyPercentValid PercentCumulative Percent
ValidDIV5536.736.736.7
GROWTH9060.060.096.7
NOT SURE53.33.3100.0
Total150100.0100.0
Table 4.11
Chart showing classification of respondents based on the option
they prefer for investment in mutual fund
Chart 4.11INTERPRETATION: 36.7% of the respondents prefer the
dividends for their investments. 60.7% of the respondents prefer
the growth for their investments. 3.3% of the respondents are not
sure their investments.Table showing classification of respondents
based on how frequent they monitor performance of investment
FrequencyPercentValid PercentCumulative Percent
ValidM10972.772.772.7
Q1812.012.084.7
HY1610.710.795.3
Y64.04.099.3
N1.7.7100.0
Total150100.0100.0
Table 4.12
Chart showing classification of respondents based on how
frequent they monitor performance of investment
Chart 4.12
INTERPRETATION: 72.7% of the respondents are monitoring their
performance of the investments monthly. 12% of the respondents are
monitoring quarterly. 10.7%of the respondents are monitoring half
yearly. 4% of the respondents are monitoring yearly. And 0.7% of
the respondents are never monitoring their performance.
Table showing classification of respondents based on how
frequent they monitor risk factors.
FrequencyPercentValid PercentCumulative Percent
ValidM7751.351.351.3
Q3724.724.776.0
HY2114.014.090.0
Y74.74.794.7
N85.35.3100.0
Total150100.0100.0
Table 4.13
Chart showing classification of respondents based on how
frequent they monitor risk factors.
Chart 4.13INTERPRETATION:
51.3% of the respondents are monitoring their risk factors
monthly. 24.7% of the respondents are monitoring quarterly. 14% of
the respondents are monitoring half yearly. 4.7% of the respondents
are monitoring yearly. 5.3% of the respondents are never monitor
their risk factor.
Table showing classification of respondents based on how
frequent they monitor portfolio of securities
FrequencyPercentValid PercentCumulative Percent
ValidM8959.359.359.3
Q2617.317.376.7
HY1812.012.088.7
Y149.39.398.0
N32.02.0100.0
Total150100.0100.0
Table 4.14
Chart showing classification of respondents based on how
frequent they monitor portfolio of securities
Chart 4.14INTERPRETATION: 59.3% of the respondents are
monitoring their portfolio of securities monthly. 17.3% of the
respondents are monitoring their quarterly. 12% of the respondents
are monitoring half yearly. 9.3% of the respondents are monitoring
yearly. 2% of the respondents are never monitor their portfolio
securities.
Table showing classification of respondents based on how
frequent they monitor portfolio of fund manager
FrequencyPercentValid PercentCumulative Percent
ValidM6845.345.345.3
Q3120.720.766.0
HY2516.716.782.7
Y1610.710.793.3
N106.76.7100.0
Total150100.0100.0
Table 4.15
Chart showing classification of respondents based on how
frequent they monitor portfolio of fund manager
Chart 4.15INTERPRETATION: 45.3% of the respondents are
monitoring their portfolio of fund manager monthly. 20.7% of the
respondents are monitoring quarterly. 16.7% of the respondents are
monitoring half yearly. 10.7% of the respondents are monitoring
yearly. 6.7% of the respondents are never monitoring their
portfolio of fund manager.4.2 BIVARIATE - CHI SQUARE:Null
hypothesis H0: There is no significance relationship between gender
& preference for investment option.Alternative hypothesis H1:
There is significance relationship between gender & preference
for investment option. Table showing crosstab between gender and
preference for investment option
OPT.INVTotal
DIVGROWTHNOT SURE
GENDERMALE2762493
FEMALE2828157
Total55905150
Table 4.16
Table showing relationship between gender and preference for
investment option
ValueDfAsymp. Sig. (2-sided)
Pearson Chi-Square6.391a2.041
Likelihood Ratio6.3902.041
Linear-by-Linear Association6.2271.013
N of Valid Cases150
Table 4.17.
INTERPRETATION: 27 males out of 93 and 28 females out of 57
prefer the mutual fund investments for dividends. Therefore women
mostly prefer the dividends. 62 males out of 93 and 28 females out
of 57 prefer the mutual fund investments for growth. Therefore
women mostly prefer the growth also. So womens only equally prefer
the dividends and growth for their investments. 4 males out of 93
and 1 female out of 57 are not prefer anything for their
investments. From the chi square test table we infer that reject
the h0.and accept the h1 so there is significance relationship
between gender& respondents preference for investment
option.Null hypothesis H0: There is no significance relationship
between gender & respondents purpose for
investments.Alternative hypothesis H1: There is significance
relationship between gender & respondents purpose for
investments.
Table showing crosstab of gender and purpose for investment
INV.FORTotal
CHILD EDURETIREMENTHOUSEVACATION ABROADOTHER
GENDERMALE261323191293
FEMALE632571657
Total3216482628150
Table 4.18
Table showing relationship between gender and purpose for
investment
ValuedfAsymp. Sig. (2-sided)
Pearson Chi-Square17.300a4.002
Likelihood Ratio17.9014.001
Linear-by-Linear Association8.0761.004
N of Valid Cases150
a. 0 cells (.0%) have expected count less than 5. The minimum
expected count is 6.08.
Table 4.19
INTERPRETATION: 26 males out of 93 and 6 females out of 57 are
purpose to invest for their child education. Therefore males mostly
purose the investments for their child education. 13 males out of
93 and 3 females out of 57 are purpose to invest for their
retirement. 23 males out of 93 and 25 females out of 57 are purpose
to invest for their house. Therefore females mostly purpose the
investments for house. 19 males out of 93 and 7 females out of 57
are purpose to invest for vacation abroad.
12 males out of 93 and 16 females out of 57 are purpose to
invest for other reasons and other purposes.
From the chi square test table we infer that reject h0.and
accept h1.so there is significance relationship between gender and
respondents purpose for investments.
Null hypothesis H0: There is no significance relationship
between age & respondents purpose for investments.Alternative
hypothesis H1: There is significance relationship age &
respondents purpose for investments.
Table showing crosstab of age and purpose for investment
INV.FORTotal
CHILD EDURETIREMENTHOUSEVACATION ABROADOTHER
AGE< 20202105
21 TO 40171132172198
41 TO 60135138746
> 60001001
Total3216482628150
Table 4.20
Table showing relationship between age and purpose for
investmentValuedfAsymp. Sig. (2-sided)
Pearson Chi-Square7.232a12.842
Likelihood Ratio8.63812.734
Linear-by-Linear Association.5351.464
N of Valid Cases150
a. 11 cells (55.0%) have expected count less than 5. The minimum
expected count is .11.
Table 4.21INTERPRETATION: Less than 20 age 2 respondents out of
5 and 21 to 40 age 17 respondents out of 98 and 41 to 60 age 13
respondents out of 46 are invest for the child education. And there
are no respondents for this option above 60 ages. 21 to 40 age 11
respondents out of 98 and 41 to 60 age 5 respondents out of 46 are
invest for retirement. And there are no respondents for this option
less than 20 ages and above 60 ages. Less than 20 age 2 respondents
out of 5 and 21 to 40 age 32 respondents out of 98 and 41 to 60 age
13 respondents out of 46 and above 60 age 1 respondents are invest
for house. Less than 20 age 1 respondents out of 5 and 21 to 40 age
17 respondents out of 98 and 41 to 60 age 8 respondents out of 46
are invest for the vacation abroad. And there are no respondents
for this option above 60 ages. From this chi square test table we
infer that accept h0 and reject h1. And there is no significance
relationship between age and respondents purpose for
investments.
Null hypothesis H0: There is no significance relationship
between age & respondents preferring for mutual
funds.Alternative hypothesis H1: There is significance relationship
between age & respondents preferring for mutual funds.
Table showing crosstab of age and reason for preferring mutual
fund
REA.MFTotal
SAVINGSreturnsdiversificationrisk tolerance
AGE< 2011215
21 TO 40463214698
41 TO 6026114546
> 6000011
Total73442013150
Table 4.22
Table showing relationship between age and reason for preferring
mutual fund
ValuedfAsymp. Sig. (2-sided)
Pearson Chi-Square18.209a9.033
Likelihood Ratio11.8439.222
Linear-by-Linear Association.2651.607
N of Valid Cases150
a. 9 cells (56.3%) have expected count less than 5. The minimum
expected count is .09.
Table 4.23
INTERPRETATION: Less than 20 age 1 respondent out of 5 and 21 to
40 age 46 respondents out of 98 and 41 to 60 age 26 respondents out
of 46 are prefer the mutual fund for savings. And there are no
respondent from above 60 ages. Less than 20 age 1 respondent out of
5 and 21 to 40 age 32 respondents out of 98 and 41 to 60 age 11
respondents out of 46 are prefer the mutual funds for returns. And
there are no respondent from above 60 ages. Less than 20 age 2
respondents out of 5 and 21 to 40 age 14 respondents out of 98 and
41 to 60 age 4 respondents out of 46 are prefer the mutual funds
for diversifications. And there are no respondent from above 60
ages. Less than 20 age 1 respondent out of 5 and 21 to 40 age 6
respondents out of 98 and 41 to 60 age 5 respondents out of 46 and
above 60 age 1 respondent out of 1 respondent are prefer the mutual
fund for risk tolerance. From the chi square test table we infer
that reject h0.accepth1. so there is significance relationship
between age and respondent preference for mutual funds.
Table showing rank of reason for investing in mutual fund
FACTORSSUM OF SCORERANK
Savings3022
Tax benefits2761
Portfolio management3053
Balanced risk3414
Potential returns3635
TOTAL1587
Table 4.24
INTERPRETATION: In case of the factors responsible for investing
in mutual funds is concerned tax benefits has got first rank,
savings has got second rank, portfolio management , balanced risk
and potential returns have been ranked third, fourth and fifth
respectively.
CHAPTER 55.1 FINDINGS:
The Study was aimed at identifying the level of attitude towards
the mutual funds.
There is significance relationship is found between the gender
and respondents preferences for investment options, and womens are
equally prefer the dividends and growth for the investments.
There is significance relationship is found between the gender
and respondents purpose for investments. Males are mostly purposeto
invest for their child education. and females are mostly purpose to
invest for house and other purposes.
There is no relationship found between age and respondent
preferring for investments.
There is significance relationship found between age and
respondents preference for mutual funds. Respondents are mostly
prefer the mutual funds for savings and returns. And next they
prefer the mutual funds for diversifications and risk
tolerance.
Ranking the factors for investing in mutual funds is concerned
the tax benefit has got first rank and savings has got second rank
and portfolio management and balanced risk and potential risk has
got third, fourth, fifth ranks.
5.2 SUGGESTIONS:
The average attitude score reveals that the respondents are
giving more importance to the dividends and growth. Therefore the
mutual funds should improve the scope of dividends and growth of
the mutual funds.
Mutual fund companies should segment their target customers and
position their products. The target segment can be broadly divided
into institutional segment and retail investor segment. The
institutional segment consisted of treasury departments of
corporate, trusts, etc and suitable products such as institutional
income schemes and money market schemes can be targeted at them. As
far as retail investors are concerned, they can be in turn divided
into various segments such as young families with small or no
children, middle-aged people saving for retirement and retired
people looking for steady income. Suitable products such as growth
and balanced schemes for young families and income schemes with
certain and steady returns for retired people can be marketed. By
proper segmentation and by targeting the right product to the right
customer, mutual fund companies can hope to win the confidence of
their customers and own them for a lifetime. In this way the market
scope for mutual funds can be expanded.
Investors usually review a range of information before
purchasing mutual fund shares. In general, they frequently review
or ask questions about a funds fees and expenses and its historical
performance. They most often turn to professional financial
advisers for information prior to purchasing fund shares. Some
investors also visit Mutual Fund Company; confer with friends,
family, or business associates for information before buying fund
shares, while others use the Internet regularly. The Internet, with
its interactive capabilities, is an effective vehicle for
communicating mutual fund information to retail investors
5.3 CONCLUSION:
The present study looks at the attitude level of the retail
investors towards investment in mutual funds. The small investors
purchase behavior does not have a high level. The buying intent of
a mutual fund product by a small investor can be due to multiple
reasons depending upon customers risk return trade off. Presently,
more and more funds are entering the industry and their survival
depends on strategic marketing choices of mutual fund companies, to
survive and thrive in this highly promising industry, in the face
of such cut throat competition. Therefore, the mutual fund industry
today needs to develop products to fulfils customer needs and help
customers understand how its products to their needs. Thus the
study provokes the authority to take some positive measures for
expanding the scope of mutual funds investment.
REFERENCES: Aman Srivastava (2007). An Analysis of Behaviour of
Investors in India, ICFAI Journal of Behavioural Finance. Bala
Ramasamy, Matthew C.H. Yeung (2003). Singh Jaspal and Chander
Subhash (2004). An Empirical Analysis of Perceptions of Investors
towards Mutual Fund.
WEBSITES:
http://www.appuonline.com/mf/knowledge/industry.htmlhttp://www.appuonline.com/mf/knowledge/industry.htmlhttp://www.investopedia.com/articles/mutualfund/05/MFhistory.asphttp://www.mutualfundsresource.com/history/www.reliancemutual.com