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REVIEW OF LITERATURE AND RESEARCH METHODOLOGY

A. REVIEW OF LITERATURE

Review of literature helps the researcher to understand the concept

of the topic. It also provides the guideline to carry on research work in the

right direction. This is the reason why the researcher made an attempt to

review the available literature on the subject in the following manner:

According to Mr. Lalit K. Bansal1, “A Mutual Fund is better

understood by the functions it performs and role it plays. It is a non-

depository financial intermediary. Mutual Funds are mobilizer of saving,

particularly from the small and household sector, for investments in stock

and money market. Basically, these institutions are professional fund

managers, managing funds of individuals and institutions that may not

have such high degree of expertise or may not have time sufficient to cope

up with complexities of different investment avenues, legal provisions

associated therewith and vagaries and vicissitudes of capital markets.

Mutual Funds, thus, provide an alternative to the investors who instead of

making direct investments in share of bonds through public issues or

through secondary market, subscribe to the corpus of mutual funds.

Investor can reap all the benefits of good investing through mutual funds

like enjoying growth in scrip in which he could not have otherwise

invested, holding a balanced and well-diversified portfolio, better return

1 Bansal, Lalit K.; Mutual Funds Management and Working –; Deep and Deep publications; New

Delhi; 1996; pp.24 & 26.

39

due to specialized and professional management of funds etc. Mutual

funds mobilize funds by selling their own shares also known as units.

Thus, Mutual funds are investment intermediaries which pool

investors’ funds to acquire individual investments and pass on the returns

thereof to fund investors. Besides investment business, mutual funds may

also undertake, if permitted, underwriting and other merchant banking

activities.”

Speaking about the growth of Mutual Funds industry,

Mr. Amitabh Gupta2, put his views in the words, “At present the

industry has four types of players viz.; (a) UTI, (b) Public Sector Banks,

(c) Financial institutions, and (d) the Private Sector. Of the total 36

players, 11 are in the public sector including the UTI, while the remaining

25 are in the private sector. The total assets under management of the

industry stood at Rs. 91,811 crore (as on September 30, 2001) out of

which, UTI alone accounts for Rs. 49,213 crore (53.60 per cent), while

the share of public sector funds is Rs. 7,564 crore (8.23 per cent). The

remaining resources of Rs. 35,034 crore (38.15 per cent) are with the

private sector funds. As on 30th September 2001, the total number of

schemes offered by all the mutual funds stood at 411, of which 283 are

open-ended while the remaining 128 are closed-ended. It is estimated that

1.5 crore or nearly 9 per cent of all Indian households have invested in

units of mutual funds and there are likely to be 2.3 crore unit holders in

mutual funds.”

2 Amitabh Gupta Quoted by Bansal, Lalit K.; Mutual Funds – Management and Working; Deep and

Deep Publications; New Delhi; 1996; pp.24 & 26.

40

Mr. Akhilesh Gururani3 expressed his views in the words,

“Benchmarks are independent portfolios that are not managed by any fund

manager, but are representative of the behaviour of returns from the

markets. The movement of these indices represents the movement in

prices, and therefore returns, of large, actively traded stocks in the equity

market. If an investor has invested in an index fund, the return from the

index a will have to compare with the risk and return of the equity index,

which the fund manager replicating. If the fund manager is managing an

equity portfolio, he invests only in equity, but is not an index fund;

investors may want to know how his performance compares with an

independent portfolio like the Nifty or the Sensex. These independent

portfolios, used to understand fund manager performance, are called

benchmarks.”

A. P. Kurian4 expressed his views saying about the growth of

Mutual Funds, “Worldwide, Mutual Fund or Unit Trust as it is referred to

in some parts of the world, has a long and successful history. The

popularity of Mutual Funds has increased manifold in developed financial

markets, like the United States. As at the end of March 2008, in the US

alone there were 8,064 mutual funds with total assets of about US

$ 11.734 trillion (Rs. 470 lack crores).

In India, the mutual fund industry started with the setting up of the

erstwhile Unit Trust of India in 1963. Public sector banks and financial

institutions were allowed to establish mutual funds in 1987. Since 1993,

private sector and foreign institutions were permitted to set up mutual

funds. In February 2003, following the repeal of the Unit Trust of India 3 Gururani, Akhilesh; Mutual Funds by Akhilesh; HABSG Consulting; Mumbai; 2007; p.89. 4 Kurian, A.P.; Making Mutual Funds Work for You; Association of Mutual Funds in India;

Mumbai; 2008; p.2.

41

Act, 1963 the erstwhile UTI was bifurcated into two separate entities viz

the specified undertaking of the Unit Trust of India, representing broadly,

the assets of US 64 scheme, schemes with assured return and certain other

schemes and UTI Mutual Fund conforming to SEBI Mutual fund

Regulations.”

A. P. Kurian5 expressed his views saying about the role of

intermediaries in the Indian Mutual Funds industry, “From the beginning,

UTI and other mutual funds have relied extensively on intermediaries to

market their schemes to investors. It would be accurate to say that without

intermediaries, the mutual funds industry would not have achieved the

depth and breadth of coverage amongst investors that it enjoys today.

Intermediaries have played a pivotal and valuable role in popularizing the

concept of mutual funds across India. They make the forms available to

clients, explain the schemes and provide administrative and paperwork

support to investors, making it easy and convenient for the clients to

invest.

Intermediation itself has undergone a change over the past few

decades. While individual agents provided the foundation for growth in

the early years, institutional agents, distribution companies and national

brokers soon started to play an active role in promoting mutual funds.

Recently, banks, finance companies, secondary market brokers and even

post offices have also begun to market mutual funds to their existing and

potential client bases.”

5 Kurian, A.P.; AMFI Guidelines and Norms for Intermediaries; Association of Mutual Funds in

India; Mumbai; 2002; p.2.

42

According to Investors India6, “Top fund houses like SBI Mutual

Fund, Birla Sun Life, Reliance Mutual, HDFC Mutual, Sundaram BNP

Paribas Mutual and Kotak Mutual have become active in the primary

market over the past one year, according merchant bankers. Equity

offerings of companies like Mahindra Holidays, India bulls Power, Adani

Power, Vascon Engineers, ARSS Infrastructure and United Bank of India

have mutual funds holding over 3% of the issue size. Through a small

number when compared to total issue size, mutual funds form a

constituents of the Qualified Institutional Buyer (QIB) segment.

According to SEBI IPO allocation rules, 5% of the QIB segment is

reserved for mutual funds.

The average assets under management (AUM) for the mutual funds

industry as a whole rose by 51 per cent to Rs. 745,422 crore at the end of

March, 2010, from Rs. 493,634 crore in March 2009. Month-on-month,

however, the AUM showed a decline of Rs. 37, 466 crore, on account of

withdrawals by banks and corporate ahead of their financial year closing

in March 2010. In the last 12 months, the top fund houses in terms of

assets under management were the biggest gainers in the rise. While the

industry AUM grew Rs. 251,787 crore in the period, it was UTI Mutual

Fund that grew the maximum, followed by HDFC Mutual Fund, ICICI

Prudential and Reliance Mutual Fund respectively.”

On the level of performance of the fund managers and the

competition among them, Can bank Mutual Fund Chief G.A. Shenai7

says, “Fund managers believe in the competitive sharing of information. 6 Investors India – India’s leading magazine for wealth – creation; A Bajaj Capital publication;

New Delhi; 2010; p.9. 7 Shenai, G.A. Quoted by Bansal, Lalit K.; Mutual Funds – Management and Working; Deep and

Deep Publications; New Delhi; 1996; pp.90 & 91.

43

This means the fund manager who identifies particularly good investment

opportunity, invests first on behalf of his fund and then shares the

information with other fund managers. The fund managers are given a

target to out perform the index, in the case of index securities, and to

show a return of 20 per cent to 25 per cent in non-index securities.”

“The Can bank Mutual Fund was a seller-when the market at its

highest- with the result that schemes which were due for redemption in

January 1995 were able to maintain their net asset values (NAVs) despite

the huge fall in market capitalization over the past six months.”

According to Amitabh Gupta8, “There are two popular measures

of risk that can be used in performance evaluation: (a) total risk and (b)

systematic or non-diversifiable risk. The former can be measured by

standard deviation of the returns distribution while the latter can be

measured by beta. The choice of the risk measure depends on the fact

whether the evaluation is to be done from the perspective of the investor

or the portfolio manager. Note that the total risk of a portfolio can be

diversified at two stages: First at the hands of the portfolio manager and

second at the hands of the investor. Thus, the choice of a risk measure

would depend on whether the risk of the managed portfolio is diversified

at the portfolio managers’ level or at the investors’ level. In case the

portfolio is neither diversified at the hands of the fund manager nor at the

hands of the investor, the appropriate risk measure would be standard

deviation. However, in all other situations, beta would be considered to be

and appropriate measure of risk. In general, empirical studies on

8 Gupta, Amitabh; Mutual Funds in India – A Study of Investment Management; Anmol

Publications Pvt. Ltd.; New Delhi; 2002; p.21.

44

performance evaluation have largely utilized both these measures of risk

i.e. standard deviation and beta.”

Nalini Prava Tripathy9 expressed her views saying about the

schemes of Mutual Fund, “Within a short span of four to five years

mutual fund operation has become an integral part of the Indian financial

scene and is poised for rapid growth in the near future. Today, there are

eight mutual funds operating various schemes tailored to meet the

diversified needs of savers. UTI has been able to register phenomenal

growth in the mid eighties. Now there are 121 mutual funds are launched

in India including UTI’s scheme attracting over Rs. 45,000 crore from

more than 3 crore investor’s accounts. Out of this closed-end schemes are

offered by mutual fund of India to issue shares for a limited period which

are traded like any other security as the period and target amounts are

definite under such schemes. Besides open-ended schemes are launched

by mutual fund under which unlimited shares are issued by investors but

these shares are not traded by any stock exchange. However, liquidity is

provided by this scheme to the investors. In addition to this offshore

mutual funds have been launched by foreign banks, some Indian banks

like SBI, Canara Bank etc, and UTI to facilitate movement of capital from

cash-rich countries to potentially high growth economics. Mutual Funds

established by leading public sector banks since 1987- SBIMF, Can bank,

Ind Bank, PNB MF and BOI MF, emerged since 1987- SBIMF, as major

players by offering bond like products with assurance of higher yields.

The latest schemes of BOI mutual fund goes to the extent of allowing

each individual investor to choose the date for receiving the income.

9 Tripathy, Nalini Prava; Mutual Funds in India: A Financial Service in Capital Market; Finance

India; 1996; pp.87 & 88.

45

Besides, the bank mutual funds have also floated a few open-ended

schemes, pure growth schemes and tax saving schemes. The LIC, GIC

mutual funds offer insurance linked product providing various types of

life and general insurance benefits to the investors. Also the income

growth oriented schemes are operated by mutual fund to cater to an

investor needs for regular incomes and hence, it distributes dividend at

intervals.”

According to www.investing-in-mutual-funds.com / mutual fund

returns10, “Calculating returns on funds with front-end loads only

involves the first year’s returns. As the load is deducted from the amount

you pay at the time you make investment in a load mutual fund, you will

have to adjust the initial NAV to reflect the load, assuming you want to do

all of your calculations with NAV rather than total amounts. This is

simply a matter of dividing the total amount you paid by the number of

shares initially purchased. This treats the load like part of your initial

investment, although the load was not actually invested.

Back-end loads are trickier, as they are paid at the time you sell

your shares and you probably don’t know exactly when you’ll sell your

shares. So the best thing to do is take a conservative approach and deduct

the back-end load from the NAV at the end of the most recent period for

which you are calculating your return. Now, don’t get carried away and

take it out and leave it out each year. If you deducted it when you

calculated your return last year, this year you need to recalculate last

year’s return without deducting the load and deduct the load from this

year’s NAV.

10 www.investing-in-mutual-funds.com / mutual fund returns.

46

Funds with contingent deferred sales loads (CDSLs) are a bit easier,

as the load goes away after a fixed number of years. If you plan on

holding these funds long enough for the load to disappear, then you can

calculate your return the same way you would if they were no load funds.

If you know you’re going to sell before the fixed period ends or you’re

not sure and you want to be conservative, you should calculate your

returns using the same method used for back-end load funds. If the load

decreases each year, which is likely with a CDSL, you’ll have to

remember to adjust you calculations accordingly.

Whether you’re evaluating load or no load mutual funds, mutual

fund returns should be one of your first considerations but never your sole

consideration. Mutual fund return should always be compared on a

relative basis, preferably on a risk-adjusted basis.”

According to www.banknetindia.com11, “The domestic mutual

funds industry (DMFI) which grew at a healthy pace of 18-19% in the last

eight years against its worldwide growth rate of 13% is all set to beat past

time records and now poised for achieving 22-23% rate of growth by end

of current fiscal.

According to a Study on ‘Indian Mutual Funds Industry’

undertaken by The Associated Chambers of Commerce and Industry of

India (ASSOCHAM), it is highlighted that IMFI which owned assets

worth around Rs. 5 lack crores until about September 2007, may end up

notching assets size of about Rs. 6 lack crores by March 2008, as it has

started expanding its penetration at smaller towns with vigorous speed.

According to the Study, Asset under Management (AUM) as

percentage of GDP in India is 4.12% as against Australia 88.22%, 11 www.banknetindia.com / banking.

47

Germany 10.54%, Japan 7.57%, UK 18.81%, USA 61.27%, Canada

34.33%, France 59.63%, Hong Kong 101.085 and Brazil 19.95%.

It was observed that IMFI is in fast growth phase; competition is

becoming fierce with mergers and takeovers and building of brand

exercise through focused advertising, better customer service, newer

distribution channels, consistent return and newer products offerings. The

mutual funds industry which witnessed downfall in 1991 when it’s

declined to Rs. 4100 crore achieved significant growth in 1998 and the

total industry became worth Rs. 72,000 crores and ever since this has kept

increasing, revealing its efficient growth. In fact, the months of February

and March considered toughest due to large-scale redemptions to meet tax

liabilities also were active.

In March 2006, mutual funds were net buyers worth Rs. 4,041.88

crore, gross purchases being Rs. 14889.15 crore and gross sales Rs.

10847.27 crore making March the most active month for the mutual funds

industry in India. May of year 2005 was considered the most active month

when mutual funds were net buyers of worth Rs. 3,334.99 crore.”

According to Workbook for NISM – Series – V – A12, “The

institutional channels have had their limitations in reaching out deep into

the hinterland of the country. A disproportionate share of mutual fund

collections has tended to come from corporate and institutional investors,

rather than retail individuals for whose benefit the mutual funds industry

exists.

Stock exchanges, on the other hand, have managed to ride on the

equity cult in the country and the power of communication networks to

12 Workbook for NISM – Series – V – A: Mutual Fund Distributors Certification Examination;

National Institute of Securities Markets; Mumbai; 2010; pp.141 & 142.

48

establish a cost-effective all-India network of brokers and trading

terminals. This has been a successful initiative in the high-volume low-

margin model of doing business, which is more appropriate and beneficial

for the country.

Over the last few months, SEBI has facilitated buying and selling

of mutual fund units through the stock exchanges. Both NSE and BSE

have developed mutual funds transaction engines for the purpose. The

underlying premise is that the low cost and deeper reach of the stock

exchange network can increase the role of retail investors in mutual funds,

and take the mutual funds industry into its next wave of growth.”

According to www.PersonalFN.com13, “The year 2010 would

continue to bring in reforms in the mutual funds industry, making every

initiative pro-investor. Also, many new players are likely to enter the

mutual funds space, thus leading to an increase in the product offering to

mutual funds investors. The potential for growth will come from inherent

strengths and sustained interest by foreign and domestic funds as well as

the common investor. However, the challenges will come from

maintaining the interest of all the participants in the market. Increasing

Assets under Management (AUM) will also be a major challenge, since

there is no incentive for the distributor to promote mutual funds. Also

after April 1, 2011, when the Direct Tax Code (DTC), come into effect,

mutual fund companies and investors would be very watchful on the tax

implication of various mutual funds.”

According to Indian Institute of Banking & Finance14, “Mutual

funds offer a wide variety of services to the unit holders. Redemption of

13 www.PersonalFN.com / How to Select Winning Mutual Funds. 14 Mutual Funds Products and Services; Indian Institute of Banking & Finance; Mumbai; 2007; p.61.

49

units within 24-48 hours, toll-free telephone numbers, cheque-writing

facilities against the mutual funds account, switching between accounts /

plans / options are some of the services. Mutual funds also provide a wide

range of services on net. There are funds, which have extended the facility

of buying / switching / redeeming units on-line. In case of on-line

transactions investors need not worry about filling up application forms,

drawing cheques / making demand drafts, depositing warrants as all the

financial transactions are completely automatic at the click of the mouse

by the investors. Mutual funds units can also be held in demat form.

Extensive investor’s education, performance communications, financial

planning details are also given on website.”

Mr. Sundar Sankaran15 expressed his views in the words, “The

offer document is a key document that provides essential information

about the scheme to help investors make informed decisions about

whether to purchase the units being offered. Minimum disclosure

requirements are set out in SEBI’s standard offer document (form-NS).

Besides, SEBI has also laid down certain “Standard Observations” that

need to be incorporated in the offer document. The standard offer

document prescribes the “nature of the disclosures” but not the “layout or

the language”, except that items I (cover page), II (definitions) and III

(risk factors) must appear in the same numerical order in the offer

document. Here again, the mutual fund may include Item III as a part of

Item I. A mutual fund is free to add any other disclosure provided such

information is not presented in an “incomplete, inaccurate or misleading

15 Sankaran, Sundar; Indian Mutual Funds Handbook; Vision Books Pvt. Ltd.; New Delhi; 2010;

p.175.

50

manner.” In the case of closed-end schemes, the offer document is issued

only once when launched.

Since open-end schemes sell units on an ongoing basis, mutual

funds have to revise and update the offer document of such schemes

regularly. A revised offer document needs to be printed at least once in

two years. Any change before the revised offer document is printed can be

incorporated through an addendum giving details of the change and

attached to the offer document. The addendum also needs to be sent to all

unit-holders, as also distributors / brokers so that it can be attached to the

existing offer documents.”

According to Workbook for NISM – Series – V – A16,

“Dematerialization is a process whereby an investor’s holding of

Investments in physical form (paper), is converted into a digital record.

Benefit of holding investments in demat form is that investors’ purchase

and sale of investments get automatically added or subtracted from their

investment demat account, without having to execute cumbersome

paperwork. Settlement of most transactions in the stock exchange needs to

be compulsorily done in demat form.

The benefits of demat facility for mutual fund investors has

increased, with National Stock Exchange (NSE) and Bombay Stock

Exchange (BSE) making available screen-based platforms for purchase

and sale of mutual fund schemes.

The demat facility is typically initiated by the mutual funds, which

would tie up with a Depository like National Securities Depository Ltd.

(NSDL) or Central Depository Securities Ltd (CSDL). On the basis of this 16 Workbook for NISM – Series – V – A: Mutual Fund Distributors Certification Examination;

National Institute of Securities Markets; Mumbai; 2010; p.200.

51

tie up, investors can go to a Depository Participant (which is generally a

bank or a broking house) and demat their investment holding i.e. convert

their physical units into demat units. In order to avail of this facility, the

Depository Participant (DP) will insist on the investor opening a demat

account. Usual KYC documentation will be required.

On dematerialization, the investor’s unit-holding will be added to

his / her demat account. As and when the investor sells the unit holding,

the relevant number of units will be reduced from the investor’s demat

account.”

According to SBI Funds Management17, “A Systematic

Investment Plan (SIP) lets you invest in small amounts in mutual funds on

a regular basis. It gives you a lot of flexibility and is a very convenient

way of building a large corpus over a period time. In mutual fund

terminology, SIP allows the investors to invest a fixed amount every

month or quarter for purchasing additional units of the scheme at NAV

based prices. Also, your investments benefit from rupee-cost averaging.

Let us explain it. If you invest an equal amount of month every month in a

mutual fund, you are engaging in rupee-cost averaging. Share prices

change from day to day, so the set amount of money you invest buys

different amounts of shares every time. When prices are high, NAV is

high- so you get less. And when prices are low, NAV is low- so you get

more. In the end, if you were to buy all units at once you risk getting less

for your money. If you are lucky enough, you would get more. But for

that you would need to be an expert. So, in the interest of an average

17 Benefiting from Mutual Funds: A Simple and Easy to Understand Guide; SBI Funds

Management; Mumbai.

52

investor, a SIP ensures that the chances of losing out on an investment are

spread out and thus minimized.”

According to www.appuonline.com18, “Mutual fund is a trust that

pools money from a group of investors (sharing common financial goals)

and invest the money thus collected into asset classes that match the stated

investment objectives of the scheme. Since the stated investment objective

of a mutual fund scheme generally forms the basis for an investor's

decision to contribute money to the pool, a mutual fund can not deviate

from its stated objectives at any point of time.

Every Mutual Fund is managed by a fund manager, who is using

his investment management skills and necessary research works ensures

much better return than what an investor can manage on his own. The

capital appreciation and other incomes earned from these investments are

passed on to the investors (also known as unit holders) in proportion of

the number of units they own.

When an investor subscribes for the units of a mutual fund, he

becomes part owner of the assets of the fund in the same proportion as his

contribution amount put up with the corpus (the total amount of the fund).

Mutual Fund investor is also known as a mutual fund shareholder or a unit

holder.

Any change in the value of the investments made into capital

market instruments (such as shares, debentures etc) is reflected in the Net

Asset Value (NAV) of the scheme. NAV is defined as the market value of

the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is

calculated by dividing the market value of scheme's assets by the total

number of units issued to the investors.” 18 www.appuonline.com / understanding mutual funds.

53

According to Nalini Prava Tripathy19, “Mutual funds go back to

the times of the Egyptians and Phoenicians when they sold shares in

caravans and vessels to spread the risk of these ventures. The foreign and

colonial government Trust of London of 1868 is considered to be the fore-

runner of the modern concept of mutual funds. The USA is, however,

considered to be the Mecca of modern mutual funds. By the early - 1930s

quite a large number of close - ended mutual funds were in operation in

the U.S.A. Much latter in 1954, the committee on finance for the private

sector recommended mobilization of savings of the middle class investors

through unit trusts. Finally in July 1964, the concept took root in India

when Unit Trust of India was set up with the twin objective of mobilizing

household savings and investing the funds in the capital market for

industrial growth. Household sector accounted for about 80 percent of

nation’s savings and only about one third of such savings was available to

the corporate sector; it was felt that UTI could be an effective vehicle for

channelising progressively larger shares of household savings to

productive investments in the corporate sector. The process of economic

liberalization in the eighties not only brought in dramatic changes in the

environment for Indian industries, corporate sector and the capital market

but also led to the emergence of demand for newer financial services such

as issue management, corporate counseling, capital restructuring and loan

syndication. After two decades of UTI monopoly, recently some other

public sector organizations like LIC (1989), GIC (1991 ), SBI (1987), Can

Bank (1987), Indian Bank (1990), Bank of India (1990), Punjab National

Bank (1990) have been permitted to set up mutual funds. Mr. M.R. Mayya 19 Tripathy, Nalini Prava; Mutual Funds in India: Financial Service in Capital Market; Finance

India; 1996; p.86.

54

the Executive Director of Bombay Stock Exchange opined recently that

the decade of nineties will belong to mutual funds because the ordinary

investor does not have the time, experience and patience to take

independent investment decisions on his own.”

According to www.sebi.gov.in20, “During 1995-96, SEBI had

prepared and widely circulated a paper titled "Mutual Funds 2000" which

identified ways to improve the working and regulation of the mutual

funds industry, so that mutual funds could provide a better performance

and service to all categories of investors and offer a range of innovative

products in a competitive manner to match investor needs and preferences

across various investor segments. Based on the comments received on the

recommendations made in the paper by market participants and investors

and on discussions held with the Association of Mutual Funds of India

(AMFI), the SEBI (Mutual Funds) Regulations, 1993 were revised and

the new regulations notified in December 1996.

The impact of the new regulations was immediately felt. Asset

management companies framed several schemes which made use of the

freedom provided to them by the new regulations. Not only the number of

schemes filed with SEBI increased significantly in a short period of time,

but also there was greater variety in the investment products offered.

There was also a significant improvement in disclosures in the offer

documents. The new regulations have brought into greater focus the

responsibilities of trustees of mutual funds who are uniquely positioned to

promote the interests of the unit holders and to ensure that mutual funds

are managed responsibly and ethically. The trustees act independently to

20 www.sebi.gov.in / Mutual Funds 2000.

55

uphold the public trust. In this process, trustees act as the first level

regulators and are critical in helping to ensure the profitability and

progress of the mutual funds. To assist trustees in their new role, and to

set out the manner in which they could best perform this role, SEBI

appointed a committee under the chairmanship of Shri. P.K. Kaul, former

Cabinet Secretary and Ambassador to the United States.

SEBI is using its interface with AMFI to assess the impact of the

new regulations on the working of mutual funds and to examine further

ways of improving the performance of mutual funds so as to restore

investor confidence in them. SEBI also continued working with AMFI so

that it becomes a more effective body representing the mutual funds

industry and embarks on a campaign to sharpen the industry's focus on the

consumer.”

On going through the literature available on the proposed research

topic, it was observed that Mutual Funds Market is passing through

revolutionary stage and has bright future prospects. Undoubtedly the

above review proved helpful in deciding the line of action for conducting

the present research study.

56

B. RESEARCH METHODOLOGY

Research methodology is a base of a research work. It provides a

line of action to the researcher on the basis of which he/she carries on

his/her research study on a particular topic.

The following research methodology was adopted for the proposed

research work:

SELECTION OF AREA

As the present study is based on the entire Mutual Funds market in

District Meerut, so the personal survey work of mutual funds companies

and investors was done in this district only.

PERIOD OF STUDY

The proposed research study has been conducted at both macro and

micro levels. For macro level study the research period remained from

2001 to 2009-10 while the year 2010-11 was taken for the purpose of

personal survey.

DATA SOURCE

The data sources for the present research work were the Different

Government reports in respect of financial sector of India, Records and

Data published by AMFI, Annual reports of leading Mutual Funds

companies of District Meerut, Survey results of leading Mutual Funds

companies of District Meerut, and Survey results of investors of Mutual

Funds of District Meerut.

57

DATA COLLECTION PROCEDURE The present study is based on both primary and secondary data. A

thorough search of the published records and reports of Government as

well as organizations associated with finance sector of India was made to

collect the information regarding the growth of Mutual Funds industry in

last 10 years. To analyse the problems of Mutual Funds industry of

District Meerut, personal survey of different Mutual Funds companies and

investors of Mutual Funds was conducted.

Two detailed questionnaires were framed and pre-tested to collect

the necessary information from the officials of Mutual Funds companies

and investors of District Meerut. Open-ended questions as well as

multiple coding of the answers were done for better communication with

the interviewee. In the questionnaires necessary adjustments were made in

the light of experience, thus gained during pilot-survey.

DATA ENTRY

Data and information collected from different sources were

tabulated chapter wise so as to make the study systematic and scientific.

The tabulated data were illustrated diagrammatically and graphically to

concentrate each and every aspect of the study.

After tabulation of data and information, an analysis of each table

was made using appropriate statistical tools so that relevancy of data

collected may be traced out with the present study and the reliable

conclusion may be drawn.

58

CONCLUSION AND SUGGESTIONS In the end findings of the research study was given with appropriate

suggestions so as to make the functioning of Mutual Funds industry of

India more systematic and scientific.

HYPOTHESIS OF THE RESEARCH STUDY

The proposed research study is based on the following

presumptions:

The Mutual Funds industry of India plays a vital role in the

industrial growth as well as economy of the country.

The Mutual Funds market in District Meerut is in its growing

stage and carries the bright prospects in coming future.

The general Indian investors are not properly educated in respect

of concept of Mutual Funds; hence they hesitate to associate

themselves with the Mutual Funds industry in District Meerut.

The sincere and honest efforts of Government of India, to

regulate the Mutual Funds market of the country, may prove

helpful in increasing the faith of Indian investors in Mutual

Funds.

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