Stock market plays a very vital role in developing economy like India and also

attracting the rural people in recent years. Investors usually perceive that all capital market

investment avenues are risky. Based on objectives and risk bearing capacities, investors go

for different investment alternatives. Among the various investment possibilities, mutual fund

seems to be viable for all kind of investors as it is considered to be a safer mode of

investment. This study is an attempt to understand the performance of share market and to

analyse the correlation of performance of mutual funds with market indices like Sensex and

Nifty. As a part of this study, data is collected regarding performance of mutual funds and

stock market for the financial year 2009 - 10, 2010 - 11 and 2011 - 12. Two mutual fund

(growth) and two index funds are taken as sampling.

The first few pages talk about the introduction of the subject and also of the industry.

This is followed by literature review followed by the objectives of the study and research

methodology. Then comes real part of the study in which the researcher have written all what

had analyzed through the questionnaire filled by investors and brokers. The last part consists

of findings, recommendations, limitations, conclusion and bibliography.

The objectives of the study which the researcher undertook are to study the return on

investment in share market. One of the another objective is to know how far the mutual fund

schemes are able to win the confidence of the investors, for this the researcher have made

structure questionnaire and interpretation for the same has been done and also in order to

make it more effective the researcher have used bar charts.

From this study the researcher have found that investment in mutual funds provides

better returns on investment

1

LITERATURE REVIEW:

It is bound to adapt the rich books, journals, periodicals, reports, etc. to measure with

quantity of collections. Lots of books, national and international level magazines, websites

are referred for the study. The previous research studies are also be used as a guideline in

preparing and designing the research work.

The project also includes the various schemes and history of mutual fund in India and world.

Dr. K Ravichandran in his Research Article titled “A study on Investors preference

towards various Derivatives market, published in the Journal of Contemporary Research in

Management a Quarterly journal, Vol3, Sept.-2012. The objective of the study was to know

the various investment avenues and the investors risk preference towards it and to find out the

preference level of investors on various capital market instruments. The research article

found few things like; 44% of investors are between age group of 31 – 40, and they are

influenced by their friend and relatives. It is concluded with the point that, though the stock

market is subjected to high risk, by using derivatives the loss can be minimized to an extent.

2

INTRODUCTION:

We have seen many of the investors across the world becoming billionaire within a

short span of time by investing in share market, at the same time some investors lost amount

in the same market also. In the year 1992, 2001 and 2008 reports reveals, few investors lost

their wealth and some of them committed suicide because of share market scandals. The

famous investor Mr.Warren Buffet became the richest person because of his wise investment

strategies, however it is not an alternative way to make money as it has huge amount of risk.

An Investor has various investment options like debentures, shares, bank deposits, real estate

etc. but choice of option is very essential. Mutual funds give higher returns because of

professional management of fund. When we look at the risk and return pattern of investment,

mutual funds have yielded good return over the past years compared to direct capital market.

The investment in stock market is increasing at a faster rate in the recent years

because of FIIs, FDIs, Stock market awareness etc. Investment in Debentures, Bank Deposits

are not so attractive because of less amount of interest, as in real terms the value of money

decreases over a period of time. The other option is to invest money in stock market, but a

common man is not much aware of market and he is not much competent enough to

understand the functions of stock market and also it is an expansive proposal. The question to

be answered is: what investment alternative should a small investor adopt? So obviously,

mutual funds come to the rescue.

A mutual fund is a very simple concept which is combination of savings of investors.

Mutual Funds are highly cost efficient and very easy to invest in. Considering the state of

mind of the general investor, the research figures out to know how mutual fund is better than

stock market, identify the most popular MF among individual investors and analyse how far

the mutual fund schemes are able to win the confidence of the investors.

3

Introduction to Equity Capital and Mutual Fund

Issue of shares is the most important

method of raising capital. Finance raised by the

issue of shares serves as a financial floor to the

company’s capital structure. Shares indicate the

ownership or equity interest in the assets of the

company. Shares are of different nominal or face

values and of different kinds to attract different

kinds of investors. The maximum amount of

capital to be raised by the issue of shares is mentioned in the memorandum of association.

During 1990-91 and 1991-92, equity accounts for 35 to 39 percent of the total capital

raised respectively. This proportion was reversed in 1992-93, the first year of free pricing,

when the share of equity increased to 62 percent. However, in 1995-96 there is a rise in the

importance of debt largely due to the high interest rates in the economy and negative returns

form the secondary market.

Mutual Funds

The first mutual funds were established in Europe. One researcher credits a Dutch

merchant with creating the first mutual fund in 1774. The first mutual fund outside the

Netherlands was the Foreign & Colonial Government Trust, which was established in

London in 1868. It is now the Foreign & Colonial Investment Trust and trades on the London

stock exchange.

Mutual funds were introduced into the United States in the 1890s. They became

popular during the 1920s. These early funds were generally of the closed-end type with a

fixed number of shares which often traded at prices above the value of the portfolio.

The first open-end mutual fund with redeemable shares was established on March 21,

1924. This fund, the Massachusetts Investors Trust, is now part of the MFS family of funds.

However, closed-end funds remained more popular than open-end funds throughout the

1920s. By 1929, open-end funds accounted for only 5% of the industry's $27 billion in total

assets.

After the stock market crash of 1929, Congress passed a series of acts regulating the

securities markets in general and mutual funds in particular. The Securities Act of

4

1933 requires that all investments sold to the public, including mutual funds, be registered

with the Securities and Exchange Commission and that they provide prospective investors

with a prospectus that discloses essential facts about the investment.

When confidence in the stock market returned in the 1950s, the mutual fund industry

began to grow again. By 1970, there were approximately 360 funds with $48 billion in

assets. The introduction of money market funds in the high interest rate environment of the

late 1970s boosted industry growth dramatically. The first retail index fund, First Index

Investment Trust, was formed in 1976 by The Vanguard Group, headed by John Bogle; it is

now called the Vanguard 500 Index Fund and is one of the world's largest mutual funds, with

more than $100 billion in assets as of January 31, 2011.

In 2003, the mutual fund industry was involved in a scandal involving unequal

treatment of fund shareholders. Some fund management companies allowed favoured

investors to engage in late trading, which is illegal, or market timing, which is a practice

prohibited by fund policy. The scandal was initially discovered by then-New York State

Attorney General Eliot Spitzer and resulted in significantly increased regulation of the

industry.

At the end of 2010, there were over 15,000 mutual funds of all types in the United

States with combined assets of $13.1 trillion, according to the Investment Company

Institute (ICI), a national trade association of investment companies in the United States. The

ICI reports that worldwide mutual fund assets were $24.7 trillion on the same date.

Mutual funds play an important role in U.S. household finances. At the end of 2010,

they accounted for 23% of household financial assets. Their role in retirement planning is

particularly significant. Roughly half of assets in 401(k) plans and individual retirement

accounts were invested in mutual funds.

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. 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 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.

5

Concept of Equity Capital and Mutual Fund

The term equity literally means the stock or ownership of a company. They are also

known as ordinary shares. The rate of dividend on equity shares varies according to the

amount of profit available and the intention of board of directors. In the event of winding up

of the company, equity shares can be refunded only after all other claims, including those of

preference shares for the refund of their capital, have been met.

Equity capital is represented by funds that are raised by a business, in exchange for a

share of ownership in the company. Equity financing allows a business to obtain funds

without incurring debt, or without having to repay a specific amount of money at a particular

time.

A Mutual Fund is a trust that pools the money of many investors to invest in a variety

of different securities. Investment may be in stocks, bonds, money market securities or some

combination of these. Those securities are professionally managed on behalf of shareholders,

and each investor holds a pro rata share of a portfolio, entitled to any profits when the

securities are sold, but subject to any losses in value as well.

A Mutual Fund is a group of investors operating through a fund manager to purchase

a diverse portfolio of stock or bonds. For the individual investor, mutual funds provides the

benefit of having someone else manage your investments, take care of record keeping for

your account, and diversify your rupees over many different securities that may not be

available or affordable to you otherwise. Today, minimum investment requirements on many

funds are low enough that even the smallest investor can get started in mutual funds.

6

Reasons to invest in Mutual Funds

Why should one choose to invest in a mutual fund?

Mutual Funds are considered to be safer mode of

investment; these are investment companies that pool money

from investors at large and offer to sell and buy back its shares /

units on a continuous basis and thus rose to invest in various

securities in different companies. If you are considering

investment in stock market and are scared of unpredictable market volatility, you can

definitely consider investing in mutual funds because of professional management. Some of

the reasons that go strongly in favour of mutual funds are like it lowers risk factors.

For the retail investor who does not have the time and experience to analyse and invest in

stocks and bonds, mutual funds offer a feasible investment alternative. This is because:

1. Normally investment in mutual fund is financially viable for all the investors, as it

provides the benefit of economical access to expensive stocks,

2. Mutual funds diversify the risk by investing in a basket of assets.

3. An expert team of specialized fund managers managing the fund, each scheme has a

separate professional fund manager.

4. As mutual fund is an institutional investor, which may have enough bargaining power

in markets, and has access to decisive corporate information which individual

investors don’t access.

Is investment in Mutual Fund Risk – Free?

Usually the risk depends on Fund Manager and Asset Allocation. Mutual fund

investments are not totally risk free. In fact, investing in mutual funds contains the same risk

as investing in the markets, the only difference being that is due to professional management

of funds the controllable risks are substantially reduced.

7

Mutual funds vs. other investments

Investment in mutual fund is always safe because of its unique advantages with it.

When an investor invests in bank deposits, debt market, usually risk will be very less but

return is around 10%, whereas investment in share market, Forex market carries higher

amount of risk having higher return. But mutual fund will give usually moderate return with

moderate risk. Probability of losing amount in mutual fund will be less as the risk is

diversified with investment in different securities and fund is managed by professional

experts. Exhibit-1 shows the comparative returns of mutual fund with other investment

alternatives.

Mutual Fund Investments and the Sensex

There are plenty of schemes available in the market like equity fund, income fund and

liquid fund. In each of these categories we have infrastructure fund, tax savings fund, bond

fund, fixed term plan and many more. One of the important funds is Growth fund where the

asset allocation of this fund is made in equity shares listed in stock market and Index fund

will be invested in share of Indices. The correlation of these two funds should be obviously

positive as direction moves towards the same way.

8

TYPES OF MUTUAL FUNDS

The Investment Company Act of 1940 established three types of registered

management investment companies in the United States: open-end funds, unit investment

trusts (UITs); and closed-end funds. Exchange-traded funds (ETFs) are open-end funds or

unit investment trusts that trade on an exchange; they have gained in popularity recently.

While the term "mutual fund" may refer to all three types of registered investment companies,

it is more commonly used to refer exclusively to the open-end type.

Open-end fundsOpen-end mutual funds must be willing to buy back their shares from their investors

at the end of every business day at the net asset value computed that day. Most open-end

funds also sell shares to the public every business day; these shares are also priced at net asset

value. A professional investment manager oversees the portfolio, buying and selling

securities as appropriate. The total investment in the fund will vary based on share purchases,

share redemptions and fluctuation in market valuation. There is no legal limit on the number

of shares that can be issued.

Closed-end fundsClosed-end funds generally issue shares to the public only once, when they are

created through an initial public offering. Their shares are then listed for trading on a stock

exchange. Investors who no longer wish to invest in the fund cannot sell their shares back to

the fund (as they can with an open-end fund). Instead, they must sell their shares to another

investor in the market; the price they receive may be significantly different from net asset

value. It may be at a "premium" to net asset value (meaning that it is higher than net asset

value) or, more commonly, at a "discount" to net asset value (meaning that it is lower than

net asset value). A professional investment manager oversees the portfolio, buying and

selling securities as appropriate.

Unit investment trustsUnit investment trusts or UITs issue shares to the public only once, when they are

created. Investors can redeem shares directly with the fund (as with an open-end fund) or they

may also be able to sell their shares in the market. Unit investment trusts do not have a

9

professional investment manager. Their portfolio of securities is established at the creation of

the UIT and does not change. UITs generally have a limited life span, established at creation.

Exchange-traded fundsA relatively recent innovation, the exchange-traded fund or ETF is often structured as

an open-end investment company, though ETFs may also be structured as unit investment

trusts, partnerships, investments trust, grantor trusts or bonds (as an exchange-traded note).

ETFs combine characteristics of both closed-end funds and open-end funds. Like closed-end

funds, ETFs are traded throughout the day on a stock exchange at a price determined by the

market. However, as with open-end funds, investors normally receive a price that is close to

net asset value. To keep the market price close to net asset value, ETFs issue and redeem

large blocks of their shares with institutional investors.

Investments and classificationMutual funds are classified by their principal investments. The four largest categories

of funds are money market funds, bond or fixed income funds, stock or equity funds and

hybrid funds. Within these categories, funds may be sub classified by investment objective,

investment approach or specific focus. The SEC requires that mutual fund names not be

inconsistent with a fund's investments. For example, the "ABC New Jersey Tax-Exempt

Bond Fund" would generally have to invest, under normal circumstances, at least 80% of its

assets in bonds that are exempt from federal income tax, from the alternative minimum tax

and from taxes in the state of New Jersey.

Bond, stock and hybrid funds may be classified as either index (passively-managed) funds or

actively-managed funds.

Money market fundsMoney market funds invest in money market instruments, which are fixed income

securities with a very short time to maturity and high credit quality. Investors often use

money market funds as a substitute for bank savings accounts, though money market funds

are not government insured, unlike bank savings accounts.

Money market funds strive to maintain a $1.00 per share net asset value, meaning that

investors earn interest income from the fund but do not experience capital gains or losses. If a

fund fails to maintain that $1.00 per share because its securities have declined in value, it is

10

said to "break the buck". Only two money market funds have ever broken the buck:

Community Banker's U.S. Government Money Market Fund in 1994 and the Reserve

Primary Fund in 2008.

Bond fundsBond funds invest in fixed income securities. Bond funds can be sub classified

according to the specific types of bonds owned (such as high-yield or junk bonds,

investment-grade corporate bonds, government bonds or municipal bonds) or by the maturity

of the bonds held (short-, intermediate- or long-term). Bond funds may invest in primarily

U.S. securities (domestic or U.S. funds), in both U.S. and foreign securities (global or world

funds), or primarily foreign securities (international funds).

Stock or equity fundsStock or equity funds invest in common stocks. Stock funds may invest in primarily

U.S. securities (domestic or U.S. funds), in both U.S. and foreign securities (global or world

funds), or primarily foreign securities (international funds). They may focus on a specific

industry or sector.

A stock fund may be sub classified along two dimensions:

(1) Market capitalization and

(2) Investment style (i.e., growth vs. blend/core vs. value).

The two dimensions are often displayed in a grid known as a "style box."

Market capitalization or market cap indicates the size of the companies in which a

fund invests, based on the value of the company's stock. Each company's market

capitalization equals the number of shares outstanding times the market price of the stock.

Market capitalizations are typically divided into the following categories:

Micro cap

Small cap

Mid cap

Large cap

11

While the specific definitions of each category vary with market conditions, large cap

stocks generally have market capitalizations of at least $10 billion, small cap stocks have

market capitalizations below $2 billion, and micro-cap stocks have market capitalizations

below $300 million. Funds are also classified in these categories based on the market caps of

the stocks that it holds.

Stock funds are also sub classified according to their investment style: growth, value

or blend (or core). Growth funds seek to invest in stocks of fast-growing companies. Value

funds seek to invest in stocks that appear cheaply priced. Blend funds are not biased toward

either growth or value.

Hybrid fundsHybrid funds invest in both bonds and stocks or in convertible securities. Balanced

funds, asset allocation funds, target date or target risk funds and lifecycle or lifestyle funds

are all types of hybrid funds.

Hybrid funds may be structured as funds of funds, meaning that they invest by buying

shares in other mutual funds that invest in securities. Most fund of funds invest in affiliated

funds (meaning mutual funds managed by the same fund sponsor), although some invest in

unaffiliated funds (meaning those managed by other fund sponsors) or in a combination of

the two.

Index (passively-managed) versus actively-managedAn index fund or passively-managed fund seeks to match the performance of a market

index, such as the S&P 500 index, while an actively managed fund seeks to outperform a

relevant index through superior security selection.

12

ADVANTAGES OF EQUITY CAPITAL

High Dividend and High Value

In times of prosperity, the equity shareholders get a very high rate of dividend,

sufficiently higher than that on preference shares. At the same time, their share value will

also go up in the market.

Voting Rights

It is the inky equity shareholders who enjoy voting rights on all the policy matter of

the company.

Pre-emptive right to new shares

Equity shareholders have the pre-emptive right to purchase new shares. Under the

provision of the companies act, the existing shareholders of the company have a right to

allotment of newly issued shared.

Many Privileges and Rights

Equity shareholders enjoy many privileges and rights. For example, they can vote at

meetings, elect directors, control the directors to run the company efficiently and profitably,

look into the books and records of the company and transfer or sell their shareholdings.

13

ADVANTAGES OF MUTUAL FUNDS

Diversification

Mutual funds typically hold anywhere from 50 to 200 different stocks. This type of

diversification diminishes the risk of a few investments adversely effecting overall returns.

Continuous, professional management

Skilled professionals whose compensation is linked to the performance of the fund

manage mutual funds.

Economies of scale

Mutual funds incur proportionately lower trading commissions than do individuals.

Lower transaction costs can translate into better investment performance.

Shareholder services

Mutual fund Complexes offer automatic investment plans, retirement plans, record

keeping for tax purposes, and systematic withdrawal plans, and they allow investors to make

exchanges or switches between funds over the telephone. Mutual funds also allow the

automatic reinvestment of income dividends and capital gains distributions into additional

shares.

Liquidity

Mutual funds are very liquid financial instruments since they can be easily purchased

or sold with no significant price impact. Redemptions technically have no direct effect on the

net asset value at which they were executed. Redemptions might have an indirect effect if

there were massive and forced portfolio liquidations before the redemption orders were

executed. This indirect effect is expected to be rare. Mutual funds typically offer more

liquidity than individual stocks, bonds, or closed-ended portfolios.

14

DISADVANTAGES OF EQUITY CAPITAL

No refund of capital

Since equity shares cannot be refunded, excessive issue of such share may leads to

overcapitalisation, particularly when the earning capacity of the company is declining.

Benefits only in prosperity

During the periods of prosperity, the company has to distribute heavy dividends on

these shares.

Manipulation of control

Since the equity share have proportionate voting power, the company’s management

many be vitiated by manipulation of votes, clique-formation, abuse of proxy rights etc.

High risk

Equity shareholders cannot claim dividend as a matter of right, because the decision

to fit the rate of dividend on equity shares is vested in the Board of Directors. Therefore

investors as a class may find equity shares unsafe, unattractive and unremunerated.

Unhealthy Speculation

During the period of boom, the market value of share will go up, which leads to

unhealthy speculation in the stock market.

15

DISADVANTAGES OF MUTUAL FUNDS

Like many investments, mutual funds offer advantages and disadvantages, which are

important for you to consider and understand before you decide to buy. Here are some of the

drawbacks of mutual funds.

Fluctuating returns

Mutual funds are like many other investments without a guaranteed return. There is

always the possibility that the value of your mutual fund will depreciate. This is especially

important for investors in money market funds.

Diversification

Although diversification is one of the keys to successful investing, many mutual fund

investors tends to over diversify. The idea of diversification is to reduce the risks associated

with holding a single security; over diversification occurs when investors acquire many funds

that are highly related and so don’t get the risk reducing benefits of diversification.

Cash. Cash and more Cash

Mutual funds pool money from thousands of investors, so everyday investors are

putting money into the fund as well as withdrawing investments. To maintain liquidity and

the capacity to accommodate withdrawals, funds typically have to keep a large portion of

their portfolio as cash. Having ample cash is great for liquidity, but money sitting around as

cash is not working for you and thus is not very advantageous.

Costs

Mutual funds provide investors with professional management; however, it comes at a

cost. Funds will typically have a range of different fees that reduce the overall pay-out. In

mutual funds the fees are classified into two categories; shareholder fees and annual fund

operating fees. The shareholder fees, in the form of loads and redemption fees are paid

directly by shareholders purchasing or selling the funds. The annual fund operating fees are

charged as an annual percentage – usually ranging from 1-3%. These fees are assessed to

mutual fund investors regardless of the performance of the fund.

16

Misleading Advertisement

The misleading advertisement of different funds can guide investors down the wrong

path. Some funds may be incorrectly labelled as growth funds, while others are classified as

small-cap or income.

Evaluating Funds

Another disadvantage of mutual funds is the difficulty they pose for investors

interested in researching and evaluating the different funds. Unlike stocks, mutual funds do

not offer investors the opportunity to compare the P/E ratio, sales growth, earnings per share,

etc. A mutual fund’s net asset value gives investors the total value of the fund’s portfolio less

liabilities, but how do you know if one fund is better than another? Furthermore,

advertisements, rankings and ratings issued by fund companies only describe past

performance.

17

LEGAL AND REGULATORY FRAMEWORK

Mutual funds are regulated by the SEBI (Mutual Fund) Regulations, 1996.

Bank-sponsored mutual funds are jointly regulated by SEBI and RBI.

Listed mutual funds are subject to the listing regulations of stock exchanges.

Association of Mutual funds India (AMFI) is an industry association of mutual funds.

(training, investor awareness)

Indian Trusts Act, 1882 which requires mutual funds to be established in form of a

trust.

Income Tax Act, 1961, which covers the tax aspects of mutual funds.

The present system of regulations of mutual funds also includes some relevant

provisions of the Companies Act, 1956.

18

Hypothesis

“Investment in mutual fund yields higher return than direct capital market”.

From this study the researcher have found that mutual funds yields higher return than

capital market and it has been proved in the below data analysis and findings. The data is

collected from 100 investors of different companies in the form of questionnaire.

It has been found that investment in mutual funds provides return of 183.59% in 3

years period and whereas investment in capital market provides return of only 19.39% in 3

years. And majority of investors i.e. 67% also agree that mutual fund investment is safer than

investment in any other avenues. From this study it concludes that mutual fund yields higher

return than direct capital market.

19

OBJECTIVES OF THE STUDY:

Following are the objectives for the study.

a. To study the return on investment in share market.

b. To understand the fund sponsor qualities influencing the selection of MFs/Schemes

c. To know how far the mutual fund schemes are able to win the confidence of the

investors

SCOPE OF THE STUDY:

The scope of the study is limited to investors and their investment preferences. Study

objective is to investigate the return on investment in share market and to understand the fund

sponsor qualities influencing the selection of MFs/Schemes. Also to find out that how far the

mutual fund schemes are able to win the confidence of the investors.

The researcher’s study will consider urban and semi-urban area of India. Now, the

researcher study purpose is to know the return on investment in share market and mutual

fund. The research was carried out to define how investor should invest in terms of making

right choice of investment, in addition what all techniques should be used so that they can get

the better returns from the markets. For conducting the study help of certain tools were taken

such as journals, net search, filling up of questionnaires.

20

LIMITATIONS OF THE STUDY:

Carrying the survey was a general learning experience but the researcher also faced

some problems, which are listed here:

India’s population is too large and the number of investors and brokers in India is

also very large and it is not possible to cover each and every investor and brokers in

India.

The data is collected from investors and brokers in Mumbai, Amritsar, and Delhi

cities only; mostly are from Mumbai. It could also not cover the whole of these cities

because the sample size was less and also due to time constraint.

Generally the respondents were busy in their work and were not interested in

responding rightly.

Respondents were reluctant to discover complete and correct information about

themselves and their financial investments.

Most respondents were not maintaining proper knowledge about the companies they

are investing, so they were unable to provide exact information regarding the returns

companies providing.

Most of the respondents don’t want to disclose the information about their

investment preferences.

Due to human behaviour information may be biased.

21

RESEARCH METHODOLOGY :

Research Design :

The design for this study is Descriptive research.

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...

Although the data description is factual, accurate and systematic, the research cannot

describe what caused a situation. Thus, Descriptive research cannot be used to create a causal

relationship, where one variable affects another. In other words, descriptive research can be

said to have a low requirement for internal validity.

Sources of Data :

The study undertaken there to be mainly based on the primary data i.e. structured

questionnaire is designed. The study also contains secondary data i.e. data from authenticated

websites and journals for the latest updates just to gain an insight for the views of various

experts. In this Project, the method used to collect the data is a primary questionnaire method.

The questionnaire is been answered by the investors and brokers who invest in equity markets

and mutual funds.

Data Collection :

The data is collected from the investors and brokers in the form of questionnaire and

the sample size is 100 as a respondents. The data is collected from Mumbai, Amritsar, and

Delhi city only, mostly sample size was from Mumbai. Because it is a pilot study and due to

time constraint the sample size could not cover whole India. The sample size is small.

Data collection method: Survey

Data collection tool: Questionnaire

22

Data Analysis And Interpretation

Sample Size: 100 Total number of questions asked: 9

Age Group:

Observation:

The sample consisted of a total of 100 investors and brokers among which 38 % of

investors and brokers belong to age group of below 25, 42% of investors and brokers belong

to 26to 35 age group, 7% investors and brokers belong to 36to 45 age group and 13%

investors and brokers belong to above 46 age group.

23

38%

42%

7%

13%

Below 25 25 -35 35 - 45 above 45

Below 25 38 38%

26 to 35 42 42%

36 to 45 7 7%

Above 46 13 13%

Do you Invest in Markets?

Observation:

The sample consisted of a total of 100 investors and brokers, which that nearly 73%

of investors and brokers invest their money in share markets or mutual funds.

24

73%

27%

Yes No

Yes 73

No 27

Income:

Observation:

The sample consisted of a total of 100 investors and brokers, which shows that all the

investors and brokers comes in the tax bracket and which is also one of the main reason to

invest in markets and schemes which provides good returns with tax benefit.

25

1,80,000 - 3,50,0003,50,000 - 7,00,000

Above 7,00,000

0

5

10

15

20

25

30

35

40

45 42% 44%

14%

INCOME BRACKET

1,80,000 - 3,50,000 42 42%

3,50,000 - 7,00,000 44 44%

Above 7,00,000 14 14%

Select your preference for the financial investment?

Observation:

The sample consisted of a total of 100 investors and brokers, which shows that most

of investors and brokers are more willing to invest their money in equities, but the difference

is very less as 42% of investors and brokers are willing to invest in equity and 33% of

investors and brokers will like to invest in mutual funds.

26

Equities42%

Mutual Funds33%

Both25%

Equities 42 42%

Mutual Funds 33 33%

Both 25 25%

State the reason for your preference?

Observation:

The sample consisted of a total of 100 investors and brokers, which shows that most

of investors and brokers choose their respective investment option with giving more

importance to rate of return on their investment.

27

74%

26%

Rate of ReturnFlexible Investment Terms

Rate of Return 74 74%

Flexible Investment Terms 26 26%

What type of investment do you make?

Observation:

The sample consisted of a total of 100 investors and brokers, which shows that most

of investors and brokers are more willing to invest their money for longer time period as the

perception is that they will get higher returns in long term investment.

28

Short Term (0-1 year period)

24%

Medium Term (1-5 year period)

41%

Long Term (More than 5 year period)

35%

Short Term (0-1 year period) 24 24%

Medium Term (1-5 year period) 41 41%

Long Term (More than 5 year period) 35 35%

Investing in Mutual Funds is far safer than Investing in other avenues”. Do you agree?

Observation:

The sample consisted of a total of 100 investors and brokers, which shows that most

of investors and brokers agree that mutual fund options as safer than investing in equity,

bonds or in debentures.

29

Yes No

67

33

Yes 67 67%

No 33 33%

According to you among these products in which one should invest now?

Observation:

According to Survey the investors still believe that invest should be done in equities

but the difference between the preference of investors is very less. As 51% of investors

suggest to invest in equities in current time whereas 49% of investors suggest to invest in

mutual funds.

30

Equity Markets Mutual Funds48

48.5

49

49.5

50

50.5

51

51.5

Equity Markets 51 51%

Mutual Funds 49 49%

State the reason for your preference with reference to above questions answer?

Observation:

According to Survey the investors select their current area of investment by giving

importance to the factor of Secure Investment.

31

52%48%

Secure Investment Expected High Rate of Returns

Secure Investment 52 52%

Expected High Rate of Returns 48 48%

Which factor of a Mutual Fund or of a equity plays an important role to invest in them?

Most Important Important Least Important Out of 100%

Brand 45% 50% 5% 100

Performance 79% 20% 1% 100

Management Team 34% 64% 2% 100

Observation:

According to Survey the investors have given the most important preference for

investing to the performance of the equity or mutual fund. And second preference has been

given to the brand name of the company and last factor to consider is management team.

Comparative Analysis of Equity Share and Mutual Fund

32

Most Important Important Least Important0

10

20

30

40

50

60

70

80

90

4550

5

79

20

1

34

64

2

BrandPerformanceManagement Team

PERFORMANCE OF RELIANCE INDUSTRIES LTD (EQUITY) FOR THE PAST 3 YEARS

Month Close PriceMonthly

DifferenceMonthly

Returns in %Yearly

DifferenceYearly

Returns in %Apr-09 1802.7 - -May-09 2277.5 474.8 26.34Jun-09 2023.35 -254.15 -11.16Jul-09 1957.1 -66.25 -3.27Aug-09 2004.1 47 2.40Sep-09 2201.2 197.1 9.83Oct-09 1931.25 -269.95 -12.26Nov-09 1062.8 -868.45 -44.97Dec-09 1089.4 26.6 2.50Jan-10 1046.55 -42.85 -3.93Feb-10 978 -68.55 -6.55Mar-10 1074.65 96.65 9.88 -728.05 -40.3866Apr-10 1032.5 -42.15 -3.92May-10 1045.05 12.55 1.22Jun-10 1086.9 41.85 4.00Jul-10 1009.6 -77.3 -7.11Aug-10 918.85 -90.75 -8.99Sep-10 986.35 67.5 7.35Oct-10 1095.8 109.45 11.10Nov-10 986.8 -109 -9.95Dec-10 1058.25 71.45 7.24Jan-11 919.25 -139 -13.13Feb-11 964.95 45.7 4.97Mar-11 1047.8 82.85 8.59 15.3 1.48184Apr-11 981.95 -65.85 -6.28May-11 951.75 -30.2 -3.08Jun-11 897.6 -54.15 -5.69Jul-11 827.7 -69.9 -7.79Aug-11 781.5 -46.2 -5.58Sep-11 808.3 26.8 3.43Oct-11 877.75 69.45 8.59Nov-11 778.8 -98.95 -11.27Dec-11 692.9 -85.9 -11.03Jan-12 815.45 122.55 17.69Feb-12 818.65 3.2 0.39Mar-12 724.85 -93.8 -11.46 -257.1 -26.1826

Difference and Returns in % of 3 years = -1077.85 -59.7909

As the above data shows that RELIANCE INDUSTRIES LTD has given positive

returns only in one financial period 2010-11 and that too only 1.48 % and has given returns

33

during two financial years. And comparing the returns of 3 years the company has given

negative returns of 59.79%.

PERFORMANCE OF ICICI BANK LTD (EQUITY) FOR THE PAST 3 YEARS

34

Month Close PriceMonthly

DifferenceMonthly

Returns in %Yearly

DifferenceYearly

Returns in %Apr-09 477.75 -May-09 740.7 262.95 55.04 474.95 99.41392Jun-09 722 -18.70 -2.52Jul-09 759.05 37.05 5.13Aug-09 749.5 -9.55 -1.26Sep-09 904.8 155.30 20.72Oct-09 789.6 -115.20 -12.73Nov-09 864.3 74.70 9.46Dec-09 875.7 11.40 1.32Jan-10 830.4 -45.30 -5.17Feb-10 871.85 41.45 4.99Mar-10 952.7 80.85 9.27Apr-10 950.5 -2.20 -0.23 162.25 17.06996May-10 867.05 -83.45 -8.78Jun-10 862 -5.05 -0.58Jul-10 904.45 42.45 4.92Aug-10 977.3 72.85 8.05Sep-10 1110.35 133.05 13.61Oct-10 1161.65 51.3 4.62Nov-10 1143.65 -18 -1.55Dec-10 1144.65 1 0.09Jan-11 1020 -124.65 -10.89Feb-11 971 -49 -4.80Mar-11 1112.75 141.75 14.60Apr-11 1114.25 1.5 0.13 -258.2 -23.1725May-11 1086 -28.25 -2.54Jun-11 1093.1 7.1 0.65Jul-11 1037.75 -55.35 -5.06Aug-11 873.25 -164.5 -15.85Sep-11 875.35 2.1 0.24Oct-11 930.5 55.15 6.30Nov-11 714.15 -216.35 -23.25Dec-11 684.6 -29.55 -4.14Jan-12 902 217.4 31.76Feb-12 906.5 4.5 0.50Mar-12 856.05 4.5 0.50

Difference and Returns in % of 3 years = 378.3 79.18367

35

As the above data shows that ICICI BANK LTD has given positive returns in two

financial periods, i.e. 2009-10 & 2010-11 and has given negative returns in one financial

year. And comparing the returns of 3 years the company has given positive returns of

79.18%.

36

PERFORMANCE OF SBI MSFU CONTRA-GROWTH (MUTUAL FUND) FOR THE PAST 3 YEARS

Date NetAsset Value

MonthlyDifference

MonthlyReturns In %

Yearly Difference

YearlyReturns in %

29-Apr-09 34.13 21.61 63.3129-May-09 45 10.87 31.8530-Jun-09 44.16 -0.84 -1.8731-Jul-09 48.3 4.14 9.38

31-Aug-09 48.97 0.67 1.3930-Sep-09 52.81 3.84 7.8430-Oct-09 49.8 -3.01 -5.7030-Nov-09 53.17 3.37 6.7731-Dec-09 55.68 2.51 4.7229-Jan-10 53.31 -2.37 -4.2626-Feb-10 52.55 -0.76 -1.4331-Mar-10 55.74 3.19 6.0730-Apr-10 56.33 0.59 1.06 -0.71 -1.2631-May-10 54.1 -2.23 -3.9630-Jun-10 57.03 2.93 5.4230-Jul-10 57.05 0.02 0.04

31-Aug-10 58.17 1.12 1.9630-Sep-10 62.63 4.46 7.6729-Oct-10 62.95 0.32 0.5130-Nov-10 59.46 -3.49 -5.5431-Dec-10 61.02 1.56 2.6231-Jan-11 54.18 -6.84 -11.2128-Feb-11 51.18 -3.00 -5.5431-Mar-11 55.62 4.44 8.6829-Apr-11 56.07 0.45 0.81 -5.4 -9.6331-May-11 54.68 -1.39 -2.4830-Jun-11 55.23 0.55 1.0129-Jul-11 54.16 -1.07 -1.94

30-Aug-11 49.36 -4.80 -8.8630-Sep-11 48.58 -0.78 -1.5831-Oct-11 50.53 1.95 4.0130-Nov-11 46.23 -4.30 -8.5130-Dec-11 43.79 -2.44 -5.2831-Jan-12 48.86 5.07 11.5829-Feb-12 51.6 2.74 5.6129-Mar-12 50.67 -0.93 -1.80

Difference and Returns in % of 3 years = 16.54 48.46

37

As the above data shows that SBI MSFU CONTRA-GROWTH has given positive

returns in 1st financial year in 2009-10 & and has given a negative returns in 2nd and 3rd

financial year. And comparing the returns of 3 years the fund has given positive returns of

48.46%.

38

PERFORMANCE OF RELIANCE EQUITY OPPORTUNITIES FUND – GROWTH PLAN (MUTUAL FUND) FOR THE PAST 3 YEARS

Date

Net Asset Value

MonthlyDifference

MonthlyReturns in %

YearlyDifference

YearlyReturns in %

29-Apr-09 15.138929-May-09 20.0628 4.92 32.52 15.95 105.355739230-Jun-09 20.1576 0.09 0.4731-Jul-09 22.1421 1.98 9.84

31-Aug-09 23.1923 1.05 4.7430-Sep-09 25.9585 2.77 11.9330-Oct-09 24.8117 -1.15 -4.4230-Nov-09 26.8891 2.08 8.3731-Dec-09 29.4351 2.55 9.4729-Jan-10 28.095 -1.34 -4.5526-Feb-10 28.3646 0.27 0.9631-Mar-10 31.0886 2.72 9.6030-Apr-10 32.2103 1.12 3.61 3.508 10.8909261931-May-10 31.0571 -1.15 -3.5830-Jun-10 32.9375 1.88 6.0530-Jul-10 34.422 1.48 4.51

31-Aug-10 35.6699 1.25 3.6330-Sep-10 38.7718 3.10 8.7029-Oct-10 38.4782 -0.29 -0.7630-Nov-10 37.2717 -1.21 -3.1431-Dec-10 38.3986 1.13 3.0231-Jan-11 34.5916 -3.81 -9.9128-Feb-11 32.683 -1.91 -5.5231-Mar-11 35.7183 3.04 9.2929-Apr-11 36.2916 0.57 1.61 -0.6954 -1.91614588531-May-11 35.6693 -0.62 -1.7130-Jun-11 36.6927 1.02 2.8729-Jul-11 36.61 -0.08 -0.23

30-Aug-11 33.5575 -3.05 -8.3430-Sep-11 33.3842 -0.17 -0.5231-Oct-11 34.847 1.46 4.3830-Nov-11 31.8511 -3.00 -8.6030-Dec-11 30.0922 -1.76 -5.5231-Jan-12 34.0546 3.96 13.1729-Feb-12 36.0334 1.98 5.8129-Mar-12 35.5962 -0.44 -1.21

20.4573 135.1306898

39

As the above data shows that RELIANCE EQUITY OPPORTUNITIES FUND –

GROWTH PLAN has given positive returns in two financial years, i.e. 2009-10 & 2010-11

and has given a negative returns in one financial year i.e.2011-12. And comparing the returns

of 3 years the fund has given positive returns of 135.13%.

40

EQUITIES 2009-10 2010-11 2011-12 2009-2012

RELIANCE INDUSTRIES LTD -40.38% 1.48% -26.18% -59.79%

ICICI BANK LTD 99.41% 17.06% -23.17% 79.18%

MUTUAL FUND 2009-10 2010-11 2011-12 2009-2012

SBI MSFU CONTRA 63.31% -1.26% -9.63% 48.46%

RELIANCE EQUITY OPP OURTUNITIES FUND 105.35% 10.89% -1.91% 135.13%COMPARATIVE ANALYSIS OF EQUITY V/S MUTUAL FUND

ANALYSIS OF EQUITY

EQUITIES 2009-10 2010-11 2011-12 2009-2012

RELIANCE INDUSTRIES LTD -40.38% 1.48% -26.18% -59.79%

ICICI BANK LTD 99.41% 17.06% -23.17% 79.18%

41

The above data shows the returns of respective equities for the period. So consider if

an investor has invested is these two companies then on 1st financial year his investment of

‘X’ amount will increase by 59.03% and on 2nd financial year his investment value will

increase by 18.54% and on 3rd financial year his investment value will reduce by 49.35%.

And if investor keep invested his money for 3yrs then his investment value at end of

3rd financial year will increase by 19.39% only which is less as he can get more than 20% of

returns by keeping fixed deposits in the bank.

42

2009-10 2010-11 2011-12 2009-2012

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

-40.38%

1.48%

-26.18%

-59.79%

99.41%

17.06%

-23.17%

79.18%

RELIANCE INDUSTRIES LTDICICI BANK LTD

ANALYSIS OF MUTUAL FUND

MUTUAL FUND 2009-10 2010-11 2011-12 2009-2012

SBI MSFU CONTRA 63.31% -1.26% -9.63% 48.46%

RELIANCE EQUITY OPPOURTUNITIES FUND 105.35% 10.89% -1.91% 135.13%

The above data shows the returns of respective mutual funds for the period. So

consider if an investor has invested is these two funds then on 1st financial year his

investment of ‘X’ amount will increase by 168.66% and on 2nd financial year his investment

value will increase by 9.63% and on 3rd financial year his investment value will reduce by

11.54%.

And if investor keep invested his money for 3yrs then his investment value at end of

3rd financial year will increase by 183.59% which is far better than the returns of equity

investment returns.

43

2009-10 2010-11 2011-12 2009-2012

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

63.31%

-1.26%

-9.63%

48.46%

105.35%

10.89%

-1.91%

135.13%

Mutual Funds

SBI MSFU CONTRARELIANCE EQUITY OPP OUR-TUNITIES FUND

ANALYSIS:

(As from analysing the above data and also from questionnaire we

can say that Hypothesis is being proved.)

Among 100% sample, 67% respondents agree that mutual funds are safer than any other investment option.

Among 3yrs data of returns of equity and mutual fund, it shows that mutual fund provides more return than the equity market.

Among 100% sample, 49% respondents says that one should invest in mutual funds, which shows the increasing preference for mutual fund.

44

FINDINGS OF THE STUDY:

The First question asked was about the investment factor and among the 100% sample

size, 73% respondents said that they do invest in markets.

Among the 100 sample size, 24% of investors were wish to invest for short term period (0-1 year) whereas 41% of investors were willing to invest their money for medium term (1–5 years)and 35% of investors for long term investment (more than 5 year).

Among the 100 sample size, 74% investors invest money with the preference of rate of return on their investment and 26% investors invest money with the preference of flexible investment terms.

The investors have given almost same weightage to the question of According to you

among these products in which one should invest now? As 51% of investors suggest investing in Equities and 49 % of investors suggests for Mutual funds. So here it can be said that mutual funds are gaining its importance in the finance industry.

When asked about the reason for selecting the respective product of investment then the preference was given to the factor of secure investment, i.e. by 52% of investors.

It is noted that investors give 1st importance to performance of the equity or mutual

fund and then brand name and at last give importance to management team while making the decision in which they would prefer to invest their money.

45

RECOMMENDATIONS OF THE STUDY:

As it has been found from the above findings that mutual funds are providing better

returns and gaining its importance in the finance industry. Therefore, the mutual fund

companies in India should make vice decisions while making investments and provide

more benefits to investors.

As many investors get fooled by some mutual fund companies which gives false

promises to investors for investing their money in their mutual fund. So government

should make strict rules for all the mutual fund companies in order to safe guard the

investment of all investors.

The charges should be reduced to minimum and also the lock in period factor should

be minimised, which will attract more investors from the market.

Key features of mutual funds should be mentioned in the advertisement. Features like

Diversification, Systematic Investment Plans (SIP), Tax benefits should be mentioned

in the advertisements. Otherwise, people will see mutual funds as normal shares in

which we invest money.

Many fund firms themselves have provided assurances regarding restitution for losses

to shareholders i.e., reassuring. However, these promises have been short on specifics

indicating how those losses will be measured and how the compensation will be

provided.

Mutual funds should use appropriate and simple names for the schemes, which match

the features of the schemes, so that the investors are not confused and not feel cheated

after investing.

46

CONCLUSION

The Indian mutual funds industry has transformed totally for good since last decade

and has shown growth and potential. Though the Asset under Management and number of

schemes has increased significantly, but it is yet to be a household product, and needs to

cover the retail segment effectively. Moreover, there are still many remote and potential areas

which lack the required knowledge and infrastructure of mutual funds.

Mutual fund is an excellent product offering great flexibility and liquidity, which can

be tailored to suit any investor’s objective and it is affordable for the all people of different

income levels and saving habits

After doing study it is concluded that yes mutual funds are much better investment

option but as future is uncertain so no one can give a sure guarantee of good returns, no

matter whether it is equity or a mutual fund.

Investors can minimise their risk by doing little research before investing in the

markets which will help them to decide the right investment plan or product.

47

BIBLIOGRAPHY

Books

Jaydev, M. 1998, Investment policy and performance of

mutual funds, Kanishka Pub., India.

Gupta, A. 2002, Mutual funds in India: a study of investment management, Anmol

Publications PVT. LTD., India.

Business world

C.R. Kothari – Research Methodology

Websites

http://www.amfiindia.com

http://search.proquest.com

http://articles.economictimes.indiatimes.com

http://www.google.com

http://www.moneycontrol.com

http://www.bseindia.com

http://www.nseindia.com

http://www.icicibank.com

http://www.sbi.co.in

http://www.sebi.gov.in

http://www.finance.yahoo.com

48

ANNEXURE

QUESTIONNAIRE

This questionnaire is prepared for a research project

An Empirical Study on Performance of Mutual Fund in India

Name:

Age:

Income Category: a. 1, 80,000-5, 00,000 b.5, 00,000-8, 00,000 c. above 8, 00,000

1. Do you invest in Markets?

a. Yes b. No

2. What type of investment do you make?

a. Short Term (0-1 year period)

b. Medium Term (1-5 year period)

c. Long Term (More than 5 year period)

3. Give your ratings on the following financial investment?

a. Equities

b. Mutual Funds

4. State the reason for your preference?

a. Rate of Return

b. Flexible Investment Terms

5. Investing in Mutual Funds is far safer than Investing in other avenues”. Do you agree?

a. Yes b. No

6. According to you among these products in which one should invest now?

a. Equity Market

b. Mutual Funds

49

7. State the reason for your preference with reference to above questions answer?

a. Secure Investment

b. Expected High Rate of Returns

8. Which factor of a Mutual Fund or of a equity plays an important role to invest in

them?

Thank you for your precious time and support.

50

Most Important Important Least Important

Brand

Performance

Management Team