deepaka "study on role and significance of mutual fund for retail investors"

1

A STUDY ON ROLE AND SIGNIFICANCE OF

MUTUAL FUND FOR RETAIL INVESTORS

(FINAL REPORT)

SUBMITTED TO LOVELY PROFESSIONAL UNIVERSITY

In Partial Fulfillment Of The Requirements For The Award Of Degree Of

MASTER OF BUSINESS ADMINISTRATION

Submitted by:

Group No 51

VARUN GUPTA 10810567

DEEPAK KUMAR 10800251

MANJIT SINGH 10809742

BALJEET KAUR 10809341

Supervisor:

Ms. Neha shandilya

Designation: Lecturer LSB LPU

DEPARTMENT OF MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY

PHAGWARA

(Year of completion: 2010)

2

TO WHOMSOEVER IT MAY CONCERN

This is to certify that the project report titled “A Study On Role And Significance Of Mutual

Fund For Retail Investors” carried out by Mr.Deepak Kumar, S/o Shri R.R.Prasad has been

accomplished under my guidance & supervision as a duly registered MBA student of the Lovely

Professional University, Phagwara. This project is being submitted by him/her in the partial

fulfillment of the requirements for the award of the Master of Business Administration from

Lovely Professional University.

His dissertation represents his original work and is worthy of consideration for the award of the

degree of Master of Business Administration.

Neha Shandilya

(Name & Signature of the Faculty Advisor)

Date: 4 May 2010

3

DECLARATION

I, "Deepak Kumar”, hereby declare that the work presented herein is genuine work done originally

by me and has not been published or submitted elsewhere for the requirement of a degree

programme. Any literature, data or works done by others and cited within this dissertation has been

given due acknowledgement and listed in the reference section.

Deepak kumar

(Student's name & Signature)

10800251

(Registration No.)

Date: 4 May 2010

4



Fund For Retail Investors” carried out by Ms. Baljeet Kaur, D/o Sh. Sukhdev Singh has been







Neha Shandilya


Date: 4 May 2010

5

DECLARATION

I, "Baljeet Kaur”, hereby declare that the work presented herein is genuine work done originally




Baljeet Kaur


10809341

(Registration No.)

Date: 4 May 2010

6



Fund For Retail Investors” carried out by Mr.Varun Gupta, S/o Sh. Satish Gupta has been







Neha shandilya


Date:

7

DECLARATION

I, "Varun Gupta”, hereby declare that the work presented herein is genuine work done originally




Varun Gupta


10810567

(Registration No.)

Date: 4 May 2010

8



Fund For Retail Investors” carried out by Mr.Manjeet Singh, S/o Shri Balwindar Singh has

been accomplished under my guidance & supervision as a duly registered MBA student of the

Lovely Professional University, Phagwara. This project is being submitted by him/her in the partial





Neha Shandilya


Date: 4 May 2010

9

DECLARATION

I, "Manjeet Singh”, hereby declare that the work presented herein is genuine work done originally




Manjeet singh


10809742

(Registration No.)

Date: 4 May 2010

10

TABLE OF CONTENT

S.No. TOPIC Page No.

Chapter1. INTRODUCTION 13 to 18

1.1 Introduction to Project

1.2Meaning of mutual fund

1.3 Definition of mutual fund

1.4 Advantages of mutual fund

1.5 Types of Mutual fund

1.6 Special features of money market mutual fund

Chapter 2. REVIEW OF LITERATURE 19 to 23

2.1 Review of literature

Chapter 3. NEED, OBJECTIVE, SCOPE & METHODOLOGY 24 to 27

3.1 Need for the study

3.2 Scope of the study

3.3 Study the basis of the parameters

3.4 Objectives of the study

3.5 Limitations

3.6 Research methodology

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Chapter 4. ANALYSIS 28 to 48

Data Presentation, Analysis and Interpretation.

Chapter 5. RECOMMENDATIONS 49 to 52

5.1 Recommendations.

5.2 Conclusion

Chapter 6. ANNEXURE 53 to 58

Questionnaire

Glossary

Reference & Bibliography.

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Chapter -:1 Introduction

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1.1 INTRODUCTION OF THE PROJECT:-

In this we are going to discuss about the role and significance of the mutual funds. What actually

the asset management do i.e. the fund management. In this capstone project we are going to

discuss about the role and significance of mutual fund on “Retail Investors”.

In the today’s scenario people have a good mind set regarding the Mutual Fund because majority

of the investors are looking for the save sand secured return and Mutual Fund do the same

resulting there is huge market of the Mutual Fund.

1.2 MEANING OF MUTUAL FUND

What is a Mutual fund?

Mutual fund is an investment company that pools money from shareholders and invests in a variety

of securities, such as stocks, bonds and money market instruments. Most open-end Mutual funds

stand ready to buy back (redeem) its shares at their current net asset value, which depends on the

total market value of the fund's investment portfolio at the time of redemption. Most open-end

Mutual funds continuously offer new shares to investors. Also known as an open-end investment

company, to differentiate it from a closed-end investment company. Mutual funds invest pooled

cash of many investors to meet the fund's stated investment objective. Mutual funds stand ready to

sell and redeem their shares at any time at the fund's current net

asset value: total fund assets divided by shares outstanding.

An investment company that continually offers new shares and stands ready to redeem existing

shares from the owners. Because the shares are purchased directly from and are sold directly to the

mutual fund, there is no secondary market in these companies' stock. Individual mutual funds vary

substantially in terms of the types of investments, their sales charges (many have none), and their

management fees. Also called fund, open-end investment company. Compare closed-end

investment company. See also clone fund, family of funds, load fund, regulated investment

http://financial-dictionary.thefreedictionary.com/closed-end+investment+company

http://financial-dictionary.thefreedictionary.com/closed-end+investment+company

http://financial-dictionary.thefreedictionary.com/clone+fund

http://financial-dictionary.thefreedictionary.com/family+of+funds

http://financial-dictionary.thefreedictionary.com/load+fund

http://financial-dictionary.thefreedictionary.com/regulated+investment+company

http://financial-dictionary.thefreedictionary.com/regulated+investment+company

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company In other words A company that invests its clients' pooled fund into securities that match

its declared financial objectives. Asset management companies provide investors with more

diversification and investing options than they would have by themselves. The act or practice of an

investment advisory firm making investment decisions on behalf of a client. Asset management

often opens up more potential investment vehicles up to the client.

1.3 DEFINITION OF MUTUAL FUND

A mutual fund is a professionally managed investment product that sells shares to investors and

pools the capital it raises to purchase investments.

A money market fund is a mutual fund that invests solely in money market instruments. Money

market instruments are forms of debt that mature in less than one year and are very liquid.

Treasury bills make up the bulk of the money market instruments. Securities in the money market

are relatively risk-free.

Money market funds are generally the safest and most secure of mutual fund investments. The goal

of a money-market fund is to preserve principal while yielding a modest return. Money-market

mutual fund is akin to a high-yield bank account but is not entirely risk free. When investing in a

money-market fund, attention should be paid to the interest rate that is being offered.

http://financial-dictionary.thefreedictionary.com/Investment+decisions

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In Simple Words, Mutual fund is a mechanism for pooling the resources by issuing units to the

investors and investing funds in securities in accordance with objectives as disclosed in offer

document. Investments in securities are spread across a wide cross-section of industries and sectors

and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in

the same direction in the same proportion at the same time. Mutual fund issues units to the

investors in accordance with quantum of money invested by them. Investors of Mutual funds are

known as unit holders. The profits or losses are shared by the investors in proportion to their

investments. The Mutual funds normally come out with a number of schemes with different

investment objectives which are launched from time to time. In India, A Mutual fund is required to

be registered with Securities and Exchange Board of India (SEBI) which regulates securities

markets before it can collect funds from the public. In Short, a Mutual fund is a common pool of

money in to which investors with common investment objective place their contributions that are

to be invested in accordance with the stated investment objective of the scheme. The investment

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manager would invest the money collected from the investor in to assets that are defined/ permitted

by the stated objective of the scheme. For example, an equity fund would invest equity and equity

related instruments and a debt fund would invest in bonds, debentures, gilts etc. Mutual fund is a

suitable investment for the common man as it offers an opportunity to invest in a diversified,

professionally managed basket of securities at a relatively low cost.

1.4 Types of Money Market Mutual Funds

Money market funds are of two types:

1. Institutional Money Market Mutual Funds:

These funds are held by governments, institutional investors and businesses etc. Huge sum of

money is parked in institutional money funds.

2. Retail Money Market Mutual Funds:

Retail money market funds are used for parking money temporarily. The investment portfolio of

money market funds comprises of treasury bills, short term debts, tax free bonds etc.

Special Features of Money Market Mutual Funds

Money market mutual funds are one of the safest instruments of investment for the retail

low income investor. The assets in a money market fund are invested in safe and stable

instruments of investment issued by governments, banks and corporations etc.

Generally, money market instruments require huge amount of investments and it is beyond

the capacity of an ordinary retail investor to invest such large sums. Money market funds

allow retail investors the opportunity of investing in money market instrument and benefit

from the price advantage.

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ADVANTAGES OF MUTUAL FUNDS

Professional Management.

The major advantage of investing in a mutual fund is that you get a professional money

manager to manage your investments for a small fee. You can leave the investment

decisions to him and only have to monitor the performance of the fund at regular intervals.

Diversification.

Considered the essential tool in risk management, mutual funds make it possible for even

small investors to diversify their portfolio. A mutual fund can effectively diversify its

portfolio because of the large corpus. However, a small investor cannot have a well-

diversified portfolio because it calls for large investment. For example, a modest portfolio

of 10 bluechip stocks calls for a few a few thousands.

Convenient Administration.

Mutual funds offer tailor-made solutions like systematic investment plans and systematic

withdrawal plans to investors, which is very convenient to investors. Investors also do not

have to worry about investment decisions, they do not have to deal with brokerage or

depository, etc. for buying or selling of securities. Mutual funds also offer specialized

schemes like retirement plans, children’s plans, industry specific schemes, etc. to suit

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personal preference of investors. These schemes also help small investors with asset

allocation of their corpus. It also saves a lot of paper work.

Costs Effectiveness

A small investor will find that the mutual fund route is a cost-effective method (the AMC

fee is normally 2.5%) and it also saves a lot of transaction cost as mutual funds get

concession from brokerages. Also, the investor gets the service of a financial professional

for a very small fee. If he were to seek a financial advisor's help directly, he will end up

paying significantly more for investment advice. Also, he will need to have a sizeable

corpus to offer for investment management to be eligible for an investment adviser’s

services.

Liquidity.

You can liquidate your investments within 3 to 5 working days (mutual funds dispatch

redemption cheques speedily and also offer direct credit facility into your bank account i.e.

Electronic Clearing Services).

Transparency.

Mutual funds offer daily NAVs of schemes, which help you to monitor your investments

on a regular basis. They also send quarterly newsletters, which give details of the portfolio,

performance of schemes against various benchmarks, etc. They are also well regulated and

Sebi monitors their actions closely.

Tax benefits.

You do not have to pay any taxes on dividends issued by mutual funds. You also have the

advantage of capital gains taxation. Tax-saving schemes and pension schemes give you the

added advantage of benefits under section 88.

Affordability

Mutual funds allow you to invest small sums. For instance, if you want to buy a portfolio of

blue chips of modest size, you should at least have a few lakhs of rupees. A mutual fund

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gives you the same portfolio for meager investment of Rs.1,000-5,000. A mutual fund can

do that because it collects money from many people and it has a large corpus.

Chapter -:2

Review of Literature

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2.1 REVIEW OF LITERATURE

Ranganathan Kavitha, (2006) A rich view of research waits this sophisticated understanding of

how financial markets are also affected by the 'financial behavior' of investors. With the reforms of

industrial policy, public sector, financial sector and the many developments in the Indian money

market and capital market, Mutual Funds which has become an important portal for the small

investors, is also influenced by their financial behavior. Hence, this study has made an attempt to

examine the related aspects of the fund selection behavior of individual investor towards Mutual

Funds, in the city of Mumbai. From the researchers and academicians point of view, such a study

will help in developing and expanding knowledge in this field

Ranganathan Kavitha “A Study of Fund Selection Behavior of Individual Investor Towards

Mutual Funds” - with Reference to Mumbai City Publisher University press Madurai Kamaraj

University

(web link- http://papers.ssrn.com/sol3/papers.cfm?abstract_id=876874)2006

Krishnan Janaki and Sharma Rakesh, (2003) This article is all about the growth of mutual fund

. In this it is clearly mention that The assets under management of all equity mutual funds has

gone up 57.52 per cent from Rs 10,000 crore (Rs 100 billion) in April 2003 to Rs 15,752 crore (Rs

157.52 billion) in August. It isn't only the equity funds that have performed well during this period.

The AMC with all domestic mutual funds have increased about 35.63 per cent to Rs 31,802 crore

(Rs 318.02 billion) between the end of April 2003 and August, the latest date for which the

industry body, the Association of Mutual Funds of India, has collated and compiled data.

Krishnan Janaki and Sharma Rakesh “Mutual fund boom”

(web link http://www.rediff.com/money/2003/sep/20spec.htm), September20,2003.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=876874)2006

http://www.rediff.com/money/2003/sep/20spec.htm

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Sharma Anuj, (2009) This article related to focus of mutual fund on retail investors. Mutual fund

industry to stick-on to know-your-customer (KYC) norms by implementing them in letter and

spirit, the Securities Exchange Board of India (SEBI) increased focus on retail investors was the

key to the growth of the mutual fund industry.KYC was not difficult but a requirement in the

interest of the investor and the industry as a whole. It also highlighted the role of the retail investor

by saying that though India had close to 39 per cent savings rate, the retail side was quite untapped

by the industry

Sharma Anuj, “Focus more on retail investors” Reports from Delhi: The Hindu (web link-

http://www.thehindu.com/2009/06/18/stories/2009061855961600.htm), Thursday, Jun 18, 2009.

Gruber MJ (2009) ,Mutual fund attrition can create problems for a researcher because funds that

disappear tend to do so due to poor performance. In this article we estimate the size of the bias by

tracking all funds that existed. When a fund merges

we calculate the return, taking into account the

merger terms. This allows a precise estimate of survivorship bias. In addition,

we examine

characteristics of both mutual funds that merger and their partner funds. Estimates of survivorship

bias over different horizons and using different models to evaluate performance

are provided.

Gruber MJ “Survivor bias and Mutual Fund performance” Leonard N. Stern School of

Business, New York University, 44 West 4th Street, 9th Floor, New York, USA(2009).

Liang.B (1998), In this article investigates hedge fund performance and risk. The empirical

evidence indicates that hedge funds differ substantially from traditional investment vehicles such

as mutual funds. The funds with watermarks significantly outperform the funds without

watermarks. The average hedge fund returns are related positively to incentive fees, the size of the

fund, and the lockup period. Hedge funds follow dynamic trading strategies and have low

systematic risk. Further it is discussed in the article that There are low correlations among

different strategies. Compared with mutual funds, hedge funds offer better risk-return trade-offs:

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they have higher Sharpe ratios, lower market risks, and higher abnormal returns. In the period of

January 1994 to December 1996, most hedge funds provide positive abnormal returns. Overall,

hedge fund strategies dominate mutual fund strategies, hence hedge funds provide a more efficient

investment opportunity set for investors

Liang.B “On the Performance of Hedge Funds” Weatherhead School of Management

Case Western Reserve University publication (http://www.hedgefund-index.com/s_marketrisk),1998.

Kumar Nirmal (2010), This article tell about that where investor has to invest i.e. in equity fund, mutual

fund,debt instrument etc. Many investors purchasing equity shares at low price and selling them at

high price at an opportune time. This is not always the case because of market fluctuations. If you

are a full time investor in the share market in India, you should diversify your investment strategies

to be on the safer side by buy multiple shares. So if they have to diversify their risk they have to

invest in mutual fund because it may be the reason that he/she is new investor.

Kumar.Nirmal,“Investing In Equity Shares And Mutual Fun,(http://www.articlesbase.com/investing-

articles/investing-in-equity-shares-and-mutual-funds-2151133.html) , 2010

Jeff Levering (2008), This articles tell about that in today, the majority of financial services firms

are involved in selling mutual funds, frequently in great quantity, yet very few give any thought to

the validity of their data or the technology that is responsible for aiding in the sale or disclosure of

these funds. Selling a mutual fund relies on complex mutual fund information to be summarized

down into small parts or “data” that sellers can understand – which is most often driven by a

technology or data warehouse infrastructure. After all, if a financial services firm unknowingly

relies on bad data it can get in the way of good, profitable, and reputable investor interactions.

Jeff Levering, “Taking the risk out of mutual fund compliance: more cost-efficient mutual

fund sales ” Vice President of Corporate Development and Business Strategies, NewRiver, Inc.,

http://www.google.com/url?sa=U&q=http://www.spinoffadvisors.com/articles/financialAnalyst0899.pdf

http://www.nirmalbang.com/equity/equity-home.aspx

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Andover,Massachusetts,USA.(http://www.emeraldinsight.com/Insight/ViewContentServlet?Filena

me=Published/EmeraldFullTextArticle/Articles/3130090108.html) 2008

Bass B (2008), This article tells about that in where investor has to invest. Because mutual Funds

Can Offer the advantage of Time Savings. Since most people are busy living their lives, funds

provide a great time-saving alternative to conventional investments. There are several key benefits

to using funds as a technique to secure your financial future but of course the core benefit is the

one that surrounds time savings. One of the most valuable advantages to mutual funds is that they

offer speculators expert attention to the investment and diversification of risk.

Bass B , “Where to Invest” Leonard N. Stern School of Business, New York University, West 4th

Street, 9th Floor, New York, (http://ezinearticles.com/?expert=Luther_Merle_B_Bass) USA,2008

Kaushik,Abhay., (2009) This paper investigates the performance of mutual funds that hold a

small number of stocks in their portfolio. Similar to results reported in the literature for the average

diversified mutual fund, our results indicate that the average small holding fund does not

outperform the S&P 500 index. On average, small holding funds under-perform the market on a

risk and investment style adjusted basis by about −20 basis points per month, or by −2.40 per cent

per year. We also find that there is a sharp contrast between the performance of Winner and Loser

portfolios. On average, Winner portfolios outperform the S&P composite index by 410 basis points

per month, or an astounding 49.2 per cent per annum, whereas Losers under-perform by 320, or

−38.4 per cent per annum, over the same period. Cross sectional regressions indicate that Winner

portfolio abnormal performance is positively and significantly related to fund turnover and the per

cent of the fund's assets invested in their top 10 most heavily weighted holdings. Results for Loser

portfolios show that abnormal performance deteriorates significantly with turnover, concentration

and expenses, but rises with Load and Size.

Kaushik,Abhay., “Do mutual funds with few holdings outperform the market” Journal of

Asset Management Correspondence Publication of Accounting, Finance and Business Law,

RadfordUniversity,Virginia,USA(http://www.palgravejournals.com/jam/journal/v9/n6/abs/jam20

0839a.html),2009

http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFullTextArticle/Articles/3130090108.html



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Chapter -:3

NEED, OBJECTIVE,

SCOPE AND

METHODOLOGY

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NEED, OBJECTIVE, SCOPE & METHODOLOGY

3.1NEED FOR THE STUDY

The main purpose of doing this project was to know about mutual fund and its functioning. This helps to

know in details about mutual fund industry right from its inception stage, growth and future prospects.

It also helps in understanding different schemes of mutual funds. Because my study depends upon

prominent funds in India and their schemes like equity, income, balance as well as the returns associated

with those schemes.

The project study was done to ascertain the asset allocation, entry load, exit load, associated with the mutual

funds for “retail investors”. Ultimately this would help in understanding the benefits of mutual funds to

investors.

SCOPE OF THE STUDY

In my project the scope is limited to some prominent mutual funds in the mutual fund industry. I analyzed

the funds depending on their schemes like equity, income, balance. But there is so many other schemes in

mutual fund industry like specialized (banking, infrastructure, pharmacy) funds, index funds etc.

3.2 STUDY ON THE BASIS OF FOLLOWING PARAMETER.

Performance

Risk

Growth rate and potentials

How to judge a good mutual fund

3.3 OBJECTIVE OF THE STUDY

To study the Risk associated with mutual funds from retail investor’s point of view.

To know how the services of mutual funds influence the retail investor behavior.

To know the factor considered by the investor while investing in the mutual fund.

To identify the scheme preferred by the investor.

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3.4 LIMITATIONS

Time is the biggest constraint in this project.

People are not revealing the actual information.

The lack scope is limited be

3.5 RESEARCH METHODOLOGY

A research methodology has a specified framework for collecting the data in an effective manner.

Research methodology means a “defining the problem , defining the research objectives,

developing the research plan, collecting the information, analyzing the information and

presentation of finding” such framework is called “Research Design”.

In order to answer the above stated key research questions we will conduct a survey in the lovely

professional university campus and outside the university also.

Research Define: The definition of problem includes “A Study Of Role And Signignificance Of

Mutual Fund For Retail Investor”.

Research Design: A Research Design is the arrangement of condition for the collection and

analysis of data in manner that aims to combine relevance to research purpose with economy in

procedure. my research design is a combination of descriptive.

Data Design: It involves different aspects like the nature of data, the data source, the data

frequency and the data tool.

Nature Of Data: Data is collection through both primary and secondary source.

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Primary Data: Original data compiled and studied for a specific purpose. For example, a

structured survey might be conducted for the purpose of discovering current attitudes on a particular

topic; raw survey responses would be primary data.

Primary data is to be collected through a set of defined questions and by personal interaction.

Secondary Data: Secondary data is used in this research for this we are collect

information from journals, magazines, financial records, web sites and annual reports of the

company. So in our project we are also using all these sources of data collection which

comes under the secondary source of data collection.

Secondary data is collected through journal, newspaper and internet.

Sample Design: Convenient Sampling

Sample size: 100

Sample place: Lovely Professional University Phagwara, Campus.

Presentation of Data: The data so collected will be than coded in the tables to make the things

presentable in more effective. The results will be presented through Pie Charts and Bar Graphs which will

help us out in easy and effective presentation and hence results are being obtained.

Sample size: here we are taking sample size of 100 respondents.

Sample area: Sample collection area is Lovely Professional University Campus and outside

also like Jalandhar city

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Chapter -:4

Analysis

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Analysis

Gender of The Respondent

a) 56% male

b) 44% Female

56%

44%

percentage

Male

female

Occupation of the respondent

These are the findings from the survey which include the number of participants and the type of

the participants. This survey includes all types of participants which may give exact results for the

evaluation

Your annual income level

15.4 % Less than one lakh

58.4 % Between 1lakh to 5 lakh

30

24.8% Above 5 lakh

16%

59%

25%

income

Less than one lakh

Between 1 lakh to 5 lakh

Above 5 lakh

Analysis

I. Lower income group of less than 1 lakh are not more attracted towards the income and

mutual fund Schemes one of the reason they cannot afford to take too much of risk.

II. Mutual Funds are more popular with the income group of 1 lakh to 5 lakh . This group is

having maximum interest in mutual fund.

III. Person having income above one lakh secondly interested in the mutual fund.

Q1.Do you have any Mutual Fund product?

a) 63% yes`

b) 37% no

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63%

37%

mutual fund

Yes

No

Analysis: From the above chart clear that there are many people who have participated in the

survey and the major portion of the survey indicates that the people are interested in investing in

mutual funds for the sake their family financial security.

Q2: Which scheme of mutual fund do you prefer?

a) Open ended 34%

b) Close ended 28%

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55%

45%

Mutual fund scheme

Open Ended

Close Ended

Analysis: 34% respondent said that they prefer the open end scheme and 28% said for the close ended

scheme. It signifies that people invested or prefer open ended scheme as compared to closed ended scheme.

Because people preferred funds which are flexible and easily converted in to liquid form.

Q3: Why do you go for Mutual Fund instead of other investment alternatives?

a) 7% Affordability

b) 36% high return

c) 14% availability

d) 4% other

33

11%

59%

23%

7%

Investment alternatives

affordability

high return

availability

other

Analysis: 36% respondent said that they go for mutual fund because they get high return , 14% said they

prefer mutual fund because of availability, 7% due to affordability, 4% go for others. It signifies that

people needs high return in a span of time or very short time and one of the more reason is that they want

to reinvest in the other investment options.

Q4. What is your mode of payment you prefer at the time of buying mutual fund.

a) One time payment 34%

b) Installment payment 26%

c) Other 2%

34

55%

42%

3%Mode of payment

One time payment

Installment payment

others

Analysis: the mode of payment that the most respondent prefer is one time payment (34%),

installment payment 26%, and other is 2%. It is clearly indicates that the people are happy with

one time payment mode in this the charges are not so much. Because whenever you pay in

installments so the charges are high reason filing and other administrative charges.

Q5. What is the most important factor which influences your investment decision?

a) Price of product 13

b) Risk level 34

c) Past experience 15

35

21%

55%

24%

factor influencing investment decision

price of Product

Risk level

Past Experience

Analysis: The most important factor that influence the investment decision is risk level (34%), past

experience is 15%,price of the product is 13%. It is said that the investors are risk adverse they are not

willing to taking risks because of little knowledge and expertise and without knowledge it is difficult to get

the return . Resulting they are investing in the Mutual Funds.

Q6.Which of your investment holding time (lock in period) you prefers.

a) Less than 6 months 15%

b) Half yearly 9%

c) One year 26%

d) More than one year 19%

36

15%

14%

41%

30%

Sales

Less than 6 months

Half yearly

One year

More than one year

Analysis: Most of the respondent said their holding investment time is one year ,19 % said that more than

one year, 9% said that they hold for half year and 9 % less than 6 months. One of the reasons it is suitable

for the one year time periods because it help to to get the return and saving of long term capital gain tax.

Q7. Do you think that the Mutual Fund investor gets the handsome return in comparison to the other

investment option?

a) Yes 53%

b) No 10 %

37

84%

16%

Handsome Return Option

Yes

No

Analysis:

53% respondent said that yes they can get handsome return and 10% said that they don’t get handsome

return because most of the investors using mutual fund as tool of a good return because of the other

available options like share, they are high risky and most of the time people loosing money instead of

getting money so mutual fund fetch the handsome return to the retail investors.

Q8. Rate the following question according to your satisfaction level.

Scale : (Rank1 for Strongly agree, Rank 2 for Agree, Rank 3 for Moderate, Rank 4 for Disagree,

Rank 5 for Strongly Disagree)

S.No. Statement

1 2 3 4 5

1. Do you think that the mutual fund help to minimize the risk related to

investment?

38

2. Do you think that mutual fund help to hedge the risks the investor?

3. Do you get the proper return on your mutual fund investment ?

Analysis:

One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

Do you think that the mutual fund help to

minimize the risk related to investment? 63 1.35 .652 .082

Do you think that mutual fund help to

hedge the risks the investor? 63 2.16 .700 .088

Do you get the proper return on your

mutual fund investment ? 63 1.59 .796 .100

One-Sample Test

Test Value = 0

T df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Do you think that the mutual

fund help to minimize the risk

related to investment?

16.437 62 .000 1.349 1.19 1.51

Do you think that mutual fund

help to hedge the risks the

investor?

24.465 62 .000 2.159 1.98 2.34

Do you get the proper return on

your mutual fund investment ? 15.831 62 .000 1.587 1.39 1.79

39

Analysis: We can apply the T-test on question no. 8 and our sample size was100. From our sample

size it has been found that only 63 respondent have mutual fund scheme and they invested in

various scheme comes under mutual funds ( Open end, Close end scheme). After applying T-test

we can get some useful information which help us to analyze or interperate the result of question

no 8. After applying T-test we can get some value (Mean=1.35, std. deviation=.652, std. Error

mean=.082, Df=62, mean diff=1.349.) After getting all the data we come to know that the

significance value=.000 is less than the table value so the hypothesis is accepted. So we get to

know that the mutual fund helps the investors to minimize the risk of the investors.

From the given value we get to analyze that the mean difference value is 2.159 and significant

value is .000 this significant value is less than the table value so it reflect that the mutual fund

helps the investor to hedge the risk of the investor.

The significant value of the 3rd

question is .000 which is less than that the table value which is

15.831 so it mean our hypothesis is right and it has been conclude that the mutual fund give the

proper return to the investors.

Q9. Purpose of your investment

a) Wealth maximization 28%

b) Regular income 15%

c) Tax saving 20%

d) Other 37%

40

28%

15%

20%

37%

Investment Purpose

Weath maximization

Regular income

tax saving

other

Analysis:

From the primary study it has been found that the main purpose of 28% investor to invest in mutual fund is

to maximize the wealth , 15% for their regular income, 20% to save the tax, 37% for other purpose. It is the

people perception that they are investing money mostly for the wealth maximization instead of regular

income and all.

Q10. How do you come to know about the Mutual Fund and its product.

Friends and relatives23%

Media and advertisement 16%

Borkers/traders/investors 23%

41

37%

26%

37%

Sales

Friends and relatives

Media and advertisement

Borkers/traders/investors tr

Analysis:

23% respondent said that they come to know about mutual fund from friends and relatives and 16% from

media and advertisement , 23% come to know from brokers. Retail investors are basically not too much

concern about the investment scheme they only come to know these scheme by the friend , relatives and

brokers/ traders/ investors who are the make familiar the investment scheme.

Q11.What is the reinvestment pattern of the investor.

a) Investment in same fund 37%

b) Investment in different fund 25%

42

60%

40%

Reinvestment pattern

investment in same fund

investment in diffreent fund

Analysis:

The reinvestment pattern of 37% investor is in same fund and 25% are in different funds. Main reason is

that people investing the money in mutual fund and it is taking care by the fund managers resulting they

get handsome return and then they have good faith on the particular fund they have mind set that again

same fund give them good return.

Q12.Why do you not invest in the mutual fund?

a) Past experience 3%

b) Lack of knowledge 17%

c) Difficult to select scheme 15%

d) Investment advisor support are not available 2%

43

59%23%

10%8%

Reason For Not Investod in Mutual fund

Past Experience

Lack of knowledge

Difficult to select scheme

ainvestment advisor support are not available

Analysis:

3% of the respondent said that they haven’t invest in mutual fund due to past experience and 17% said that

they haven’t invest in mutual fund due to lack of knowledge and 15% due to difficult selection scheme and

2% because of investor support are not available. Most of the time it seems to be that the company not able

to fetch the suitable return. Resulting investors having big impact on the investment decision.

44

Chapter: 4

Recommendation

45

4.1 RECOMMENDATION:

The mutual fund should be more transparent.

Easy redemption should be of fund.

Flexible to transfer one fund to another.

Knowledge should be approachable to retail investor.

Conclusion

46

Chapter: 5

References

47

WEBSIDE LINKS

Ranganathan Kavitha “A Study of Fund Selection Behavior of Individual Investor

Towards Mutual Funds” - with Reference to Mumbai City Publisher University press

Madurai Kamaraj University

Krishnan Janaki and Sharma Rakesh “Mutual fund boom” (web link

http://www.rediff.com/money/2003/sep/20spec.htm), September 20,2003.

Sharma Anuj, “Focus more on retail investors” Reports from Delhi: The Hindu (web

link- http://www.thehindu.com/2009/06/18/stories/2009061855961600.htm), Thursday, Jun

18, 2009.

Gruber MJ “Survivor bias and Mutual Fund performance” Leonard N. Stern School of

Business, New York University, 44 West 4th Street, 9th Floor, New York, USA(2009).

Liang.B “On the Performance of Hedge Funds” Weatherhead School of Management

Case Western Reserve University publication (http://www.hedgefund-

index.com/s_marketrisk),1998.

Kaushik,Abhay., “Do mutual funds with few holdings outperform the market” Journal of

Asset Management Correspondence Publication of Accounting, Finance and Business Law,

Radford University, Virginia, USA

(http://www.palgrave-journals.com/jam/journal/v9/n6/abs/jam200839a.html),2009

http://www.rediff.com/money/2003/sep/20spec.htm

http://www.google.com/url?sa=U&q=http://www.spinoffadvisors.com/articles/financialAnalyst0899.pdf

48

BIBLIOGRAPHY

Machiraju,H.R.of “Indian Financial System” Third Edition Vikas Publication House Pvt.

Ltd. New Delhi, 2009 Edition.

Ratogi,Harsha, “Financial Institution And Market” Fouth Edition, Kings Books

Publication Delhi

Krishnaswamy.K.N., “Managemet Research Methodology” Interation of principles,

Methods and Techniques, Publication by Dorling Kindersley (India) Pvt. Ltd, South Asia,

first edition 2006.

Singh.Sharmila, “Marketing Research” Concept , Practice and Cases, publication by

Oxford University Press,fourth Edition 2008.

Shankar.Jai, “Quantitative techniques for management’ Publication By Excel Books First

Edition New Delhi 2005

49

Annexure

50

QUESTIONNAIRE

Here we are conducting a survey to know the importance and to know the investor

perception towards Mutual Fund so it’s our humble request to every respondent to devote

his or her precious time for fill this questionnaire.

Name……….. Age……………….

Gender……… Occupation……….

Your annual income level

Less than 1lakh

Between 1lakh to 5 lakh

5 lakh and above

Q1. Do you have any Mutual Fund Product?

a) Yes b) No

(If your answer is “NO” so go to Q 12. otherwise continue to Q2.)

Q2. Which scheme of mutual fund do you prefer?

a) Open Ended b) Close Ended

Q3. Why do you go for Mutual Fund instead of other investment alternatives.

a) Affordability b) High Return

c) Availability d) Other (specify)…….

Q4. What is your mode of payment you prefer at the time of buying mutual fund.

a) One Time Payment b) Installment Payment

51

Cont…

Q5. What is the most important factor which influences your investment decision?

a) Price of product b) Risk Level

c) Past Experience c) Other (specify)…..

Q6.Which of your investment holding time (lock in period) you prefers.

a) Less than 6months b) Half yearly

c) 1 year d) More than 1 year.

Q7. Do you think that the Mutual Fund investor gets the handsome return in comparison to

the other investment option?

a) Yes b) No

Q8. Rate the following question according to your satisfaction level.

Scale : (Rank1 for Strongly agree, Rank 2 for Agree, Rank 3 for Moderate, Rank 4 for Disagree,

Rank 5 for Strongly Disagree)

S.No. Statement

1 2 3 4 5

1. Do you think that the mutual fund help to minimize the risk related to

investment?

2. Do you think that mutual fund help to hedge the risks the investor?

3. Do you get the proper return on your mutual fund investment ?

Q9. Purpose of your investment

52

a) Wealth maximize b) Regular Income

c) Tax saving c) Other (specify)…

Q10. How do you come to know about the Mutual Fund and its product.

a) Friends and relative b) Media advertisement

c) brokers/traders/investors d) Other (specify)….

Q11.What is the reinvestment pattern of the investor.

a) Investment in same fund b) Investment In Different Fund

(Question Number 12 only for those who tick “No” in Q1.)

Q12.Why do you not invest in the mutual fund because of

a) Bitter past experience

b) Lack of knowledge

c) Difficult to select the schemes

c) Investment advisor support not available.

Any suggestion and recommendation

…………………………………………………………………………………………

…………………………………………………………………………………………

Date: (Signature of the Respondent)

Thanking You in Anticipation

53

GLOSSARY.

Asset Management Company (AMC) :A Company registered with SEBI, which takes

investment/ divestment decisions for the mutual fund, and manages the assets of the mutual fund.

e.g. for Sun F&C mutual fund , the AMC is Sun F&C Asset Management (India) Pvt. Ltd.

Asset Allocation :It is the process of allocating the overall corpus to different assets like equities,

bonds, real estate, derivatives etc.

Back-end Load :A kind of redemption charge that an investor has to pay for withdrawing his

money from the mutual fund. It is basically imposed to discourage investors from exiting the fund.

It is also popularly referred to as an Exit Load.

Balanced fund :A fund that invests substantially both in debt and equity..

Closed-ended fund: A fund where investors have to commit their money for a particular period.

In India these closed-ended funds have to necessarily be listed on recognized stock exchanges

which provides an exit route.

Contingent deferred sales charge (CDSC): An exit charge permitted under the regulations for a

no-load scheme

Continuous Offer Period:Is the date from which the units are available for sale and repurchase at

a price linked to NAV of the scheme.

Corpus: The total investable funds available with a mutual fund scheme at any point of time.

Credit Risk: It is the risk that the issuer of a fixed income security may default on payment of

interest and repayment of principal. It is also referred to as default risk.

Dated Security: A debt instrument that is long term in nature and has a fixed date of redemption.

54

Debt fund: A fund that invests in debt securities like Government securities, Treasury Bills,

corporate Bonds etc. These funds are generally preferred by investors wanting steady income and

not willing to take higher risks.

Dematerialization: The process of converting the physical /paper shares in Electronic form. SEBI

had made it compulsory to get the shares of some companies dematerialized. In this process the

investor opens an account with a Depository Participant (DP) and the number of shares the

investor holds is shown in this account.

Depository Participant: An authorized body who is involved in dematerialization of shares and

maintaining of the investors accounts.

Discount/Premium to (Net Asset Value) NAV: It is the difference between the unit price and

NAV. If the price is higher than the NAV, the units are trading at premium: if the price is lower,

the units are trading at a discount.

Diversification: It is the investment strategy of not putting all one’s eggs in one basket. By

diversifying a portfolio across different industries, overall risk of the portfolio is reduced.

Efficient Portfolio :A portfolio which ensures maximum return for a given level of risk or a

minimum level of risk for an expected return.

Factor Fund: It is a mutual fund that has a core philosophy of investing in a particular factor or

style in the market. They are also referred to as Style Funds. Examples of factor funds are Mid-cap

funds, Low P/E funds, Growth funds etc.

Financial Pyramid :An investment plan in the shape of a pyramid structure where the safest

investments are at the base and the riskiest investments at the peak.

Fixed Income Security: A type of security that pays fixed interest at regular intervals. These

comprise gilt-edged securities, bonds (taxable and tax-free), preference shares and debentures.

Less risky than equity shares and have little scope for capital appreciation.

55

Front-End Load : An initial amount charged by a fund for its administrative expenses or for

paying commissions to brokers. If the charge is made at the termination or redemption, it becomes

a back-end load.

Gilt-edged Security: Government securities and bonds, usually with a low interest rate.

Considered safest investments, as the government security is free from default risk. Originally such

certificates were edged with gold and hence the name.

Gilt fund: Funds that invest predominantly in government securities and treasury bills. It is good

for investors who desire safety of principal and adequate liquidity.

Equity/Growth fund: A fund that invest primarily in equities and has capital appreciation as its

investment objective

Fund Manager : A professional manager appointed by the Asset Management Company to invest

money in accordance with the objects of the scheme.

Fundamental Analysis: A method of investment analysis based on the fundamentals like

turnover, net profit, growth, and vision of a company. The boom or depression of the stock

markets are not considered in this analysis.

Income Fund: A fund that usually invests in debentures, bonds, and high dividend shares.

Preferred by investors who wants regular income. It pays dividends to the investors out of its

earnings.

Index Fund: A fund whose portfolio is benchmarked against a popular index like the BSE Sensex

or the BSE Natex. Such an investment philosophy reflects the belief that the market is efficient and

trying to beat the market over the long term is futile

Initial Offer Period: The dates on which the initial subscription to the units of the scheme can be

made. It is similar to the IPO of an equity issue. This initial offer period is followed by a

continuous offer period.

56

Interest Rate Risk: The change in the price of a debt security due to changes in the market

interest rates is the interest rate risk. For debt oriented mutual fund schemes, this interest rate risk

affects the NAV of the fund. A rise in the interest rates leads to a fall in the price of a fixed income

security.

Interim Dividend :An advance installment of the dividend finally declared. More often one, but

sometimes two such payments are made. The final dividend is often at least equal, and sometimes

more. The interim dividend is a fair indication of a company's profitability, during the working

year.

Liquid Fund : A fund that invests its corpus in short term instruments like call markets, treasury

bills, Commercial Paper (CP), Certificate of Deposit (CD).

Liquidity Risk : It is the risk in a fixed income security as well as in equities that these securities

may not be sold in the market at close to their value. Liquidity risk is characteristic of narrow

markets like India.

Load: A charge by the fund when an investor buys (entry load) or sells (exit load) units in the

fund.

Market Capitalization: Represents the market value of the company. It is a product of the current

market price and the number of shares outstanding.

Market Instrument: A fully negotiable instrument for short-term debt.

Market Lot: A fixed minimum number of shares, in which or in multiples of which, shares are

bought and sold on the stock exchange. The advent of dematerialization of shares will do away the

significance of market lot.

Net Asset Value (NAV):This is calculated as total assets minus all expenses and divided by the

number of outstanding units. This is the main performance indicator for a mutual fund, especially

when viewed in terms of appreciation over time.

57

Offer Price: The price at which units can be bought from a fund.

Offshore Fund :A fund domiciled outside the country where investments are made. It is often a

tax haven, not subject to the tax laws of the holder's country.

Pari Passu: Ranking equally. After conversion of debentures into shares, the new shares created

carry the same rights as the existing shares of the company to receive dividends, rights and bonus

shares, and to participate in the company's profit and loss.

Passive portfolio management: Exactly the reverse of active portfolio management. The portfolio

manager assumes that markets are efficient and all information is already analyzed and reflected in

the prices of shares. This strategy is based on the premise that it is impossible to consistently beat

the market.

Rating :Evaluation of credit risk in fixed income securities. This evaluation is specific to the

security rated and is done in India by Crisil, Icra, Care and Duff & Phelps.

Reinvestment Plan: It is a plan where the earnings of a mutual fund scheme are reinvested back in

the fund.

Reinvestment Risk :It is the risk that the interest on fixed income instruments cannot be

reinvested at the same rate. This problem becomes pronounced in a falling interest rate scenario.

Sector fund: Such funds invest only in stocks belonging to a specific industry usually aimed at

growth. For e.g. Kothari Pioneer Infotech Fund. Sector funds are generally considered to be risky

in nature.

Securities: Financial documents which give the owner specific rights of ownership; these include:

equity and preference shares, debentures, treasury bills, government bonds, units of mutual fund,

and any other marketable documents.

58

Sinking Fund: Money regularly set aside in a separate fund and invested by a company for the

repayment of debt instruments (fixed deposits, debentures, other loans) or the redemption of

preference shares, or for replacement of assets.

Sponsor: Sponsor is the parent organization that contributes the initial capital of the asset

management company (AMC).

Switching: Transferring from one scheme to another in a group of schemes operated by a Mutual

Fund, where the rules so permit. A switching fee may or may not be charged.

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