Download docx - A study on investor attitude towards mutual funds with reference to reliance mutual funds

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CHAPTER 1INTRODUCTION

The term investment is used to describe the process of investing money in shares,

debentures, fixed deposits, gold, real assets, life policies, mutual funds, and money market

instruments. These outlets where the money is invested are known as investment assets. By

investing, an investor commits the present funds to one or more assets to be held for some time

in expectation of some future return in terms of interest or capital gain. Individual investor

considers a number of factors before deciding to invest their funds in various securities involving

varying degrees of risk and return. In the present economic scenario, the option available to

them is different and the factor motivating the investors to invest is governed by their socio-

economic profile including expected return and risk tolerance.

In short, the investment decision making process is a multi-faceted subject to change

over a period of time. An attempt has been made in this study to identify the perceptual factors

which influence the investors to invest in mutual funds. There are a number of investment

opportunities available to an investor. Each of these investments has its own risk and return

features. The proverb “never put all the eggs in the same basket” guides the investor to diversify

the risk. Diversification refers to the process whereby an investor invests his funds in more than

one investment opportunity. An investor must learn to analyze and measure the risk and return

of the portfolio. All investors may not be in a position to undertake fundamental and technical

analysis before they decide about their investment options. Neither do they have the resources

nor the expertise to do so. Instead of investing directly, the investors particularly, small investors

may go for indirect investment through the mutual funds. Instead of becoming the share holder

or bondholder of a company, these investors would become the unit holders of mutual funds. In

almost all the capital markets throughout the world, mutual funds have gained a significant

position.

The mutual fund industry plays a significant role in the development of the economy as

well. Its buoyant growth leads to lower intermediation costs, more efficient financial markets,

and increased vibrancy of the capital markets and higher local ownership of financial assets. If

retail investment is directed through the mutual fund route, it will lead to greater wealth creation

in the long run. Thus, the industry can be one of the causative factors for a healthy economy.

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

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

benefits of stock market investment. SEBI has played a vital role in regularizing the mutual fund

business. From time to time it has tried to plug the loopholes prevailing in the system and

safeguard the interest of investors who has been backbone of this unprecedented growth. As of

now big challenge of mutual fund industry is to mount on investor awareness and to spread

further to the semi urban and rural areas. Since the need of this study has been aroused in

order to see the preference awareness and the investor’s attitude regarding the mutual funds.

Investment is a commitment of funds made in the expectation of some positive return. If

the investment is properly undertaken, the return will be commensurate with the risk the investor

assumes. Investment goals vary from person to person business to business. While some want

security, others give more weightage to returns alone. With objectives defying any range, it is

obvious that the products required will vary as well.

Investments generally involve real assets. Real assets are tangible, material thing

such as buildings, automobiles, and gold etc. financial assets are pieces of paper representing

an indirect claim to real assets held by someone else.

MUTUAL FUNDS:A mutual fund is an investment vehicle that pools in the monies of several investors, and

collectively invests this amount in either the equity market or the debt market, or both,

depending upon the fund’s objective. This means you can access either the equity or the debt

market, or both, without investing directly in equity or debt.

INVESTING IN MUTUAL FUNDS:Diversification is a major advantage of investment through Mutual Funds, as

investors get the benefit of various instruments through a single avenue.

Professionally qualified people manage the funds.

Mutual Funds offer flexibility in options and choice of schemes to match individual

needs.

Transparency of operations as well as investment pattern and philosophy by disclosures

of portfolio also add to the advantages of investing in Mutual Funds.

The Mutual Fund industry is very well regulated by SEBI

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Mutual Funds offer tax benefits. Dividend income received from investing in Mutual

Funds is tax free in the hands of the investor. Investments in the growth option will be subject to

long term or short-term capital gains tax as applicable.

ADVANTAGE OF MUTUAL FUNDS

1. Professional Fund Management

2. Services

3. Diversification

4. Affordability

5. Cost effectiveness

6. Liquidity

7. Tax breaks

8. Transparency.

There are wide varieties of mutual fund schemes and are classified on the basis of

its structure and its investment objective.

BASED ON STRUCTURE

OPEN ENDED FUNDSAn open-end fund is one that is available for subscription all through the year. These

do not have a fixed maturity. Investors can conveniently buy and sell units at Net asset value

(“NAV”) related prices. The key feature of this scheme is liquidity.

CLOSED-ENDED FUNDSThe fund is open for subscription only during a specific period. Investors can invest in

the scheme at the time of the initial public issue and thereafter they can buy or sell the units of

the scheme on the stock exchanges where they are listed. The objective of the fund is to

declare regular dividend.

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BASED ON INVESTMENT OBJECTIVE

GROWTH FUNDSThe aim of growth funds is to provide capital appreciation over the medium to long-

term. Such schemes normally invest a majority of the stock exchanges where they are listed.

The fund may declare dividend but the main objective is only capital appreciation.

INCOME FUNDSThese are also known as debt funds since they invest in debt instruments issued by

the government, private companies banks and financial institutions. These funds target low risk

and stable income to the investors. While returns in these funds may be regular, their scale may

fluctuate depending on the prevailing interest rates and the credit quality of the debt securities.

BALANCED FUNDSThese funds, as the name suggests, are a mix of both equity and debt funds. They

invest in both equities and fixed income securities in line with pre-defined investment objectives.

The aim at providing a balanced mix of capital appreciation through investments in equities

coupled with investments in stable instruments like bonds etc.

LIQUID FUNDSAlso know as Money market funds as they invest in securities of short term nature,

typically securities of less than one-year maturity like Treasury Bills issued by the government,

Certificate of Deposits issued by banks and Commercial Paper issued by companies as well as

in the inter- bank call money market. These funds are considered to be at the lowest rung in the

hierarchy of risks.

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1.1 COMPANY PROFILE

Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of India’s leading Mutual Funds, with

Average Assets Under Management (AAUM) of Rs. 78,112 Crores and an investor count of

over 64.65 and 70.99 Lakh folios. (AAUM and investor count as of Jan - Mar '12 ) Source :

http://www.amfiindia.com/

Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing mutual

funds in India. RMF offers investors a well-rounded portfolio of products to meet varying investor

requirements and has presence in 179 cities across the country. Reliance Mutual Fund

constantly endeavors to launch innovative products and customer service initiatives to increase

value to investors. Reliance Capital Asset Management Limited (‘RCAM’) is the asset manager

of Reliance Mutual Fund. RCAM a subsidiary of Reliance Capital Limited, which holds 92.93%

of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders.

Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial

services companies, and ranks among the top 3 private sector financial services and banking

companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life

and general insurance, private equity and proprietary investments, stock broking and other

financial services.

Sponsor : Reliance Capital Limited

Trustee : Reliance Capital Trustee Co. Limited

Investment Manager /

AMC

: Reliance Capital Asset Management Limited

Statutory Details : The Sponsor, the Trustee and the Investment Manager are

incorporate under the Companies Act 1956.

Vision Statement

To be a globally respected wealth creator with an emphasis on customer care and a

culture of good corporate governance.

Mission Statement

To create and nurture a world-class, high performance environment aimed at

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delighting our customers

Our Corporate Governance Policy:

Reliance Capital Asset Management Limited has a vision of being a leading player in the

mutual fund business and has achieved significant success and visibility in the market.

However, an imperative part of growth and visibility is adherence to good conduct in the

marketplace. At Reliance Capital Asset Management Limited, the implementation and

observance of ethical processes and policies has helped us in standing up to the scrutiny of our

domestic and international investors.

Management:

The management at Reliance Capital Asset Management Limited is committed to good

corporate governance, which includes transparency and timely dissemination of information to

its investors and unit holders. The Board of Directors of RCAM is a professional body

constituting inter-alia of, well-experienced and knowledgeable independent members.

Employees:

Reliance Capital Asset Management Limited has at present, a code of conduct for all its

officers. It has a clearly defined prohibition on insider trading policy and regulations. The

management believes in the principles of propriety and utmost care is taken while handling

public money, making proper and adequate disclosures. All personnel at RCAM are made

aware of their rights, obligations and duties as part of the Dealing Policy laid down in terms of

SEBI guidelines. They are taken through a well-designed HR program, conducted to impart

work ethics, the Code of Conduct, information security, Internet and e-mail usage and a host of

other issues. One of the core objectives of RCAM is to identify issues considered sensitive by

global corporate standards, and implement policies/guidelines in conformity with the best

practices as an ongoing process. RCAM gives top priority to compliance in true letter and spirit,

fully understanding its fiduciary responsibilities.

Sponsors

Reliance Capital Limited:

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Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management

Limited, a subsidiary of Reliance Capital Limited, which holds 86.80% of the paid-up capital of

Reliance Capital Asset Management Limited, the balance paid up capital being held by minority

shareholders. Reliance Mutual Fund (RMF) has been sponsored by Reliance Capital Ltd (RCL).

The promoter of RCL is AAA Enterprises Private Limited.

Reliance Capital Limited is a Non Banking Finance Company and is one of the India’s

leading and fastest growing financial services companies, and ranks among the top three

private sector financial services and banking companies in India, in terms of networth.

Reliance Capital Limited has interests in asset management and mutual funds, life and

non-life insurance, private equity and proprietary investments, stock broking and other activities

in the financial services sector. The net worth of RCL is as follows:

Particulars

(Rs.in crores) 2009-10 2008-09 2007-08

Net Worth 6885.70 6687.30 5927.50

Total Income 2366.62 2974.85 2079.79

Profit After Tax 339.42 968.02 1025.45

Reliance Capital Limited has contributed Rupees One Lac as the initial contribution to

the corpus for the setting up of the Reliance Mutual Fund. Reliance Capital Limited is

responsible for discharging its functions and responsibilities towards the Fund in accordance

with the Securities and Exchange Board of India (SEBI) Regulations.

The Sponsor is not responsible or liable for any loss resulting from the operation of the

Scheme beyond the contribution of an amount of Rupees one Lac made by them towards the

initial corpus for setting up the Fund and such other accretions and additions to the corpus.

AMC:

About Reliance Capital Asset Management Limited.

Reliance Capital Asset Management Limited (RCAM) is an unlisted Public Limited

Company incorporated under the Companies Act, 1956 on February 24, 1995. RCAM has been

appointed as the Asset Management company of Reliance Mutual Fund by the Trustees of

Reliance Mutual Fund vide Investment Management Agreement (IMA) dated May 12, 1995 and

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executed between Reliance Capital Trustee Co. Limited and Reliance Capital Asset

Management Limited and amended on August 12, 1997 and amended on August 12, 1997,

January 20, 2004 and February 17, 2011 in line with SEBI (Mutual Funds) Regulations, 1996.

Pursuant to this IMA, RCAM is acting as the Investment Manager of the Mutual Fund. The net

worth of the Asset Management Company based unautdited financials statements as on

September 30, 2011 is Rs. 1,228.89 Crore. RCAM is also registered as a Portfolio Manager

vide SEBI Registration Number PM/INP000000423 and renewed with effect from August1,

2009. The AMC is also rendering advisory services in respect of ‘Emergent India Investment

Limited’, an offshore fund for investment in India.

RCAM has ensured that key personnel of the AMC, the systems, back office, bank and

securities accounts are segregated activity wise and there exists systems to prohibit access to

inside information of various activities. As per SEBI Regulations, it will further ensure that AMC

meets the capital adequacy requirements, if any, separately for each such activity. However,

there is no conflict of interest between various business activities carried on by RCAM.

The mutual fund:

About RMF has been registered with the Securities & Exchange Board of India (SEBI) vide

registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual

Fund was changed to Reliance Mutual Fund effective 11th March 2004 vide SEBI's letter no.

IMD/PSP/4958/2004 date 11th March 2004. Reliance Mutual Fund was formed to launch

various schemes under which units are issued to the Public with a view to contribute to the

capital market and to provide investors the opportunities to make investments in diversified

securities.

The main objectives of the Reliance Mutual Fund are:

To carry on the activity of a Mutual Fund as may be permitted at law and formulate and

devise various collective Schemes of savings and investments for people in India and

abroad and also ensure liquidity of investments for the Unit holders.

To deploy Funds thus rose so as to help the Unit holders earn reasonable returns on

their savings.

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To take such steps as may be necessary from time to time to realise the effects without

any limitation.

Awards and achievements:

CNBC TV18 - CRISIL Mutual Fund of the Year Award for 2009: Reliance Mutual Fund

has won the ‘CNBC TV18 - CRISIL Mutual Fund of the Year’ Award in the Category – Mutual

Fund House of the Year (Awarded by CRISIL Fund Services, CRISIL Limited). In total 37 fund

houses were considered as the award universe. Fund Houses winning at least one award for

their schemes in the category level awards for 2009 were eligible to be in contention for the

award. The award is based on consistency of fund house’s performance across various scheme

categories in the four quarterly CRISIL Composite Performance Rankings (CPRs) released

during the calendar year 2009. The individual CRISIL CPR ranks for their schemes were

aggregated on a weighted average basis to arrive at the final ranks for fund houses. The mutual

fund house with the highest final score is the “Mutual Fund House of the Year”. The award has

been granted for the year 2009 and will be in vogue till the announcement of the award for the

next year in the same category. A detailed methodology of the CRISIL CPR is available at

www.crisilfundservices.com. Past performance is no guarantee of future results.

Rankings and Award Source: CRISIL Fund Services, CRISIL Limited.

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1.2 OBJECTIVES OF THE STUDY:

To study the investors attitude towards the mutual funds.

To find out the factors which influencing the investors to prefer the investment in mutual

funds.

To suggest the suitable measures for extending the scope for investment in mutual

funds based on findings of the study.

1.3 SCOPE OF THE STUDY:

The present study is an attempt to study the investor’s attitude towards mutual fund of

Chennai city. it involves understanding the basic concept of mutual fund, various

concepts of mutual fund, various schemes of mutual fund, investment alternatives.

Factor influencing to investment in mutual funds, investors expectations regarding the

mutual fund and investors attitudes of different mutual funds.

The analysis would help how much importance investors giving to the mutual funds

comparing to the other investments.

1.4 NEED OF THE STUDY: This study gives information about mutual fund industry and as well as awareness level

among the people for mutual funds.

And this study deals with the investors attitude and how the mutual funds are performing

in the current market situation.

This study facilitates the general people who can understand the importance and explore

the new option for investment in the mutual funds

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1.5 LIMITATIONS OF THE STUDY

For the research work, data was collected and interpreted with utmost reliability and

consistency but due to prejudices of a few respondents, certain limitations of the study are as

follows:

The study depicts the present scenario in the selected city of Chennai and hence the

result may not be applicable to another period of time.

The study is limited to 150 respondents of the selected city of Chennai.

Answer to the questionnaire depends upon the beliefs and prejudices of investors.

It is assumed that respondents are true and honest in expressing their views and have

filled the questionnaire honestly and without any bias.

The present study is restricted to information collected about the Mutual Fund Investors

with the help of questionnaire.

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CHAPTER 2 REVIEW OF LITERATURE

Investors are generally more careful while making investment decision and presence of

rationality in every investor demands higher return at minimum risk but when markets are

efficient it is not possible to gain abnormal returns. Risk is generally, associated with various

applications differently but in common it means negative connotation such as harm or loss or

some undesirable action.

2.1 Factors influencing the retail investors to prefer investment in mutual funds in Puducherry: An Emprical study*D.Kandavel*Asst. Professor of Commerce, DDE, Annamalai University, AnnamalaiNagar, Tamil Nadu, India.

Mutual funds have emerged as an important segment of financial markets

and so far have delivered value to the investors. It has grown by leaps and bounds in last

couple of years. But no industry can flourish without a proper regulatory mechanism in the

place. These initiatives would help towards making the Indian mutual fund industry more vibrant

and competitive. Since, the need of study has been aroused in order to see the factors

influencing the retail investors to prefer investment regarding the mutual funds in Puducherry.

The study is based on the formulation of the following null hypotheses:

There is no significant relationship among the acceptance level of the retail investors

belonging to different demographic profile towards factors influencing to invest in mutual funds.

In order to study the factors influencing the retail investors to prefer investment in mutual funds

in Puducherry, chi square test, analysis of one-way variance, student t-test, analysis of co-

efficient of variation, multiple regression analysis, and percentage analysis have been

employed. Chi square test was employed to measure the association between the demographic

profile of the respondents and their satisfaction with investment in mutual funds and type of fund

preferred. The present study looks at the small investors purchase behavior does not have a

high level of coherence due to the influence of different purchase factors. If the study provokes

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the authority concerned to take some positive measures for expanding the scope of mutual

funds investment.

2.2 Investors perception towards investment in mutual fundsKaplan and Garrick (1981), Rajeshwari TR and Rama moorthy VE (2002)

The investment decision making process is a multi-faceted subject to change over a

period of time. Mutual Funds have become an important portal for the small investors. The

objectives of the study are to know investor’s motivational factors, investment preference and

problems faced by investors in Mutual Funds. The study reveals that 1) The motivational factors

to invest in mutual funds are Portfolio diversification, Risk minimization and greater tax benefits;

2) Lack of knowledge is the primary reason for not investing in mutual fund.

Risk expressed by Kaplan and Garrick (1981) demonstrates that risk involves a factor of

uncertainty and potential loss that might be incurred. Rajeshwari TR and Rama moorthy VE

(2002) studied the financial behavior and factors influencing fund/scheme selection of retail

investors by conducting factor analysis using principal component analysis, to identify the

investors underlying fund scheme selection criteria, so as to group them into specific market

segment for designing of the appropriate marketing strategy. Although majority of investors who

invest in mutual fund themselves are not clear with the objective and constraints of their

investment but in addition to this most important critical gap that exist in this process is lack of

awareness about presence of risk elements in mutual fund investment. The new marketing

philosophy and strategies place special emphasis on recognition of customer needs in an effort

to provide high level of quality services (Harrison, 2000).

2.3 Learn how to invest in Mutual FundsMustafa Soleimanzadeh

Mustafa Soleimanzadeh in his article, “Learn how to invest in Mutual Funds” had

discussed about the risk and return in mutual funds. He stated that the risk and return depend

each other, the greater the risk, the higher the potential return; the lower the risk, the lower the

expected return. Mutual funds try to reduce their risk by investing in a diversified group of

individual stocks, bonds, or other securities. He concluded that the investment in stocks can get

more return than mutual funds but investment in mutual funds the risk is lower. Mutual funds are

great for funding retirement plans and investors that don't have the time or energy to consider

individual stocks.(2006) Kum Martin in his article, “Basics about Mutual Funds” had discussed

about different types of mutual funds. He stated that the equity funds involve just common stock

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investments. They are extremely risky but can end up earning a lot of money. Fixed income

funds are government and corporate securities. Fixed income funds offer fixed returns and the

risk associated with these funds is very low. Balanced mutual funds are a combination of bonds

and stocks. He concluded that the low risk in investment will not earn a lot of returns. (2007)

Mutual fund managers have to use various investment styles depending upon investor’s

requirement. Most of the empirical evidences have shown that mutual fund investor’s purchase

decision is influenced by past performance (Patel, et al. 1992). Research study by (Jones et al,

2007) has proved that a negative correlation exists between advertisement and fund quality. A

common investor may expect that mutual fund should option strategies that have been

documented to produce superior returns in the past instead they follow to select portfolios that

don’t deviate markedly from market benchmarks.

2.4 Investors’ Preference towards Mutual Funds in Coimbatore CityA. Vennila, Author, Assistant Professor, Sri Krishna College of Technology, Coimbatore.R. Nandhagopal, Co-Author, Director, PSG Institute of Management, Coimbatore

There are a lot of investment avenues available today in the financial market for an

investor with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and

Bonds where there is low risk but low return. The recent trends in the Stock Market have shown

that an average retail investor always lost with periodic bearish tends. If the invests in Index

Funds, they foregoes management risk, because these funds do not employ managers.

In the present study an attempt has been made to study the attitude of the investors

towards investment in mutual funds in Coimbatore City. The study aims at finding out the

attitude of the investors towards investment in mutual funds in Coimbatore city. The primary

data was collected from the investors of mutual funds with help of the questionnaire. The

secondary data were collected from the books, records and journals. By adopting convenience

sampling, 250 respondents were selected for this study.

2.5 .An Analysis of Investors' Attitude towards Tax Saving Mutual Funds in IndiaN. S. Santhi, Assistant Professor, Department of Business Administration, KSR College of Engineering, Tiruchengode.K. Balanaga Gurunathan, Professor, Department of Management Studies, KSR College of Technology, Tiruchengode.

Investment is saving money and engaging them with the expectation of earning profit in

future. Mutual fund is supposed to be a better avenue for the individual investor. Tax saving

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mutual funds is also known as Equity Linked Saving tax saving mutual funds which provides all

the benefits along with tax exemption on their investment. This study makes an attempt to

analyze the investor’s attitude towards their investment on Tax saving mutual funds. The study

finds that the participation of investors in Tax saving mutual funds is comparatively less than

other safer investment areas like Insurance, Postal Deposit Schemes and Fixed Deposits. The

dynamic relationship between investors’ biographical information and their behavior has been

examined by using relevant statistical techniques.

The investors’ Knowledge and satisfaction on Tax saving mutual funds and awareness

on regulating bodies also has been analyzed. The study finds that majority of the investor

doesn’t have the knowledge on schemes and awareness on controlling authorities and they are

satisfied with the overall benefits on Tax saving mutual funds.

For the purpose of research, Primary data have been collected from the Tax saving Mutual fund

Investors’ in Tamil Nadu, India through well structured questionnaire schedule.

2.6 Investors attitude towards Mututal Funds Project ReportThe research was done on the topic “Investors Attitude towards UTI Mutual Funds”. The

study aims at analysing the attitude of the investors towards UTI Mutual Funds. The data was

collected with the help of a questionnaire. The sample size considered for the study was 100

wherein all the samples were investors of UTI Mutual Funds in Coonoor.

The tools used for the analysis include Percentage Analysis and Mean Score Values.

The analysis was divided into 2 phases which are Personal Factors and Investment Factors.

The study revealed that the investors have a positive attitude towards their investments in UTI

Mutual Funds. The investors mainly look into the returns earned from the investment. It was

found that the awareness towards the risk related to the investment was relatively low. Based

on the analysis Suggestions for improvement are provided.

2.7 Perceptions of investors, brokers and fund managers on the indian mutual fund industry

Financial system comprises of financial institutions, services, market and instruments.

Financial institutions mobilize resources, purchase and sell instruments and render various

services in accordance with the practices and procedures of law. Investing in financial securities

is a complex one involving knowledge of various investment tools, terms, concepts, strategies

and process. The success of a financial investment activity depends on the knowledge and

ability of investors to invest the

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right amount, in the right type, at the right time. Investor has to use his intellect, which is an art

to acquire by learning and experience.

Knowledge of financial investment principles and the art of investment management are

the basic requirements for a successful investment. The financial securities include ownership

securities (like shares, mutual fund units) and creditorship securities (like debentures, bonds).

Ownership securities are more risky than creditorship securities. Investment decisions relating

to ownership securities involve planning of investment strategies according to the extent of

diversification desired by individuals. Investors can reduce risk and maximize returns by way of

mutual fund investments, enjoying the expertise of professional fund management. In India,

Mutual fund industry is an organised financial system, accessible to individual investors having

varied needs and options. In order to identify the preferences of brokers and investors for

mutual funds, a careful collection of primary data through questionnaire was made. Schedules

were used to collect data from fund managers on mutual funds.

2.8 Investors Preference for Investment in Mutual Funds: An Empirical EvidenceSince interest rates on investments like PPF, NSC, bank deposits, etc., are falling, the

question to be answered is: What investment alternative should a small investor adopt? Direct

investment in capital market is an expensive proposal, and keeping money in saving schemes is

not advisable. One of the alternatives is to invest in capital markets through mutual funds. This

helps the investor avoid the risks involved in direct investment. Considering the state of mind of

the general investor, this article figures out: (i) the preference attached to different investment

avenues by the investors; (ii) the preference of Mutual Funds schemes over others for

investment; (iii) the source from which the investor gets information about Mutual Funds; and

(iv) the experience with regard to returns from mutual funds. The results show that the investors

consider gold to be the most preferred form of investment, followed by NSC and Post Office

schemes. Hence, the basic psyche of an Indian investor, who still prefers to keep his savings in

the form of yellow metal, is indicated. Investors belonging to the salaried category, and in the

age group of 20-35, years showed inclination towards close-ended growth (equity-oriented)

schemes over the other scheme types. A majority of the investors based their investment

decision on the advice of brokers, professionals and financial advisors. The findings also

reveals the varied experiences of respondents regarding the returns received from investments

made in mutual funds.

The masses in India generally prefer to save in those instruments that are safe. The

safety of the money invested is not compromised, and at times, they do not mind accepting

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lesser returns on their investment. An average small investor generally advocates the

phenomenon of risk aversity. But, return on investment in capital markets comes with the

associated risk.

2.9 An Empirical Study of Retail Investor’s Attitude Towards Investment in Mutual FundsAshok Khurana, Guru Nanak Khalsa College, YamunanagarVikas Chaudhary

In the financial industry, Mutual Funds have become a hot favourite of millions of people

all over the world. A mutual fund is a special type of institution, a trust or an investment

company which acts as an investment intermediary and invests the savings of large number of

people to the corporate securities in such a way that investors get steady returns, capital

appreciation and a low risk. It is essentially a mechanism of pooling together the savings of a

large number of investor for collecting investment with an avowed objective of attractive yields

and appreciation in their values. The concept of 'Mutual Fund' is a new feature in Indian capital

market but not to international capital markets. A mutual fund in the most suitable investment for

the retail investors as it offers an opportunity to invest in a diversified, professionally managed

portfolio at a relatively low cost. At the retail level, investors are unique and are a highly

heterogeneous group. A large number of investment options are available to investors.

Currently there are large numbers of schemes available and asset management companies

(AMCs) compete against one another by launching new products or repositioning old ones.

Unless mutual fund schemes are tailored to the changing needs, and the AMCs understand the

fund selection behaviour of the investors, survival of funds will be difficult in future. With this

significance an attempt is made to study the attitude of mutual fund investors.

2.10 A study on investors’ attitude towards mutual funds as an investment option Dr. Binod Kumar Singh, Faculty Member,Amity Global Business School,Patna.

In this paper, structure of mutual fund, operations of mutual fund, comparison between

investment in mutual fund and bank and calculation of NAV etc. have been considered. In this

paper, the impacts of various demographic factors on investors’ attitude towards mutual fund

have been studied. For measuring various phenomena and analyzing the collected data

effectively and efficiently for drawing sound conclusions, Chi-square () test has been used and

for analyzing the various factors responsible for investment in mutual funds, ranking was done

on the basis of weighted scores and scoring was also done on the basis of scale. Key words:

Hypothesis, Chi-square () test, Rank, Weighted score and Scaling.

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CHAPTER –3RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve a problem. It may be understood

as a science of study where research is done scientifically. It includes various steps that are

generally adopted by a researcher in studying his research problem.

3.1 Type of research:The type of research carried out was Descriptive. Descriptive research, also known as

statistical research, describes data and characteristics about the population or phenomenon

being studied. Descriptive research answers the questions who, what, where, when, "why" and

how.

3.2 Data collection methods:

3.2.1 Primary data:Questionnaire was used as a tool for primary data collection.

3.2.1 Secondary data:Secondary data were collected from books, journals, websites and magazines.

3.3 Sampling design:Collection of data from a sample of units that have been selected from the target universe

with the intention that they may be representative of that universe. This is referred to as

purposive sampling or judgemental sampling.

Sample size taken for this study is 150.

Convenience sampling technique was used. Accidental sampling (sometimes known as

grab, convenience or opportunity sampling) is a type of non-probability sampling which

involves the sample being drawn from that part of the population which is close to hand.

That is, a population is selected because it is readily available and convenient. It may be

through meeting the person or including a person in the sample when one meets them

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or chosen by finding them through technological means such as the internet or through

phone.

3.4 Statistical tool for analysis:

3.4.1 Percentage analysis:Percentage method refers to a specified kind which is used in making comparison

between two or more series of data. Percentages are based on descriptive relationship. It

compares the relative items. Since the percentage reduces everything to a common base and

thereby allow meaning comparison.

Percentage = Number of respondents x 100

Total no of respondents

3.4.2 Cross tabulation:Cross tabulation tables (contingency tables) display the relationship between two or

more categorical (nominal or ordinal) variables. The Cross tabs procedure forms two-way and

multiway tables and provides a variety of tests and measures of association for two-way tables.

The structure of the table and whether categories are ordered determine what test or measure

to use.

3.4.3 Chi-square:The Chi square test procedure tabulates a variable into categories and computes a chi

square statistic. This goodness-of-fit test compares the observed and expected frequencies in

each category to test that all categories contain the same proportion of values or test that each

category contains a user-specified proportion of values.

Statistical method to test whether two (or more) variables are: (1) independent or (2)

homogeneous. The chi-square test for independence examines whether knowing the value of

one variable helps to estimate the value of another variable. The chi-square test for

homogeneity examines whether two populations have the same proportion of observations with

a common characteristic.

20

CHAPTER 4DATA ANALYSIS AND INTERPRETATION

4.1 Univariate – Percentage AnalysisTable showing classification of respondents based on Gender

Frequency Percent Valid PercentCumulative

PercentValid MALE 93 62.0 62.0 62.0

FEMALE 57 38.0 38.0 100.0Total 150 100.0 100.0

Table 4.1

Chart showing classification of respondents based on Gender

Chart 4.1

21

INTERPRETATION:Out of 150 respondents 62% were male and 38% were female.

Table showing classification of respondents based on Occupation


PercentValid STUDENT 12 8.0 8.0 8.0

GOVT.EMP 64 42.7 42.7 50.7PRI.EMP 59 39.3 39.3 90.0BUSINESS 11 7.3 7.3 97.3RETIRED 4 2.7 2.7 100.0Total 150 100.0 100.0

Table 4.2

Chart showing classification of respondents based on Occupation

Chart 4.2

INTERPRETATION: 8% are the students

42.7%are the government employees

39.3% are the private employees

7.3%are the business

2.7% are the retired peoples.

22

Table showing classification of respondents based on Age


PercentValid < 20 5 3.3 3.3 3.3

21 TO 40 98 65.3 65.3 68.741 TO 60 46 30.7 30.7 99.3> 60 1 .7 .7 100.0Total 150 100.0 100.0

Table 4.3

Chart showing classification of respondents based on Age

Chart 4.3

INTERPRETATION: 3.3% of the respondents are at the age less than 20.

65.3% are at the age 21 to 40

30.7% are at the age 41 to 60

0.7% are at the age above 60.

23

Table showing classification of respondents based on Annual income


PercentValid < 1LAC 9 6.0 6.0 6.0

1 TO 3LAC 92 61.3 61.3 67.33 TO 5LAC 31 20.7 20.7 88.0>5LAC 18 12.0 12.0 100.0Total 150 100.0 100.0

Table 4.4

Chart showing classification of respondents based on Annual income

Chart 4.4

INTERPRETATION: 6% of the respondents earn less than 1lakh annually.

61.3% earn 1 to 3lakh.

20.7% earn 3 to 5lakh

12% earn above 5lakh

24

Table showing classification of respondents based on Amount invested

Frequency Percent Valid Percent

Cumulative

Percent

Valid <10000 66 44.0 44.0 44.0

>10000 84 56.0 56.0 100.0

Total 150 100.0 100.0

Table 4.5

Chart showing classification of respondents based on Amount invested

Chart 4.5

INTERPRETATION: 44% of the respondents are invested less than 10000.

56% of the respondents are invested above 10000

25

Table showing classification of respondents based on reason for investment in mutual funds


PercentValid CHILD EDU 32 21.3 21.3 21.3

RETIREMENT 16 10.7 10.7 32.0HOUSE 48 32.0 32.0 64.0VACATION ABROAD

26 17.3 17.3 81.3

OTHER 28 18.7 18.7 100.0Total 150 100.0 100.0

Table 4.6

Chart showing classification respondents based on reason for investment in mutual funds

Chart 4.6

INTERPRETATION: 21.3% of the respondents are invested for their child education.

10.7% are invested for retirement

32% are invested for house

26

17.3% are invested for vacation abroad.

18.7% are invested for other purposes.

Table showing classification of respondents based on how long they are investors of

mutual funds


PercentValid < 1YR 7 4.7 4.7 4.7

1 TO 3YR 103 68.7 68.7 73.3>5yr 40 26.7 26.7 100.0Total 150 100.0 100.0

Table4.7

Chart showing classification of respondents based on how long they are investors of

mutual funds

Chart 4.7

INTERPRETATION:

4.7% of the respondents are investing in less than one year

27

68.7% are invested one to 3 year.

26.7% are invested above 5 year.

Table showing classification of respondents based on reason for choosing mutual funds


PercentValid SAVINGS 73 48.7 48.7 48.7

returns 44 29.3 29.3 78.0diversification 20 13.3 13.3 91.3risk tolerance 13 8.7 8.7 100.0Total 150 100.0 100.0

Table 4.8

Chart showing classification of respondents based on reason for choosing mutual funds

Chart 4.8

INTERPRETATION: 48.7% are chosen mutual funds for savings.

29.3% are chosen mutual funds for returns.

13.3% are chosen mutual funds for diversification.

28

8.7% are chosen mutual funds for risk tolerance.

Table showing classification of respondents based on number of plans they have invested in

mutual funds.


PercentValid 1 65 43.3 43.3 43.3

2 54 36.0 36.0 79.33 24 16.0 16.0 95.3>3 7 4.7 4.7 100.0Total 150 100.0 100.0

Table 4.9

Chart showing classification of respondents based on number of plans they have invested in

mutual funds.

Chart 4.9

INTERPRETATION: 43.3% of the respondents invested in one scheme.

36% of the respondents invested in 2 schemes.

16%of the respondents invested in 3 schemes.

29

4.7% of the respondents invested in more than 3 schemes.

Table showing classification of respondents based on the reason for selecting a particular

mutual fund company.


PercentValid REPUTATION 27 18.0 18.0 18.0

GOOD RETURNS 88 58.7 58.7 76.7EXPERT ADVICE 33 22.0 22.0 98.7OTHER 2 1.3 1.3 100.0Total 150 100.0 100.0

Table 4.10

Chart showing classification of respondents based on the reason for selecting a particular

mutual fund company.

Chart 4.10

INTERPRETATION: 18% are chosen the mutual fund company for the company reputation.

58.7% chosen for the good returns.

30

22% chosen for the expert advice.

1.3% chosen for the other reasons.

Table showing classification of respondents based on the option they prefer for investment in

mutual fund


PercentValid DIV 55 36.7 36.7 36.7

GROWTH 90 60.0 60.0 96.7NOT SURE 5 3.3 3.3 100.0Total 150 100.0 100.0

Table 4.11

Chart showing classification of respondents based on the option they prefer for investment in

mutual fund

Chart 4.11

INTERPRETATION:

31

36.7% of the respondents prefer the dividends for their investments.

60.7% of the respondents prefer the growth for their investments.

3.3% of the respondents are not sure their investments.

Table showing classification of respondents based on how frequent they monitor performance of

investment


PercentValid

M 109 72.7 72.7 72.7Q 18 12.0 12.0 84.7HY 16 10.7 10.7 95.3Y 6 4.0 4.0 99.3N 1 .7 .7 100.0Total 150 100.0 100.0

Table 4.12

Chart showing classification of respondents based on how frequent they monitor performance of

investment

Chart 4.12

INTERPRETATION: 72.7% of the respondents are monitoring their performance of the investments monthly.

12% of the respondents are monitoring quarterly.

10.7%of the respondents are monitoring half yearly.

32

4% of the respondents are monitoring yearly.

And 0.7% of the respondents are never monitoring their performance.

Table showing classification of respondents based on how frequent they monitor risk factors.


PercentValid M 77 51.3 51.3 51.3

Q 37 24.7 24.7 76.0HY 21 14.0 14.0 90.0Y 7 4.7 4.7 94.7N 8 5.3 5.3 100.0Total 150 100.0 100.0

Table 4.13

Chart showing classification of respondents based on how frequent they monitor risk factors.

Chart 4.13

INTERPRETATION:

51.3% of the respondents are monitoring their risk factors monthly.

24.7% of the respondents are monitoring quarterly.

14% of the respondents are monitoring half yearly.

33

4.7% of the respondents are monitoring yearly.

5.3% of the respondents are never monitor their risk factor.

Table showing classification of respondents based on how frequent they monitor portfolio of

securities



Q 26 17.3 17.3 76.7HY 18 12.0 12.0 88.7Y 14 9.3 9.3 98.0N 3 2.0 2.0 100.0Total 150 100.0 100.0

Table 4.14

Chart showing classification of respondents based on how frequent they monitor portfolio of

securities

Chart 4.14

INTERPRETATION:

59.3% of the respondents are monitoring their portfolio of securities monthly.

17.3% of the respondents are monitoring their quarterly.

12% of the respondents are monitoring half yearly.

34


2% of the respondents are never monitor their portfolio securities.

Table showing classification of respondents based on how frequent they monitor portfolio of

fund manager



Q 31 20.7 20.7 66.0HY 25 16.7 16.7 82.7Y 16 10.7 10.7 93.3N 10 6.7 6.7 100.0Total 150 100.0 100.0

Table 4.15

Chart showing classification of respondents based on how frequent they monitor portfolio of

fund manager

Chart 4.15

INTERPRETATION: 45.3% of the respondents are monitoring their portfolio of fund manager monthly.

20.7% of the respondents are monitoring quarterly.

35

16.7% of the respondents are monitoring half yearly.


6.7% of the respondents are never monitoring their portfolio of fund manager.

4.2 BIVARIATE - CHI SQUARE:

Null hypothesis H0: There is no significance relationship between gender & preference for

investment option.

Alternative hypothesis H1: There is significance relationship between gender & preference for

investment option.

Table showing crosstab between gender and preference for investment option

OPT.INVTotalDIV GROWTH NOT SURE

GENDER MALE 27 62 4 93FEMALE 28 28 1 57

Total 55 90 5 150Table 4.16

Table showing relationship between gender and preference for investment option

Value DfAsymp. Sig.

(2-sided)Pearson Chi-Square 6.391a 2 .041Likelihood Ratio 6.390 2 .041Linear-by-Linear Association

6.227 1 .013

N of Valid Cases 150Table 4.17.

INTERPRETATION: 27 males out of 93 and 28 females out of 57 prefer the mutual fund investments for

dividends. Therefore women mostly prefer the dividends.

62 males out of 93 and 28 females out of 57 prefer the mutual fund investments for

growth. Therefore women mostly prefer the growth also. So women’s only equally prefer

the dividends and growth for their investments.

4 males out of 93 and 1 female out of 57 are not prefer anything for their investments.

36

From the chi square test table we infer that reject the h0.and accept the h1 so there is

significance relationship between gender& respondents preference for investment

option.

Null hypothesis H0: There is no significance relationship between gender & respondents

purpose for investments.

Alternative hypothesis H1: There is significance relationship between gender & respondents

purpose for investments.

Table showing crosstab of gender and purpose for investment

INV.FOR

TotalCHILD EDU

RETIREMENT HOUSE

VACATION ABROAD OTHER

GENDER MALE 26 13 23 19 12 93

FEMALE 6 3 25 7 16 57Total 32 16 48 26 28 150

Table 4.18

Table showing relationship between gender and purpose for investment

Value dfAsymp. Sig.


8.076 1 .004

N of Valid Cases 150a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 6.08.

Table 4.19

37

INTERPRETATION: 26 males out of 93 and 6 females out of 57 are purpose to invest for their child

education. Therefore males mostly purose the investments for their child education.

13 males out of 93 and 3 females out of 57 are purpose to invest for their retirement.

23 males out of 93 and 25 females out of 57 are purpose to invest for their house.

Therefore females mostly purpose the investments for house.

19 males out of 93 and 7 females out of 57 are purpose to invest for vacation abroad.

12 males out of 93 and 16 females out of 57 are purpose to invest for other reasons and

other purposes.

From the chi square test table we infer that reject h0.and accept h1.so there is

significance relationship between gender and respondents purpose for investments.

38

Null hypothesis H0: There is no significance relationship between age & respondents purpose

for investments.

Alternative hypothesis H1: There is significance relationship age & respondents purpose for

investments.

Table showing crosstab of age and purpose for investment

INV.FOR

TotalCHILD EDU RETIREMENT HOUSEVACATION ABROAD OTHER

AGE < 20 2 0 2 1 0 521 TO 40 17 11 32 17 21 9841 TO 60 13 5 13 8 7 46> 60 0 0 1 0 0 1

Total 32 16 48 26 28 150Table 4.20

Table showing relationship between age and purpose for investment

Value dfAsymp. Sig.


.535 1 .464

N of Valid Cases 150a. 11 cells (55.0%) have expected count less than 5. The minimum expected count is .11.

Table 4.21

INTERPRETATION: Less than 20 age 2 respondents out of 5 and 21 to 40 age 17 respondents out of 98 and

41 to 60 age 13 respondents out of 46 are invest for the child education. And there are

no respondents for this option above 60 ages.

39

21 to 40 age 11 respondents out of 98 and 41 to 60 age 5 respondents out of 46 are

invest for retirement. And there are no respondents for this option less than 20 ages and

above 60 ages.

Less than 20 age 2 respondents out of 5 and 21 to 40 age 32 respondents out of 98 and

41 to 60 age 13 respondents out of 46 and above 60 age 1 respondents are invest for

house.


41 to 60 age 8 respondents out of 46 are invest for the vacation abroad. And there are

no respondents for this option above 60 ages.

From this chi square test table we infer that accept h0 and reject h1. And there is no

significance relationship between age and respondents purpose for investments.

40

Null hypothesis H0: There is no significance relationship between age & respondents preferring

for mutual funds.

Alternative hypothesis H1: There is significance relationship between age & respondents

preferring for mutual funds.

Table showing crosstab of age and reason for preferring mutual fund

REA.MFTotalSAVINGS returns diversification risk tolerance

AGE < 20 1 1 2 1 521 TO 40 46 32 14 6 9841 TO 60 26 11 4 5 46> 60 0 0 0 1 1

Total 73 44 20 13 150Table 4.22

Table showing relationship between age and reason for preferring mutual fund

Value dfAsymp. Sig. (2-

sided)Pearson Chi-Square 18.209a 9 .033Likelihood Ratio 11.843 9 .222Linear-by-Linear Association

.265 1 .607

N of Valid Cases 150a. 9 cells (56.3%) have expected count less than 5. The minimum expected count is .09.

Table 4.23

41

INTERPRETATION: Less than 20 age 1 respondent out of 5 and 21 to 40 age 46 respondents out of 98 and

41 to 60 age 26 respondents out of 46 are prefer the mutual fund for savings. And there

are no respondent from above 60 ages.

Less than 20 age 1 respondent out of 5 and 21 to 40 age 32 respondents out of 98 and

41 to 60 age 11 respondents out of 46 are prefer the mutual funds for returns. And there

are no respondent from above 60 ages.


41 to 60 age 4 respondents out of 46 are prefer the mutual funds for diversifications. And

there are no respondent from above 60 ages.

Less than 20 age 1 respondent out of 5 and 21 to 40 age 6 respondents out of 98 and

41 to 60 age 5 respondents out of 46 and above 60 age 1 respondent out of 1

respondent are prefer the mutual fund for risk tolerance.

From the chi square test table we infer that reject h0.accepth1. so there is significance

relationship between age and respondent preference for mutual funds.

42

Table showing rank of reason for investing in mutual fund

FACTORS SUM OF SCORE RANK

Savings 302 2

Tax benefits 276 1

Portfolio management 305 3

Balanced risk 341 4

Potential returns 363 5

TOTAL 1587

Table 4.24

INTERPRETATION:

In case of the factors responsible for investing in mutual funds is concerned tax benefits

has got first rank, savings has got second rank, portfolio management , balanced risk and

potential returns have been ranked third, fourth and fifth respectively.

43

CHAPTER 55.1 FINDINGS:

The Study was aimed at identifying the level of attitude towards the mutual funds.

There is significance relationship is found between the gender and respondents

preferences for investment options, and women’s are equally prefer the dividends and

growth for the investments.

There is significance relationship is found between the gender and respondents purpose

for investments. Males are mostly purposeto invest for their child education. and females

are mostly purpose to invest for house and other purposes.

There is no relationship found between age and respondent preferring for investments.

There is significance relationship found between age and respondents preference for

mutual funds. Respondents are mostly prefer the mutual funds for savings and returns.

And next they prefer the mutual funds for diversifications and risk tolerance.

Ranking the factors for investing in mutual funds is concerned the tax benefit has got

first rank and savings has got second rank and portfolio management and balanced risk

and potential risk has got third, fourth, fifth ranks.

44

5.2 SUGGESTIONS:

The average attitude score reveals that the respondents are giving more importance to

the dividends and growth. Therefore the mutual funds should improve the scope of

dividends and growth of the mutual funds.

Mutual fund companies should segment their target customers and position their

products. The target segment can be broadly divided into institutional segment and retail

investor segment. The institutional segment consisted of treasury departments of

corporate, trusts, etc and suitable products such as institutional income schemes and

money market schemes can be targeted at them. As far as retail investors are

concerned, they can be in turn divided into various segments such as young families

with small or no children, middle-aged people saving for retirement and retired people

looking for steady income. Suitable products such as growth and balanced schemes for

young families and income schemes with certain and steady returns for retired people

can be marketed. By proper segmentation and by targeting the right product to the right

customer, mutual fund companies can hope to win the confidence of their customers and

own them for a lifetime. In this way the market scope for mutual funds can be expanded.

Investors usually review a range of information before purchasing mutual fund shares.

In general, they frequently review or ask questions about a fund’s fees and expenses

and its historical performance. They most often turn to professional financial advisers for

information prior to purchasing fund shares. Some investors also visit Mutual Fund

Company; confer with friends, family, or business associates for information before

buying fund shares, while others use the Internet regularly. The Internet, with its

interactive capabilities, is an effective vehicle for communicating mutual fund information

to retail investors

45

5.3 CONCLUSION:

The present study looks at the attitude level of the retail investors towards investment in

mutual funds. The small investors purchase behavior does not have a high level. The buying

intent of a mutual fund product by a small investor can be due to multiple reasons depending

upon customers risk return trade off. Presently, more and more funds are entering the industry

and their survival depends on strategic marketing choices of mutual fund companies, to survive

and thrive in this highly promising industry, in the face of such cut throat competition. Therefore,

the mutual fund industry today needs to develop products to fulfils customer needs and help

customers understand how its products to their needs. Thus the study provokes the authority to

take some positive measures for expanding the scope of mutual funds investment.

46

REFERENCES: Aman Srivastava (2007). An Analysis of Behaviour of Investors in India, ICFAI Journal of

Behavioural Finance.

Bala Ramasamy, Matthew C.H. Yeung (2003).

Singh Jaspal and Chander Subhash (2004). An Empirical Analysis of Perceptions of

Investors towards Mutual Fund.

WEBSITES:

http://www.appuonline.com/mf/knowledge/industry.html


http://www.investopedia.com/articles/mutualfund/05/MFhistory.asp

http://www.mutualfundsresource.com/history/

www.reliancemutual.com

http://www.reliancemutual.com/

http://www.mutualfundsresource.com/history/

http://www.investopedia.com/articles/mutualfund/05/MFhistory.asp

