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A PROJECT REPORT ON Consumer Preference: A Case of Mutual Fund Industry in Ludhiana

Submitted To: Punjab Technical University, Jalandhar In partial fulfillment of the requirements for the degree of Masters in Business Administration

Submitted By: Sahil Khosla MBA 3rd sem Punjab College of Technical Education Baddhowal, Punab

Acknowledgement
In this research project success I would like to thanks to all those people who have made this research a successful one. I would like to owe debt of gratitude to Mr. Prashant Sharma (Cluster Head) and Mr. Suneet Sharma (Deputy Manager) for giving me the opportunity to gain exposure in the organization. We would also like to thanks the public who patiently listened to us and also cooperated with us in their fullest of their capacity to fill up the questionnaires which we have made them to fill. In the end I would like to thanks our parents and the god who gave us the immense opportunity to have such a nice education going with us. In the end we would like to thanks one and all who gave us the inspiration and the morale to complete this research project.

Preface
This is the research project in which we are going to study about the mutual funds and the preference of the people of Ludhiana towards this industry. A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. These funds manager invest the money on behalf of the investors in various schemes. Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations. To make the study successful we have collected the data from the researches previously done in this field. Some of the people have quoted some nice conclusions which helped us in shaping our research. As far as research methodology is concerned we have used both descriptive and the explorative research techniques and by applying the non probability sampling techniques we have made our research to yield the appropriate results in our study. Various conclusions can be drawn from our study which includes that most of the people consider mutual funds as the safest options in investment etc. Hence these results are very important which we have drawn from our study.

Table Of Contents
Contents Title page Acknowlegement Preface Introduction to the Industry Diversification in Mutual Funds Major players in Mutual Fund Industry in India Introduction to the Project Research Methodology Findings and Analysis Recommendations and Suggestion Conclusion Appendix

Introduction to the Industry


What is Mutual Fund? A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. The Evolution of Mutual Fund in India The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India. The history of mutual fund industry in India can be better understood divided into following phases: Phase 1. Establishment and Growth of Unit Trust of India - 1964-87 Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate under the regulatory control of the RBI until the two were de-linked in 1978 and the entire control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years.

UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master share (India's first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700 crores. Phase II. Entry of Public Sector Funds - 1987-1993 The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share. Phase III. Emergence of Private Sector Funds - 1993-96 The permission given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutual fund industry in 1993, provided a wide range of choice to investors and more competition in the industry. Private funds introduced innovative products, investment techniques and investorservicing technology. By 1994-95, about 11 private sector funds had launched their schemes. Phase IV. Growth and SEBI Regulation - 1996-2004 The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after the year 1996. The mobilization of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds. Investors' interests were safeguarded by SEBI and the Government offered tax benefits to the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999

exempted all dividend incomes in the hands of investors from income tax. Various Investor Awareness Programmers were launched during this phase, both by SEBI and AMFI, with an objective to educate investors and make them informed about the mutual fund industry. In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by an Act of Parliament. The primary objective behind this was to bring all mutual fund players on the same level. UTI was re-organized into two parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past schemes (like US-64, Assured Return Schemes) are being gradually wound up. However, UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant growth in mobilization of funds from investors and assets under management which is supported by the following data: GROSS FUND MOBILISATION (RS. CRORES) PUB FROM TO U TI LIC SEC TOR 3101-April-98 March99 3101-April-99 March00 3101-April-00 March01 01-April-01 3111 ,6 79 13 ,5 36 12 ,4 13 4, 1,73 2 PRIV ATE SECT OR TOTAL

7,966

21,377

4,03 9

42,17 3

59,748

6,19 2 13,6

74,35 2 1,46,2

92,957

1,64,523

March02 31-Jan03 3101-Feb.-03 March03 3101-April-03 March04 3101-April-04 March05 3101-April-05 March06

64 3 5, 50 5

13

67

01-April-02

22,9 23

2,20,5 51

2,48,979

7,25 9*

58,43 5

65,694

68,5 58

5,21,6 32

5,90,190

1,03, 246

7,36,4 16

8,39,662

1,83, 446

9,14,7 12

10,98,15 8

ASSETS UNDER MANAGEMENT (RS. CRORES) U AS ON T I 53,32 0 and PUBLI C SECTO R 8,292 PRIVAT E SECTOR

TOTA L

31-March-99

6,860

68,472

Phase

V.

Growth

Consolidation

2004

Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutal fund

players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29 funds as at the end of March 2006. This is a continuing phase of growth of the industry through consolidation and entry of new international and private sector players.

Diversification in Mutual Funds Diversification is nothing but spreading out your money across available or different types of investments. By choosing to diversify respective investment holdings reduces risk tremendously up to certain extent. The most basic level of diversification is to buy multiple stocks rather than just one stock. Mutual funds are set up to buy many stocks. Beyond that, you can diversify even more by purchasing different kinds of stocks, then adding bonds, then international, and so on. It could

take you weeks to buy all these investments, but if you purchased a few mutual funds you could be done in a few hours because mutual funds automatically diversify in a predetermined category of investments (i.e. - growth companies, emerging or mid size companies, low-grade corporate bonds, etc). Types of Mutual Funds Schemes in India Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund might be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below. Major players in Mutual Fund Industry in India

ABN AMRO Mutual Fund Benchmark Mutual Fund Birla Mutual Fund BOB Mutual Fund Canbank Mutual Fund Chola Mutual Fund Deutsche Mutual Fund DSP Merrill Lynch Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Franklin Templeton Investments

HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund JM Financial Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Morgan Stanley Mutual Fund PRINCIPAL Mutual Fund Prudential ICICI Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SBI Mutual Fund Standard Chartered Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund Unit Trust of India UTI Mutual Fund

Overview of existing schemes existed in mutual fund category: BY STRUCTURE

1. Open - Ended Schemes: An 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 open-end schemes is liquidity. 2. Close - Ended Schemes: These schemes have a pre-specified maturity period. One can invest directly in the scheme at the time of the initial issue. Depending on the structure of the scheme there are two exit options available to an investor after the initial offer period closes. Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchanges could vary from the net asset value (NAV) of the scheme on account of demand and supply situation, expectations of unitholder and other market factors. Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes NAV; however one cannot buy units and can only sell units during the liquidity window. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor. 3. Interval Schemes: Interval Schemes are that scheme, which combines the features of open-ended and closeended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.

The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vise versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion. Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesnt mean mutual fund investments risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives market which is considered very volatile.

Overview of existing schemes existed in mutual fund category: BY NATURE 1. Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows:

Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix. 2. Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government. Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in

corporate debentures. Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns. Further the mutual funds can be broadly classified on the basis of investment parameter viz, Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly. By investment objective: Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear

short-term decline in value for possible future appreciation. Income Schemes:Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial

paper and inter-bank call money. Other schemes Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate. Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index. Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. Pros & cons of investing in mutual funds: Advantages of Investing Mutual Funds: 1. Professional Management - The basic advantage of funds is that, they are professional managed, by well qualified professional. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. 2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. 3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to bring down the average cost of the unit. 4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want. 5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50

per month basis. Disadvantages of Investing Mutual Funds: 1. Professional Management- Some funds doesnt perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professionals are any better. 2. Costs The biggest source of AMC income, is generally from the entry & exit load which they charge from an investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon. 3. Dilution - Because funds have small holdings across different companies, high returns from a few investments often don't make much difference on the overall return. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money. 4. Taxes - when making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale.

Introduction to the Project


This project is related to the consumer demographics related to the mutual fund industry in Ludhiana. As this is one of the newest concept in the field of the investment therefore it is necessary to study the consumer demographics of the person investing in the mutual funds in the city of Ludhiana. Hence we have chosen this concept that we are going to study the various parameters that effect the people of Ludhiana while investing their money in the Mutual Funds and the different schemes that are available to them while investing in the mutual funds in the city of Ludhiana. We are also going to study that people consider that whether the mutual fund is considered as one of the safest option or whether they have some doubt to the safety related to the investment of the mutual fund industry in the Ludhiana. Hence this is the need for todays time to know what all factors are considered by the investors while investing in the various mutual funds schemes that are available with them and what all factors they consider while investing their money in the mutual funds and their various schemes available to them in the given area.

Hence there is the need to study the various aspects of the investors in the city of Ludhiana. Hence for this fact we have taken up this project.

Need of Study
The money is considered by all the people in India as one of their assets and hence a lot of care is taken by them while investing their money in various investment options available to them within the constraint of the area. Hence we have taken the initiative to study the mutual fund industry as a whole and what all factors are considered by the investors as the important factors while investing in the various schemes that are available in the market. Hence they have to decide to themselves that which schemes are needed by them for making their money safer for them so that they can take care of their future needs. There huge doubt in the minds of the investors regarding the safety of the various mutual funds available with the various AMCs around them. Hence their was a need to study that what all factors are considered by the investors as the important while investing in the mutual funds. Hence to fulfill the title that we have developed for our study we have framed the following objectives which would help us making our study a successful.

Objectives of the Study


To identify the consumer demographics regarding mutual fund industry in Ludhiana. To identify the consumer awareness towards the mutual fund industry in Ludhiana. To find the factors considered while investing in the mutual funds by the people of Ludhiana.

Review of Literature
Sudhaker & Kumar (2009) in his study titled Past Present & Future of MFs in India: Investors Perception concluded that mutual fund is the fastest growing financial sector in & recorded exponential growth with 11% compounded growth. Gupta & Aggarwal (2007), in their study titled Performance of mutual fund in India: AN EMPIRICAL STUDY concluded that while the global industry continues to grow research on mutual fund has been confined to only a few developed markets with USA getting the special attention. Syama Sunder (1998) conducted a survey to get an insight into the MF operations of private institutions. The survey revealed that the awareness about MF concept was poor during that time in small cities like Vishakhapatnam. Agents play a vital role in spreading the MF culture; open-end schemes were much preferred then; age and income are the two important determinants in the selection of fund / scheme; brand image and return are their prime considerations. Raja Rajan (1997, 1998) highlightened segmentation of investors on the basis of their characteristics, investment size, and the relationship between stage in life cycle of the investors and their investment pattern. Gupta L.C. (1993) conducted a household investor survey with the objective to provide data on investor preferences on MFs and other financial assets and helped a lot in building up of the consumer preference in our study.

Daniel Kahneman and Amos Tversky (1979) originally described Prospect Theory and found that individuals were much more distressed by prospective losses than they were happy by equivalent gains. Some economists have concluded that investors typically consider the loss of $1 twice as painful as the pleasure received from a $ gain. Individuals will respond differently to equivalent situations depending on whether it is presented in the context of losses or gains. Here is an example from Tversky and Kahneman 1979 article. Tversky and Kahneman presented

groups of subjects with a number of problems. One group of subjects was presented with this problem. 1. In addition to what you own, you have been given $1000. You are now asked to choose between A. A sure gain of $500. B. A 50% chance to gain $1,000 and a 50% chance to gain nothing. Another group of subjects were presented with another problem. 2. In addition to whatever you own, you have been given $2000. You are now asked to choose between: A. A sure loss of $500. B. A 50% chance to lose $1,000 and 50% chance to lose nothing. In the first group 84% chose A. In the second group 69% chose B. The two problems are identical in terms of net cash to the subject; however the phrasing of the question causes the problem to be interpreted differently.

Research Methodology
Research Design There are basically three types of research design namely Descriptive Explorative Causal The design of our study is both descriptive as we as explorative. It is explorative as we have collected the reviews and the literatures of various authors who have already has done some kind of research in the field we are doing our study. Hence it is explorative in nature. It is descriptive as we are predicting the consumer behaviour of the people who are investing their money in the mutual and we are describing the various attributes related to their study and other aspects like their demographics, factors etc. Hence it is descriptive in nature. Data Collection The data is collected from both the sources i.e Primary Source Secondary Source The primary source data is collected from the respondents by making them fill the structured questionnaires which were developed keeping in mind the objectives which we have established for conducting the study. The respondents were allowed to fill the answers as per their choice and no interference was there from over side. The secondary data is collected form data already published in any of the form. These forms can be electronic or any print form as well.

The print forms includes the magazines, journals, newspapers etc and the electronic forms include the internet and various other sources. Sampling Technique It is the technique which has to be established by the researcher to make his/her research more successful. There are various parameters which has to be taken into consideration while choosing the sampling design for any research. Sample Unit Since our study is restricted only to Ludhiana hence our sampling unit is all the individuals in Ludhiana. Sample Size Since our study is to study the consumer behaviour of the people of Ludhiana while investing in the mutual funds hence we have chosen the sample size i.e we have made 40 individuals from Ludhiana to make and fill the structured questionnaires which we have developed on our own. Sampling Method The sampling method we have used here is the non probability sampling techniques which are. Convenience Sampling- In this we have chosen the locations as per our convenience. Hence this is the non probability technique which we have used for designing our sampling method. Judgment Sampling- This is another non probability sampling technique which we have used in our study. We have judged all those areas were potential investors i.e the people which can invest in the mutual funds in Ludhiana were selected. Theses includes the Feroz Gandhi Market, Dugri and the Model Town area. Scope of Study The scope of the study includes the following points. The matter is related to the investors approach toward the MFs.

People are between the age of 20-60 years. Area limited is Ludhiana. Demographics include age, Qualifications, income level etc. This is how the whole Research Methodology of our study has been defined by us.

Findings and Analysis


Demographic Profile-Age

Options(O) (a) Below 25 (b) 25-35 (c) 35-45 (d) 45-55 (e) 55 & above

Responses(R) 18 9 8 3 2

Percentage 45 22.5 20 7.5 5 Table 1

Demographic Profile - Age


54 45 Percentage 36 27 18 9 0 Below 25 25-35 35-45 Options 45-55 55 & Above Percentage

Graph1 Interpretation: - Most of the respondents were below 25 and also 25 to 45 years forms considerable part.

Demographic Profile-Qualification

Options(O) (a) HSC (b) SSC (c) Graduate (d) Postgraduate

Responses(R) 3 4 23 10

Percentage 7.5 10 57.5 25 Table 2

Graph 2 Interpretation: - Most of the respondents were Graduates also Post Graduates formed the considerable part.

Demographic Profile-Income Level

Options(O) (a) Upto 2 lakh (b) 2 to 5 lakh (c) 5 to 10 lakh (d) More than 10 lakh

Responses(R) 20 9 7 4

Percentage 50 22.5 17.5 10 Table 3

Graph 3

Interpretation: - Most of the respondents lye in the income range of Upto 2 lakh and also 2 to 10 lakh was another range under consideration.

Demographic Profile-Dependent

Options(O) (a) 0-2 (b) 3-5 (c) 6 & above

Responses(R) 24 14 2

Percentage 60 35 5 Table 4

Graph 4

Interpretation: - Most of the respondents had 2 or less dependents. Also 3-5 formed a considerable part.

Hom Many Make Investments

Options(O) (a) Yes (b) No

Responses(R) 29 11

Percentage 72.5 27.5 Table 5

Graph 5

Interpretation: - Most of the people make investments.

Aware about Mutual Fund . Options(O) (a) Yes (b) No Responses(R) 34 6 Percentage 85 15 Table 6

Graph 6

Interpretation: - Most of the people were aware of the Mutual Fund.

Awareness about Mutual Fund Cos. Options(O) (a) LIC MF (b) TATA MF (c) Reliance MF (d) BNP Paribas (e) JM Financial (f) Sundram MF (g) ICICI MF (h) UTI MF (i) Others Responses(R) 21 22 26 8 4 3 28 20 0 Percentage 16 17 20 6 3 2 21 15 0 Table 7
Awareness About MF Cos.
25 Percentage 20 15 10 5 0
M F ia nc e B M N F P P ar ib JM as Fi na nc S un ia l dr am M F IC IC IM F U TI M F O th er s M F LI C TA

Percentage

TA

R el

Mutual Fund Co.

Graph 7 Interpretation: - ICICI MF is the most aware MF also reliance is the other one. Sundaram MF was the least aware MF. Mutual Fund Schemes

Options(O) (a) Dividend (b) Growth (c) Tax Saving (d) Others

Responses(R) 4 13 26 0

Percentage 9 31 60 0 Table 8

M utual fund Schemes


63 54 Percentage 45 36 27 18 9 0 Dividend Growth Tax Saving Others Options Percentage

Graph 8

Interpretation: - Most of the people are aware of mutual funds as tax saving instruments.

Sources of Information

Options(O) (a) Newspaper (b) Magazine (c) Television (d) AMC (e) Others

Responses(R) 17 11 22 3 6

Percentage 29 19 37 5 10 Table 9

Sources Of Information
45 Percentage 36 27 18 9 0
Ne ws pa pe r sio n C ag az in e Te le vi O th er s AM

Percentage

Sources

Graph 9 Interpretation: - Television and newspaper are the most important sources from where people draw information about mutual funds.

Mutual Fund - Safer option

Options(O) Strongly Disagree Disagree Neutral Agree Strongly Agree

Responses(R) 1 1 6 22 4

Average 3 3 18 64 12 Table 10

Graph 10 Interpretation: - Most of the people agree to the fact that mutual fund is the safer option to invest.

72

Mutual Fund Long Term or Short Term:

Options Short Term Long Term

Response 9

Percent 26

25

74

Table 11

Graph 11

Interpretation: - Maximum of the people consider mutual fund as long term instrument.

Information About NAV

Options Yes

Response 32

Percent 90

No

10

Table 12

Graph 12

Interpretation: - Most of the people want that they should be made aware of the NAV regularly.

Information About NAV Options(O) Monthly Quarterly Responses(R) 13 10 Average 40 31

Half Yearly Yearly

6 3

19 10

Table 13

Graph 13

Interpretation: - People want to know their NAV value periodically after every month.

Way to Get Information Options(O) Mail Post Responses(R) 7 3 Average 21 10

Telephone SMS Others

12 11 0

36 33 0

Table 14

Way to give Information


45 36 Percentage 27 Percentage 18 9 0 Mail Post Telephone Options SMS Others

Graph 14 Interpretation: - Telephone is the most preferred way by which the people want to get the information.

Other investment options Options(O) (a) Debenture (b) Real Estate (c) Fixed Deposit (d) Equity (e) Bullion (f) Insurance (g) Bonds (h) Others Responses(R) 11 12 23 17 4 25 10 0 Percentage 11 12 23 17 4 25 10 0 Table 15

Graph 15 Interpretation: - Insurance and Fixed deposits are other known investment options people are aware of.

Preferred way to Redeem

Options(O) (a) ECS (b) Cheque (c) Demand Draft (d) Others

Responses(R) 7 10 16 1

Percentage 21 29 47 3

Table 16

Graph 16

Interpretation: - Demand draft is the preferred way by which people want to redeem their value.

Preferred way to Pay

Options(O) (a) Online (b) Cheque/DD (c) Other

Responses(R) 11 23 0

Percentage 32 68 0 Table 17

Graph 17

Interpretation: - Demand draft and Cheque are the most preferred way to pay for buying mutual fund. Rate the factors considered while investing in Mutual Fund-

(a) Popularity Of brand

Options(O) 1 2 3 4 5

Responses(R) 2 4 9 18 1

Total(O*R) 2 8 27 72 5 Table 18.1

(b) Return upon Investment

Options(O) 1 2 3 4 5

Responses(R) 1 3 6 12 12

Total(O*R) 1 6 1 48 60 Table 18.2

(c) Security

Options(O) 1 2 3 4 5

Responses(R) 1 3 7 8 15

Total(O*R) 1 6 21 32 75 Table 18.3

(d) Recommendation

Options(O) 1 2 3 4 5

Responses(R) 0 6 12 11 5

Total(O*R) 0 12 36 44 25 Table 18.4

e) Knowledge

Options(O)

Responses(R)

Total(O*R)

1 2 3 4 5

1 4 13 12 4

1 8 39 48 20 Table 18.5

Graph 18 Interpretation: - Security is the most important factor considered while investing in mutual fund followed by Return, Recommendation, Knowledge and popularity.

4.2 4 3.8 3.6 3.4

Mean

Results And Findings

Most of the people make investments. Most of the people were aware of the Mutual Fund. ICICI MF is the most aware MF also reliance is the other one. Sundaram MF was the least aware MF. Most of the people are aware of mutual funds as tax saving instruments. Television and newspaper are the most important sources from where people draw information about mutual funds. Most of the people agree to the fact that mutual fund is the safer option to invest. Maximum of the people consider mutual fund as long term instrument. Interpretation: - Most of the people want that they should be made aware of the NAV regularly. People want to know their NAV value periodically after every month. Telephone is the most preferred way by which the people want to get the information. Insurance and Fixed deposits are other known investment options people are aware of. Demand draft is the preferred way by which people want to redeem their value. Demand draft and Cheque are the most preferred way to pay for buying mutual fund. Security is the most important factor considered while investing in mutual fund followed by Return, Recommendation, Knowledge and popularity.

Recommendations and Suggestion

Most people are aware of the mutual funds. Television and newspapers are the most important sources that help people draw information about mutual funds. So, mutual fund companies should advertise more and more on these medias. ICICI MF and Reliance MF are those Mutual Funds about which most of the people are aware of and they advertise more on television and newspapers. So, this supports our study. People want to know regularly about their NAV and so companies can do more by taking proper care that the customers are told about their NAV values and this will add to their satisfaction level about the performance of the company.

People consider Security the most important issue which affect their decision while investing in the MF companies, even more then the return factor.

Conclusion

As has been discussed, mutual funds offer several benefits that are unmatched by other investment options. Post liberalization, the industry has been growing at a rapid pace and has crossed Rs. 100000 crore size in terms of its assets under management. However, due to the low key investor awareness, the inflow under the industry is yet to overtake the inflows in banks. Rising inflation, falling interest rates and a volatile equity market make a deadly cocktail for the investor for whom mutual funds offer a route out of the impasse. The investments in mutual funds are not without risks because the same forces such as regulatory frameworks, government policies, interest rate structures, performance of companies etc. that rattle the equity and debt markets, act on mutual funds too. But it is the skill of the managing risks that investment managers seek to implement in order to strive and generate superior returns than otherwise possible that makes them a better option than many others.

The mutual fund industry is still in the nascent stage. i.e. the ship hasnt even sailed the shore yet. Today an investor puts his money in the bank or in an unorganized market. The unorganized market is in shambles. Most people havent even got back their money. As the pressure builds up they will try and explore new avenues. Compare a country of our size to the mutual fund industry in the developed economies. Its rather too small. Nevertheless, this is just a beginning and the industry will grow surely. In between you may have ups and downs which are part and parcel of any industry.

Future of Mutual Funds.


The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investors shift their assets from banks and other traditional avenues. Some of the older public and private sector players will either close shop or be taken over. Out of ten public sector players five will sell out, close down or merge with stronger players in three to four years. In the private sector this trend has already started with two mergers and one takeover. Here too some of them will down their shutters in the near future to come. But this does not mean there is no room for other players. The market will witness a flurry of new players entering the arena. There will be a large number of offers from various asset management companies in the time to come. Some big names like Fidelity, Principal, Old Mutual etc. are looking at Indian market seriously. One important reason for it is that most major players already have presence here and hence these big names would hardly like to get left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as this would enable it to hedge its risk and this in turn would be reflected in its Net Asset Value (NAV). SEBI is working out the norms for enabling the existing mutual fund schemes to trade in derivatives. Importantly, many market players have called on the Regulator to initiate the process immediately, so that the mutual funds can implement the changes that are required to trade in Derivatives.

Appendix A

Questionnaire

Name : Mr. / Ms. ___________________________ Occupation: ________________________ 1. To which Age group do you belong? (a) Below 25 (d) 45 To 55 2. (b) 25 To 35 (e) 55 & above (c) 35 To 45

What is your Educational Qualification? (a) HSC (b) SSC (c) Graduate (d) Post Graduate

3.

In which Income Range you are ? (a) Upto 2 lakh (d) More than 10 lakh (b) 2 to 5 lakh (c) 5 to 10 lakh

4.

Number of Dependents: (a) 0-2 (b) 3-5 (c) 6 and above

5.

Do you make investments? Yes/ No

6. Are you aware about Mutual Fund As an investment option? Yes/No If yes, then proceed. 7. Which Mutual Fund Company or Asset Management Company are you aware of? LIC MF JM Financial

TATA MF Reliance MF BNP Paribas Others ( Please Specify)______________

Sundram MF ICICI MF UTI MF

8. Which type of Mutual Fund Scheme you are aware of? Dividend Growth Tax Saving ( ELSS)

Other ( Please Specify)_______________ 9. From where do you come to know about Mutual Fund? Newspaper Magazine Television Asset Management Company ( AMC) Others ( Please Specify)___________

10. Do you consider Mutual Fund as A Safer option?

11.

Mutual Fund is for :

12. Do you want your AMC to inform you about NAV? Yes / No 13. If Yes, how frequently? (a) Every Month (b) Quarterly (c) Half yearly (d) Yearly

14. Which medium should they follow? (a) Mail (b) Post (c) Telephone (d) SMS (e) Others

15. Apart from Mutual Fund, Which Other investment option(s) are you aware of?

Debentures Real Estate

Equity

Insurance

Bonds

Bullion/Commodity(Gold,Silver, Etc.)

Fixed Deposit / Post office Savings Scheme Others (Please Specify)___________ 16. Which option you prefer to redeem your Mutual Fund units? (a) ECS (b) Cheque (c) Demand Draft (d) Others________

17. How would you like to make payment/ purchase of Mutual Fund Scheme? (a) Online (b) Cheque/ DD (e) Others_________

18. Rate the factors considered while investing in Mutual Fund(a) Popularity Of brand

(b) Return upon Investment

(c) Security

(d) Recommendation

(e) Knowledge