A Study of Attitude of Investors' Towards Mutual Fund as an Investment Tool

A

PROJECT REPORT

ON

A STUDY OF INVESTORS’ ATTITUDE TOWARDS MUTUAL FUNDS AS AN INVESTMENT OPTION

For

NJ INDIA INVEST PVT. LTD

MASTER OF MANAGEMENT STUDIES (MMS)

UNIVERSITY OF MUMBAI

SUBMITTED TO

SINHGAD INSTITUTE OF BUSINESS MANAGEMENT

CHANDIVALI

UNDER THE GUIDANCE OF

SUSHMA VERMA

SUBMITTED BY

SURAJ NILEKAR2012-14/ROLL NO: 125

FIANANCE

A study of Investors’ attitude towards mutual fund as an investment option

CERTIFICATE

This is to certify that _____________________________________________ has

successfully completed the project work as a part of academic fulfillment of

Masters of Management Studies (M.M.S.) Semester II examination.

___________________________________

Name & Signature of Project Guide

Date : ____________

DIRECTOR SIBM

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DECLARATION

I, Suraj S. Nilekar of Master of Management Studies (Semester II) of Sinhgad

Institute of Business Management, hereby declare that I have successfully

completed this Project on “A study of investors’ attitude towards mutual

fund as an investment tool” in the academic year 2012-14.

The information incorporated in this project is true and original to the best of

my knowledge.

_____________________________

Signature

(SURAJ S. NILEKAR)

SIBM, Mumbai 3


ACKOWLEDGEMENT

It is great exposure for us using our theoretical knowledge which we have learnt till 2nd

semester of Master of Management Studies (M.M.S.) in my project work which I have done

at NJ India Pvt. Ltd. It is great pleasure to use knowledge in practical way in our tenure of

training.

I would like to first heartily thanks to MUMBAI UNIVERSITY for including project in our

M.M.S. syllabus. It is helpful to learn real situation of industry and helpful for increasing in

our practical knowledge.

We present our sincere sentiments of appreciation and gratitude to our college Director Dr.

Meera Vijay for the approval of our project.

I am very thankful to Mr. Shailesh Mathukia, Branch Manager of NJ India Pvt. Ltd. As

without his help and guidance this project is not possible, he shares his good knowledge and

guide in my project work. I am also thankful to all staff members of NJ India Pvt. Ltd.

I would like to thank my project guide Prof. Sushma Verma for her invaluable guidance at

every stage. Without her support I would not have been able to successfully complete and

present the project.

I am thankful to my parents and my friends as they always motivate me and help me directly

or indirectly in my project work.

I appreciate the non teaching staff of SIBM College for providing me all information related

the project and my sincere thanks to MMS Department for providing us essential amenities,

which proved beneficial for my project development.

EXECUTIVE SUMMARY

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Mutual Funds have gained popularity as an investment vehicle over the past two years.

Though technically, must have been in India since 1964 through Unit Trust of India , the

industry has gained importance only recently after new private sector funds and funds backed

by global investment houses set up shop in India.

Mutual Funds have often been associated with equity markets. While that is industry, the debt

or fixed income side has also gained prominence in the recent past. In fact, now mutual funds

offer instruments schemes for all types of investors from the risk averse to high risk takers.

The project lays a great stress on investor education. The primary objective is to explain in

clear and simple language, the benefits and pitfalls of investing in mutual funds. There is a

gap in the market about quality information on Mutual Funds. Most of the information is

either inadequate or biased towards a particular scheme/fund or a particular category. This

project attempts to look at the subject from the point of view of an ordinary investor who has

little time or inclination to get into the technical details of Mutual Funds.

This Project gave me a great learning experience and at the same time it gave me enough

scope to implement my analytical ability. The analysis and advice presented in this Project

Report is based on market research on the saving and investment practices of the investors

and preferences of the investors for investment in Mutual Funds. This Report will help to

know about the investors’ Preferences in Mutual Fund means Are they prefer any particular

Asset Management Company (AMC), Which type of Product they prefer, Which Option

(Growth or Dividend) they prefer or Which Investment Strategy they follow (Systematic

Investment Plan or One time Plan). This Project as a whole can be divided into two parts.

The first part of the project explains the basics of a Mutual Fund including the history and

evolution of the history. Then it highlights the types of Mutual Funds and the recent trends in

the industry.

The second portion deals with doubts and questions that arise in investors' mind about Mutual

Funds. The data collected has been well organised and presented. Hope the research findings

and conclusions will be helpful in understanding the perception and attitude of Indian

Investors towards Mutual Fund which may reveal some interesting insights and directions for

future research.

INDEX

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Sr. No. Topic Page No1. Introduction 9 - 16 1.1 The Concept of Mutual Fund 10 1.2 Definition of Mutual Fund 10 1.3 History of Mutual Fund 11 1.4 Originated Mutual Fund in India 11

1.5 Type of Mutual Fund in India 141.6 Mutual Fund Investing vs. Investing through banks 16

2. Company Overview 17 - 192.1 Company Profile 172.2 Product of the Company 172.3 Experience during SIP 19

3. Review of Literature 20 - 25 3.1 Review of the existing literature 20 3.2 Theoretical framework / Background Theory 224. Objectives, Scope and Hypothesis of the Study 26 - 27 4.1 Research Aim 26 4.2 Research Objective 26 4.3 Scope of the Research 26 4.4 Hypothesis 275. Research Methodology of the Study 28 5.1 Data Source 28 5.2 Duration of the Study 28 5.3 Sampling Procedure 28

5.4 Sample Size 28 5.5 Sample Design 28

6. Data analysis, Results and Interpretation 29 - 40 6.1 Profile of Sample 29 6.2 Data Analysis 33 6.3 Interpretation of results 387. Limitation of the Project 418. Conclusion 429. Recommendations and Suggestions 4310. Appendix 44 – 4611. Bibliography 47

LIST OF FIGURE

Figure 1: Growth in AUM in different Phase

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Figure 2: Mutual Fund Operation Flow Chart

Figure 3: Organisation of a Mutual Fund

Figure 4: Classification as per Gender

Figure 5: Classification as per Age

Figure 6: Classification as per Qualification

Figure 7: Classification as per Occupation

Figure 8: Profile of Investors on the basis of Income

Figure 9: Investors’ preference for investing money

Figure 10: Factor consider while investing money

Figure 11: No of Investors who invest in Mutual Fund

Figure 12: Reason for not investing in MF

Figure 13: Awareness level of Mutual Fund Investors

Figure 14: Source of information for investors

Figure 15: Key features which attract investors

Figure 16: Preferable mode of investment in Mutual Fund

Figure 17: Intermediaries in Mutual Fund

Figure 18: Mode of receive returns

Figure 19: Most preferred AMCs as per Investors

LIST OF TABLE

Table 1: Growth in Mutual Fund Industry in India

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Table 2: Comparison between investment in bank and Mutual Funds

Table 3: Ranking of AMCs as per Investor

1. Introduction

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Mutual fund is a trust that pools the savings of a number of investors who share a common

financial goal. This pool of money is invested in accordance with a stated objective. The joint

ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. The money thus

collected is then invested in capital market instruments such as shares, debentures and other

securities. Mutual fund is the pool of money, based on the earnings of individuals who shares

a common objective of having financial secured for future uncertainty as well as some sort of

financial benefits like the capital appreciation and dividend earning. The money collected

from the investors is then relocated or invested in capital market instruments such as shares,

debenture, and various foreign markets. Investors invest money and get the units as per the

unit value which can be called as Net Assets Value (NAV).The income earned through these

investments and the capital appreciations realized are shared by its unit holders in proportion

the number of units owned by them. Thus a Mutual Fund is the most suitable investment for

the common man as it offers an opportunity to invest in a diversified, professionally managed

basket of securities at a relatively low cost.

A Mutual Fund pools the money of people with certain investment goals. The money

invested in various securities depending on the objectives of the mutual fund scheme and the

profits (or loss) are shared among investors’ in proportion to their investment. Investments

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

reduces the risk because all stocks may not move in the same direction in the same

proportion at the same time. Mutual fund issues units to the investors’ in accordance with

quantum of money invested by them. Investors’ of mutual funds are known as unit holders.

The profits or losses are shared by the investors’ in proportion to their investment. The

mutual funds normally come out with a number of schemes with different investment

objectives which are launched from time to time. A mutual fund is required to be registered

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

before it can collect funds from the public.

Mutual funds can be invested in many different kinds of securities. The most common are

cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds invest primarily

in the shares of a particular industry, such as technology or utilities. These are known as

sector funds. Bond funds can vary according to risk (e.g., high-yield or junk bonds,

investment-grade corporate bonds), type of issuers (e.g., government agencies, corporations,

or municipalities), or maturity of the bonds (short- or long-term). Both stock and bond funds

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can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities

(global funds), or primarily foreign securities (international funds). Most mutual funds'

investment portfolios are continually adjusted under the supervision of a professional

manager, who forecasts the future performance of investments appropriate for the fund and

chooses those which he or she believes will most closely match the fund's stated investment

objective. A mutual fund is administered through a parent management company, which may

hire or fire fund managers. Mutual funds are liable to a special set of regulatory, accounting,

and tax rules. Unlike most other types of business entities, they are not taxed on their income

as long as they distribute substantially all of it to their shareholders. Also, the type of income

they earn is often unchanged as it passes through to the shareholders. Mutual fund

distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable

distributions can be either ordinary income or capital gains, depending on how the fund

earned those distributions.

1.1 The Concept of Mutual Fund:

Investors have a basic choice, they can invest directly in individual securities, or they can

invest indirectly through a financial intermediary. Financial intermediaries gather savings

from investors and invest these monies in portfolio of financial assets.

A mutual fund is a type of financial intermediary that pools the funds of investors who seek

the same general investment objectives and invests them in a number of different types of

financial claims (e.g. equity shares, bonds, money market instruments). These pooled funds

provide thousands of investors with proportional ownership of diversified portfolios managed

by professional investment managers. The term ‘mutual’ is used in the sense that all its

returns, minus expenses, are shared by the fund’s unit holders.

1.2 Definition of Mutual Fund:

An investment vehicle that is made up of a pool of funds collected from many investors for

the purpose of investing in securities such as stocks, bonds, money market instruments and

similar assets. Mutual funds are operated by money managers, who invest the fund's capital

and attempt to produce capital gains and income for the fund's investors. A mutual fund's

portfolio is structured and maintained to match the investment objectives stated in its

prospectus.

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A mutual fund is a company that brings together money from many people and invests it in

stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund

owns are known as its portfolio. Each investor in the fund owns shares, which represent a part

of these holdings.

1.3 History of Mutual Fund:

The history of mutual funds dates support to 19th century when it was introduced in Europe,

in particular, Great Britain. Robert Fleming set up in 1868 the first investment trust called

Foreign and colonial investment trust which promised to manage the finances of the

moneyed classes of Scotland by scattering the investment over a number of different stocks.

This investment trust and other investment trusts which were afterward set up in Britain and

the U.S., resembled today’s close – ended mutual funds. The first mutual fund in the U.S.,

Massachusetts investor’s trust, was set up in March 1924. This was the open – ended mutual

fund.

The stock market crash in 1929, the Great Depression, and the outbreak of the Second World

War slackened the pace of growth of the mutual fund industry. Innovations in

products and services increased the popularity of mutual funds in the 1950s and 1960s. The

first international stock mutual fund was introduced in the US in 1940. In 1976, the first tax

exempt municipal bond funds emerged and in 1979, the first money market mutual funds

were created. The latest additions are the international bond fund in 1986 arm funds in 1990.

This industry witnessed substantial growth in the eighties and nineties when there was a

significant increase in the number of mutual funds, schemes, assets, and shareholders. In the

US the mutual fund industry registered s ten – fold growth the eighties. Since 1996,

mutual fund assets have exceeds bank deposits. The mutual fund industry and the banking

industry virtually rival each other in size.

1.4 Originated Mutual Fund in India:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India,

at the initiative of the Government of India and Reserve Bank of India. The history of

mutual funds in India can be broadly divided into four distinct phases:

Years Rs in Crores Different Phase in MF IndustryMar-65 to Feb-87 25 First Phase

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Mar-87 to Feb-93 4564 Second PhaseMar-93 to Feb-03 47000 Third Phase

Mar-03 121805

Fourth Phase

Mar-04 139616Mar-05 149554Mar-06 231862Mar-07 326388Mar-08 505152Mar-09 417300Mar-10 613979Mar-11 592250

Table 1: Growth in Mutual Fund Industry in India

1.4.1 First Phase: 1964 – 87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by

the Reserve Bank of India and functioned under the Regulatory and administrative control of

the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

Development Bank of India (IDBI) took over the regulatory and administrative control in

place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988

UTI had Rs.6, 700 crores of assets under management.

1.4.2 Second Phase: 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks

and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India

(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987

followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),

Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund

(Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund

in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004

crores

1.4.3 Third Phase: 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

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industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the

year in which the first Mutual Fund Regulations came into being, under which all mutual

funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now

merged with Franklin Templeton) was the first private sector mutual fund registered in July

1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI

(Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds

setting up funds in India and also the industry has witnessed several mergers and

acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of

Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under

management was way ahead of other mutual funds.

1.4.4 Fourth Phase: Since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of

India with assets under management of Rs.29,835 crores as at the end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain other schemes.

The Specified Undertaking of Unit Trust of India, functioning under an administrator and

under the rules framed by Government of India and does not come under the purview of the

Mutual Fund Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered

with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the

erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under

management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual

Fund Regulations, and with recent mergers taking place among different private sector

funds, the mutual fund industry has entered its current phase of consolidation and growth.

The graph indicates the growth of assets over the years.

Figure 1: Growth in AUM (Rs in Crores) in different Phase

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Mar-65

Mar-87

Mar-93

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

0

100000

200000

300000

400000

500000

600000

700000

Growth in Assets Under Management

Rs in Crores

Years

Rs

in C

rore

s

Source: Association of Mutual Funds in India (AMFI)

1.5 Type of Mutual Fund in India:

A common man is so much confused about the various kinds of Mutual Funds that he is

afraid of investing in these funds as he cannot differentiate between various types of Mutual

Funds with fancy names. Mutual Funds can be classified into various categories under the

following heads:

1.5.1 According to type of Investments: While launching a new scheme, every Mutual Fund

is supposed to declare in the prospectus the kind of instruments in which it will make

investments of the funds collected under that scheme. Thus, the various kinds of Mutual

Fund schemes as categorized according to the type of investments are as follows:

(a) Equity Funds

(b) Debt Funds (also called Income Funds)

(c) Diversified Funds (Also called Balanced Funds)

(d) Gilt Funds

(e) Money Market Funds

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(f) Sector Specific Funds

(g) Index Funds

1.5.2 According to the time of closure of the scheme: While launching new schemes,

Mutual Funds also declare whether this will be an open ended scheme (i.e. there is no specific

date when the scheme will be closed) or there is a closing date when finally the scheme will

be wind up. Thus, according to the time of closure schemes are classified as follows:

(a) Open Ended Schemes

(b) Close Ended Schemes

Open ended funds are allowed to issue and redeem units any time during the life of the

scheme, but close ended funds cannot issue new units except in case of bonus or rights

issue. Therefore, unit capital of open ended funds can fluctuate on daily basis (as new

investors may purchase fresh units), but that is not the case for close ended schemes. In

other words we can say that new investors can join the scheme by directly applying to the

mutual fund at applicable net asset value related prices in case of open ended schemes but not

in case of close ended schemes. In case of close ended schemes, new investors can buy the

units only from secondary markets.

1.5.3 According to tax incentives Schemes: Mutual Funds are also allowed to float some tax

saving schemes. Therefore, sometimes the schemes are classified according to this also:

(a) Tax Savings Funds

(b) Non Tax Savings Funds

1.5.4 According to the time of payout: Sometimes Mutual Fund schemes are classified

according to the periodicity of the pay outs (i.e. dividend etc.). The categories are as follows:

(a) Dividend Paying Schemes

(b) Reinvestment Schemes

The mutual fund schemes come with various combinations of the above categories.

Therefore, we can have an Equity Fund which is open ended and is dividend paying plan.

Before you invest, you must find out what kind of the scheme you are being asked to invest.

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You should choose a scheme as per your risk capacity and the regularity at which you wish to

have the dividends from such schemes

1.6 Mutual Fund Investing vs. Investing through banks:

Mutual funds are only one kind of financial intermediary. Bank is the largest intermediary in

the financial system. Thousands of depositors pool their savings in a bank. However,

investments in banks entitle the depositors to different financial claims than the generated by

the mutual funds.

Factors Bank Mutual FundReturns Low Better

Administrative Exp. High LowRisk Low Moderate

Investment Options Less MoreNetwork High Penetration Low but ImprovingLiquidity At a cost Better

Quality of Assets Not transparent TransparentInterest Calculation Minimum balance between 10th

& 30th of Every monthEveryday

GuaranteeMaximum Rs. 1,00,000 on deposits

None

Table 2: Comparison between investment in bank and Mutual Funds

2. Company Overview

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2.1 Company Profile:

NJ Group is a leading player in the Indian financial services industry known for its' strong

distribution capabilities. The journey of NJ began in 1994 with the establishment of NJ India

Invest Pvt. Ltd., the flagship company, to cater to investor needs in the financial services

industry. Today, the Wealth Advisory Network, also known as the NJ Funds Network, started

in 2003 is among the largest networks of wealth advisors in India.

A evolving, emerging & enterprising group with its' roots in the financial services sector and

today expanding into newer horizons with great passion.

The vision of the group is to be leaders in businesses driven by customer satisfaction,

commitment to excellence and passion for continued value creation for all stakeholders. This

vision has helped us grow and build the trust of our customers and associates which is at the

cornerstone of everything we do. Trust is also at the heart of our success and the driver for

passion for our success.

Over the years, NJ Group has diversified into other businesses and today has the presence in

businesses ranging from wealth advisory network, asset management, real estate, insurance

broking, training & development and technology. Our rich experience in financial services,

combined with execution capabilities and strong process & system orientation, has enabled us

to shape a rising growth trajectory in our businesses.

NJ Group is based out of Surat in Gujarat (India) and has presence in over 100 locations in

India and has over 1,000 employees.

2.2 Product of the Company:

The NJ Wealth Advisors Network is among India's largest and most successful network of

advisors in the financial services industry. The NJ Wealth Advisory Platform is a

comprehensive, 360° platform offering end-to-end solutions, required for a successful wealth

advisory practice.

Started in 2003, the network seeks to reach out to the common man and extend the

opportunity to create wealth through sound investment principles and strategies. The NJ

Wealth Advisors Network today has over 15,000* Advisors, called as NJ Partners, spread

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across India catering to over 12* lakh investors and having an AUA close to

Rs.10,000* Crores. The platform offers Partners with a basket of wealth products in addition

to comprehensive solutions in all important areas of business, backed by cutting edge IT

services. The Wealth Advisory Platform has managed to successfully transform the lives of

many wealth advisors by providing them with one answer to all advisory practice related

concerns.

NJ Wealth Advisors Network has its presence in over 100* locations in India. The key

offerings of the NJ Wealth Advisory Platform are briefly mentioned here.

Product basket

Domestic mutual funds (all AMCs)

Fixed Deposits of companies

PMS products (Third party & NJ)

Government/ RBI/ Infrastructure bonds

Residential & commercial properties

Partner Services

Dedicated Relationship Manager

Marketing & Sales support

Research support

Training & Education support

Dedicated Customer Care / Query management support

Technological support, including online business / 'Partners Desk' with CRM,

Financial Planning & Employee Management modules

Customer Services:

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Online family "Wealth / Client Desk" enabling single portfolio view of 'entire' wealth

portfolio

Trading & Demat Account with online transacting & call-&-trade service in mutual funds

2.3 Experiences during SIP:

This SIP was my first industrial experience. During the SIP in NJ India Invest provided me

with a great deal of exposure to the financial market. I found myself in a professional

working environment after quite a long gap. I’m sure the training which was given to me at

NJ India Invest would help me tremendously in the future

During the initial days of my SIP, I had many interactive sessions with various officials on

their areas of expertise. I was lucky enough to have discussions with the Regional Head on

various finance related topics. My interactions with these people gave me a rough idea of the

entire financial products especially mutual fund. I got many doubts cleared and concepts

corrected.

I got a chance to interact with the sales people and tried to understand the way they sell

Investment products. I also accompanied them to different locations to meet customers.

The Investors’ Survey was the most difficult part of the SIP which continued for about one

and half months. As the sample size was large, successfully completing the survey seemed

next to impossible. The big problem I faced was in approaching people. Some were good

enough to answer my questions while some others were quite hesitant.

This SIP taught me many things; I met different people and different types of people who

were more or less nice.

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3. Review of Literature

The published work relating to the topic is reviewed. The relevant literature is reviewed on

the basis of Books, Periodicals, News Papers and Websites. The detailed review is given

below:

Dr. Shantanu Mehta (September 2012) in his research paper “Preference of Investors

for Indian Mutual Funds and its Performance Evaluation”, published in Pacific

Business Review International Vol. 5 concluded that, Mutual funds have opened new vistas

to millions of small investors by virtually taking investment to their doorstep. In India, a

small investor generally goes for such kind of information, which do not provide hedge

against inflation and often have negative real returns. However Mutual funds have come, as a

much needed help to these investors.

Dr. Ravi Vyas (July 2012) in his article “Mutual Fund Investor’s Behaviour and

Perception”, published in International Refereed Research Journal Vol. – III concluded

that, Mutual fund companies should come forward with full support for the investors in

terms of advisory services, ensure full disclosure of related information to investor, proper

consultancy should be given by mutual fund companies to the investors in understanding

terms mutual fund information should be published in investor friendly language and style,

proper system to educate investors should be developed by mutual fund companies to analyse

risk in investments made by them, etc.

Dr. Binod Kumar Singh (March 2012) in his article “Investors attitude towards Mutual

Funds”, published in the International Journal of Research in Management pointed out

that, most of the investors having lack of awareness about the various function of mutual

funds. Moreover, as far as the demographic factors are concerned, gender, income and level

of education have significantly influence the investors’ attitude towards mutual funds. On the

other hand the other two demographic factors like age and occupation have not been found

influencing the attitude of investors’ towards mutual funds.

Mr. Sarish (2012) in his research paper “A Study of Opportunities and Challenges for

Mutual Fund in India: Vision 2020”, published in VSRD International Journal of

Business & Management Research Vol. 2 draw a conclusion that, Mutual funds are among

the most preferred investment instruments. For middle income individuals, investing in

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mutual funds yields higher interest and comes with good principal amount at the end of the

maturity period of the mutual fund investment. Another important fact which he concluded is

that mutual funds are safe, with close to zero risk, offering an optimized return on earnings

and protecting the interest of investors.

Mr. B. K. Singh and Mr. A. K. Jha (2009) in his study, “An Empirical study on

awareness & acceptability of Mutual Fund”, published in Regional Student’s

Conference, ICWAI pointed out that investors basically prefer mutual fund due to return

potential, liquidity and safety and they were not totally aware about the systematic investment

plan. The invertors’ will also consider various factors before investing in mutual fund.

Ramamurthy and Reddy (2005) conducted a study, “Recent Trends in Mutual Fund

Industry” published in SCMS Journal of Indian Management to analyze recent trends in

the mutual fund industry and draw a conclusion that the main benefits for small investors’

due to efficient management, diversification of investment, easy administration, nice return

potential, liquidity, transparency, flexibility, affordability, wide range of choices and a proper

regulation governed by SEBI. The study also analyzed about recent trends in mutual fund

industry like various exit and entry policies of mutual fund companies, various schemes

related to real estate, commodity, bullion and precious metals, entering of banking sector in

mutual fund, buying and selling of mutual funds through online.

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3.2 Theoretical framework / Background Theory:

A Mutual Fund is a trust that pools the savings of a number of investors who share a common

financial goal. The money thus collected is then invested in capital market instruments such

as shares, debentures and other securities. The income earned through these investments and

the capital appreciation realised are shared by its unit holders in proportion to the number of

units owned by them. Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. The flow chart below describes broadly the working of a

mutual fund:

Figure 2: Mutual Fund Operation Flow Chart

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Fund Manag

er

Securities

Returns

Investors

Pool their

Money with

Invest in

Passed back to

Generates


Organisation of Mutual Fund in India:

There are many entities involved and the diagram below illustrates the organisational set up

of a mutual fund:

Figure 3: Organisation of a Mutual Fund

Sponsors:

They are the individuals who think of starting a mutual fund. The Sponsor approaches

SEBI, the market regulator and also the regulator for mutual funds. Not everyone can start a

mutual fund. SEBI will grant a permission to start a mutual fund only to a person of

integrity, with significant experience in the financial sector and a certain minimum net

worth. These are just some of the factors that come into play.

Trustee:

Once SEBI is satisfied with the credentials and eligibility of the proposed Sponsors, the

Sponsors then establish a Trust under the Indian Trust Act 1882. Trusts have no legal

identity in India and thus cannot enter into contracts. Hence the Trustees are the

individuals authorized to act on behalf of the Trust. Contracts are entered into in the

name of the Trustees. Once the Trust is created, it is registered with SEBI, after which

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SEBI

Trustees

AMC

Unit Holders

Sponsors

Transfer AgentCustodian

Mutual Fund


point, this Trust is known as the mutual fund.

Asset Management Company:

Asset Management Company is the one which will manage the asset (money collected to

invest on company shares) of its customers by appointing a manager under several schemes.

Every scheme will have a specific objective, which is framed at the time of introducing the

scheme. A manager is to be appointed under the scheme to keep up the objectives framed. He

should take care that the investment on specific scheme should not affect the customer's asset.

The schemes being introduced by the Asset Management Companies is known as Mutual

Fund Scheme. As per the Mutual Fund definition, the Asset is the money received towards a

collective investment plan. This will help the small investors to increase their asset with the

help of Asset Management Companies.

Anyhow an investor cannot blame AMC, for its under performance. We need to have a quick

review on the performance of the fund in which we invest, at least once in 3 months. The

AMC will help in providing the various investment plans. We should select the suitable plan

from it which can meet our requirement. So risks are based on our decisions.

Requirement of Asset Management Company:

Recent days are said to be the days of competition. Every day and every minute everyone is

running to achieve something in their career. Achieving some goal is not that much easier

nowadays, not only the hard work but also fastness in the work will help in achieving their

goal to earn money. So, many of us do not have time to think about the future financial

requirement and planning. Many of us are not having time to watch the market status and

invest the money in it. That is the only source, through which we can grow our money drastic

in a long run. However that needs some follow up of market, to change the investments

periodically in order to fetch high returns. The above are all the reasons for which the Asset

Management Companies are required. By paying the fund manager a little percentage we are

making him to take care of our assets by investing in the shares which will meet the declared

financial objectives

SIBM, Mumbai 24


Top 10 Asset Management Companies in India:

As it is very tough to find the best one AMC among the list, with the past performance and

the returns of the schemes they have, many are suggesting the following the 10 AMC as top

among the 44. It is not in order from the first to last, all may have same importance.

Axis AMC ltd.

Reliance Capital AMC Ltd.

SBI Funds Management Ltd.

HDFC Asset Management Co. Ltd.

ICICI Prudential AMC Ltd.

Franklin Templeton AMC (I) Pvt. Ltd.

Birla Sun Life AMC Ltd.

BNP Paribas AMC Ltd.

Tata Asset Management Ltd.

DSP Blackrock Investment Managers Pvt. Ltd.

SIBM, Mumbai 25


4. Objectives and Scope of the study4.1 Research Aim:

The aim of this research is to empirically investigate the investors’ attitude toward mutual

fund

4.2 Research Objective:

Objective 1: To study and analyze the impact of various demographic factors on investors’

attitude towards mutual fund.

Objective 2: To study about the factors responsible for the selection of mutual funds as an

investment option.

Objective 3: To study the people in which age and income group prefer mutual funds over

other investment options

4.3 Scope of the Research:

Over the past few decades, much research has already been done over legal requirements of a

mutual fund, SEBI Norms and role of AMFI. The main reason for choosing this topic is

based on the fact that so far no study has been conducted in order to understand the attitude of

Investors’ towards mutual fund as an investment tool.

Academically, this research project will be helpful in understanding the perception and

attitude of Indian Investors towards mutual fund which may reveal some interesting insights

and directions for future research.

It is observed that the level of income also influences the investment decisions. As far as the

demographic factors are concerned, gender, income and level of education have significantly

influence the investors’ attitude towards mutual funds.

Later after reading and studying various literatures, I came to know about various problems

regarding mutual fund industry and its complex procedure. Additionally, we believe that

conducting this research project will enhance the valuable personal knowledge about the

subject and experience for future career applications.

SIBM, Mumbai 26


4.4 Hypotheses

The main purpose of this study is to find out what is the attitude of investors towards mutual

fund as an investment option. To be able to fulfill the purpose of this research we find it

appropriate to test the perception of investors towards mutual fund. This led into generating

the following hypotheses to test accordingly:

Hypothesis 1:

The demographic factors like gender, income and level of education have significantly

influence the investors’ attitude towards mutual funds.

Hypothesis 2:

The individual investors having lack of knowledge about mutual fund and hence they are not

considering mutual fund as an investment option.

SIBM, Mumbai 27


5 Research Methodology of Study

5.1 Data Source:

This report is based on primary as well as secondary data. The study aims at finding out the

attitude of the investors towards Mutual fund in Mumbai and Suburb. This study was based

mainly on primary sources. The primary data was collected from the investors of mutual

funds with help of the questionnaire which are supplied among the investors of Mumbai City.

The secondary data were collected from the books, records and journals. The essential data

were collected with the help of questionnaire.

5.2 Duration of Study:

The study was carried out for a period of one month, from 5th June 2013 to 4th July, 2013.

5.3 Sampling procedure:

By adopting convenience sampling, approximately 100 respondents were selected for this

study. The essential data were collected with the help of questionnaire. It was collected

through filling up the questionnaire prepared. The data has been analyzed by using Statistical

tool.

5.4 Sample size:

The sample size of our project is limited to 100 people only. Out of which only 72 people had

invested in various mutual fund schemes. Other 28 people had not invested in any of the

mutual fund schemes

5.5 Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs etc.

SIBM, Mumbai 28


6 Data Analysis, Results and Interpretation

This chapter provides results obtained from the survey, which have been examined and

evaluated through data analysis techniques. Findings are subjected to hypotheses testing. This

chapter evaluates investors’ attitude towards mutual fund:

6.1 Profile of Sample:

Here we have mentioned profile of sample like age, gender, Income etc. The sample size of

our project is limited to 100 people only.

93%

7%

Gender

MaleFemale

Figure 4: Classification as per Gender

Data Interpretation:

Total number of respondents is 100 out of which 93% are male and 7% are female

respondents. Hence we can say that the majority of our respondents are male and due to this

reason NO further analysis of the impact of gender as a dependant (demographic) factor on

other independent factors is

SIBM, Mumbai 29


Less than 30

31 to 40 41 to 50 More than 50

0

10

20

30

40

50

60

Classification as per Age

No. of Investors

Figure 5: Classification as per Age


This shows that majority of the respondents are young and they have just started their career.

It might be possible that these respondents do not have complete knowledge of mutual fund

and they might be investing in various avenues according to the advices given by their

brokers and agents.

6%

46%

29%

19%

Qualification Distribution

SSC/HSCGraduatePost GraduateProfessional

Figure 6: Classification as per Qualification

SIBM, Mumbai 30



A minor portion of 6% of the respondents are high school pass out while maximum of them

i.e. 46% are graduates while 29% and 19% of the respondents hold Postgraduate and

Professional qualification respectively.

12%

33%51%

4%

Occupation Distribution

Professional

Business

Salaried

Retired

Figure 7: Classification as per Occupation


51% of the respondents are salaried employees which forms a majority. 33% are business

persons 12% are practicing professionals (like Chartered Accountants, Architects, Lawyers

etc.) while a minor portion of 4% of them are retired employees.

SIBM, Mumbai 31


59%

34%

6%1%

Distribution on the basis of Income

3 to 5 lakhs5 to 15 lakhs15 to 25 lakhsAbove 25 lakhs

Figure 8: Profile of Investors on the basis of Income


Majority of the respondents i.e. 59% lie in the slab of annual income between Rs. 3-5 lakhs.

34% of the respondents have an income ranging from Rs. 5-15 lakhs, while a minor portion

of 6% and 1% of the respondents have an annual income of Rs. 15-25 lakhs and above Rs. 25

lakhs respectively.

SIBM, Mumbai 32


6.2 Data Analysis, Interpretation and Results

Savings A/c

Fixed Deposit

Insur-ance

Mutual Fund

Post Of-fice

Shares/Deben-tures

Gold and Sil-

ver

Real Es-tate

no. of re-spondent

50 40 31 48 24 41 45 26

5

15

25

35

45

Preferred Investment Avenue by InvestorsN

o o

f R

esp

on

den

t

Figure 9: Investors’ preference for investing money


This chart mainly talks about the respondents’ preference to Investment Avenue. As per our

survey it is seen that investors give second preference to mutual fund investment after savings

A/c. It shows that mutual fund has gained popularity among the investors and they also prefer

it as investment tool.

22%

41%

25%

12%

Factor Preferred Most

Liquidity

Low Risk

High Returns

Company Reputation

Figure 10: Factor consider while investing money

SIBM, Mumbai 33



Figure 10 mainly talks about the factor considered by investors while investing their money

in different financial product. It is found that most of the investors are look at the safety of

their money here as per our survey 41% people prefer low risk while investing their money.

Around 25 % people are ready to take risk and attract to high returns followed by liquidity

and company reputation which is 22% and 12% respectively.

Question 1: Have you ever invested money in mutual fund?

72%

28%

Have you ever invested money in Mutual Fund?

Yes

No

Figure 11: No of Investors who invest in Mutual Fund


This chart mainly talks about the respondents’ interest in investing in Mutual Fund. Out of

100 people surveyed it is seen that 72% of the people are investing or invested their money in

MF whereas just 28% of the people are not investing in MF. This shows that mutual fund is

considered as a good option for investment by most of the respondents.

SIBM, Mumbai 34


Question 2: If you do not invest in mutual fund then why?

54%

25%

11% 11%

Reason for not investing in Mutual Fund

Not aware about MF

Higher Risk

Difficult to understand

Not any specific reason

Figure 12: Reason for not investing in MF


Figure 12 is clearly shows that 53% of people who don’t invest in mutual fund are due to lack

of awareness and knowledge. And second most important reason is risk factor it is seen that

25% people think that mutual fund is a risky investment. Also 11% people think that it is

difficult to understand and same no. of people also don’t give specific reason for not

investing in mutual fund.

Question 3: Where do you find yourself as a mutual fund Investor?

14%

32%

38%

17%

Level of awareness in Mutual Fund Investors

Totally ignorant

Partial Knowledge of MF

Aware only about any specific scheme in which you invested

Fully Aware

Figure 13: Awareness level of Mutual Fund Investors

SIBM, Mumbai 35



This chart mainly talks about level of awareness among the mutual fund investors. It is seen

that only 17% people are fully aware about mutual fund, where as 14% people are fully

ignorant and it seems that they invest their money in mutual fund as per their advice of their

financial advisor. Around 37% people are aware only about specific scheme in which they

have invested their money and 32% are having partial knowledge about mutual fund.

Question 4: How do you come to know about various mutual funds scheme?

10% 14%

25%

51%

Source of Information

Advertisement

Peer Groups

Banks

Financial Advisors

Figure 14: Source of information for investors


Figure 14 mainly talks about the source of information for mutual fund investors. It is clearly

seen that the financial advisors stands first as the main source of information that is 51% of

sample size followed by banks (that is 25% of sample) peer groups (that is 14% of sample)

and advertisement (that is 10% of sample). The point to be noted is that most of the people

prefer advice of their financial advisor before investing in mutual fund.

SIBM, Mumbai 36


Question 5: Which feature of mutual fund allure you most?

14%

38%

17%

32%

Features which attract Investors

Diversification

Better returns & Safety

Regular income

Tax Benefits

Figure 15: Key features which attract investors


Figure 15 mainly talks about the key features which attract investors towards mutual fund.

We can see that 37% of the respondents have attracted because mutual fund provide better

returns and safety followed by tax benefits (that is 32% of sample), regular income (that is

17% of sample), diversification (that is 14% of sample).

Question 6: When you invest in mutual fund which mode of investment will you prefer?

31%

69%

Mode of Investment

One time investment

Systematic Investment Plan (SIP)

Figure 16: Preferable mode of investment in Mutual Fund

SIBM, Mumbai 37



Figure 16 shows the respondents’ mode of investment in mutual fund and it is seen that 69%

of people prefer systematic investment plan and 31% people prefer one time investment in

mutual fund.

Question 7: Where do you go to invest your money in mutual funds?

15%

44%

38%

3%

Intermediaries in MF

Direct in AMCs

Financial Advisor

Distributor/Broker

Other Source

Figure 17: Intermediaries in Mutual Fund


Figure 17 talks about who are the most effective intermediaries in mutual fund. It is clearly

seen that the financial advisors stands first as the main intermediaries that is 44% of sample

size followed by distributor/broker (that is 38% of sample) direct AMCs (that is 15% of

sample) and other source (that is 3% of sample).

SIBM, Mumbai 38


Question 8: How would you like to receive returns every year?

29%

15%

56%

Preferred mode to receive returns

Dividend Payout

Dividend re-investment

Growth in NAV

Figure 18: Mode of receive returns


Figure 18 mainly talks about the preferred mode to receive returns. It is found that most of

the investors are preferred returns in terms of growth in NAV. Their number stands to be at

56% followed by 29% people would like to receive returns in form dividend payout and 15%

people would like to re invest their returns in mutual fund or other investment avenue.

Question 9: Which AMC would you like to prefer to invest your money?

Name of AMC No. Of Respondents RankReliance 37 1HDFC 32 2AXIS 28 3

Birla Sun Life 27 4SBI MF 22 5

ICICI Prudential 20 6Kotak Mahindra 19 7

Other 10 8

Table 3: Ranking of AMCs as per Investor

SIBM, Mumbai 39


HDFC

Relian

ce

SBI M

FAXIS

ICIC

I Pru

dent

ial

Birla S

un L

ife

Kotak

Mah

indr

aOth

er05

10152025303540

Most preferred Assets Management Company

No. of respondent

Name of AMC

No

of R

espo

nden

t

Figure 19: Most preferred AMCs as per Investors


Table 3 shows reliance is most preferred AMCs among mutual fund investors followed by

HDFC, AXIS, Birla Sun Life, SBI MF, ICICI Prudential and Kotak Mahindra.

SIBM, Mumbai 40


7 Limitations of the Project

Some of the persons were not so responsive. Respondents may not be prepared to

contribute to the research due to lack of time and resources required.

Possibility of error in data collection because many of investors may have not given

actual answers of questionnaire.

Sample size is limited to 100 investors.

Some respondents were reluctant to divulge personal information which can affect the

validity of all responses.

The research is confined only to the city Mumbai.

SIBM, Mumbai 41


8 Conclusion

Even though the first mutual fund was introduced in year 1963, the awareness about mutual

fund is comparatively low among the Indian investors. Most of the Indians are unaware of a

financial option called mutual funds. Till now, the major part of saving goes into bank

deposits, postal deposits and insurance. In the competitive business environment good

performance of scheme of a particular mutual fund company plays a vital role in the minds of

the existing investors will deciding to invest than the brand name of the AMC.

Further this study shows that most of respondents are still confused about the mutual funds

and have not formed any attitude towards the mutual fund for investment purpose. It has been

observed that most of the respondents having lack of awareness about the various function of

mutual funds. Moreover, as far as the demographic factors are concerned, gender, income and

level of education have significantly influence the investors’ attitude towards mutual funds.

As far as the benefits provided by mutual funds are concerned, return potential and liquidity

have been perceived to be most attractive by the investors followed by flexibility,

transparency and affordability. Apart from the above, in India there is a lot of scope for the

growth of mutual fund.

SIBM, Mumbai 42


9 Recommendations and Suggestions

There is need to build awareness of the new funds among the investors with constantly

being in contact with them.

Proper training should be given to the advisor so that they will solve the question of the

customer mind.

Some of investors have asked for periodical market report about stock market so that

they can get the knowledge properly.

AMC’s should go for increasing more awareness about different facilities of

investment such as SIP & MIP among investors.

The AMC should advertise their tax saving plan more so that they can gain

more customers.

The promotional activities play a vital role. So it should be given importance for creating

more awareness among the people.

SIBM, Mumbai 43


10 Appendix

Questionnaire

The Questionnaire given below is designed to conduct Primary research for measuring Investors’ attitude towards Mutual Fund in the city of Mumbai & Suburbs.

The Personal information will not be used/disclosed anywhere, It is solely used for academic purpose only.

Section: I

A) Name: _______________________________________________________

B) Age : _____________________ C) Gender: ______________________

D) Qualification E) Occupation F) Yearly Income

a. SSC/HSC a. Professional a. 3 - 5 lakhs

b. Graduate b. Business b. 5 - 15 lakhs

c. Post Graduate c. Salaried c. 15 - 25 lakhs

e. Professional d. Retired d. Above 25 lakhs

Section: II

1. What kind of investment do you prefer most?

(Kindly tick () which are applicable)

a. Saving Account e. Post Office - NSC

b. Fixed Deposit f. Shares/Debentures

c. Insurance g. Gold and Silver

d. Mutual fund h. Real Estate

Note: Kindly tick () on any one option for the following questions

2. While inventing your money which factor you would consider most?

a. Liquidity c. High Returns

b. Low Risk d. Company Reputation

SIBM, Mumbai 44


3. Have you ever invested money in mutual fund?

a. Yes

b. No

If No,

4. If you do not invest in mutual fund then why?

a. Not aware of MF

b. Higher Risk

c. Difficult to Understand

d. Not any specific Reason

If Yes, Please Answer the below questions.

Section: III

A. Where do you find yourself as a mutual fund Investor?

a. Totally Ignorant

b. Partial Knowledge of Mutual Fund

c. Aware only of any specific scheme in which you invested

d. Fully Aware

B. How do you come to know about various mutual funds scheme?

a. Advertisement

b. Peer Groups

c. Banks

d. Financial Advisors

C. Which feature of mutual fund allure you most?

a. Diversification

b. Better Returns & Safety

c. Regular Income

d. Tax Benefits

D. When you invest in mutual fund which mode of investment will you prefer?

SIBM, Mumbai 45


a. One time investment

b. Systematic Investment Plan

E. Where do you go to invest your money in mutual funds?

a. Direct in AMCs

b. Financial Advisor

c. Distributor/Broker

d. Other Source

F. How would you like to receive returns every year?

a. Dividend Payout

b. Dividend re-investment

c. Growth in NAV

G. Which AMC would you like to prefer to invest your money?

a. HDFC e. ICICI Prudential

b. Reliance f. Birla Sun Life

c. SBI MF g. Kotak Mahindra

d. AXIS h. Other

11 Bibliography

References:

SIBM, Mumbai 46


Ramamurthy and Reddy (2005), “Recent Trends in Mutual Fund Industry” published

in SCMS Journal of Indian Management

Mr. B. K. Singh and Mr. A. K. Jha (2009), “An Empirical study on awareness &

acceptability of Mutual Fund”, published in Regional Student’s Conference, ICWAI

Mr. Sarish (2012) “A Study of Opportunities and Challenges for Mutual Fund in

India: Vision 2020”, published in VSRD International Journal of Business &

Management Research Vol. 2

Dr. Binod Kumar Singh (March 2012), “Investors attitude towards Mutual Funds”,

published in the International Journal of Research in Management

Dr. Ravi Vyas (July 2012), “Mutual Fund Investor’s Behaviour and Perception”,

published in International Refereed Research Journal Vol. – I

Dr. Shantanu Mehta (September 2012), “Preference of Investors for Indian Mutual

Funds and its Performance Evaluation”, published in Pacific Business Review

International Vol. 5

Website:

www.amfiindia.com

www.moneycontrol.com

www.njgroup.in

www.investopedia.com

www.investor.sebi.gov.in

www.bseindia.com

www.nseindia.com

SIBM, Mumbai 47

Documents

A Study of Attitude of Investors' Towards Mutual Fund as an Investment Tool