Final Karthi k Prooo

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A PROJECT REPORT

ON

PORTFOLIO MANAGEMENT

Submitted in partial fulfillment for

MASTER OF BUSINESS ADMIMISTRATION

(INTERNATIONAL BANKING & FINANCE)

Under the guidance of

Mrs.Lubza Nihar Dr. Vijay Das

Assistant Professor Associate Professor

GSIB GSIB

Mr.Sanat Bhardwaj

Cluster head

HDFC AMC, Jamshedpur

GITAM SCHOOL OF INTERNATIONAL BUSINESS

Submitted by

ARCHANA TIWARI

ROLL NO. 1226209103

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DECELARATION

I hereby declare that this project report entitled Portfolio Management in HDFC Mutual

Fund submitted in the requirement of Master of Business Administration of Gitam School of

International Business, Visakhapatnam is based on Primary data which I collected through

surveys by filling up of questionnaires, mails and formal and informal meetings and

Secondary data found by me in various books, magazines and websites collected by me under

guidance Shailesh Bansal..

DATE: ARCHANA TIWARI

MBA (IBF)

1226209103

ACKNOWLEDGEMENT

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It is indeed an opportunity to prepare a report on Mutual fund and consumer behaviour

towards the investment in Mutual fund. Preparation of such type of report calls for intellectual nourishment, professional help and encouragement from many areas.

I would like to thank Gitam School of International Business for the compulsion of this most

wonderful aspect of our MBA curriculum without which knowledge of management studies

is incomplete and futile.

I would like to thank and express my gratitude to my Functional guide Mrs. Lubza Nihar andmy Industrial Guide Dr. Vijay Das for providing their guidance and co-operation.

I would like to thank and express my gratitude to Mr. shailesh Bansal and Mr. Sanat

Bhardwaj for providing me their guidance and co- operation.

Further, I am thankful to all the respondents of our questionnaire who spared there time from

their busy schedule and obliged us by giving their co-operation and the information we

needed

Lastly, we would like to thank to all those who had helped us directly or indirectly in

completing this project successfully

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CERTIFICATE

This is to certify that Miss Archana Tiwari a student of Gitam School of International

Business Visakhapatnam has completed project work on Mutual Fund is the better

Investment Plan in HDFC AMC during 21 April to 20 June 2010 under our guidance and

supervision.

We certify that this is an original work and has not been copied from any source.

Signature of Functional Guide Signature of Industrial Guide

Mrs.Lubza Nihar Dr. Vijay Das

Assistant Professor Associate Professor

GSIB GSIB

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Executive Summary 07

Objectives of the study 08

Limitations of the study 09

Research methodology 10

Introduction to Mutual Funds 12

History of Mutual Funds 12

Types of Mutual Funds 14

Advantages of Mutual Funds 17

Disadvantages of Mutual Funds 18

Limitations of Mutual Funds 21

Analysis of financial instruments 21

Features of financial instruments 22

Company profile 29

Data analysis and Interpretation 31

Findings and conclusion 66

Suggestions and Recommendations 67

Bibliography 68

EXECUTIVE SUMMARY

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In few years Mutual Fund has emerged as a tool for ensuring ones financial well being.

Mutual Funds have not only contributed to the India growth story but have also helped

families tap into the success of Indian Industry. As information and awareness is rising more

and more people are enjoying the benefits of investing in mutual funds. The main reason the

number of retail mutual fund investors remains small is that nine in ten people with incomes

in India do not know that mutual funds exist. But once people are aware of mutual fund

investment opportunities, the number who decide to invest in mutual funds increases to as

many as one in five people, the trick for converting a person with no knowledge of mutual

funds to a new Mutual Fund customer is to understand which of the potential investors are

more likely to buy mutual funds and to use the right arguments in the sales process that

customers will accept as important and relevant to their decision.

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 (SystematicInvestment Plan or One time Plan).

This Project as a whole can be divided into two parts.

The first part gives an insight about Mutual Fund and its various aspects, the Company

Profile, Objectives of the study, Research Methodology. One can have a brief knowledge

about Mutual Fund and its basics through the Project.

OBJECTIVES OF THE STUDY

The various objectives of the study are

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To study the various financial opportunities available for investment.

To study about the investors perception regarding various investment opportunities

available in the market

To analyze the investment patterns of the investment.

To examine the investors changing behavior regarding various investment

opportunities.

LIMITATIONS

Some persons were not responding.

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

answers of my questionnaire.

The research is confined to certain part of Jamshedpur

Sample size does not adequately represent the whole market

RESEARCH METHODOLOGY

This report is based on primary as well as secondary data, however primary data collection

was given more importance since it is a very important factor. One of the most important

users of research methodology is that it helps in identifying the problem, collecting,

analyzing the required information data and providing an alternative solution to the problem.

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It also helps in collecting the vital information that is required by top management to assist

them for better decision making.

DATA SOURCES

Research is totally based on primary data and the data has been collected by interacting with

the people of different age groups and questionnaires were given to them. The secondary data

has been collected through books, journals, websites etc.

DURATION OF STUDY

The study was carried out for a period of two months from April 21, 2010 to June 20, 2010 .

SAMPLING PROCEDURE

It was collected through personal visits to persons through formal and informal meetings and

through filling of the questionnaires .

SAMPLE SIZE

The sample size of my project is limited to only members. Out of which only 43 members

have invested in mutual funds and others have not invested in mutual funds .

SAMPLE DESIGN

Data has been presented with the help of pie charts, bar diagrams, factor analysis,

discriminate analysis, cross tabulation and Chi square.

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INTRODUCTION TO MUTUAL FUNDS

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 realized is shared by its unit holders in proportion to the number of

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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.

HISTORY OF MUTUAL FUUNDS

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

First Phase 1964-87Unit 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.

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 Canbank 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.

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

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,

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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.

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.

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TYPES OF MUTUAL FUND SCHEMES

By Structure

o Open - Ended Schemes

o Close - Ended Schemes

o Interval Schemes

By Investment Objective

o Growth Schemes

o Income Schemes

o Balanced Schemes

Money Market Schemes

Other Schemes

o Tax Saving Schemes

o Special Schemes

o Index Schemes

o Sector Specific Schemes14


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Balanced fund: Their investment portfolio includes both debt and equity. As a

result, on the risk-return ladder, they fall between equity and debt funds. Balanced

funds are the ideal mutual funds vehicle for investors who prefer spreading their risk

across various instruments. Following are balanced funds classes:

o Debt-oriented funds - Investment below 65% in equities.

o Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

Debt fund: They invest only in debt instruments, and are a good option for investors

averse to idea of taking risk associated with equities. Therefore, they invest

exclusively in fixed-income instruments like bonds, debentures, Government of India

securities; and money market instruments such as certificates of deposit (CD),

commercial paper (CP) and call money. Put your money into any of these debt funds

depending on your investment horizon and needs.

Gilt funds : Invest in only treasury bills and government securities, which do not

have a credit risk (i.e. the risk that the issuer of the security defaults).

Diversified debt funds on the other hand, invest in a mix of government and non-

government debt security Junk bond schemes or high yield bond schemes invest in

companies that are of poor credit quality. Such schemes operate on the premise that

the attractive returns offered by the invested companies makes up for the losses

arising out of a few companies defaulting.

Fixed maturity plans are a kind of debt fund where the investment portfolio is

closely aligned to the maturity of the scheme. AMCs tend to structure the scheme

around pre-identified investments. Further, like close-ended schemes, they do not

accept moneys post-NFO. The fund manager has little ongoing role in deciding on

the investment options. Such a portfolio construction gives more clarity to investors

on the likely returns if they stay invested in the scheme until its maturity. This helps

them compare the returns with alternative investments like bank deposits.

Floating rate funds invest largely in floating rate debt securities i.e. debt securities

where the interest rate payable by the issuer changes in line with the market. For

example, a debt security where interest payable is described as 5-year Government

Security yield plus 1%, will pay interest rate of 7%, when the 5-year Government

Security yield is 6%; if 5-year Government Security yield goes down to 3%, then

only 4% interest will be payable on that debt security. The NAVs of such schemes

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fluctuate lesser than debt funds that invest more in debt securities offering a fixed

rate of interest.

Liquid schemes or money market schemes are a variant of debt schemes that invest

only in debt securities where the moneys will be repaid within 91-days.These are

widely recognized to be the lowest in risk among all kinds of mutual fund schemes.

MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure

of 10%-30% to equities.

ADVANTAGES OF MUTUAL FUNDS

Professional Management

Mutual funds offer investors the opportunity to earn an income or build their wealth throughprofessional management of their investible funds. There are several aspects to such

professional management viz. investing in line with the investment objective, investing based

on adequate research, and ensuring that prudent investment processes are followed.

Economies of Scale

The pooling of large sums of money from so many investors makes it possible for the mutual

fund to engage professional managers to manage the investment. Individual investors with

small amounts to invest cannot, by themselves, afford to engage such professionalmanagement. Large investment corpus leads to various other economies of scale. For

instance, costs related to investment research and office space get spread across investors.

Further, the higher transaction volume makes it possible to negotiate better terms with

brokers, bankers and other service providers

Liquidity

At times, investors in financial markets are stuck with a security for which they cant find a

buyer worse; at times they cant find the company they invested in! Such investmentsbecome illiquid investments , which can end in a complete loss for investors. Investors in a

mutual fund scheme can recover the value of the moneys invested, from the mutual fund

itself. Depending on the structure of the mutual fund scheme, this would be possible, either at

any time, or during specific intervals, or only on closure of the scheme. Schemes where the

money can be recovered from the mutual fund only on closure of the scheme are listed in a

stock exchange. In such schemes, the investor can sell the units in the stock exchange to

recover the prevailing value of the investment.

Tax Deferral

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Mutual funds are not liable to pay tax on the income they earn. If the same income were to be

earned by the investor directly, then tax may have to be paid in the same financial year.

Mutual funds offer options, whereby the investor can let the moneys grow in the scheme for

several years. By selecting such options, it is possible for the investor to defer the tax

liability. This helps investors to legally build their wealth faster than would have been the

case, if they were to pay tax on the income each year.

Tax benefits

Specific schemes of mutual funds ( Equity Linked Savings Schemes ) give investors the benefit

of deduction of the amount invested, from their income that is liable to tax. This reduces their

taxable income, and therefore the tax liability. Further, the dividend that the investor receives

from the scheme is tax-free in his hands.

Convenient Options

The options offered under a scheme allow investors to structure their investments in line with

their liquidity preference and tax position. Investment Comfort Once an investment is made

with a mutual fund, they make it convenient for the investor to make further purchases with

very little documentation. This simplifies subsequent investment activity.

Regulatory Comfort

The regulator, Securities & Exchange Board of India (SEBI) has mandated strict checks and

balances in the structure of mutual funds and their activities. These are detailed in the

subsequent units. Mutual fund investors benefit from such protection.

Systematic approach to investments

Mutual funds also offer facilities that help investor invest amounts regularly through a

Systematic Investment Plan (SIP); or withdraw amounts regularly through a Systematic

Withdrawal Plan (SWP); or move moneys between different kinds of schemes through a

Systematic Transfer Plan (STP). Such systematic approaches promote an investment

discipline, which is useful in long term wealth creation and protection.

DISADVANTAGES OF MUTUAL FUNDS

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

important for you to consider and understand before you decide to buy. Here we explore

some of the drawbacks of mutual funds.

Fluctuating Returns

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

the possibility that the value of your mutual fund will depreciate. Unlike fixed-income

products, such as bonds and Treasury bills, mutual funds experience price fluctuations along

with the stocks that make up the fund. When deciding on a particular fund to buy, you need to

research the risks involved - just because a professional manager is looking after the fund,

that doesn't mean the performance will be stellar.

Another important thing to know is that mutual funds are not guaranteed by the U.S.

government, so in the case of dissolution, you won't get anything back. This is especially

important for investors in money market funds. Unlike a bank deposit, a mutual fund will not

be FDIC insured.

Diversification

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

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

with holding a single security; over diversification (also known as diworsification) occurs

when investors acquire many funds that are highly related and so don't get the risk reducing

benefits of diversification. To read more on this subject, see this article.

At the other extreme, just because you own mutual funds doesn't mean you are automatically

diversified. For example, a fund that invests only in a particular industry or region is still

relatively risky.

Cash

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

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

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

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

not working for you and thus is not very advantageous.

Costs

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

Funds will typically have a range of different fees that reduce the overall payout. In mutual

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funds the fees are classified into two categories: shareholder fees and annual fund-operating

fees.

The shareholder fees, in the forms of loads and redemption fees, are paid directly by

shareholders purchasing or selling the funds. The annual fund operating fees are charged as

an annual percentage - usually ranging from 1-3%. These fees are assessed to mutual fund

investors regardless of the performance of the fund. As you can imagine, in years when the

fund doesn't make money these fees only magnify losses.

Misleading Advertisements

The misleading advertisements of different funds can guide investors down the wrong path.

Some funds may be incorrectly labeled as growth funds, while others are classified as small-

cap or income. The SEC requires funds to have at least 80% of assets in the particular type of

investment implied in their names. The remaining assets are under the discretion solely of the

fund manager.

The different categories that qualify for the required 80% of the assets, however, may be

vague and wide-ranging. A fund can therefore manipulate prospective investors by using

names that are attractive and misleading. Instead of labeling itself a small cap, a fund may besold under the heading growth fund. Or, the "Congo High-Tech Fund" could be sold with the

title "International High-Tech Fund".

Evaluating Funds

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

researching and evaluating the different funds. Unlike stocks, mutual funds do not offer

investors the opportunity to compare the P/E ratio, sales growth, earnings per share, etc. A

mutual fund's net asset value gives investors the total value of the fund's portfolio less

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

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

past performance. Always note that mutual fund descriptions/advertisements always include

the tagline "past results are not indicative of future returns". Be sure not to pick funds only

because they have performed well in the past - yesterday's big winners may be today's big

losers.

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Limitations of a Mutual Fund

Lack of portfolio customization

Lack of portfolio customization some securities houses offer Portfolio Management Schemes

(PMS) to large investors. In a PMS, the investor has better control over what securities arebought and sold on his behalf. On the other hand, a unit-holder is just one of several thousand

investors in a scheme. Once a unit-holder has bought into the scheme, investment

management is left to the fund manager (within the broad parameters of the investment

objective). Thus, the unit-holder cannot influence what securities or investments the scheme

would buy. Large sections of investors lack the time or the knowledge to be able to make

portfolio choices. Therefore, lack of portfolio customization is not a serious limitation in

most cases.

Choice overload

Over 800 mutual fund schemes offered by 38 mutual funds and multiple options within

those schemes make it difficult for investors to choose between them. Greater

dissemination of industry information through various media and availability of professional

advisors in the market should help investors handle this overload.

ANALYSIS OF FINANCIAL INSTRUMENTS

Types of Investments

There are many ways to invest your money. Of course, to decide which investment vehicles

are suitable for you, you need to know their characteristics and why they may be suitable for

a particular investing objective.

Debt Market

Public Provident Fund

Fixed Deposits

Bonds

Mutual Funds

Banks Deposits

Equity Market

Initial Public Offer

InsuranceForex

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Cash

Gold

Real Estate

FEATURES OF DIFFERENT TYPES OF INVESTMENTS

DEBT INSTRUMENTS

Debt instruments protect your capital, therefore the importance of a solid debt portfolio. This

not only gives stability, but also offers you optimal returns, liquidity and tax benefits. Debt

products, besides safeguarding your capital, can be used to meet short, medium and long-term

financial needs.

SHORT TERM INVESTMENTThey are good for short term goals; you can look at liquid funds, floating rate funds and short

term bank deposits as options for this category of investments. Liquid funds have retuned

around 5% post-tax returns as compared to 5.6% post-tax that your one-year 8% bank fixed

deposit gives you. So, if you have funds for investment for over a period of one year, it is

better to go in for bank deposits. However, liquid funds are better, if your time horizon is less

than one-year, say around six months. This is because the bank deposit rates decrease

proportionately with lower periods, while liquid funds will yield the same annualized returnsfor any period of time. Short-term floating rate funds can be considered at par to liquid funds

for short term investments.

Fixed Maturity Plan (FMP)

If you know exactly for how much time you need to invest your surplus, a smarter option is

to invest in FMPs. They are shorter-tenured debt schemes that buy and hold securities till

maturity, thereby eliminating the interest rate risk. Try and opt for FMPs that offer a double

indexation benefit. Fund houses usually launch double-indexation FMPs during the end of

the financial year so that they cover two financial year closings .

MEDIUM AND LONG TERM OPTIONS

These options typically offer low or virtually no liquidity. They are, however, largely useful

as income accumulation tools because of the assured interest rates they offer. These

instruments (small savings schemes) should find place in your long-term debt portfolio.

BONDS

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A bond is a debt security , in which the authorized issuer owes the holders a debt and,

depending on the terms of the bond, is obliged to pay interest (the coupon ) and/or to

repay the principal at a later date, termed maturity . A bond is a formal contract to repay

borrowed money with interest at fixed intervals.Thus a bond is like a loan : the issuer is the borrower (debtor), the holder is the lender

(creditor), and the coupon is the interest. Bonds provide the borrower with external funds to

finance long-term investments , or, in the case of government bonds, to finance current

expenditure. Certificates of deposit (CDs) or commercial paper are considered to

be money market instruments and not bonds. Bonds must be repaid at fixed intervals over

a period of time.

Bonds and stocks are both securities , but the major difference between the two is that

stockholders have an equity stake in the company (i.e., they are owners), whereas

bondholders have a creditor stake in the company (i.e., they are lenders). Another difference

is that bonds usually have a defined term, or maturity, after which the bond is redeemed,

whereas stocks may be outstanding indefinitely. An exception is a consol bond , which is

a perpetuity (i.e., bond with no maturity)

TAX SAVING BONDS

These are those bonds that have a special provision that allows the investor to save on tax.

Examples of such bonds are:

Infrastructure Bonds:-

Capital Gains Bonds:-

Rural Electrification Corporation (REC) Bonds

National Highway Authority of India (NHAI)

National Bank for Agriculture & Rural Development

RBI Tax Relief Bonds

MUTUAL FUNDS

A mutual fund is a body corporate registered with SEBI that pools money from the

Individuals/corporate investors and invests the same in a variety of different financial

Instruments or securities such as Equity Shares, Government Securities, Bonds, Debentures,

etc. The income earned through these investments and the capital appreciations realized 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

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in a diversified, professionally managed basket of securities at a relatively low cost. Mutual

fund units are issued and redeemed by the Asset Management Company (AMC) based on the

funds net asset value (NAV), which is determined at the end of each trading session. Mutual

funds are considered to be the best investments

FIXED DEPOSITS

A fixed deposit is meant for those investors who want to deposit a lump sum of money for a

fixed period; say for a minimum period of 15 days to five years and above, thereby earning a

higher rate of interest in return. Investor gets a lump sum (principal + interest) at the maturity

of the deposit. Bank fixed deposits are one of the most common savings scheme open to an

average investor. Fixed deposits also give a higher rate of interest than a savings bank

account. The facilities vary from bank to bank. Some of the facilities offered by banks are

overdraft (loan) facility on the amount deposited, premature withdrawal before maturity

period (which involves a loss of interest) etc. Bank deposits are fairly safer because banks are

subject to control of the Reserve Bank of India.

GOLD FUNDS

These funds invest in gold and gold-related securities. They can be structured in either of the

following formats:

Gold Exchange Traded Fund , which is like an index fund that invests in gold. The structure

of exchange traded funds is The NAV of such funds moves in line with gold prices in the

market.

Gold Sector Funds i.e. the fund will invest in shares of companies engaged in gold mining

and processing. Though gold prices influence these shares, the prices of these shares are more

closely linked to the profitability and gold reserves of the companies. Therefore, NAV of

these funds do not closely mirror gold prices.

NEW PENSION SCHEMES

Any Indian citizen between 18 and 55 years, only tier-I of the scheme, involving a

contribution to a non-withdrawable account, is open. Subsequently tier-II accounts, which

permit voluntary savings that can be withdrawn at any point of time, can be opened. But to be

eligible to open a tier-II account, you need a tier-I account.

There is no investment ceiling. But the minimum investment limit has been fixed at Rs 500 a

month or Rs 6,000 annually. Subscribers are required to contribute at least once a quarter butthere is no ceiling on how many times you invest during the year.

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The investment is covered under section 80CCD of the Income Tax Act and a tax will be

levied if you withdraw the money. You can avoid paying tax by transferring the entire corpus

to the annuity service provider. PFRDA has, however, approached the government to treat

investment in NPS on a par with instruments like Employees Provident Fund and Public

Provident Fund, for which no tax is levied at the investment, accumulation or withdrawal

stage.

MONEY MARKET

The money market is a component of the financial markets for assets involved in short-term

borrowing and lending with original maturities of one year or shorter time frames. Trading in

the money markets involves Treasury bills, commercial paper, bankers' acceptances,

certificates of deposit, federal funds, and short-lived mortgage- and asset-backed securities. It

provides liquidity funding for the global financial system.

COMMON MONEY MARKET INSTRUMENTS

Certificate of deposit - Time deposits, commonly offered to consumers by banks, thrift

institutions, and credit unions.

Repurchase agreements - Short-term loans normally for less than two weeks and frequently

for one day arranged by selling securities to an investor with an agreement to repurchase

them at a fixed price on a fixed date.

Commercial paper - Unsecured promissory notes with a fixed maturity of one to 270 days;

usually sold at a discount from face value.

Treasury bills - Short-term debt obligations of a national government that are issued to

mature in three to twelve months. For the U.S., see Treasury bills.

Money funds - Pooled short maturity, high quality investments which buy money market

securities on behalf of retail or institutional investors.

Foreign Exchange Swaps - Exchanging a set of currencies in spot date and the reversal of

the exchange of currencies at a predetermined time in the future.

REAL ESTATES

Real estate investment involves the commitment of funds to property with an aim to

generate income through rental or lease and to achieve capital appreciation. Real estate refers

to immovable property, such as land, and everything else that is permanently attached to it,

such as buildings. When a person acquires real estate, s/he also acquires a set of rights,

including possession, control and transfer rights.

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http://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Treasury_security#Treasury_billhttp://en.wikipedia.org/wiki/Commercial_paperhttp://en.wikipedia.org/wiki/Bankers'_acceptancehttp://en.wikipedia.org/wiki/Mortgage-backed_securityhttp://en.wikipedia.org/wiki/Asset-backed_securityhttp://en.wikipedia.org/wiki/Market_liquidityhttp://en.wikipedia.org/wiki/Global_financial_systemhttp://en.wikipedia.org/wiki/Certificate_of_deposithttp://en.wikipedia.org/wiki/Repurchase_agreementhttp://en.wikipedia.org/wiki/Commercial_paperhttp://en.wikipedia.org/wiki/Treasury_security#Treasury_billhttp://en.wikipedia.org/wiki/Money_fundhttp://en.wikipedia.org/wiki/Forex_swaphttp://www.economywatch.com/investment/real-estate-investment.html#%23http://www.economywatch.com/investment/real-estate-investment.html#%23


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Understanding real estate investment is crucial because it usually involves a substantial

investment and a long-term one. Moreover, the real estate market can be unpredictable. This

is particularly important when one goes beyond buying a home to actually 'investing' in real

estate. There are a number of ways in which an investor can participate in the real estate

market.

INSURANCE

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another,

in exchange for payment. An insurer is a company selling the insurance;

an insured or policyholder is the person or entity buying the insurance policy. The insurance

rate is a factor used to determine the amount to be charged for a certain amount of insurance

coverage, called the premium. Risk management, the practice of appraising and controllingrisk, has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively small loss

in the form of payment to the insurer in exchange for the insurer's promise to compensate

(indemnify) the insured in the case of a large, possibly devastating loss. The insured receives

a contract called the insurance policy which details the conditions and circumstances under

which the insured will be compensated.

COMMODITY FUNDS

Commodities as an asset class, include: Food crops like wheat and chana, spices like pepper

and turmeric, fibres like cotton, industrial metals like copper and aluminium, energy products

like oil and natural gas and precious metals (bullion) like gold and silver. The investment

objective of commodity funds would specify which of these commodities it proposes to

invest in, as with gold, such funds can be structured as Commodity ETF or Commodity

Sector Funds. In India, mutual fund schemes are not permitted to invest in commodities.

Therefore, the commodity funds in the market are in the nature of Commodity Sector Funds,

i.e. funds that invest in shares of companies that are into commodities. Like Gold Sector

Funds, Commodity Sector Funds too are a kind of equity fund.

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COMPANY PROFILE

HDFC Asset Management Company Ltd (AMC) was incorporated under the

Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset

Management Company for the HDFC Mutual Fund by SEBI vide its letter dated on

July 3, 2000.

In terms of the Investment Management Agreement, the Trustee has appointed the

HDFC Asset Management Company Limited to manage the Mutual Fund. The paid

up capital of the AMC is Rs. 25.161 crore.

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The AMC is managing 24 open-ended schemes of the Mutual Fund viz.

o HDFC Growth Fund (HGF)

o HDFC Balanced Fund (HBF)

o

HDFC Income Fund (HIF)o HDFC Liquid Fund (HLF)

o HDFC Long Term Advantage Fund (HLTAF)

o HDFC Children's Gift Fund (HDFC CGF)

o HDFC Gilt Fund (HGILT)

o HDFC Short Term Plan (HSTP)

o HDFC Index Fund

o HDFC Floating Rate Income Fund (HFRIF)o HDFC Equity Fund (HEF)

o HDFC Top 200 Fund (HT200)

o HDFC Capital Builder Fund (HCBF)

o HDFC TaxSaver (HTS)

o HDFC Prudence Fund (HPF)

o HDFC High Interest Fund (HHIF)

o HDFC Cash Management Fund (HCMF)

o HDFC MF Monthly Income Plan (HMIP)

o HDFC Core & Satellite Fund (HCSF)

o HDFC Multiple Yield Fund (HMYF)

o HDFC Multiple Yield Fund Plan 2005 (HMYF-Plan 2005)

o HDFC Quarterly Interval Fund (HQIF)

o HDFC Arbitrage Fund (HAF)

The AMC is also managing 10 closed ended Schemes of the HDFC Mutual Fund viz.

o HDFC Long Term Equity Fund

o HDFC Mid-Cap Opportunities Fund

o HDFC Infrastructure Fund

o HDFC Fixed Maturity Plans - Series V

o HDFC Fixed Maturity Plans - Series VII

o HDFC Fixed Maturity Plans - Series VIII

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o HDFC Fixed Maturity Plans - Series IX

o HDFC Fixed Maturity Plans - Series X

o HDFC Fixed Maturity Plans - Series XI

o HDFC Fixed Maturity Plans - Series XI.

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DATA ANALYSIS AND INTERPRETATION

AGE OF INVESTORS

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Age Frequency

of no of

investors

Valid

Percent

Cumulative

Percent

Under 30 28 28.0 28.0

30-45 43 43.0 71.0

45-60 26 26.0 97.0

Above 60 3 3.0 100.0

Total 100 100.0

AGE

under 3028%

30-45

43%

45-6026%

above 603%

Interpretation:-

The sample consists of diversified age groups of investors where the age of the investors lies

from below 30 years to more than 60 years but the majority of the investors belonged to age

group of 30 to 45 years as this is the age group where the people are settled and they being

having many liabilities on them and also they have to meet the financial requirements of thefuture on a particular time they have to plan their investment in the best and the most

effective way where in they could maximise their returns.

QUALIFICATION OF INVESTORS

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FrequencyValidPercent

CumulativePercent

Under matriculation 2 2.0 2.0

Under graduation 17 17.0 19.0

Graduation 47 47.0 66.0

Post graduation 34 34.0 100.0

Total 100 100.0

QUALIFICATION

under matriculation2%

under graduation17%

graduation47%

post garduati

34%

Other81%

Interpretation:-

Despite of the educational qualification people go in for savings and investments but the type

of investment differs. The majority of the investors are graduates and post graduates so the

financial literacy is high among these type of investors so these type of investors go for

investments in different type of investments like equity, mutual funds, forex etc but where as

the investors with low financial literacy go for investments which has guaranteed returns. The

qualification helps in understanding the market risks. Around 81% of the sample consists of

graduates and post graduates.

OCCUPATION OF THE INVESTORS

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Frequency

Valid

Percent

Cumulative

Percent

1 66 66.0 66.0

2 28 28.0 94.0

3 6 6.0 100.0

Total 100 100.0

OCCUPATION

service

self employed

others

Interpretation:-

While considering the occupation of the investors the majority of the investors were

employees working in Private and Government organizations and some of them were self

employed. The factors the investors would consider and the type of funds they would go in

for investment also differs in the different working group. As for example a salaried

employee would go for investing in those type of investments were he would get a

guaranteed and moderate rate of return but where as the investors who are self employed

would go for one time investment as they dont get a fixed income every month. The self employed people may also look for the short term investments where as the service people

may look after long term investments. So different occupation group helps in understanding

the different patterns of investments

NUMBER OF DEPENDENTS

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Frequency

Valid

Percent

Cumulative

Percent

None 19 19.0 19.0

1 to 2 30 30.0 49.0

3 to 4 43 43.0 92.0

5 or more 8 8.0 100.0

Total 100 100.0

NUMBER OF DEPENDENTSnone19%

1 to 230%

3 to 443%

5 or more8%

Interpretation:-

The savings and investment pattern varies with the investors based on the number of

dependents on him. The sample consists of diversified group which gives understanding

about the investment pattern and the risk taken by the investors. In the sample the major

group of investors are having 3-4 dependent on them which comprises of 43% of the totalsample. Thus, if the dependents are more, then they would definitely prefer higher returns

and at the same time they are also unwilling to take higher risks.

INCOME OF THE INVESTORS

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Frequency

Valid

Percent

Cumulative

Percent

0 to 150000 15 15.0 15.0

150000-30000 50 50.0 65.0

30000-50000 21 21.0 86.0

Above 50000 14 14.0 100.0

Total 100 100.0

Interpretation:-

The income of the investors is one of the important factors for the investor to invest. In the

sample considered about 50% of the people are earning about 15000-30000 and the rest of

the 50% is divided among the other three groups. Though the sample has 50% of the

investors who are earning 15000-30000, but consists of both the service and self employed

people. Thus the investment pattern of them varies though it is the same income group. It

gives understanding about the investment of the individuals based on the income and the risk

they would take risk based on their occupation.

ANNUAL SAVINGS OF THE INVESTORS

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Frequency Percent

Cumulative

Percent

Valid Below

1028 28 28

10-20 43 43 71

20-30 18 18 89

Above

3011 11 100

Total 100 100

SAVINGS OF INVESTORS

below 10%28%

10-20%

20-30%18%

above 30 %11%

Interpretation:-

The majority of the sample is saving about 10-20% which consists of about 43% of the total

sample. There is lot of scope for the mutual fund industry because 72% of the investors aresaving is above 10% of their income. If the investments can provide higher returns then

savings with more or less same risk, then there is a lot of scope for increase in the

investments.

CURRENT INVESTMENT OF THE PEOPLE

Fixed Deposits 42

Public Provident Fund 30

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Mutual Funds 53

Shares 37

New Pension Schemes 7

Insurance 73

Gold/Gold ETF 15

Real Estates 20

Post Office Saving Scheme 23

0 10 20 30 40 50 60 70

Fixed Deposits

Public Provident Fund

Mutual Funds

Shares

New Pension Schemes

Insurance

Gold/Gold ETF

Real Estates

Post Office Saving Scheme

CURRENT INVESTMENT

Interpretation:-

A large number of investors invest in insurance besides in mutual funds because the investors

are really thinking about the future, safety and guarantee. Where as the investments in the

post office savings, fixed deposits and provident funds are coming down this indicates thatthe investors are looking for higher returns when compared to these investments and also they

are not willing to take higher risks this can be understood from the decline in real estates and

shares. If the mutual funds can provide a guaranteed return then there is lot of investors will

prefer the mutual funds as their primary investment

SOURCES OF INFORMATION

Television 31Internet 27

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Newspapers & Journals 28

Friends & Relatives 26

Financial Advisors 55

Banks 25

1, 312, 27 3, 28 4, 26

5, 55

6, 25

0

10

20

30

40

50

60

1 2 3 4 5 6 7

Seri

Seri

Interpretation:-

The investors get information from various sources such as internet, television, banks;

financial advisors etc but a majority of the investors prefer to take advice from the financial

advisors. If the mutual fund industry can have a financial advisor which can clear the doubtsof many investors and thus there will be a flow of investment will take place in the mutual

fund industry.

INVESTMENT DURATION

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Growth & Income 68

Conservative Growth 13

Appreciation 13

Tax Benefit 48

Aggressive Growth 10

Interpretation:-

The majority of the investors have been investing mainly for two reasons one is growth and

income and another is to have a tax benefit. If they go for the investment they will have the

income along their regular income and also it is one of their growth options. They are also

having tax benefit. Though the investment is of aggressive or conservative nature, the

investors are not having that as their primary objective.

PURPOSE OF INVESTMENT

Retirement Plans 40

Education 16

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Purchase of House 20

Marriage 18

Others 22

40

16

2018

22

0

5

10

15

20

25

30

35

40

RetirementPlans

Education Purchase of House

Marriage Others

Seri

Interpretation:-

Though previously majority of them has been investing retirement plans as their main

purpose bit now it is changing, Though retirement plans is one of their main purpose along

with that they are investing in the investments for different reasons like for education,

purchase of property, etc so if the mutual funds produce a constant returns they can attract

huge investors because their main purpose is to have the regular returns for the education andretirement plans.

INVESTMENTS MADE IN DIFFERENT MUTUAL FUND COMPANIES

HDFC 43

HSBC 5

UBI 2

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TATA 29

SBI 39

ICICI 33

RELIANCE 19

AXIS 6

OTHERS 7

Interpretation:-

The people are interested in willing in both the public and private sector as we can observe

that 39 of them are interested in SBI and 43 of them are interested in HDFC. So they are

giving more or less equal importance to both the sectors. Those investors who are willing to

take high risk may go for investment in private sector as the returns are higher and those who

are willing to take low risk may invest in public sector or they may invest in funds which

gives guaranteed returns.

TIME PERIOD AFTER INVESTMENT

Frequency Cumulative

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frequency

1-3 years 18 18

3-5 years 35 53

More than 5 years 47 100

0 10 20 30 40 50

1-3 years

3-5 years

more than 5

TIME PERIOD OF INVESTMENT

Interpretation:-

Majority of the investors are willing to wait for longer times to get back their investment

returns. Among the sample of 100 people, 47% of them are willing to wait for longer times.

Thus the mutual fund industry may not worry about the time in returning back the investment

but they had to think about the investments which can fetch the investors higher returns

which is the ultimate interest of the investor.

RISK RETURNS SCENARIOS INVESTORS ARE COMFORTABLE

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FrequencyValidPercent

CumulativePercent

No risk/return 6 6 6

Low risk/return 14 14 20

Moderate risk/return 45 45 65

High risk/ return 35 35 100.0

Total 100 100.0

Interpretation:-

Majority of the people are willing to take moderate or high risk and very few people are

thinking about the low risk or no risk. Since the pattern of the investment is changing the

investors are mainly thinking of the higher returns and thus for getting higher returns they arealso accepting higher risks. So they are willing to invest in those investments where they can

earn higher returns. So if the mutual fund industry can show higher returns to the investors

then majority of the people would start investing in them.

INVESTORS SATISFIED WITH THEIR INVESTMENT RETURNS

Yes 87

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No 13

87

13

YES

NO

RETURN SATISFACTIONSatisfaction with investment return

Interpretation:-

Among the investors the majority of the people are satisfied with their investments where as

very few are expecting very high returns. In the sample 87% are satisfied with the returns.

CROSS TABULATION

INCOME WITH RESPECT TO ANNUAL SAVINGS

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how much do you save annually as (%) of your annual

earnings

Total0-10% 10-20% 20-30% >30%

income 0-15000 9 3 1 2 15

15000-30000 13 25 7 4 49

30000-50000 4 10 7 0 21

Above 50000 2 5 2 5 14

Total 28 43 17 11 99

The investors are diversified among different working groups such as employees working in

private and Government organizations, self employed etc so the savings habits also differ to

their occupation. For example, a employee would save a certain amount every month but

where as a self employed who gets the payment after completion of the work cannot save

every month. Thus the savings pattern varies with their occupation. Among the sample, the

majority of people who are earning 15000-30000 are having different savings pattern.

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)

Pearson Chi-Square 24.688 a 9 .003

Likelihood Ratio 23.279 9 .006

Linear-by-Linear Association 7.496 1 .006

N of Valid Cases 99

Null hypothesis : The annual savings of the investors is independent of the income of the

investor

Alternate hypothesis : The annual savings of the investors is independent of the income of

the investor

Here, the calculated Chi Square value is 24.688 and the tabulated Chi Square value at 9 d.f. is

16.92. Since the calculated value is much greater than the tabulated value, it is highly

significant and null hypothesis is rejected at 5% level of significance. i.e. The savings of the

investors is dependent on the income.

RISK RETURN SCENARIO WITH RESPECT TO INCOME.

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Which of the following risk return scenario would you be most

comfortable with

TotalNo risk Low risk Moderate risk High risk

income 1 0 2 7 6 15

2 3 6 22 18 49

3 2 4 12 3 21

4 1 1 4 8 14

Total 6 13 45 35 99

Generally the risk taken by the investors doesnt depend mostly on their income but it is one

of the reasons for their investment. From the table it is clear that irrespective of their income

majority of people are willing to take moderate risk only and very few people are interested

in taking high risk. The majority of people who are earning 15000-30000 are taking moderate

or high risk. And also the people who are earning more are also taking high risk.

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)



Linear-by-Linear Association .102 1 .750

N of Valid Cases 99

Null hypothesis : The income of the investor is independent on the risk return scenario

Alternate hypothesis : The income of the investor is dependent on the risk return scenario



significant and null hypothesis is accepted at 5% level of significance. i.e. The income of the

investor is independent on the risk return scenario. The risk taken capability will does not

depend on the income of the person is more or less dependent on whether he is an risk

averter, risk neutral or risk taker.

RISK RETURN SCENARIO WITH RESPECT TO ANNUAL SAVINGS

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Risk return scenario

Total1 2 3 4

how much do you save

annually as (%) of your

annual earnings

0-10% 3 1 17 7 28

10-20% 0 6 17 19 4220-30% 3 2 6 6 17

>30% 0 4 4 3 11

Total 6 13 44 35 98

The risk taking capacity of the investors does not only depend on the earnings but also it

depends on their perception, attitudes and the risk taking capability. A large number of

investors who save less but have high risk taking capability but where as there are also some

investors who have high earning but less risk taking capability.

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)



Linear-by-Linear Association .409 1 .523

N of Valid Cases 98

Null hypothesis : The annual savings of the investors is independent on the risk return

scenario

Alternate hypothesis : The annual savings of the investors is independent on the risk return

scenario

Here, the calculated Chi Square value is 18.824 and the tabulated Chi Square value at 9 d.f. is16.92. Since the calculated value is much greater than the tabulated value, it is highly

significant and null hypothesis is rejected at 5% level of significance. The annual savings of

the investors is independent on the risk return scenario. The investors who is high risk

takers will generally prefer in investing rather than savings and those who take low risk will

go for savings because they have guaranteed returns

ANNUAL SAVINGS WITH RESPECT TO NO OF DEPENDENTS

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how long do you wait after investing

Total1-3 3-5 >5

how much do you saveannually as (%) of your annual earnings

0-10 9 7 12 28

10-20 4 10 29 43

20-30 1 7 8 16>30 1 2 8 11

Total 15 26 57 98

Those who are saving more are waiting for long time to get back more returns where as those

who are saving less planning to get back their return in short span of time. The table shows

that majority of the investors who are saving more than 10% are waiting for more than 5

years to get back their returns.

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)




N of Valid Cases 98

Null hypothesis: The time, investor will wait to get back his returns is independent of theannual savings

Alternate hypothesis: The time, investor will wait to get back his returns is dependent of the

annual savings



significant and null hypothesis is rejected at 5% level of significance. i.e the time, investor

will wait to get back his returns is independent of the annual savings. If the investor has more

savings it doesnt mean that he will wait for long time to get back his returns and vice versa.

Hence the time, the investor will wait to get back his returns will not depend on the annual

savings

NUMBER OF DEPENDENTS WITH RESPECT TO INVESTMENT DURATION

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how long have you been investing

Total1 2 3 4

no of dependents 1 10 5 1 3 19

2 9 9 3 9 303 5 12 8 18 43

4 0 2 0 6 8

Total 24 28 12 36 100

The investors having more number of dependents mainly invested for long term periods

where as if they had no dependents they mainly investing for short term periods. The time

period of investment is diversified so the investors invest according to their requirement of

funds in the future.

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)




N of Valid Cases 100

Null hypothesis: The time period of investment is not influenced by the number of

dependents

Alternate hypothesis: The time period of investment is influenced by the number of

dependents


16.92. Since the calculated value is much greater than the tabulated value, it is highlysignificant and null hypothesis is rejected at 5% level of significance. i.e. if the number of

dependents in the family are more on the investor then the time length of his investment

varies and thus the time period of the investment is influenced by the number of dependents.

FACTOR ANALYSIS

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A class of procedures used for data reduction and summarization. This was an

interdependence technique in which an entire set of interdependent relationships is examined.

The factor analysis is done in the following steps

Formulate the problem

The factor analysis is done to determine that which factors are looked most by the investors

when they are investing in the mutual funds. A sample of 100 respondents have been taken

and they are asked to indicate the following statements using an 5 point scale where 1 is very

little and 5 is very high

Performance of past schemes

Rating of mutual funds53

CALCULATE THEFACTOR SCORES

SELECT THESURROGATEVARIABLES

DETERMINE THE MODEL


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Method of factor analysis

The principal components analysis is used in which the total variance in the data is

considered. The diagonal of the correlation matrix consists of unities and full variance is

brought into the factor matrix. The principal component analysis is used mainly because for

the identification of minimum number of factors that will account for maximum variance in

the data which are used in the subsequent multivariate analysis.

Communalities

Initial Extraction

performance of past

schemes 1.000 .536rating of mutual funds 1.000 .693Advertisements 1.000 .456higher returns 1.000 .438goodwill organization 1.000 .717time period 1.000 .648tax saving 1.000 .400

Extraction Method: Principal Component Analysis.

Under the communalities initial column, it can be seen that the communality for each variable

is 1 as unities were inserted in the diagonal of the correlation matrix. The initial Eigen values

are, as expected, in decreasing order of magnitude as we go from factor 1 to 7. The eigen

values indicate the total variance attributed for that factor. The total variance accounted by all

seven factors is 7, which is equal to number of variables. The total variance explained by the

three factors is 55.65%

Determination of number of factors

The determination is based on the scree plot. A scree plot is a plot of the Eigen values

against the number of factors. The shape of the plot is used to determine the number of

factors. From the scree plot we can say that there are 3 factors based on the shape of the plot.

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Rotate factors

The rotation is done using the varimax procedure. This is an orthogonal method of rotation

that minimizes the number of variables with high loadings on a factor there by enhancing the

interpretability of the factors. The factor matrix contains the coefficients used to express the

standardized variables in terms of the factors and the variables. A coefficient with a large

absolute value indicates that the factor and the variable are closely related. The coefficients of

the factor matrix can be used to interpret the results. Although the initial unrotated matrix

indicates the relationship between the factors and individual variables, it seldom results in

factors that can be interpreted, because the factors are correlated with many variables. In un

rotated matrix it is complex to interpret so the through factor rotation the factor matrix is

simple to interpret.

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Component Matrix a

Component1 2 3

performance of past

schemes.687 -.112 -.229

rating of mutual funds -.460 -.141 .679Advertisements -.528 -.197 -.373higher returns .651 .117 -.007goodwill organization -.326 .660 -.419time period .273 .564 .505tax saving .177 -.607 .018

Extraction Method: Principal Component Analysis.a. 3 components extracted.

Rotated Component Matrix a

Component1 2 3

performance of past

schemes.669 .167 -.247

rating of mutual funds -.793 .150 -.203Advertisements -.175 -.640 .126higher returns .510 .409 -.108goodwill organization .045 -.158 .831time period -.090 .764 .237tax saving .100 -.175 -.600

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.a. Rotation converged in 6 iterations.

Interpret the results

In the rotated factor matrix the factor 1 has high coefficients for variables performance of

past schemes, rating of mutual funds and higher returns. Where the factor 1 investors not yetall influenced by the rating of mutual funds because it is negative the factor 2 has higher

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coefficients in advertisements, higher returns and time period. Where they not yet all

influenced by the advertisements because it is negative in sign the factor 3 is influenced by

the goodwill of the organization and not yet all influenced by the time period.

Calculate the factor scores

The factor scores are calculated in order to use instead of the original variables in subsequent

multivariate analysis. The standardized variable values would be multiplied by the

corresponding factor score coefficients to obtain the factor scores.

Select the surrogate variables

By examining the factor matrix one could select for each factor the variable with the highest

loading on that factor. That would be the surrogate variable for that associated factor. For

factor 1 the surrogate variable is performance of the past schemes. And for factor 2 the

surrogate variable is time period and for the third factor the surrogate variable is the goodwill

of the organization.

Determine the model fit

There are only six residuals which are larger than 0.05 hence the factor analysis can be

considered as a goof fit.

Reproduced Correlations

performance

of past

schemes

rating

of

mutual

funds advertisements

higher

returns

goodwill

organization

time

period

tax

saving

performance of

past schemes .620a

-.488 -.116 .407 -.238 -.210 .035

rating of mutual

funds-.488 .483 a .310 -.359 .062 -.034 .079

advertisements -.116 .310 .559 a -.213 -.112 -.525 .054

higher returns .407 -.359 -.213 .331 a -.219 .057 .144

goodwill

organization-.238 .062 -.112 -.219 .504 a .061 -.521

time period -.210 -.034 -.525 .057 .061 .755 a .169

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Reproduced Correlations

tax saving.035 .079 .054 .144 -.521 .169 .662 a

DISCRIMINANT ANALYSIS

A technique for analyzing marketing research data when the criterion or dependent variable iscategorical and the predictor or independent variables are interval in nature, in the analysis

the dependent variable is the savings annually from the income and the independent variables

are income, no of dependents, occupation, risk return scenario, how long will you wait after

investing and how long have you been investing.

Steps involved in Discriminant analysis

Formulate the problem

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The objective is to identify which variable is more dependent on the annual savings of the

investors and how much they are saving annually based on the independent variables income,

no of dependents, occupation, risk return scenario, how long will you wait after investing and

how long have you been investing.

Estimate the Discriminant function coefficients

This was a four group discriminating analysis. Hence there will be 4-1 = 3 functions can be

extracted.

Eigenvalues

Function Eigenvalue

% of Variance

Cumulative%

CanonicalCorrelation

1 .217 a 58.1 58.1 .4222 .137 a 36.6 94.7 .3473 .020 a 5.3 100.0 .139The Eigen value associated with the first function is 0.217and this function accounts for

58.1% of the explained variance. Because the Eigen value is large the first function is likely

to be superior. The second function has the Eigen value of 0.137 and accounts for 36.6 % of

the explained variance and the third function has the Eigen value of 0.20 and explains only5.3 % of the explained variance.

Determine the significance of the Discriminant function

The first function which is significant than the 0.05 in the below table which contribute

significantly to the group differences and 2 through 3 and the 3 are having the Wilks lambda

of 0.862 and 0.981 and the significance is not that much for the for the group differences

because they are not significant at 0.05 levels.

Wilks' Lambda

Test of

Function(s)

Wilks'

Lambda Chi-square Df Sig.

1 through 3 .709 31.358 18 .0262 through 3 .862 13.469 10 .1993 .981 1.784 4 .775

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predominantly on no of dependents and the risk return scenario. The third function is

dependent on the occupation of the investors.

Annual savings in % Mean Std.Deviation

Valid N (list wise)

Unweighted Weighted

1 no of dependents 2.21 .876 28 28.000

Income 1.96 .881 28 28.000

how long have you been investing 2.04 1.201 28 28.000

how long do you wait after investing 2.11 .875 28 28.000

risk return scenario 3.00 .861 28 28.000

Occupation 1.50 .745 28 28.000

2 no of dependents 2.24 .958 42 42.000

Income 2.40 .798 42 42.000how long have you been investing 2.67 1.141 42 42.000



Occupation 1.33 .526 42 42.000

3 no of dependents 2.88 .719 16 16.000

Income 2.62 .806 16 16.000


how long do you wait after investing 2.44 .629 16 16.000risk return scenario 2.88 1.147 16 16.000

Occupation 1.31 .602 16 16.000

4 no of dependents 2.55 .522 11 11.000

Income 2.73 1.272 11 11.000




Occupation 1.45 .522 11 11.000

l no of dependents 2.37 .882 97 97.000

Income 2.35 .913 97 97.000




Occupation 1.39 .605 97 97.000

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Among the group statistics, the group one which has the annual savings of less than 10 % is

mostly dependent on the risk return scenario and no of dependents and also it was somewhat

influenced by the time taken by the investor to get back his return and also the time from

which the investment. The second group of people who are saving about 10-20% are mostly

influenced by the risk return scenario, how long have you been investing and how long do

you wait after investing. The third group of people who are saving about 20-30% no of

dependents risk return scenario and the income levels. The fourth group who are saving more

than 30% are mainly depending on the independent variable that is how long they have been

investing and the risk return scenario.

Thus we can say that in the different percentage of savings the dependency of the annual

savings will be varying with the independent factors.

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FINDINGS AND CONCLUSION

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A majority of the investors belonged to the age group of 30-45 years and this group

consists of both service sector and the self employed. While coming to the investment

pattern it varies though it being a similar age group but the income and occupation

varies and the risk taking ability also varies with the nature of the investor.

The investors are looking for the higher returns with higher or moderate risk or high

risk. So the mutual fund industry can attract the investors by promising them higher

returns. The other factors which effect the investor pattern is the number of

dependents, time duration of investment and how long they wait for the returns.

The investors are not interested in immediate returns but they are interested in higher

returns if the mutual fund industry can promise them to pay higher returns there will

be a lot of flow of investment into this industry.

The main factors which they are considering while investing in mutual fund are past

performance of the funds, higher returns and the rating of mutual funds. If the mutual

funds have good rating and are promising to pay higher returns then the majority of

investors are willing to invest in those types of funds.

The majority of investors are saving more than 10% of the annual income if the

mutual funds can target these savings then there is a lot of flow of investment in this

industry. The main purpose of investing in the investments is for retirement plans and

education.

Thus if the industry can promise the regular returns to pursue their education needs

then also there is a lot of scope for development. The objective with which the

investments are invested is growth and income and also getting the advantage from

the taxes if these funds can provide a regular income and also the investors would get

a tax benefit then the investors will be ready to invest in these funds.

SUGGESTIONS AND RECOMMENDATIONS

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In the survey it was found a majority of the investors belonged to the salaried group still the

investment and savings is found to be high so there is a very good market for mutual funds

but the only thing was that the financial literacy is low as only a few of them had knowledge

about the various financial products and their investment pattern there is a very good market

but the awareness about the financial instruments being low the companies should go for

something like creating awareness about their products and educate the investors about the

products and their returns and the risks involved in it.

Doing this it would not only increase the sales of the company but also investors are more

aware about the financial products and would come forward to invest in different types of

funds and would also take interest in different types of new product coming in the market.

So the companies should focus equally on both salaried persons as well as the businessmen

and should also focus on creating awareness and this will definitely help the companies to

increase the sales.

BIBLIOGRAPHY

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1. Economic Times2. Business Standards

3. Business World4. Financial Economics (journal)5. Wealth creation guide6. Websites & Links

www.nse-india.com www.bseindia.com www.moneycotrol.com www.valueresearchonline.com www.rbi.org.in

www.helplinelaw.com www.amfiindia.com www.webindia123.com/finance www.personalfn.com www.thehindubusinessline.com www.economictimes.com www.crisil.com

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