mutual fund

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Int. J. Mgmt Res. & Bus. Strat. 2013 R Padmaja, 2013

A STUDY OF CONSUMER BEHAVIOR TOWARDSMUTUAL FUNDS WITH SPECIAL REFERENCE TO

ICICI PRUDENTIAL MUTUAL FUNDS, VIJAYAWADA

R Padmaja1*

A mutual fund is a type of professionally-managed collective investment vehicle that pools moneyfrom many investors to purchase securities. As there is no legal definition of mutual fund, theterm is frequently applied only to those collective investments that are regulated, available to thegeneral public and open-ended in nature. Mutual funds have both advantages and disadvantagescompared to direct investing in individual securities. Today they play an important role in householdfinances. So the present study aims at consumer behavior towards mutual funds with specialreference to ICICI Prudential Mutual Funds Limited, Vijayawada. Data was collected throughprimary and secondary sources. Primary data was collected through structured questionnaire.Convenience sampling method was used to collect the data and entire study was conducted inVijayawada City. The study explains about investors awareness towards mutual funds, investorperceptions, their preferences and the extent of satisfaction towards mutual funds. Somesuggestions were also made to increase the awareness towards mutual funds and measuresto select appropriate mutual funds to maximize the returns.

Keywords: Mutual funds, Customer perception, Consumer behavior

*Corresponding Author: R Padmaja,[email protected]

INTRODUCTIONA mutual fund is a type of professionally-managed

collective investment vehicle that pools money

from many investors to purchase securities. As

there is no legal definition of mutual fund, the term

is frequently applied only to those collective

investments that are regulated, available to the

general public and open-ended in nature. Unit

Trust of India is the first mutual fund set up under

a separate act, UTI Act in 1963, and started its

1 Department of Business Management, Krishna University, Machilipatnam-521 001, Krishna District, AP.

Int. J. Mgmt Res. & Bus. Strat. 2013

ISSN 2319-345X www.ijmrbs.comVol. 2, No. 2, April 2013

2013 IJMRBS. All Rights Reserved

operations in 1964 with the issue of units under

the scheme US-64. In India, mutual funds must

be registered with Securities Exchange Board of

India (SEBI) is the regulatory body for all the

mutual funds. The only exception is the UTI, since

it is a corporation formed under a separate Act of

Parliament. Mutual funds have both advantages

and disadvantages compared to direct investing

in individual securities. Today they play an impor-

tant role in household finances. The first mutual

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funds were established in Europe in 1774. The

first mutual fund outside the Netherlands was the

Foreign & Colonial Government Trust, which was

established in London in 1868. Mutual funds were

introduced into the United States in the 1890s.

They became popular during the 1920s. These

early funds were generally of the closed-end type

with a fixed number of shares which often traded

at prices above the value of the portfolio. The first

open-end mutual fund with redeemable shares

was established on March 21, 1924.

MUTUAL FUNDS IN INDIAIn India mutual funds are divided in to balanced

funds, Income fund, Growth funds, Sector funds,

etc. Equity funds mainly consist of common

shares and stocks of companies listed in the

stock exchanges. They are considered risky but

are likely to give higher return in the longer run.

Fixed income funds: Also known as low risk

funds, these funds mainly invest in government

and corporate securities (debentures) with fixed

amount of returns, which are generally moderate.

Balanced funds are basically a combination of

both bonds and stocks, which involves moderate

to little risk. Hybrid funds include other investment

classes in their portfolio like gold apart from equity

and debt. Since April 2011, the mutual fund

industry clocked a 3% growth in its average Assets

Under Management (AUM) to touch Rs. 7.53 lakh

cr in August (month-on-month) on the back of

higher inflows into liquid and income funds. (Crisil

Report-September 2012). Mutual funds have

advantages compared to direct investing in

individual securities. These include increased

diversification, daily liquidity, professional invest-

ment management, ability to participate in invest-

ments that may be available only to larger

investors, service and convenience, government

oversight and ease of comparison. Mutual funds

have disadvantages as well, which include fees,

less control over timing of recognition of gains,

less predictable income and no opportunity to

customize. Top 10 mutual funds in India are ICICI

Prudential Top 100, Escorts Income Plan- Gro,

Reliance RSF Balanced, DSP Black Rock MIP

Fund, Escorts Liquid Plan Gr, Reliance Equity

Linked S, MOSt Shares NASDAQ 100, Baroda

Pioneer Gilt Fund, IDFC Nifty Fund Growth.

SEBI Guidelines Pertaining to Mutual Funds:

SEBI is the regulatory authority of MFs. SEBI has

the following broad guidelines pertaining to mutual

funds: They are MFs should be formed as a Trust

under Indian Trust Act and should be operated by

Asset Management Companies (AMCs). MFs

need to set up a Board of Trustees and Trustee

Companies. They should also have their Board

of Directors. The net worth of the AMCs should

be at least Rs. 5 cr.

AMCs and Trustees of a MF should be two

separate and distinct legal entities.

The AMC or any of its companies cannot act

as managers for any other fund.

AMCs have to get the approval of SEBI for its

Articles and Memorandum of Association.

All MF schemes should be registered with

SEBI. MFs should distribute minimum of 90% of

their profits among the investors. There are other

guidelines also that govern investment strategy,

disclosure norms and advertising code for mutual

funds.

NEED FOR STUDYFor retail investor who does not have the time

and expertise to analyze and invest in stocks and

bonds, mutual funds offer a viable investment

alternative. This is because mutual funds provide

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the benefit of cheap access to expensive stocks.

Mutual funds diversify the risk of the investor by

investing in a basket of assets. A team of

professional fund managers manages them with

in-depth research inputs from investment

analysts. Being institutions with good bargaining

power in markets, mutual funds have access to

crucial corporate information which individual

investors cannot access. So the present study

has taken up to know the extent of awareness

about mutual funds and to analyze the investors

perception towards mutual funds.

OBJECTIVES1. To know about the extent of awareness about

mutual funds with special reference to ICICI

Prudential Mutual Funds, Vijayawada.

2. To know about the preferences of investors

towards mutual funds with special reference

to ICICI Prudential Mutual Funds, Vijayawada.

3. To know about the perceptions of investors

towards mutual funds with special reference

to ICICI Prudential Mutual Funds, Vijayawada.

4. To know about the extent of satisfaction of

investors towards mutual funds with special

reference to ICICI Prudential Mutual Funds,

Vijayawada.

METHODOLOGYResearch Design selected for this research is

descriptive design and the Universe is Vijayawada

City. Data was collected in two ways, i.e., Primary

data and Secondary data. The data collection

method used for collection of primary data was

survey method and the data collection instrument

used is structured questionnaire. The sampling

technique used is non probability convenience

sampling. Sample size is 100 respondents and

sampling units include businessmen, Govern-

ment servants, professional and retired Indivi-

duals. The secondary data was collected through

journals, magazines, books, company manuals,

websites, etc.

LIMITATIONS1. Sample size was limited to 100 because of

limited time which is small to represent the

whole population.

2. The research was limited to Vijayawada city

only and if the same research would have been

carried in another city, the results may vary.

3. Sometimes the respondents because of their

business didnt able to concentrate while filling

up the questions. However the researcher

tried her level best to overcome the limitation

by explaining the importance of research.

DATA ANALYSIS ANDINTERPRETATIONFrom Table 1, it is observed that 25% of all the

respondents fall under income group of less than

1,00,000, 65% of our total respondents fall under

income group of 1,00,001-2,00,000 and 10% of

our respondents fall under income group of

2,00,001-3,00,000.

From Table 2, it is observed that out of the total

respondents, 76 respondents are aware of

mutual funds and 24 respondents are not aware

of mutual funds.

From Table 3, it is observed that 68% of the

respondents invest in mutual fund and 32% of

total respondents were not invested in any mutual

fund.

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S. No. Income (In rupees)/Month Number of Respondents Percentage

1. Less than 1,00,000/- 25 25

2. 1,00,001/-to 2,00,000/- 65 65

3. 2,00,001/- to 3,00,000/- 10 10

4. 3,00,001/- and Above 00 00

Total 100

Table 1: Classification of Respondents Based on Income

S. No. Aware/Not Aware Number of Respondents Percentage

1. Yes 76 76

2. No 24 24

Total 100 100

Table 2: Classification of Mutual Funds Basing on the Awareness Towards Mutual Funds

S. No. Investment Number of Respondents Percentage

1. Yes 68 68

2. No 32 32

Total 100 100

Table 3: Classification of Respondents Basing on Whetherthey Invest/or Not Invest in Mutual Funds

From Table 4, it is observed that 89% of therespondents are interested in getting gooddeduction from tax and 11% of respondents arenot interested in getting deduction from tax.

From Table 5, it is observed that 76% of all therespondents know mutual fund is a good instru-ment of tax saving and 24% of total respondentsdid not that mutual fund is a good instrument oftax saving.

From Table 6, it is observed that majority ofthe responders prefer mutual funds as aninvestment rather than other type of investment.

From the Table 7, it is observed that 20% ofthe respondents invest for the purpose of highreturn, 18% invest for the purpose of tax benefit,

45% invest for the purpose of saving, 10% investfor the purpose of wealth creation and 7% investfor the purpose of risk diversification.

From the Table 8, it is observed that 3% of therespondents get less than 5%, 65% of therespondents get between 5%-10% returns. Somajority of the respondents get 5-10% returns.

From the Table 9, it is observed that 65% of allthe respondents prefer investment in equity fund,11% of all the respondents prefer investment in Debtfund, and remaining 24% of the respondents preferinvestment in balanced fund. So it can be concludedthat majority of the respondents are interested to

invest in equity funds.

From Table 10, it is observed that SBI magnum

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S. No. Interest Number of Respondents Percentage

1. Yes 89 89

2. No 11 11

Total 100 100

Table 4: Classification of Respondents Basing on Their Interest to get Deduction from Tax


1. Yes 76 76

2. No 24 24

Total 100 100

Table 5: Respondents Classification Basing on Whether TheyKnow/Not Know That Mutual Fund is a Good Instrument of Tax Saving


1. Equity market 20 20

2. Mutual fund 54 54

3. Government bond 00 00

4. Real estate 09 09

5. Bank FD 48 48

6. Post office 26 26

7. Insurance 45 45

Total 202 202

Table 6: Classification of the Respondents Basing on theType of the Investments They Hold at Present

S. No. Investment Purpose Number of Respondents Percentage

1. High return 20 20

2. Tax benefit 18 18

3. Saving 45 45

4. Wealth creation 10 10

5. Risk diversification 7 7

Total 100 100

Table 7: Classification of Respondents Basing on the Purpose they Invested in Mutual Funds

Note: Respondent invest in more than one instrument of saving.

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S. No. Investment Returns (%) Number of respondents Percentage

1. 20 05 05

Total 100 100

Table 8: Classification of the Respondents Basingon the Returns Receive From all their Investments

S. No. Investment preference Number of respondents Percentage

1. Equity fund 65 65

2. Debt fund 11 11

3. Balanced fund 24 24

Total 100 100

Table 9: Classification of the Respondents Basingon Their Preference Towards Different Types Of Mutual Funds

tax gain scheme gained more points when

compared with other plans.

From the Table 11, it is observed that majority of

the respondents preferred to invest in three year period

mutual funds. It means majority of the respondents

preferred SBI magnum tax gain scheme.

From the Table 12, it is observed that wealth

maximization benefit is most preferred benefit by

the investors.

From Table 13, it is observed that investor

prefer ICICI tax plan.

S. No. Investment in Various Company Tax Plan Number of Points Percentage

1. SBI magnum tax gain scheme 545 26.0

2. Kotak tax saver 198 09.4

3. ICICI prudential tax plan 498 23.7

4. Fidelity tax advantage fund 275 13.1

5. Reliance tax saver fund 345 16.4

6. HDFC tax saver 239 11.4

Total 2100 100.0

Table 10: Preference for the SIP Tax Plan of Various Companies(Where 1 Point is For Most Preferred and 6 For Least Preferred)

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S. No. Investment time period Number of points Percentage

1. Three year 316 31.6

2. Five year 286 28.6

3. Six year 275 27.5

4. Seven year 123 12.3

Total 1000 100.0

Table 11: Preference for the Period of Investment of Systematic Investment Plan (SIP)for your tax Saving (Where 1 is for Most Preferred and 4 is for Least Preferred)

S. No. Investment Benefits Number of Points Percentage

1. Flexibility to investors 256 17.1

2. Capital appreciation 323 21.5

3. Tax free return 387 25.8

4. Wealth maximization 389 25.9

5. Small amount of investment 145 09.7

Total 1500 100.0

Table 12: Preference for Benefits Offered Among Various AMC Tax Planof Mutual Funds (Where 1 is for Most Preferred and 5 is Least Preferred)

From the Table 14, it is observed that the peoplein the age group of 20-30 years are more open tomutual fund holding and equity market. The shareof mutual fund shows a decreasing trend as theage increases. It is observed that in the latter agegroups, Life Insurance policies and GovernmentSecurities and Bonds have an increasinglypreferred. Overall, Mutual Fund, Stock Market,Bank Fixed Deposits and Life Insurance policiesare the most preferred holdings amongst all agegroups in the service category

From the Table 15, it is observed that maximuminvestment is made in 30-40 age group investors.Also they are holding a diversified portfolio which

includes PPF, Postal Schemes, Fixed Deposit,

as well as Equity Schemes (Mut-ual fund, Stock

Market). Age group 25-40 holds investments in

Equity Market, Bank FD, and some also hold their

Money in Real Estate. Business class people

focus more on high return with moderate security

of return. So majority of their investment is made

in Mutual Investment. Also comparing the options

the maximum is in Mutual Fund then come Equity

Market and at the third Position there are three

types of holding with similar preferences. They

are Post Office, Real Estate and Bank FD.

From the Table 16, it is observed that people

in the age category of 30-40 and 40-50 years have

a certain preference for equity holdings, mutual

fund, real estate. However these people are very

conscious for the assured return and security.

This category mostly consisting of retired

people and housewives and from Table 17, it has

been observed that preference for mutual fund is

low in this category. However Bank Fixed Depo-

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S. No. Investment Preference Number of Respondents Percentage

1. Most preferred 12 12

2. Favorably preferred 16 16

3. Preferred 44 44

4. Least preferred 11 11

5. Not preferred 17 17

Total 100 100

Table 13: Classification of Respondents Basing on the Preferencefor Tax Saving Plan of ICICI Prudential Mutual Fund

S. No. Service Class 20-30 30-40 40-50 50-60 > 65 Total

1. Equity Market 5 6 1 0 0 12

2. Mutual Fund 12 8 2 0 0 22

3. Govt. Bonds 1 2 1 0 0 04

4. Real Estate 0 1 0 0 0 01

5. Bank F.D. 3 1 0 0 0 04

6. Post office 0 1 0 0 0 01

7. Life Ins. 4 1 1 0 0 06

Total 25 20 5 0 0 50

Table 14: Age Wise Classification of Respondents Basing on Their Preference of Investment

S. No. Business Class 20-30 30-40 40-50 50-60 > 65 Total

1 Equity Market 1 3 0 1 0 5

2 Mutual Fund 0 6 0 0 0 6

3 Govt. Bonds 0 0 0 0 0 0

4 Real Estate 1 4 0 0 0 5

5 Bank F.D. 1 2 1 0 0 4

6 Post office 0 2 0 0 0 2

7 Life Ins. 0 0 0 0 0 0

Total 3 17 1 1 0 22

Table 15: Age Wise Break up of Business Class Respondents

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sits, Post Schemes, Life Insurance have the

greatest preference amongst people in this

category.

From the Table 18, it is observed that

investment in mutual funds is by all age groups

S. No. Professional 20-30 30-40 40-50 50-60 > 65 Total


2. Mutual Fund 3 4 0 0 0 7

3. Govt. Bonds 0 1 0 0 0 1

4. Real Estate 0 0 5 0 0 5

5. Bank F.D. 0 0 1 1 0 2

6. Post office 0 0 0 0 0 0

7. Life Ins. 0 1 0 0 0 1

Total 3 8 8 1 0 20

Table 16: Age Wise Break up of Professional Class Respondents

but investors between the age of 20-30 and 30-

40 years mostly prefer to invest in Mutual Fund.

From the Table 19, it is observed that investor

whose income is between 100001/- to 200000/- highly

prefer to invest in tax saving plan of Mutual Fund.

S. No. Retired 20-30 30-40 40-50 50-60 >65 Total


2. Mutual Fund 0 0 0 0 0 0

3. Govt. Bonds 0 0 0 0 0 0

4. Real Estate 0 0 0 1 0 1

5. Bank F.D. 0 0 0 1 0 1

6. Post office 0 0 0 2 1 3

7. Life Ins. 0 0 0 0 3 3

Total 0 0 0 4 4 8

Table 17: Age Wise Break Up of Retired Class Respondents

S. No. Attribute 20-30 30-40 40-50 50-60 > 65 Total

1. Yes 18 36 15 5 2 76

2. No 2 1 1 5 15 24

Total 20 37 16 10 17 100

Table 18: Age Wise Break Up of Investment in Mutual Funds

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S. No. Service Class Business Class Professional Retired Total

1. Equity Fund 35 11 17 02 65

2. Debt Fund 01 07 01 02 11

3. Balanced Fund 14 04 02 04 24

Total 50 22 20 8 100

Table 20: Occupation Wise Break Up For Investment in Different Funds

S. No. Service Class Business Class Professional Retired Total

1. Most Preferred 3 5 1 3 12

2. Favorably Preferred 4 5 5 2 16

3. Preferred 32 4 7 1 44

4. Least Preferred 3 3 4 1 11

5. Not Preferred 8 5 3 1 17

Total 50 22 20 8 100

Table 21: Occupation Wise Preference for ICICI Mutual Funds

From the Table 20, it is observed that investors

in business class and professionals like to invest

in equity fund and balanced fund.

From the Table 21, it is observed that investors

of service class, business and professional like

to invest in ICICI Tax saving plan, while retired

class are less likely to invest.

SUGGESTIONSEven though the mutual funds are good source

of income, the people lack awareness and

information towards mutual funds. So the

following suggestions were made in order to

increase the awareness among the people

especially the rural people.

1. Increase awareness among investors: Many

investors are still restricting their choices to

the non-governmental options like gold and

fixed deposits even the market is flooded with

countless investment opportunities. This is

because of lack of awareness about mutual

funds which makes many investors restrict

their choice to traditional options like gold and

fixed deposits. So awareness relating to

S. No. >100,000 100001-200000 200001-300000 300001 and More Total

1. Yes 19 42 7 0 68

2. No 6 23 3 0 32

Total 25 65 10 0 100

Table 19: Income Wise Break Up Of Investment

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mutual funds must be increased among the

investors to encourage them to invest in

mutual funds.

2. Provide complete information relating to

mutual funds: Even among the investors who

invest in mutual funds are unclear about how

they function and how to manage them. So

proper information must be provided to the

investors in order to increase the loyalty among

the investors.

3. Investors fee must be reduced by reducing

paper work: Investors fee includes manage-

ment fee, distribution fee, distribution fee, and

administrative costs, etc., which are generally

deducted from the asset value. This can be

possible if the investment is made without

agent and if the paper work is reduced.

4. Better commission should be paid to Asset

Management Companies: From the past 4-5

years the trust of investors on mutual funds is

reduced because of the poor performance of

mutual funds in these years. So if better

commission is paid to Asset Management

Companies which are highly knowledgeable

and by motivating them we can improve the

distribution system of mutual funds.

5. Subsidized Investments to rural investors:

Because of the issue of commercial viability,

mutual funds were limited to major cities only.

So if mutual funds are offered to rural and semi

urban investors at subsidized rates like

agricultural loans, the demand for mutual funds

increases in rural and semi urban areas also.

6. Advertising campaigns must be conducted in

rural areas to increase awareness among rural

investors.

CONCLUSIONMutual funds are good source of returns for

majority of households and it is particularly useful

for the people who are at the age of retirement.

However, average investors are still restricting

their choices to conventional options like gold and

fixed deposits when the market is flooded with

countless investment opportunities, with mutual

funds. This is because of lack of information about

how mutual funds work, which makes many

investors hesitant towards mutual fund invest-

ments. In fact, many a times, people investing in

mutual funds too are unclear about how they

function and how one can manage them. So the

organizations which are offering mutual funds

have to provide complete information to the

prospective investors relating to mutual funds.

The government also has to take some measures

to encourage people to invest in mutual funds

even though it is offering schemes like Rajiv

Gandhi Equity Savings Scheme to the investors.

It is believed that some of these measures could

lift the morale of the mutual fund industry which

has been crippled for the last three years.

REFERENCES1. Investment Company Institute (2011), as

cited in Ignites, December 30.

2. Fink Matthew P (2008), The Rise of Mutual

Funds, Oxford University Press, p. 9.

3. Pozen Robert and Hamacher Theresa

(2011), The Fund Industry: How Your Money

is Managed, John Wiley & Sons. pp. 5-7.

4. Pozen and Hamacher (2011), pp. 7-9.

5. Pozen and Hamacher (2011), pp. 11-15.

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6. Rouwenhorst K Geert (2004), The Origins

of Mutual Funds, Yale ICF Working Paper

No. 04-48, December 12, 2004), p. 5.

7. 2011 Investment Company Fact Book,

Investment Company Institute. Retrieved

2011-08-02.

mutual fund

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