vishav dissertation final
TRANSCRIPT
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CERTIFICATE
This is to certify that Mr. Vishav Vibhu, student of MBA (BE) 4
th
semester has done hisdissertation on the topic A study of behaviour of potential investors of jammu region
towards investment in mutual funds for the academic year2011-2013.
SIGNATURE SIGNATURE
Dr Sushil kumar mehta Prof. D Mukhopadhyay
Dissertation Guide Dean
Assistant professor College of Management
College of Management School of business economics
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ACKNOWLEDGEMENT
The successful completion of this dissertation would not have been possible without the supportand cooperation of others. A dissertation is created with a blend of ideas, views, suggestions and
I express my thankfulness to all those people without whom this work could not have been
possible. I am pleased to express my thankfulness to respondents for giving their precious time
and relevant information for my study.
I owe my earnest thankfulness to THE ALMIGHTY for bestowing me with the willpower and
patience that has made this endeavour a success.
I express by sincerest gratitude to my guide, Dr Sushil Kumar Mehta, Assistant Professor School
of Business, College of Management, for guidance, meticulous suggestions and ever willing help
extended during the period of study.
Last but not least I want to thank my family and friends who have helped me in bringing out the
best in the project, directly or indirectly.
VISHAV VIBHU
(2011MBE07)
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DECLARATION
I, VISHAV VIBHU student of MBA(BE) Shri Mata Vaishno Devi University (SMVDU)
have completed the dissertation titled A study of behaviour of potential investors of jammu
region towards investment in mutual funds for the academic session 2011-2013.
The information given in this project is true to the best of my knowledge.
VISHAV VIBHU
(2011MBE07)
SCHOOL OF BUSINESS ECONOMICS
COLLEGE OF MANAGEMENT
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CONTENTS
CHAPTERDESCRIPTION
PAGE
No.
Certificate 1
Acknowledgement 2
Declaration 3
Executive summary 7
Chapter 1 Introduction 8-16
Chapter 2 Literature Review 17-20
Chapter 3 Objective of study 21
Chapter 4 Research Methodology 22
Chapter 5 Analysis and data interpretation 23-47
Chapter 6 Findings, Limitations of study and Conclusion 48-49
References 50
Questionnaire 51-52
FIGURES AND TABLES
TABLES DESCRIPTIONPAGE
No.
5.1 Reasons for not investing in mutual funds 27
5.2 Factors according to their importance in purchase decision 30
5.3 Perception of consumers towards some mutual funds 41
5.12.1 Chi square test of association between age group and cash dividend 42
5.12.2 Strength of association 42
5.13.1 Chi square test of association between age group and NAV 43
5.13.2 Strength of association 43
5.14.1Chi square test of association between age group and promoters track
record44
5.14.2 Strength of association 45
5.15.1 Chi square test of association between age group and importance 46
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attached to flexible benefits
5.15.2 Strength of association 46
FIGURES
1.1 Mutual fund operation flow chart 91.2 Classification of mutual fund schemes 12
5.1 Distribution of gender 23
5.2 Distribution of income 23
5.3 Proportion of respondents who invested in mutual funds 24
5.4 Schemes owned by investors 24
5.5 Sources used by investors 25
5.6 Proportion of risk 255.7 Type of mutual fund preferred 26
5.8 Nature of investors 26
5.9.1 Lack of awareness as hurdle to investment 28
5.9.2 Non availability of investible funds as hurdle to investment 28
5.9.3 Complex procedure as hurdle to investment 29
5.9.4 Fluctuating capital market as hurdle to investment 29
5.9.5 Stock market scams as hurdle to investment 305.10.1 Cash dividend as factor for making investment in mutual funds 31
5.10.2 NAV as factor for making investment in mutual funds 31
5.10.3Promoters track record as factor for making investment in mutual
funds32
5.10.4 Flexibility of schemes as factor for making investment in mutual funds 32
5.11.1 Satisfaction level for cash dividend of HDFC 33
5.11.2 Satisfaction level for cash dividend of Reliance MF 33
5.11.3 Satisfaction level for cash dividend of SBI MF 34
5.11.4 Satisfaction level for cash dividend of PNB MF 34
5.11.5 Satisfaction level for NAV of HDFC 35
5.11.6 Satisfaction level for NAV of Reliance MF 35
5.11.7 Satisfaction level for NAV of SBI MF 36
5.11.8 Satisfaction level for NAV of PNB MF 36
5.11.9 Satisfaction level for sponsors/ Partners of HDFC 37
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5.11.10 Satisfaction level for sponsors/ Partners of Reliance MF 37
5.11.11 Satisfaction level for sponsors/ Partners of SBI MF 38
5.11.12 Satisfaction level for sponsors/ Partners of PNB MF 38
5.11.13 Satisfaction level for Flexible benefits of HDFC 395.11.14 Satisfaction level for Flexible benefits of Reliance MF 39
5.11.15 Satisfaction level for Flexible benefits of SBI MF 40
5.11.16 Satisfaction level for Flexible benefits of PNB MF 40
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Executive Summary
The Mutual Fund Industry is a fast growing sector of the Indian Financial Markets. They
have become major vehicle for mobilization of savings, especially from the small and
household savers for investment in the capital market. Mutual Funds entered the Indian
Capital Market in 1964 with a view to provide the retail investors the benefit of
diversification of risk, assured returns, and professional management. Every type of
investment, including Mutual Funds, involves risk. Risk refers to the possibility that
investors will lose money (both principal and any earnings) or fail to make money on an
investment. A Fund's investment objective and its holdings are influential factors in
determining how risky a fund is. The project focused on finding out the Behaviour of potentialinvestors of jammu region towards the investment in mutual funds. The stated objective of
the study is to know what are different factors which can influence the investment decisions
of respondents.
The asset management companies therefore, have to understand the behaviour of
potential investors towards mutual funds. A strong understanding of investors behaviour is
required for sustenance and growth of the business. To get a first hand input I have taken
responses of 100 respondents through the questionnaire. The analysis of data was done by
using chi-square test and Ranking. I am hopeful that the present study will positively
contribute to mutual fund industry to understand the what are the reasons that people are not
interested in making investment in mutual funds
Keywords: Mutual Fund, Potential Investors, Investment.
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A study of behaviour of potential investors of jammu region towards
investment in mutual funds
Chapter 1: INTRODUCTION
A mutual fund is a common pool of money in to which investors with common investment
objective place their contributions that are to be invested in accordance with the stated
investment objective of the scheme. The investment manager would invest the money
collected from the invested in to assets that are defined/permitted by the stated objective of
the scheme. For example, an equity fund would invest equity and equity related instruments
and a debt fund would invest in bonds, debentures, gifts, etc. A Mutual Fund is an investment
tool that allows small investors access to a well-diversified portfolio of equities, bonds and
other securities. Each shareholder participates in the gain or loss of the fund. Units are issued
and can be redeemed as needed. The funds Net Asset Value (NAV) is determined each day.
Mutual Funds are financial intermediaries. They are companies set up to receive your
money, and then having received it, make investments with the money Via an AMC. It is an
ideal tool for people who want to invest but don t want to be bothered with deciphering the
numbers and deciding whether the stock is a good buy or not. A mutual fund manager
proceeds to buy a number of stocks from various markets and industries. Depending on the
amount you invest, you own part of the overall fund. The beauty of mutual funds is that
anyone with an inventible surplus of a few hundred rupees can invest and reap returns as high
as those provided by the equity markets or have a steady and comparatively secure
investment as offered by debt instruments.
Mutual funds are one of the best investments ever created because they are very cost efficient
and very easy to invest in. By pooling money together in a mutual fund, investors can
purchase stocks or bonds with much lower trading costs than if they tried to do it on theirown. But the biggest advantage to mutual funds is diversification.
Concept
Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through these
investments and the capital appreciation realised are shared by its unit holders in proportion
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to the number of units owned by them. Thus a Mutual Fund is the most suitable investment
for the common man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost. The flow chart below describes broadly
the working of a mutual fund:
Fig 1.1 Mutual Fund Operation Flow Chart
The simplest mutual funds definition is that they are an investment group set up by
professional investors and headed by an investment manager. Individuals are then able to
invest small amounts of money into the fund for making a reasonable profit. There are an
incredibly large number of mutual funds. While some mutual funds aim to produce short
term, high yield profits, others look for the long term profit. Mutual funds are seemingly the
easiest and least stressful way to invest in the stock market. Quite a large amount of new
money has been put into mutual funds during the past few years.
Briefly put, a mutual fund is a pool of money contributed to by individual investors,
companies, and other organizations. There will be a fund manager hired to invest this cash
with a primary goal that depends upon the type of fund. The manger usually diversifies in a
manner such that the net average earning is expected to be considerably positive. S/he may be
a fixed-income fund manager. In that case s/he would work hard to provide the highest return
at the lowest risk. On the other hand a long-term growth manager should try at least to beat
the Dow Jones Industrial Average or the S&P 500 in a given fiscal year. But that is what any
successful investor attempts to do, and anyone with a similar approach can be expected to
make the same earnings.
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Benefits of Mutual Funds investment
The benefits on offer are many with good post-tax returns and reasonable safety being the
hallmark that we normally associate with them. Some of the other major benefits of investing
in them are:
Number of available options: - Mutual funds invest according to the underlying investment
objective as specified at the time of launching a scheme. So, we have equity funds, debt
funds, gilt funds and many others that cater to the different needs of the investor. The
availability of these options makes them a good option. While equity funds can be as risky as
the stock markets themselves, debt funds offer the kind of security that is aimed for at the
time of making investments. Money market funds offer the liquidity that is desired by big
investors who wish to park surplus funds for very short-term periods. Balance Funds cater to
the investors having an appetite for risk greater than the debt funds but less than the equity
funds. The only pertinent factor here is that the fund has to be selected keeping the risk
profile of the investor in mind because the products listed above have different risks
associated with them. So, while equity funds are a good bet for a long term, they may not find
favor with corporate or High Net worth Individuals (HNIs) who have short-term needs.
Diversification: - Investments are spread across a wide cross-section of industries and
sectors and so the risk is reduced. Diversification reduces the risk because all stocks dont
move in the same direction at the same time. One can achieve this diversification through a
Mutual Fund with far less money than one can on his own.
Professional Management: - Mutual Funds employ the services of skilled professionals who
have years of experience to back them up. They use intensive research techniques to analyze
each investment option for the potential of returns along with their risk levels to come up
with the figures for performance that determine the suitability of any potential investment.
Potential of Returns :- Returns in the mutual funds are generally better than any other
option in any other avenue over a reasonable period of time. People can pick their investment
horizon and stay put in the chosen fund for the duration. Equity funds can outperform most
other investments over long periods by placing long-term calls on fundamentally good stocks.
The debt funds too will outperform other options such as banks. Though they are affected by
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the interest rate risk in general, the returns generated are more as they pick securities with
different duration that have different yields and so are able to increase the overall returns
from the portfolio.
Liquidity: - Fixed deposits with companies or in banks are usually not withdrawn premature
because there is a penal clause attached to it. The investors can withdraw or redeem money at
the Net Asset Value related prices in the open-end schemes. In closed-end schemes, the units
can be transacted at the prevailing market price on a stock exchange. Mutual funds also
provide the facility of direct repurchase at NAV related prices. The market prices of these
schemes are dependent on the NAVs of funds and may trade at more than NAV (known as
Premium) or less than NAV (known as Discount) depending on the expected future trend of
NAV which in turn is linked to general market conditions. Bullish market may result in
schemes trading at Premium while in bearish markets the funds usually trade at Discount.
This means that the money can be withdrawn anytime, without much reduction in yield.
WellRegulated: - Unlike the company fixed deposits, where there is little control with the
investment being considered as unsecured debt from the legal point of view, the Mutual Fund
industry is very well regulated. All investments have to be accounted for, decisions
judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties on the
AMCs at fault. The regulations, designed to protect the investors interests are also
implemented effectively.
Transparency: -Being under a regulatory framework, mutual funds have to disclose their
holdings, investment pattern and all the information that can be considered as material, before
all investors. This means that the investment strategy, outlooks of the market and scheme
related details are disclosed with reasonable frequency to ensure that transparency exists in
the system. This is unlike any other investment option in India where the investor knows
nothing as nothing is disclosed.
Flexible, Affordable and a Low Cost affair: - Mutual Funds offer a relatively less
expensive way to invest when compared to other avenues such as capital market operations.
The fee in terms of brokerages, custodial fees and other management fees are substantially
lower than other options and are directly linked to the performance of the scheme. Investment
in mutual funds also offers a lot of flexibility with features such as regular investment plans,
regular withdrawal plans and dividend reinvestment plans enabling systematic investment or
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withdrawal of funds. Even the investors, who could otherwise not enter stock markets with
low investible funds, can benefit from a portfolio comprising of high-priced stocks because
they are purchased from pooled funds. It all depends really on the overall investment climate
and the sectors in which funds are flowing in. Diversification is definitely a good approach
when it comes to successful investing by a reasonable investor. But with mutual funds, there
is that the controllers may over diversify. Diversification minimizes the inherent risks of
stock trading by spreading out the capital over many stocks. But over-diversification is again
a bad thing.
Volatility is a measurement of the change in price (fluctuations) over a given time
period. It is usually expressed as a percentage and computed as the annualized standard
deviation of the percentage change in daily price. The more volatile a stock or market, the
more money an investor can gain (or lose) in a short time. In referring to mutual funds,
volatility (Standard Deviation) is the measure of the degree to which a funds return varies on
a day-to-day or month-to-month basis.
CLASSIFICATION OF MUTUAL FUND SCHEMES:-
Types of Schemes
Fig1.2: Classification of mutual fund schemes
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MUTUAL FUNDS INDUSTRY IN INDIA
The origin of mutual fund industry in India is with the introduction of the concept of mutual
fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year
1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund
industry had seen a dramatic improvement, both quality wise as well as quantity wise.
Before, the monopoly of the market had seen an ending phase, the Assets Under Management
(AUM) was Rs. 67bn. The private sector entry to the fund family rose the AUM to Rs. 470
bn in March 1993 and till April 2004, it reached the height of 1,540 bn.
Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it
is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by
the Indian banking industry. The mutual fund industry is a lot like the film star of the finance
business. Though it is perhaps the smallest segment of the industry, it is also the most
glamorousin that it is a young industry where there are changes in the rules of the game
every day, and there are constant shifts and upheavals. The mutual fund is structured around a
fairly simple concept, the mitigation of risk through the spreading of investments across
multiple entities, which is achieved by the pooling of a number of small investments into a
large bucket. Yet it has been the subject of perhaps the most elaborate and prolonged
regulatory effort in the history of the country.The main reason of its poor growth is that the
mutual fund industry in India is new in the country. Large sections of Indian investors are yet
to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund
companies, to market the product correctly abreast of selling.
Mutual funds are an excellent way to invest in stocks, bonds and other securities. They are a
good choice of investment because:
They are managed by professional money managers, so most of the investmentresearch is done for you. (Most investors dont have the time or know-how to do all
the necessary research.)
You diversify your investment risk by owning shares in a mutual fund, instead ofbuying individual stocks or bonds directly.
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Transaction costs are often lower than what you would pay if you invested inindividual securities (the mutual fund buys and sells large amounts of securities at a
time).
For those who are not adept at understanding the stock market, the task of generating
superior returns at similar levels of risk is arduous to say the least. This is where Mutual
Funds come into picture. Mutual Funds are essentially investment vehicles where people with
similar investment objective come together to pool their money and then invest accordingly.
Each unit of any scheme represents the proportion of pool owned by the unit holder
(investor). Appreciation or reduction in value of investments is reflected in net asset value
(NAV) of the concerned scheme, which is declared by the fund from time to time. Mutual
fund schemes are managed by respective Asset Management Companies (AMC). Different
business groups/ financial institutions/ banks have sponsored these AMCs, either alone or in
collaboration with reputed international firms. Several international funds like Alliance and
Templeton are also operating independently in India. Many more international Mutual Fund
giants are expected to come into Indian markets in the near future.
Top Asset Management companies in India
UTI Asset Management
The major shareowners of UTI Asset Management are State Bank of India, bank of Baroda,
Punjab National Bank, and Life Insurance Corporation. It is the oldest provider of mutual
fund services in India. At the end of 2011-12 UTIs assets were valued at INR 11,387.9
million as opposed to INR 10,653.9 million.
Birla Sun Life Asset Management: One of the leading asset management companies in
India, Birla Sun Life Asset Management is a combined effort of the India based Aditya Birla
Group and Sun Life Financial, which is one of the top insurers in Canada.
Reliance Group: Reliance Mutual Fund is owned by the Reliance Group and is one of the
quickest growers in the segment. It is presently operative in 179 cities across India. On an
average it manages assets worth INR 86,327 crores and has between 61 and 67 lakh investor
portfolios
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Tata Group: Tata Mutual Fund enjoys the support of Tata Group, which is one of the
premier brands in the country and presently caters to several lakh investors. It manages assets
that are worth approximately INR 20,247 crores.
Franklin Templeton: In India Franklin Templeton has been operating for more than 10
years. Its first office was launched here during 1996 as the Templeton Asset Management
India Private Limited and its mutual fund business in India was started by introducing the
Templeton India Growth Fund.
L&T Finance Limited: The L&T Mutual Funds are issued by L&T Finance Limited that
was set up as a NBFC (non banking finance corporation during November 1994. At present
the organization also offers corporate and infrastructure finance, wealth management, loans,
and general insurance services apart from mutual funds.
SBI: SBI Mutual Fund has been one of the leading names in the business for the past two
decades and half. The company is a combined enterprise of AMUNDI from France and the
State Bank of India, one of the leading banks in India. At present the organization has at least
222 acceptance points in India.
DSP BlackRock: DSP BlackRock mutual funds are offered by DSP BlackRock Investment
Managers, which is one of the leading asset managers in the country. It is a combined venture
of BlackRock and DSP Group. The latter is led by Hemendra Kothari, has been in the
business for 145 years. It is also one of the entities that set up the Bombay Stock
Exchange. BlackRock is the biggest publicly listed asset management organization of the
world. It operates in South and North America, Australia, Europe, Middle East, Asia, and
Africa. It has at least 9300 employees and has an investor base spanning corporate entities,
union, public companies, and industry pension providers.
HDFC Asset Management Company: HDFC Mutual Fund is a product of the HDFC Asset
Management Company Limited (AMC), which was set up on December 10, 1999 as per the
Companies Act, 1956. Its headquarters are presently at Mumbai and it owns paid up capital
worth INR 25.169 crore.
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Religare Asset Management CompanyLimited: Religare Mutual Fund is marketed by the
Religare Asset Management Company Limited. At the end of the quarter that concluded after
September 2012, the organizations average asset base is at least INR 126 billion. It caters to
individual investors as well as institutions and corporate clients.
ICICI Prudential Asset Management Company Limited: The ICIC Prudential Mutual
Fund is offered by ICICI Prudential Asset Management Company Limited. It is a joint
venture of Prudential PLC, based in the UK, and ICICI Bank. The company was inaugurated
during 1993 and is one of the biggest asset management entities in India.
Kotak Mahindra Asset Management Company Limited: Kotak Mahindra Asset
Management Company Limited or KMAMCL is owned by Kotak Mahindra Bank Limited.
The fund house has entered into collaboration with T Rowe Price for marketing funds on a
global basis.
Sundaram Asset Management Company Limited: Sundaram Asset Management
Company Limited was set up during 1996. The company is owned by Sundaram Finance,
which is one of the oldest non banking financial companies of India. For the quarter that
ended in September, the company had, on an average, managed assets worth INR 13,668.88
crore. It, along with SBI Mutual Fund is among the companies that are planning to buy
mutual fund property worth INR 789 crore from Daiwa Asset Management India.
(Source: http://business.mapsofindia.com/finance/top-asset-management-
companies.html)
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CHAPTER 2: REVIEW OF LITERATURE
Rajarajan (2000)1 has attempted to identify predictors of individual investors' expected rate
of return by investigating relationship of demographic variables such as age, income,
occupation, employment status and stage in life cycle with investment behavior of an
individual in the paper titled, "Predictors of Expected Rate of Return by Individual
Investors". The study was conducted by administering questionnaire to a sample size of 405
investors. The investigation was made across 12 variables. Multiple regression analysis was
used by the researcher to examine the relationship between expected rate of return on
investments by individual investors and their demographics. Some investment related
characteristics (including risk bearing capacity of investor) were also studied. The study
found that factors like investment size, portfolio choice, and risk bearing capacity are
positively related to rate of returns. The variable locus of control was inversely related to rate
of return. The paper concluded that the rate of return was not strongly related to any socio
economic variable except age. The author has empirically proved the significant relationship
between expected rate of return on investments and demographic variables.
SEBI-NCAER survey (2000)2 was carried out to estimate the number of households, the
population of individual investors, their economic and demographic profile, portfolio size,
and investment preference for equity as well as other savings instruments. Data was collected
from three lakhs geographically dispersed rural and urban households. Findings of the survey
are: the investors' choice of investment instruments matched the risk perceived by them.
Bank Deposit was the most preferred investment avenue across all income class; 43% of the
non-investor households (estimated around 60 million households) apparently lack awareness
about stock markets; and: a relative comparison shows that the higher income group has a
greater share of investments in mutual funds compared with low income groups, suggesting
that mutual funds have not truly become investment vehicle for small investors'.
Nevertheless, the study predicts that in the next two years (i.e., 2000 hence) the investment of
households in mutual funds is likely to increase.
Crosnan and Gneezy (2004)3 in the research work titled "Gender Differences by
Preferences" have done an exhaustive review of various studies on gender differences over a
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period of time. The authors have highlighted the differences in perception on the basis of
gender. The paper explains that there is vast difference as to how men or women perceive the
areas of risk taking, social behavior and competition behavior. The paper establishes that
women take less risk than men. According to the authors the various factors that might be
responsible for such a difference in preference may be age, marital status, number of children
and culture. The paper further discusses that gender difference by preference is reduced when
the outcome is unsure as in the case of lottery as the perceptions are made on a subjective
idea of outcome.
Similarly the paper establishes the lack of difference in perception when a population
consisting of managers and professionals was studied. The study disclosed that there is no
significant difference in the way men or women. Managers think of performance, risk and
other fund characteristics. The authors concluded the study by stating that women are risk
averse than men as far as investment decision involving risk was concerned.
The research article by Giessen and Ruenzi (2009)4titled Sex Matters: Gender Differences
in the Mutual Fund Industry", 74 investigates gender differences between female and male
US mutual fund managers. The research is carried along three broad dimensions of: risk
taking, investment styles, and trading activity. The primary data is gathered from the CRSP
Survivor Bias Free Mutual Fund Database. The data for analysis is only of actively managed
equity funds that invest more than 50% of their assets in stocks and excludes bond, money
market and index funds. Performance measures of the study are obtained by using various
statistical tools like regressions, significance testing, Fames regression models etc. The
findings of the study are that
1. Female fund managers are moderately more risk averse than male fund managers:
2. Female fund managers follow significantly less extreme investment styles as compared to
male fund managers:
3. Female managers investment styles are more stable over a period of time:
4. Male managers trade more than female managers. The authors conclude by elucidating
that a fund investor may prefer female manager to manage the fund. Many researchers are
studied different dimensions of investors socio-economic profiles of investment to mutual
fund schemes. They are found out some important factors influences their risk perception,investment decisions and savings patron of investors investment. Above the literature, there
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are taken factors are age, gander, marital status, income and educational qualifications. In my
research point of view I had taken family and personal considerations of individual investors
to awareness and adoption of different mutual fund schemes.
Parihar, Sharma and Parihar (2009)5 conducted a study on analyzing investors attitude
towards mutual funds as an investment option and found that majority of investors have still
not formed any attitude towards mutual fund investments. The main reason behind this has
been observed to be lack of awareness of investors about the concept and working of the
mutual funds. They concluded that demographic variables are concerned; age, gender and
income have been found influencing the attitude of investors towards mutual funds
significantly. Whereas, amazingly, the other two demographic variables (education and
occupation), have not been found influencing the attitude of investors towards mutual funds.
They also analyzed that benefits delivered by the mutual funds are concerned; return potential
and liquidity have been perceived to be the most attractive by the investors, followed by
flexibility, affordability and transparency.
Desigan et al. (2006)6 conducted a study on women investors' perception towards investment
in general and found that women investor's generally hesitate in investing in mutual funds
due to their lack of knowledge regarding investment protection, procedure of making
investment, market fluctuations, risk associated with investment, valuation of investment and
redressal of grievances regarding their investment related problems.
Ramamurthy and Reddy (2005)7 carried out a study to analyze recent trends in the mutual
fund industry and concluded that the major benefits delivered to the small investors by
mutual funds are professional management, diversification of investment, convenient
administration, return potential, liquidity, transparency, flexibility, affordability, wide choice
and proper regulation. They also analyzed certain recent trends in the mutual fund industry
such as, entry and exit of mutual fund companies, compulsory certification of mutual fund
sales/marketing personnel, mutual fund schemes related to real estate, commodity, bullion
and precious metals, etc., shift from income funds to money market funds, shift from banks to
mutual funds and buying and selling of mutual funds online.
Anand and Murugaiah (2004)8 studied the strategic issues related to the marketing of
financial services and concluded that today's financial services industry requires new
strategies to survive and continue to operate. They have to adopt new marketing strategiesand tactics that enable them to capture maximum opportunities with the lowest risks in order
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to enable them to survive and meet the tough competition from global players of domestic
and foreign origin.
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Chapter 3: Objectives of study
To know the reasons among the potential investors for not investing in mutual funds. To know the importance attached to various parameters of study while investing in
mutual fund.
To find the association between age group of potential investor and cash dividend ofmutual fund.
To find the association between age group of potential investor and high NAV ofmutual fund.
To find the association between age group of potential investor and promoters trackrecord.
To find the association between age group of potential investor and flexibility ofschemes.
Hypothesis
There is no association between age group of potential investor and expectation ofcash dividend of mutual fund.
There is no association between age group of potential investor and expectation ofhigh NAV of mutual fund.
There is no association between age group of potential investor and promoters trackrecord of mutual funds.
There is no association between age group of potential investor and flexibility ofschemes of mutual funds
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Chapter 4: Research methodology
Data collection
Primary as well as secondary data was used in the study. Various sources were used in
collection of data.
1. Primary Data:- primary data was collected from applicants through schedule.Structured and close ended schedules were used.
2. Secondary Data:- secondary data was collected from sources such as websites andbooks.
Sample size:-
Sample size of 100 respondents was collected to conduct this study.
Sampling Technique
Convenience sampling was done to collect data from respondents.
Tools used in study
Software :- Microsoft excel and SPSS 16.0
Statistical tools :- Chi square test.
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Chapter 5: Analysis
5.1 Distribution of gender as per gender
Figure 5.1 In our survey there are 100 respondents out of which 75% are male and 25% are
females.
5.2 Income distribution of respondents
Figure 5.2: this chart shows that most of the respondents have income between Rs. 20000-
Rs.40000
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5.3 Proportion of investors who have invested in mutual
funds
Figure 5.3: This chart shows that the majority of respondent dont invest in mutual funds. It
shows that only 30% of the respondents have invested in mutual funds.
5.4 Number of schemes owned by the respondents
Figure 5.4: It is found that large number of respondents has invested in less than two
schemes.
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5.5Sources preferred by respondents to get information about mutualfunds.
Figure 5.5 It was found that most of the investors use to prefer business news before
investing in mutual funds.
5.6 Risk that investors are willing to take.
Figure 5.6: It is found that 58% of the investors are willing to take moderate risk.
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5.7 Type of mutual funds preferred by investors.
Figure 5.7: It is found that there is little difference in preference of investors towards type of
mutual funds. 54% of respondents prefer close ended mutual funds.
5.8 What attracts investors towards mutual funds?
Figure5.8: It is found that 61% of the respondents get attracted towards both NAV and
returns.
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5.9 Reasons for not investing in mutual fundsRanks
Factors Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Total
Lack of
awareness
32 21 4 7 6 70
Non
availability of
funds
4 14 36 11 5 70
Complex
procedure
26 23 11 8 2 70
Fluctuating
capital markets
5 10 13 40 2 70
Stock market
scams
5 2 4 4 55 70
Table 5.1: Reasons for not investing in mutual funds
Interpretation:
45.71% respondent find lack of awareness is the main reason for not investing inmutual funds.
Stock market scams has least significance as a reason for not investing in funds.
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a) Lack of awareness as a hurdle to investment.
Figure5.9.1 This graph show that lack of awareness is the most important reason for not
investing in mutual funds.
b) Non availability of investible funds as a hurdle to investment.
Figure 5.9.2: This graph shows that non availability of investible funds is not a major
reason for not investing in mutual funds.
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c) Complex process as a hurdle to investment.
Figure 5.9.3: This graph shows that complex procedure is also the most important reason
for not investing in mutual funds.
d) Highly fluctuating capital market as a hurdle to investment.
Figure5.9.4: This graph shows that highly fluctuating capital market is not a major
reason for not investing in mutual funds.
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e) Stock market scams as a hurdle to investment.
Figure 5.9.5: This graph shows that highly stock market scams is not a major reason for
not investing in mutual funds for most of the respondents.
5.10 Factors according to their importance in purchase of mutual funds.
Ranks
Factors
Rank 1 Rank 2 Rank 3 Rank 4 Total
Cash dividend 24 50 14 12 100
NAV 52 29 14 5 100
Promoters track record 14 15 52 19 100
Flexibility of schemes 10 6 20 64 100
Table 5.2: Factors according to their importance in purchase of mutual funds.
Interpretation:
Investors perceive NAV as most important factor for investment decision in mutualfunds.
Investors perceive flexibility of schemes as least important factor for investmentdecision in mutual funds.
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A) Cash dividend
Figure 5.10.1: This graph shows that most of the respondents say that cash dividend
is an important factor which influences their decision for investment in mutual funds.
B) NAV
Figure 5.10.2: This graph shows that most of the respondents say that NAV is the
most important factor which influences their decision for investment in mutual funds.
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C) Promoters track record
Figure 5.10.3: This graph shows that most of the respondents say that promoters
track record is not an important factor which can influence their decision for
investment in mutual funds.
D) Flexibility of schemes
Figure 5.10.4: This graph shows that most of the respondents say that flexibility of
schemes is not a important factor which influence their decision for investment in
mutual funds.
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5.11 Comparison of the companies on the basis of parameters as perthe perception of respondents.
HS- Highly satisfied, S-Satisfied, MS- Moderately satisfied, NS- not satisfied
Satisfaction level of respondents for cash dividend of firms.
Figure 5.11.1: Cash dividend of HDFC
Figure 5.11.2: Cash dividend of Reliance MF
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Figure 5.11.3: Cash dividend of SBI
Figure 5.11.4: Cash dividend of PNB
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Satisfaction level of respondents for NAV of firms
Figure 5.11.5: Attractiveness due NAV
Figure 5.11.6: Attractiveness due NAV of reliance
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Figure 5.11.7: Attractiveness due NAV of SBI
Figure 5.11.8: Attractiveness due NAV of PNB
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Satisfaction level of respondents for sponsored/partners of firms
Figure 5.11.9: Attractiveness due Sponsors/partners of HDFC
Figure 5.11.10: Attractiveness due Sponsors/partners of Reliance
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Figure 5.11.11: Attractiveness due Sponsors/partners of SBI
Figure 5.11.12: Attractiveness due Sponsors/partners of PNB
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Satisfaction level of respondents for Flexible benefits of firms
Figure 5.11.13: Attractiveness due Flexible benefits of HDFC
Figure 5.11.14: Attractiveness due Flexible benefits of Reliance
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Figure 5.11.15: Attractiveness due Flexible benefits of SBI
Figure 5.11.16: Attractiveness due Flexible benefits of PNB
Interpretation:
Weightage assigned in calculating overall point
Highly satisfied: 0.4
Satisfied: 0.3
Moderately satisfied: 0.2
Not satisfied: 0.1
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Overall points table
Mutual funds Cash dividend NAV Sponsored/partner Flexible
schemes
HDFC 29 26.2 24.4 26.8
RELIANCE
MF
28.7 30.6 41.7 30.2
SBI MF 35.2 34.1 38.4 35.7
PNB MF 34.3 34 33.2 36
Table 5.3: Showing perception of respondents towards some mutual fund companies
Cash dividend: SBI MF is perceived the best company with respect to cashdividend paid.
NAV: SBI MF is perceived the best company with respect to NAV. Sponsored/partner: Reliance MF is perceived the best company with respect
to sponsors/ partners
Flexible schemes: PNB MF is perceived the best company with respect toflexibility in schemes.
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5.12 Chi square test of association between age group andimportance attached to cash dividend.
Chi-Square Tests
Value Df
Asymp. Sig.
(2-sided)
Pearson Chi-Square 26.641a 9 .002
Likelihood Ratio 23.463 9 .005
Linear-by-Linear
Association.039 1 .843
N of Valid Cases 100
a. 9 cells (56.3%) have expected count less than 5. Theminimum expected count is .48.
TABLE 5.12.1: Chi square test of association between age group and cash dividend.
Symmetric Measures
Value
Approx.
Sig.
Nominal by
Nominal
Contingency
Coefficient.459 .002
N of Valid Cases 100
TABLE 5.12.2: Showing strength of association.
Interpretation:
According to chi square test there exist association between age group of investorsand importance attached to cash dividend. Therefore we reject null hypothesis. The
significance level is .002.
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The strength of association is .459.Null hypothesis Ho: There is no association between age group of potential investor and
expectation of cash dividend of mutual fund.
Alternative hypothesis H1: There is an association between age group of potential investor
and expectation of cash dividend of mutual fund.
5.13 Chi square test of association between age group andimportance attached to NAV.
Chi-Square Tests
Value df
Asymp. Sig.
(2-sided)
Pearson Chi-Square 8.642a 9 .471
Likelihood Ratio 8.857 9 .451
Linear-by-LinearAssociation
3.150 1 .076
N of Valid Cases 100
a. 10 cells (62.5%) have expected count less than 5. The
minimum expected count is .20.
Table 5.13.1:Chi square test of association between age group and NAV.
Symmetric Measures
Value
Approx.
Sig.
Nominal by
Nominal
Contingency
Coefficient.282 .471
N of Valid Cases 100
Table 5.13.2: Showing strength of association
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Interpretation:
According to chi square test there exist no association between age group of investorsand importance attached to cash dividend. Therefore we accept null hypothesis. The
significance level is .471.
The strength of association is .282.
Null hypothesis Ho: There is no association between age group of potential investor and
expectation of high NAV of mutual fund.
Alternative hypothesis H1: There is an association between age group of potential investor
and expectation of high NAV of mutual fund.
5.14 Chi square test of association between age group andimportance attached to promoters track record.
Chi-Square Tests
Value Df
Asymp. Sig.
(2-sided)
Pearson Chi-Square 12.809a 9 .171
Likelihood Ratio 13.683 9 .134
Linear-by-Linear
Association.012 1 .912
N of Valid Cases 100
a. 9 cells (56.3%) have expected count less than 5. The
minimum expected count is .56.
Table 5.14.1: Chi square test of association between age group and promoters trackrecord.
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Symmetric Measures
Value
Approx.
Sig.
Nominal by
Nominal
Contingency
Coefficient.337 .171
N of Valid Cases 100
Table 5.14.2: Showing strength of association
Interpretation:
According to chi square test there exist no association between age group of investorsand importance attached to promoters track record. Therefore we accept null
hypothesis. The significance level is .171.
The strength of association is .337.
Null hypothesis Ho: There is no association between age group of potential investor and
promoters track record of mutual funds.
Alternative hypothesis H1:There is a association between age group of potential investor
and promoters track record of mutual funds.
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5.15 Chi square test of association between age group andimportance attached to Flexible benefits.
Chi-Square Tests
Value Df
Asymp. Sig.
(2-sided)
Pearson Chi-Square 12.992a 12 .370
Likelihood Ratio 14.707 12 .258
Linear-by-Linear
Association2.014 1 .156
N of Valid Cases 100
a. 14 cells (70.0%) have expected count less than 5. The
minimum expected count is .08.
Table 5.15.1: Chi square test of association between age group and Flexible benefits.
Symmetric Measures
Value
Approx.
Sig.
Nominal by
Nominal
Contingency
Coefficient.339 .370
N of Valid Cases 100
Table 5.15.2: showing strength of association
Interpretation:
According to chi square test there exist no association between age group of investorsand importance attached to flexible benefits. Therefore we accept the null hypothesis.
The significance level is .370.
The strength of association is .339.
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Null hypothesis Ho:There is no association between age group of potential investor and
flexibility of schemes of mutual funds
Alternative hypothesis H1:There is a association between age group of potential investor
and flexibility of schemes of mutual funds
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Chapter 6: Findings
From the study it is observed that 45.71% respondents consider lack of awareness ofmutual fund as the major reason for not investing in mutual funds.
From the study it is observed that the 52% of investors consider cash dividend as theprominent reason for making investment.
Cash dividend: SBI MF is perceived the best company with respect to cash dividendpaid.
NAV: SBI MF is perceived the best company with respect to NAV. Sponsored/partner: Reliance MF is perceived the best company with respect to
sponsors/ partners
Flexible schemes: PNB MF is perceived the best company with respect to flexibilityin schemes.
From chi square test it is observed that there exists an association between age groupand cash dividend.
From chi square test it is observed that there exists no association between age groupand NAV.
From chi square test it is observed that there exists no association between age groupand promoters track record.
From chi square test it is observed that there exists no association between age groupand flexibility of schemes.
Limitations of study
Sample size of 100 respondents could give biased results. Study was based on the perception of the potential investors towards the companies
and not on the data of the company.
All the areas of jammu region are not covered due to time and financial constraintrespondents are from jammu, udhampur, and katra.
Respondents who already invested in mutual fund are lesser than the respondents whodid not invest in mutual funds.
The number of male respondents are more than female respondents.
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Recommendations:
Mutual fund company need to educate investors basically semi urban and ruralinvestor regarding the benefits associated with mutual funds as an instrument for
making investments.
NAV and cash dividend is prominent force to motivate investor for investing inmutual fund. Companies should bring more liquid schemes and balanced schemes for
semi urban and rural investors.
It has been found that the association between age group and expectation of cashdividend as a force for investment, hence it is recommended that market penetration
by the mutual fund company will be based on cash dividend and its perception in
various age groups.
CONCLUSION
The study reveals that 70% of investors out of 100 respondents had not
made any mutual fund investments. The main reason behind this has been observed to be the
lack of awareness of investors about the mutual funds followed by complex procedure for
making investment. Most of the respondents use to prefer business news for getting
information about the mutual fund investments, so asset management companies should use
business news as a marketing and promotion of mutual funds. Mutual fund companies should
detailed information about the risk and returns of mutual fund investments because the most
of the respondents use to take moderate risk and prefer both net asset value and returns.
Net asset value (NAV) is revealed to be most important factor for making
investments in mutual funds. Also it found that there is a association between age group and
cash dividend, so investors are more inclined towards the returns that they can get out of the
investments in the mutual funds.
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REFERENCES
1. Rajarajan, V., 2000. Predictors of Expected Rate of Return by Individual, Investors. The
Indian Journal of Commerce, Vol.53 (4), 65:70, Oct-Dec.
2. NCAER, 2000.Survey of Investors, Securities Exchange: Board of India, New Delhi.
3. Crosnan, R., and U.Oneezy, 2004.Gender Differences by Preferences. Retrieved from
http://www.hks.harvard.edu/ wappp /research/ rachelcrosonandurigneez.pdf.
4. Giessen and Ruezi (2009) Sex Matters: gender Differences in the Mutual Fund Industry.
5. B.B.S.Parihar, Rajeev Sharma and Deepika Singh Parihar Analyzing Investors Attitude
Towards Mutual Funds as an Investment Option, The Icfaian Journal of Management
Research,July 2009
6. Desigan Gnana, Kalaiselvi S and Anusuya L (2006), "Women Investors' Perception
Towards Investment: An Empirical Study", Indian Journal of Marketing, April.
7. Ramamurthy B M and Reddy Sudarsana (2005), "Recent Trends in Mutual Fund
Industry", SCMS Journal of Indian Management, July-September.
8. Anand S and Murugaiah V (2004), "Marketing of Financial Services: Strategic Issues",
SCMS Journal of Indian Management, July-September.
Websites
1. www.google.co.in2. www.investopedia.com3. www.indiainfoline.com4. www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-
growing-financial-inclusion-boosting-investment-companies-complete-
listaumindustry/
5. www.business.mapsofindia.com/finance/top-asset-management-companies.html/
http://www.google.co.in/http://www.google.co.in/http://www.investopedia.com/http://www.investopedia.com/http://www.indiainfoline.com/http://www.indiainfoline.com/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.business.mapsofindia.com/finance/top-asset-management-companies.html/http://www.business.mapsofindia.com/finance/top-asset-management-companies.html/http://www.business.mapsofindia.com/finance/top-asset-management-companies.html/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.greenworldinvestor.com/2011/07/04/asset-management-companies-in-india-growing-financial-inclusion-boosting-investment-companies-complete-listaumindustry/http://www.indiainfoline.com/http://www.investopedia.com/http://www.google.co.in/ -
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Questionnaire
A study of behaviour of potential investors of jammu region towards
investment in mutual funds
Name.................................................. Place.............................................
Occupation:- ......................................
Age:
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Q5:- If you want to invest in any mutual fund company then rank the factors which can influence
your decision while investing in mutual fund company?
Factors 1 2 3 4Cash dividend
NAV
Promoters track
record
Flexible benifits
Others please specify.............................................................................................................
Q6:- How much risk are you willing to take?
High moderate low
Q7:- Do you get influenced by the name of the company promoting mutual funds?
Yes No
Q8:- Which type of mutual funds do you prefer?
Open ended schemes Close ended schemes
Q9:- What you think is more attractive for making investments in mutual funds?
NAV Returns Both
Q10:- If you want to invest in Mutual Funds Company then rank the following factors which
influence you to invest in Mutual Fund Company?
Company
name
Cash dividend NAV Sponsored/Partner Flexible benifits
NS MS S HS NS MS S HS NS MS S HS NS MS S HS
HDFC
Bank
Reliance
MFSBI MF
PNB MF
NS:- Not satisfied, MS:- Moderately Satisfied, S:- Satisfied, HS:- Highly Satisfied