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GTU’S ENROLLMENT NO. 137690592124

GTU’S ENROLLMENT NO. 137690592051

A

Comprehensive project report

On

“INVESTMENT AVENUE AND PERCEPTION ABOUT THE MUTUAL FUND”

Submitted to

Shri Jairambhai Patel Institute of Business Management and Computer Application

In Partial Fulfillment of the requirement of the Award for the Degree of

Master of Business Administration

In

Gujarat Technological University

Under The Guidance of

PROF. (DR.) MAMTA BRAHMBHATT

SUBMITTED BY

VISHAL VIRANI (137690592124)

KISHAN MANGUKIYA (137690592051)

[Batch: 2013-15]

Shri Jairambhai Patel Institute of Business Management and Computer Application

Affiliated to Gujarat Technological University, Ahmedabad

May 2015

2

DECLARATION

This Comprehensive Project Titled “ Investment avenue and perception about the Mutual

Fund ” has been prepared by us under the guidance of Prof. (Dr.) Mamta Brahmbhatt for

partial fulfillment for Master of Business Administration (MBA) of Gujarat Technological

University. This study has been undertaken by us and the report has not been submitted in any

University / Academic Institute.

Place: Gandhinagar VISHAL C. VIRANI

Date: KISHAN A. MANGUKIYA

5

PREFACE

A Comprehensive Project Report is one of the highly effective means of the learning and

acquiring worldwide knowledge. It generates a concerted effort by students to acquire in depth

knowledge on a subject and present the same in systematic manner.

A Comprehensive Project Report is an integral part of the MBA program. The main objective of

the Comprehensive Project Report is to enhance the skill of researcher and gain the valuable

knowledge of management skills that will be useful in the future career building. Hence,

Comprehensive Project Report is the only way out for the students of management to increase

his analytical skill.

This Comprehensive Project Report is based on Indian mutual fund industries. We have taken

care to deal with the prescribed topics in sufficient depths and in a very lucid language.

6

ACKNOWLEDGEMENT

This project is not one person’s solitary effort. It is our duty as well as privilege to express my

deep sense of gratitude to all those who have been associated with me in this summer project.

First of all, we express my deep gratitude towards Dr. S.O Junare, Director & our project

guide Prof. (Dr.) Mamta Brambhatt, Core Faculty, Shri Jairambhai Patel Institute of

Business management and Computer Applications (NICM) who initiated this study and also

helped me by giving their valuable comments at every stage of my project.

We would also like to thank our friends, family for that help and cooperation throughout the

Project.

(Vishal C. Virani )

( Kishan A. Mangukiya )

7

EXECUTIVE SUMMARY

The report contains the psychological and qualitative study. The report title is

“Investment Avenue and perception about mutual fund.”

This study was conducted to find out the investor perception about the mutual fund and

the way of thinking toward mutual fund business future opportunity

The methodology adopted for the study was through a questionnaire, which is targeted to

different men in Ahmedabad and Gandhinagar. Based on questionnaire, the survey of urban men

in Ahmedabad and Gandhinagar was undertaken. For this purpose the sample size of 100 was

taken. The data collected from different men was analyzed thoroughly and presented in form of

charts and tables.

The study was a great learning experience resulting in a better understanding of the

Gujarati urban men and their perceptions of investment

8

INDEX

NO. Particular Page no.

1.

GENERAL INFORMATION

9

Introduction 10

Types of mutual fund 11

Overview of World Market 18

Overview of Indian / Gujarat Market 24

Growth of Mutual Fund Industry 27

2. ABOUT MAJOR COMPANIES IN THE INDUSTRY 30

3. LITERATURE REVIEW 32

4. RESEARCH METHODOLOGY 36

Objective of the Study 37

Problem of the Study 38

Research Design 38

Research Type 39

Data Collection Method 39

Sources of the data

Hypothesis 40

5. DATA ANALYSIS FINDINGS AND INTERPRETATIONS 41

6. CONCLUSION & SUGGESION 57

7. DIRECTION FOR FURTHER RESEARCH

60

8. BIBLIOGRAPHY 61

9. APPENDIX 62

9

1. GENERAL

INFORMATION

10

INTRODUCTION ABOUT THE MUTUAL FUND

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

common financial goal. The money collected & invested by the fund manager in different types

of securities depending upon the objective of the scheme. These could range from shares to

debentures to money market instruments. The income earned through these investments and its

unit holders in proportion to the number of units owned by them (pro rata) shares the capital

appreciation realized by the scheme. Thus, a Mutual Fund is the most suitable investment for the

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

portfolio at a relatively low cost. Anybody with an investible surplus of as little as a few

thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment

objective and strategy

A mutual fund is the answer to all these situations. It appoints professionally qualified

and experienced staffs that manage each of these functions on a full time basis. The large pool of

money collected in the fund allows it to hire such staff at a very low cost to each investor. In

effect, the mutual fund vehicle exploits economies of scale in all three areas - research,

investments and transaction processing. While the concept of individuals coming together to

invest money collectively is not new, the mutual fund in its present form is a 20 th century

phenomenon. In fact, mutual funds gained popularity only after the Second World War.

Globally, there are thousands of firms offering tens of thousands of mutual funds with different

investment objectives. Today, mutual funds collectively manage almost as much as or more

money as compared to banks.

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

11

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

person 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.

Mutual Funds have been a significant source of investment in both government and

corporate securities. It has been for the decades the monopoly of the state with UTI being the key

player with invested funds exceeding Rs. 300 bn. (US $ 10 bn.). The state owned insurance

companies also hold a portfolio of stocks. Presently, numerous mutual funds exist, including

private and foreign companies. Banks - mainly state owned too have established Mutual Funds

(MFs). Foreign participation in mutual funds and asset management companies permitted on a

case-by-case basis.

12

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

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 then. The history of mutual funds in

India can be broadly divided into four distinct phases

First Phase – 1964-87

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

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

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

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

of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of1988 UTI had

Rs.6,700 crores of assets under management.

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

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

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

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

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

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

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

December 1990. At the end of 1993, the mutual fund industry had assets under management

ofRs.47,004 crores.11

13

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,

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 Ltd, 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

14

mutual fund industry has entered its current phase of consolidation 12 and growth. As at the end

of October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386

schemes. The graph indicates the growth of assets over the years.

15

TYPES OF MUTUAL FUND

The different types of Mutual Funds are as follows -

Equity Funds / Growth Funds

Funds that invest in equity shares are called equity funds. They carry the principal

objective of capital appreciation of the investment over a medium to long-term investment

horizon. Equity Funds are high risk funds and their returns are linked to the stock markets. They

are best suited for investors who are seeking long term growth. There are different types of

equity funds such as Diversified funds, Sector specific funds and Index based funds.

Diversified Funds

These funds provide you the benefit of diversification by investing in companies

spread across sectors and market capitalisation. They are generally meant for investors who seek

exposure across the market and do not want to be restricted to any particular sector.

Sector Funds

These funds invest primarily in equity shares of companies in a particular business

sector or industry. While these funds may give higher returns, they are riskier as compared to

diversified funds. Investors need to keep a watch on the performance of those sectors/industries

and must exit at an appropriate time.

16

Index Funds

These funds invest in the same pattern as popular stock market indices like CNX

Nifty Index and S&P BSE Sensex. The value of the index fund varies in proportion to the

benchmark index. NAV of such schemes rise and fall in accordance with the rise and fall in the

index. This would vary as compared with the benchmark owing to a factor known as “tracking

error”.

Tax Saving Funds

These funds offer tax benefits to investors under the Income Tax Act, 2961.

Opportunities provided under this scheme are in the form of tax rebates under section 80 C of the

Income Tax Act, 1961. They are best suited for long investors seeking tax rebate and looking for

long term growth.

Debt Fund / Fixed Income Funds

These Funds invest predominantly in rated debt / fixed income securities like

corporate bonds, debentures, government securities, commercial papers and other money market

instruments. They are best suited for the medium to long-term investors who are averse to risk

and seeking regular and steady income. They are less risky when compared with equity funds.

17

Liquid Funds / Money Market Funds

These funds invest in highly liquid money market instruments and provide easy

liquidity. The period of investment in these funds could be as short as a day. They are ideal for

Corporate, institutional investors and business houses who invest their funds for very short

periods.

Gilt Funds

These funds invest in Central and State Government securities and are best suited

for the medium to long-term investors who are averse to risk. Government securities have no

default risk.

Balanced Funds

These funds invest both in equity shares and debt (fixed income) instruments and

strive to provide both growth and regular income. They are ideal for medium- to long-term

investors willing to take moderate risks.

18

OVERVIEW OF WORLD MUTUAL FUND MARKET

Over the past few decades, there has been explosion of the mutual fund industry --

and an attendant expansion of academic research on this topic. However, while the fund industry

has grown all around the world, academic studies of mutual funds have remained geographically

narrow. While at the end of 2001, funds originating in the U.S. accounted for only 15 percent of

the number of funds available globally and 60 percent of the world’s fund assets,1 in the last ten

years, almost every article published in the top finance journals relates to the U.S. fund industry.

While there have been isolated and excellent studies of the fund industry in various countries,2

most readers of U.S. journals would probably be surprised that the nation domiciling the second

largest fund industry (measured by fund assets) outside the United States is Luxembourg with

6.5 percent of world mutual fund assets or that France and Korea offer the second largest number

of mutual funds available worldwide (13 percent of the world total for each country). In this

paper, we study the fund industry around the world. We seek to understand why this form of

intermediated asset management has thrived more in some countries than in others. In functional

terms, a nation’s savers can choose to directly invest in primary securities (do-it-yourself), may

invest their money in transparent narrow financial intermediaries (funds), or may prefer more

opaque and typically broader financial intermediaries (banks or insurance firms).3 Under what

circumstances have relatively transparent financial intermediaries been preferred by a nation’s

savers? One set of hypotheses, drawn from the ample literature on law and economics, focuses

on laws and regulations to explain differences in this direction of financial development. Funds

prosper when laws and regulations make this sort of investment attractive relative to others.

“Supply-side” hypotheses focus on competitive dynamics both within the mutual fund industry

and from elsewhere in the financial services sector to explain these differences

19

Global Mutual Funds Cover a Lot of Territory

Global funds are often categorized by where they invest. Some of the most common

kinds of funds are:

Global equity and fixed-income funds.

Sometimes called world mutual funds, they typically have the broadest geographic

investment mandates and are usually able to invest anywhere in the world. They may invest a

larger portion of their assets in the United States and the developed markets of Europe and Asia.

Global hybrid funds invest in both equity and fixed-income securities from around the world.

The ability to invest anywhere in the world is one big advantage global funds offer

because they have the greatest number of securities from which to choose. Investing globally,

however, may involve higher risks depending on market conditions, currency exchange rates and

economic, social and political climates of the countries where the fund invests.

International equity and fixed-income funds.

Often called foreign funds, they invest outside the United States. They typically

invest in the developed markets of Europe and Asia. Depending on their investment strategy,

they may also invest in emerging or frontier markets. An international hybrid fund invests in

combinations of equity and fixed-income securities from non-U.S. countries.

By investing outside the United States, these funds can potentially capitalize on

different economic cycles occurring in different countries at different times, thereby

complementing funds that invest primarily in the U.S. Investing abroad, however, may involve

20

higher risks depending on market conditions, currency exchange rates and economic, social and

political climates of the countries where the fund invests.

Regional equity funds.

As the name suggests, these funds concentrate in a particular region of the world. For

example, a regional fund may focus on the stocks of Europe, Latin America or Pacific Rim

nations. Such a focus can be rewarding if the region is experiencing high growth rates, as has

been the case in Asia at various times over the last two decades.

However, the limited geographic scope of these funds may increase their volatility as

negative events in one country often spill over into neighboring countries, dragging down the

region as a whole.

Country-specific equity funds.

These funds have very specific investment mandates that restrict the majority of their

investing to a single country. Typically, they focus on a country with a significant stock market

or stock market growth potential. A narrow focus, however, can substantially increase risk.

Emerging and frontier markets funds.

These funds invest principally in the less developed markets of Africa, Latin

America, Asia and Eastern Europe. Typically, these types of regions are undergoing dramatic

economic change, such as transforming from a state-run economy into a free-market-based

economy. Compared with more mature markets, investing in emerging or frontier markets may

offer the potential for sharp growth rates.

21

However, investments in foreign securities involve special risks including currency fluctuations,

and economic and political uncertainties. As a result, such funds can experience significant

volatility.

A World of Potential Opportunity

With so much global integration taking place, limiting investments to U.S.-only

mutual funds also means eliminating potential opportunities from around the world.

Foreign markets have expanded substantially over the past 32 years. In 1982, U.S.

stocks represented 56% of the world’s equity market capitalization. By 2012, foreign markets

had become a solid majority of the opportunities, expanding to account for 65% of the world’s

equity investments.1

Understanding the Risks

All investments involve risks, including possible loss of principal. Stock prices

fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies,

particular industries or sectors, or general market conditions. Bond prices generally move in the

opposite direction of interest rates. Thus, as the prices of bonds in the fund adjust to a rise in

interest rates, the fund’s share price may decline. Special risks are associated with foreign

investing, including currency fluctuations, economic instability and political developments.

Investments in emerging markets, of which frontier markets are a subset, involve heightened

risks related to the same factors, in addition to those associated with these markets’ smaller size,

lesser liquidity and lack of established legal, political, business and social frameworks to support

securities markets. Because these frameworks are typically even less developed in frontier

markets, as well as various factors including the increased potential for extreme price volatility,

illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are

magnified in frontier markets. A fund’s ability to invest in smaller company securities that may

22

have limited liquidity involves additional risks, such as relatively small revenues, limited product

lines and small market share. Historically, these stocks have exhibited greater price volatility

than larger-company stocks, especially over the short term. All investments in a frontier market

fund should be thought of as long-term investments that could experience significant price

volatility in any given year. A frontier market fund is designed for the aggressive portion of a

well-diversified portfolio. These and other risk considerations are discussed in a fund’s

prospectus.

23

GLOBAL SCENARIO OF MUTUAL FUNDS

The money market mutual Fund segment has a total corpus of $1.48 million in the

U.S. against a corpus of $100 million in India. Out of the top 10 Mutual Funds world wide,8 are

bank sponsored. Only Fidelity & capital is non-bank Mutual Funds in this group. In U.S. the total

number of schemes is higher than that of the listed companies while in India we have just 277

Schemes.

Internationally, Mutual Funds are allowed to go short. In India fund managers do not

have such leeway. In about 9.7 million households will manage their assets online. By the year

2004, such a facility is not available in India. Online trading is a great idea to reduce

management expenses from the current 2% of total assets to about 0.75% of the total assets.

Around 72% of the core customer base of Mutual Funds in the top 50 broking firms in the U.S. is

expected to trade online.

The Indian Mutual Fund Industry is dominated by the UTI, which has a total corpus

of Rs.700 billion, collected from over 200 million investors. The 2nd largest category of Mutual

Funds is the ones floated by the nationalized banks. Can bank asset management floated by

Canara Bank & S.B.I. Fund Management floated by S.B.I. are the largest of these. The aggregate

corpus of the funds managed by this category of Asset Management Companies is around Rs.150

billion among the private players the largest are Birla Capital Asset Management Company &

Prudential ICICI Asset Management Company. The aggregate corpus of the asset managed by

this category of Asset Management companies is about Rs.60billion.

24

OVERVIEW OF INDIAN MUTUAL FUND MARKET

Mutual Fund is an investment vehicle that is made up of a pool of funds collected

from many investors for the purpose of investing in securities such as stocks, bonds, money

market instruments and similar assets. Mutual funds are operated by money managers, who

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

A mutual fund's portfolio is structured and maintained to match the investment objectives stated

in its prospectus. One of the main advantages of mutual funds is that they give small investors

access to professionally managed, diversified portfolios of equities, bonds and other securities,

which would be quite difficult (if not impossible) to create with a small amount of capital. Each

shareholder participates proportionally in the gain or loss of the fund. Mutual fund units, or

shares, are issued and can typically be purchased or redeemed as needed at the fund's current net

asset value (NAV) per share, which is sometimes expressed as NAVPS. Mutual funds as an

intermediation mechanism and products play an important role in India’s financial sector

development. Apart from pooling resources from small investors, they also provide informed

decision making mechanism to them. Thus they contribute to not only financial sector

participation, but also financial inclusion and thereby enhance market efficiency. Additionally

they contribute to financial stability and help in enhancing market transparency

25

STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY

The Indian mutual fund industry is dominated by the Unit Trust of India, which has a

total corpus of Rs700bn collected from more than 20 million investors. The UTI has many

funds/schemes in all categories i.e. equity, balanced, income etc with some being open-ended

and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is a

balanced fund, is the biggest scheme with a corpus of about Rs200bn. Most of its investors

believe that the UTI is government owned and controlled, which, while legally incorrect, is true

for all practical purposes.

The second largest category of mutual funds is the ones floated by nationalized

banks. Can bank Asset Management floated by Canara Bank and SBI Funds Management floated

by the State Bank of India are the largest of these. GIC AMC floated by General Insurance

Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent

ones.

SEBI

AMC

Unit holders

Saving

s

Unit

s

Trus

t

Investment

s

Returns

Trust

AMC Custodian

Registrar

26

PERFORMANCE OF MUTUAL FUNDS IN INDIA

Let us start the discussion of the performance of mutual funds in India from the

day the concept of mutual fund took birth in India. The year was 1963. Unit Trust of India

invited investors or rather to those who believed in savings, to park their money in UTI Mutual

Fund. The performance of mutual funds in India in the initial phase was not even closer to

satisfactory level. People rarely understood, and of course investing was out of question. But yes,

some 24 million shareholders were accustomed with guaranteed high returns by the beginning of

liberalization of the industry in 1992. This good record of UTI became marketing tool for new

entrants. The expectations of investors touched the sky in profitability factor.

The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me

concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the

Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure had a three times

higher performance by April 2004. It rose as high as Rs. 1,540bn. The net asset value (NAV) of

mutual funds in India declined when stock prices started falling in the year 1992. Those days, the

market regulations did not allow portfolio shifts into alternative investments. There was rather no

choice apart from holding the cash or to further continue investing in shares. One more thing to

be noted, since only closed-end funds were floated in the market

The performance of mutual funds in India suffered qualitatively. The 1992 stock

market scandal, the losses by disinvestments and of course the lack of transparent rules in the

whereabouts rocked confidence among the investors. Partly owing to a relatively weak stock

market performance, mutual funds have not yet recovered, with funds trading at an average

discount of 1020 percent of their net asset value. The measure was taken to make mutual funds

the key instrument for long-term saving. The more the variety offered, the quantitative will be

investors. At last to mention, as long as mutual fund companies are performing with lower risks

and higher profitability within a short span of time, more and more people will be inclined to

invest until and unless they are fully educated with the dos and don'ts of mutual funds.

27

GROWTH OF MUTUAL FUND INDUSTRY

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. Unit Trust of India

(UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of

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

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

(IDBI) took over the regulatory and administrative control iplace 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. The year 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. 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, 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

28

assets under management was way ahead of other mutual funds. Indian mutual fund industry has

grown at a Compounded Annual Growth Rate (CAGR) of 15 per cent from FY07 to FY13, the

growth performance in the recent years have been rather subdued.

However Assets under Management (AUM) as a per cent of GDP for India is

about 5 to 6 per cent, significantly lower than some other emerging economies, for example, 40

percent for Brazil and around 33 per cent for South Africa. This indicates significant headroom

for growth. However, the industry growth will continue to be characterized by external factors

such as volatility and performance of the capital markets, and macro-economic drivers such as

GDP growth, inflation and interest rates. The Indian mutual fund industry has shown relatively

slow growth in the period FY 10-13 growing at a CAGR of approximately 3.2 per cent. Average

(AUM) stood at INR 8,140 billion as of September 2013.

29

2. ABOUT MAJOR

COMPANIES IN

THE INDUSTRY

30

ABOUT MAJOR COMPANIES IN THE INDUSTRY

Name of the Fund No of Schemes Asset Under

Management

(Rs. core)

ALLIANCE MUTUAL FUND 36 3309.03 36 3309.03

BENCH MARK MUTUAL FUND 1 6.1

BIRLA MUTUAL FUND 35 4436.79

BOB MUTUAL FUND 8 31

CAN BANK MUTUAL FUND 14 692.04

CHOLA MUTUAL FUND 25 812.67

DSPML MUTUAL FUND 13 2154.67

ESCORTS MUTUAL FUND 13 83.91

FIRST INDIA MUTUAL FUND 5 0.7

DUNDEE MUTUAL FUND 19 20.72

FRANKLIN TEMPELTION MUTUAL

FUND

25 3919.52

GIC MUTUAL FUND 13 333.29

HDFC MUTUAL FUND 22 4707.32

IDBI-PRINCIPAL MUTUAL FUND 33 1346.61

IL & FS MUTUAL FUND 18 537.72

ING MUTUAL FUND 15 396.31

JF MUTUAL FUND 3 201.8

31

KOTAK MUTUAL FUND 30 1199.36

JM MUTUAL FUND 21 1199.35

MORGAN STANLEY MUTUAL FUND 1 793.21

PIONEER ITI MUTUAL FUND 62 3517.77

62 3457.77

PNB MUTUAL FUND 8 149.76

PRU ICICI MUTUAL FUND 52 7006.72

RELIANCE CAPITAL MUTUAL FUND 15 2913.25

SBI MUTUAL FUND 42 3294.63

STANDARD CHARTERED MUTUAL FUND

30 3294.63

SUN F& C MUTUAL FUND 26 413.11

26 413.11

SUNDARAM MUTUAL FUND 11 702.25

TATA MUTUAL FUND 20 893

TAURUS MUTUAL FUND 11 59.76

UTI MUTUAL FUND 103 508.83

ZURICH INDIA MUTUAL FUND 39 255.11

LIC MUTUAL FUND 27 2340.3

32

3. LITERATURE

REVIEW

33

LITERATURE REVIEW

Chang and Lewellen (1984) used the method processed by Henryksson Merton and studied 67

mutual funds between 1971 and 1979. They divided data into up and down market components

and computed two separate slope coefficient b1 and b2. Of the 67 mutual fund studied, only 28in

5 cases, data displayed statistically significant difference between b1 and b2. Majority of them

were in the negative direction, suggesting poor market timings and they concluded that neither

skillful market timing nor clever security selection abilities are evident in abundance in the

observed mutual fund return data

Ramesh Chander (2000) examined 34 mutual fund schemes with reference to the three fund

characteristics with 91-days treasury bills rated as risk-free investment from January 1994 to

December 1997. Returns based on NAV of many sample schemes were superior and highly

volatile compared to BSE SENSEX. Open-end schemes outperformed close-end schemes in term

of return. Income funds outsmarted growth and balanced funds. Banks and UTI sponsored

schemes performed fairly well in relation to sponsorship. Average annual return of sample

schemes was 7.34 percent due to diversification and 4.1 percent due to stock selectivity. The

study revealed the poor market timing ability of mutual fund investment. The researcher also

identified that 12 factors explained majority of total variance in portfolio management practices.

Borensztein, E. and Gelos, G. (2001) explores the behavior of emerging market mutual funds

using a novel database covering the holdings of individual funds over the period January 1996 to

March 1999. An examination of individual crises shows that, on an average, funds withdrew

money one month prior to the events. The degree of herding among funds is statistically

significant, but moderate. Herding is more widespread among open-ended funds than among

closed-end funds, but 31not more prevalent during crisis than during tranquil times. Funds tend

to follow momentum strategies, selling past losers and buying past winners, but their overall

behavior is more complex than often suggested.

34

Gavin Quill (2001) examined the evidence that investor behavior is frequently detrimental to the

achievement of investors’ long-term goals. The picture that emerges from this analysis is one of

investors who have lost a good portion of their potential returns because of the excessive

frequency and poor timing of their trading activities. They established that investors trade much

more than they realize and much more than is conducive to the achievement of their financial

plans. Investors think long-term in theory, but act according to short-term influences in practice.

This excessive turnover, combined with a propensity to buy relatively over-valued investments

and ignore relatively under-valued ones, has caused the average mutual fund investor to

underperform substantially over the past decade.

Gupta Amitabh (2001) evaluated the performance of 73 selected schemes with different

investment objectives, both from the public and private sector using Market Index and Fundex.

NAV of both close-end and open-end schemes from April 1994 to March 1999 were tested. They

found that sample schemes were not adequately diversified, risk and return of schemes were not

in conformity with their objectives, and there was no evidence of market timing abilities of

mutual fund industry in India.

Karthikeyan (2001) conducted research on Small Investors Perception on Post office Saving

Schemes and found that there was significant difference among the four age groups, in the level

of awareness for Scheme for Retired Employees (DSRE). The Overall Score confirmed 32that

the level of awareness among investors in the old age group was higher than in those of young

age group. No differences were observed among male and female investors.

Narasimhan M S and Vijayalakshmi S (2001) analyzed the top holding of 76 mutual fund

schemes from January 1998 to March 1999. The study showed that, 62 stocks were held in

portfolio of several schemes, of which only 26 companies provided positive gains. The top

holdings represented more than 90 percent of the total corpus in the case of 11 funds. The top

holdings showed higher risk levels compared to the return. The correlation between portfolio

stocks and diversification benefits was significant at one percent level for 30 pairs and at five

percent level for 53 pairs.

35

Kum Martin (October 2007) in his article, “Basics about Mutual Funds” discussed about

different types of mutual funds .He stated that the equity funds involve just common stock

investments. They are extremely risky but can end up earning a lot of money. He concluded that

the low risk in investment will not earn a lot of returns. Mutual fund managers have to use

various investment styles depending upon investor’s requirement. 35Most of the empirical

evidences showed that mutual fund investor’s purchase decision is influenced by past

performance.

36

4. RESEARCH

METHODOLOGY

37

OBJECTIVE OF THE STUDY

Primary Objectives:

To know future opportunities in mutual fund advisory business in India and perception

about mutual fund.

Secondary Objectives:

To study the perception of Retail investors.

To know future opportunity in mutual fund advisory business and find new scope for

financial business in India.

To study the views about different type of services distributer and problem faces by them

for doing this business.

PROBLEM OF THE STUDY

To assess the of Perception of Retail investors to know future opportunities in mutual fund

business in India and the perception about mutual fund.

This is analytical research. What is the Perception of Retail investor to know future opportunities

in mutual fund advisory business in India. Can be finding out after doing the study of

independent financial investors.

38

RESEARCH DESIGN

Research design is the plan, structure & strategy of investigation conceived so as to obtain

answers to questions & to control variance. The definition consists of three important terms plan,

structure & strategy. The plan is an outline of the research scheme on which the research is to

work. The structure of the research is a more specific outline or the scheme and the strategy

shows how the research will be carried out specifying the methods to be used in the collection

and analysis of data.

RESEARCH TYPE

In the Research type there are three type of research

1. Exploratory research

2. Descriptive research

3. Causative research

Here Researchers uses the Descriptive research design. A descriptive study adopted because

detailed information is required for the study.

DATA COLLECTION METHOD

There are two types Of Data Collection Method:-

Primary Method

Secondary Method

39

Researchers are using secondary data collection method for this research.

The Secondary Data

Secondary data are already someone fined early time and from that data new researcher ready to

refer that secondary data after they continue with their study and find out something new from

that data. Which is very useful to present conditions of company, company can sometime

implement better solution which is fined by researcher.

1. Annual report of the companies.

2. Published Journals and Books

3. Internet and other secondary sources

On the context of the topic researchers have use secondary data and done the Z score model.

SOURCES OF DATA

-Annual reports of the selected sugar industries.

- Magazines and Journal

-Websites of related companies

-Books

Population: - All he person who associate with Mutual fund in India.

Sampling:

For the report customer perception towards mutual fund at selected to do market research.

100% coverage is difficult within the limited period of time. Hence sampling survey

method is adopted for the purpose of the study.

Sampling frame: Investors in Ahmedabad and Gandhinagar city.

Sampling size: 100

40

HYPOTHESIS OF THE RESEARCH

The following are the hypothesis of the research to assess the association between investors awareness of

Mutual Funds & different investment instruments like Savings bank A/c, Fixed Deposit A/c, Shares, Real

Estate, Postal Savings & Gold/Silver.

H 1: There is no significant association between awareness of mutual fund and Savings bank as an

investment instrument.

H 2: There is no significant association between awareness of mutual fund and Fixed deposit as an

investment instrument

H 3: There is no significant association between awareness of mutual fund and Shares as an investment

instrument

H 4: There is no significant association between awareness of mutual fund and Gold/silver as an


H 5: There is no significant association between awareness of mutual fund and Postal savings as an


H 6: There is no significant association between awareness of mutual fund and Real estate as an


H 7: There is no significant association between awareness of mutual fund and Insurance as an


41

5. DATA ANALYSIS

AND

INTERPRETATION

42

1. Gender

[TABLE 1.1: GENDER]

[FIGURE 1.1: GENDER]

Interpretation:-

In above chart and table shows that 63% of male are interested to invest in mutual fund

and rest of 37% of female are interested in mutual fund. So overall male member invest

more in mutual fund compare to female.

63%

37%

Gender

male female

Options Respondent percentage

Male 63 63%

Female 37 37%

43

1. Age


18 to 29 30 30%

30 to 39 33 33%

40 to 49 20 20%

50 to above 17 17%

[TABLE 1.1: GENDER]

[FIGURE 1.1: GENDER]

Interpretation:-

The above data convey that there is more no. of people of age from 30 to 39 who invest money in

mutual fund. And people whose age is 50 and above is less interested to invest in mutual fund.

30%

33%

20%

17%

AGE

18-29 30-39 40-49 50 and above

44

2. What investment opportunities you prefer to invest your saving?


Bank Deposit 0 0%

Mutual fund 100 100%

Debentures 0 0%

Insurance 0 0%

[TABLE 1.2: INVESTMENT OPPORTUNITIES]

[FIGURE 1.2: INVESTMENT OPPORTUNITIES]

Interpretation:-

Above research shows that all 100 people are invest in mutual fund.

0%

100%

0%0%

IOPIS

Bank Deposit Mutual fund Debentures Insurance

45

3. How much amount do you save yearly?

Options Respond

ent

Percentage

0 to 50000 47 47%

50000 to 100000 43 43%

100000 to 150000 10 10%

150000 to above 0 0%

[TABLE 1.3:]

[FIGURE 1.3:]

Interpretation:-

Above research shows that highest 47% of people saves up to Rs.50000 yearly.

47%

43%

10%

0%

ASY

0-50000

50000-100000

100000-150000

150000 and above

46

4. Do you invest in mutual fund?

Options Respondent Percentage

Yes 100 100%

No 0 0%

[TABLE 1.4: INVEST IN MUTUAL FUND]

[FIGURE 1.4: INVEST IN MUTUAL FUND]

Interpretation:-

All 30 respondents are investing in mutual fund.

100%

0%

IMF

Yes No

47

5. What criteria you keep in your mind while selecting any investment opportunity?


Security 40 40

Liquidity 30 30

Maturity 20 20

Tax benefit 10 10

[TABLE 1.5:]

[FIGURE 1.5:]

Interpretation:-

Above graph shows that 40% of people are investing in mutual fund for security. And 10% of

people who are for investing in mutual fund for tax benefit.

40%

30%

20%

10%

CSIO

Security Liquidity Maturity Tax Benefit

48

6. Which type of fund would you like to invest?


Equity fund 70 70%

Debt fund 30 30%

Hybrid fund 0 0%

[TABLE 1.6: TYPE OF FUND]

[FIGURE 1.6: TYPE OF FUND]

Interpretation:-

Above graph shows that out of 100 respondent 70 are invest in equity fund and rest of 30 people

are invest in debt fund and no one invest in hybrid fund.

70%

30%

0%

TFI

Equity Fund Debt fund Hybrid fund

49

7. Which structure of scheme do you prefer in mutual fund?


Open Ended 70 70%

Close Ended 30 30%

[TABLE 1.7: MUTUAL FUND SCHEME]

[FIGURE 1.7: MUTUAL FUND SCHEME]

Interpretation:-

Above chart shows that 70 responded are use open ended structure scheme. And rest of use close

ended structure scheme.

47%

53%

SSMF

Open ended Close ended

50

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


Lump sum investment 13 13%

Systematic investment plan 87 87%

[TABLE 1.8: MODE OF INVESTMENT]

[FIGURE 1.8: MODE OF INVESTMENT]

Interpretation:-

Above chart shows that 87% people are use systematic investment plan. And rest 13% people

use lump sum investment.

13%

87%

IMFI

Lump sum investment Systematic investment plan

51

9. How long would you like to hold your mutual fund investment?


Less than 1 year 6 6%

1 to 3 year 77 77%

4 to 6 year 17 17%

7 to above 0 0%

[TABLE 1.9: TIME]

[FIGURE 1.9: TIME]

Interpretation:-

Above chart shows that 77% of people who invest their mutual for 1 to 3 year 17% people are

invest for 4 to 6 year and 6% of people are invest for less than 1 year.

6%

77%

17%

0%

HMFI

Less than 1 year 1 to 3 year 4 to 6 year 7 to above

52

10. How would you rate the risk associated with mutual fund?


Low 50 50%

Moderate 43 43%

High 7 7%

[TABLE 1.10: RISK]

[FIGURE 1.10: RISK]

Interpretation:-

Above chart shows that50% people says that there are low risk in mutual fund and 7% are says

that there are less risk in mutual fund.

50%

43%

7%

RRAMF

Low Moderate High

53

11. How would you rate mutual fund on the basis of return?


Highly satisfied 23 23%

Satisfied 60 60%

Average 17 17%

Dissatisfied 0 0%

[TABLE 1.11: RETURN]

[FIGURE 1.11: RETURN]

Interpretation:-

Above chart shows that 60% of people are highly satisfied in term of return in mutual fund and 17% are

average in term of mutual fund.

23%

60%

17%

0%

RMFR

Highly satisfied satisfied Average Dissatisfactory

54

12. Which option would you prefer in mutual fund?


Dividend payout 60 60%

Dividend reinvestment 10 10%

Growth 30 30%

[TABLE 1.12]

[FIGURE 1.12]

Interpretation:-

Above chart shows that 60% of people who preferred dividend payout in mutual fund and 30%

of people are preferred growth in M.F. and rest of 10% are preferred dividend reinvestment in

mutual fund.

60%10%

30%

OPMF

Dividend payout Dividend reinvestment Growth

55

13. Your overall experience with mutual fund investing?


Highly satisfied 33 33%

Satisfied 60 60%

Average 7 7%

Dissatisfied 0 0%

[TABLE 1.13: EXPERIENCE WITH MUTUAL FUND]

[FIGURE 1.13: EXPERIENCE WITH MUTUAL FUND]

Interpretation:-

All research shows that 60% of people are satisfied in investing in mutual fund. 33% of people

are highly satisfied. And 7% of people are who says that it is average.

33%

60%

7%

0%

EXEMFI

Highly satisfied satisfied Average Dissatisfactory

56

FINDINGS

63% of male are interested to invest in mutual fund and rest of 37% of female are

interested in mutual fund. So overall male member invest more in mutual fund compare

to female.

People who age from 30 to 39 compare to 50 and above are higher investing in mutual

fund.

Liquidity fund customers are satisfied with the mutual fund investment because they can

easily change the funds.

Growth fund customers are satisfied with the mutual fund investment because mutual

fund gives the time to time growth for that investment.

Regular fund customers are not satisfied with mutual fund investment because they don’t

receive the regular return for that particular investment.

57

6. CONCLUSION

AND

SUGGESTION

58

CONCLUSION

Mutual fund is the ideal investment vehicle for today’s complex and modern financial

scenario. Market for equity shares, bonds and other fixed income instruments have become

matured and information driven. Prices changes in these assets are driven by global event

occurring in faraway places. The typical individual is unlikely to have skills, knowledge,

inclination and time to keep track of events, understand their implication and act speedily.

A mutual fund is answer to these entire situation it appoints professionally qualified and

experienced staff manages each of these function on a full time basis. Mutual fund provides

varieties of schemes for different kind of customer to suit their goals. Mutual fund have

open-ended and close-ended schemes, children’s plan, diversified equity fund, balanced fund,

liquid plan, income fund, short term fund, sector fund and pension plan. So the future of

mutual fund in India is bright, because it meets investor’s confidence.

1. The majority of respondents were of the age group below 29 & above 60.

2. Major part of the respondents belong to service sector.

3. Annual income of the respondents between 1-2 lacks prefers more of investments.

4. Investor’s preference when going for an investment in primarily for security.

59

SUGGESTIONS

Indian mutual fund industry has completed 48 years till 2012. In spite of such a

long experience and huge establishment, most of the mutual fund schemes have been performing

inefficiently. Mutual fund companies, AMFI and governing bodies as SEBI should take

corrective measures for this. For achieving the efficiency level, all the inefficient schemes might

follow their respective peer efficient schemes in the proportion of their target values or virtual

inputs. Load fee and expense ratio have been found as the major cause of inefficiency in mutual

fund schemes and hence mutual fund companies might focus on reducing these.

Most of the mutual fund companies are not getting benefited in performance

efficiency frothier experience. Therefore, older mutual fund schemes must be either wind up or a

thorough review of strategy is needed i.e., these must be restructured. Also, large mutual fund

schemes with high assets are not performing efficiently. Therefore, mutual fund companies

should either improve their management or must occupy limited funds.

Investors consider the Indian mutual fund industry as a non performing one. During

April, 2006 to March, 2012, more than half of the mutual fund schemes have risk adjusted

performance (Sharpe ratio) below than the industry average risk adjusted return. Therefore,

companies should take corrective measures to improve their performance. Also policy makers

and governing bodies might abolish the schemes giving poor performance since a long period.

Investors consider mutual funds as risky as shares. Its liquidity is perceived as high

but tax benefits and procedural understanding are low for this investment avenue. Therefore,

there is need to educate investors about the advantages of mutual fund schemes. The AMFI with

the help of SEBI should arrange more and more awareness programmers to promote proper

understanding of the concept and working of mutual funds.

To conclude the researcher can say that Investors judge mutual fund schemes for

investment on the basis of their structure, size, performance, status and professional

60

expertise. Therefore, mutual fund companies should emphasize strong points of their schemes

regarding these characteristics. Further, investors expect strong grievance mechanism,

regulations and expert advice from mutual fund companies. Most of the investors have been

investing in growth, income and balanced mutual fund schemes. They must be made aware about

the benefits of other type of schemes also as ELSS, index, fund of funds, international funds, and

lifestyle funds and so on

61

BIBLIOGRAPHY

www.irda.org.com

www.nseindia.com

www.moneycontrol.com

http://www.ehow.com

http://www.amfiindia.com

http://www.economictimesindiatimes.com

http://www.businessstandards.com

http://faculty.ed.umuc.edu/.../A%20Chi%20Square%20Test%20for%20Goodness%20of%20

Fit

www.mutual funds india.com

http://www.irda.org.com/

http://www.nseindia.com/

http://www.moneycontrol.com/

http://www.ehow.com/

http://www.amfiindia.com/

http://www.economictimesindiatimes.com/

http://www.businessstandards.com/

http://faculty.ed.umuc.edu/.../A%20Chi%20Square%20Test%20for%20Goodness%20of%20Fit

http://faculty.ed.umuc.edu/.../A%20Chi%20Square%20Test%20for%20Goodness%20of%20Fit

62

QUESTIONNAIRE

Respected Madam/Sir,

We are pursuing Master of Business Administration from National Institute of

Cooperative Management. We are doing our research report on “A Study on Investment

Avenue and perception about Mutual fund.” as a part of our course curriculum. We

will be more obliged if you could respond to the below mentioned questionnaire. The

information provided by you will be kept confidential and used for academic purpose

only.

Name of person: _________________________________________________________

Gender: Male Female

Age: 18 to 29 30 to 39 40 to 49 50 to above

Address: __________________________________________________________

__________________________________________________________

1) What investment opportunities you prefer to invest your saving?

Bank Deposit Mutual fund

Debentures Insurance

2) How much amount do you save yearly?

0 to 50000 50000 to 100000

100000 to 150000 150000 to above

63

3) Do you invest in mutual fund?

Yes No

4) What criteria you keep in your mind while selecting any investment opportunity?

Security Liquidity

Maturity Tax benefit

5) Which type of fund would you like to invest?

Equity fund Debt fund Hybrid fund

6) Which structure of scheme do you prefer in mutual fund?

Open Ended Close Ended

7) When you invest in mutual fund which mode of investment will you prefer?

Lump sum investment Systematic investment plan

8) How long would you like to hold your mutual fund investment?

Less than 1 year 1 to 3 year

4 to 6 year 7 to above

9) How would you rate the risk associated with mutual fund?

Low Moderate High

10) How would you rate mutual fund on the basis of return?

Highly satisfied satisfied

Average Dissatisfactory

64

11) Which option would you prefer in mutual fund?

Dividend payout Dividend reinvestment Growth

12) Your overall experience with mutual fund investing?

Highly satisfied satisfied

Average Dissatisfactory

Gp

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