Vipparthi and Margam

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Research J ournal of Business Management and Accounting ISSN 2277 0712Vol. 2(2), pp. 036 - 047, February 2013 2013 Wudpecker J ournals

Perceptions of investors on mutual funds: Acomparative study on public and private sector mutual

funds1

Ms Manasa Vipparthi , Assistant Professo r, Department of Commerce and Business Management, P.G Centre,Lal Bahadur College, Warangal, 506001 Andhra Pradesh.

2Ashwin Margam MBA, Research Scholar,P.G.Centre, Lal Bahadur College. Warangal. 506001 Andhra Pradesh.

*Corresponding author E-mail: [email protected].

Accepted 10 J anuary 2013

Indian Mutual Fund (MF) industry provides reasonable options for an ordinary man to invest in theshare market. The plethora of schemes provides variety of options to suit the individual objectiveswhatever their age, financial position , risk to lerance and return expectations. In the past few years, wehad seen a dramatic growth of the Indian MF industry with many private players bringing global

expertise to the Indian MF industry. Investment in mutual funds is effected by the perception of theinvestors. Financial markets are constantly becoming more efficient by providing more promisingsolutions to the investors. Being a part of financial markets although mutual funds industry isresponding very fast by understanding the dynamics of investors perception towards rewards, stillthey are continuously following this race in their endeavor to differentiate their products responding tosudden changes in the economy. Therefore a need is there to study investor s perception regarding themutual funds. The study at first tests whether there is any relation between demographic profile of theinvestor and selection of mutual fund alternative from among public sector and private sector. For thepurpose of analysis perceptions of selected investors from public and private sector mutual funds aretaken into consideration. The major perceptual factors identified are Liquidity, Security, Flexibility,Transparency, Returns and Tax benefits along with Monetary and Core product as the most influencingfactors.

Key words: Mutual funds, perception, public sector, private sector, liquidity, security, flexibility, monetary, coreproduct, service quality, transparency.

INTRODUCTION

Mutual funds are recognized as a mechanism of poolingtogether the investment of unsophisticated investors andturn in the hands of professionally managed fundmanagers for consistent return along-with capitalappreciation. Money collected in this process is theninvested in capital market instrument such as shares,debentures and other securities. Finally, unit holders in

proportion of units owned by them share the incomeearned through these investments and capitalappreciation. Mutual funds put forward a way out toinvestors to approach most schemes and get well-diversified portfolio because investors with small savingsneither have sufficient expertise nor have access torequired diversification. Figure 1 describes broadly theworking of a mutual fund.

Mutual funds have already entered into a world ofexciting innovative products. These products are nowtailor made to suit specific needs of investors. Intensifiedcompetition and involvement of private players in the race

of mutual funds have forced professional managers tobring innovation in mutual funds. Thus, mutual fundsindustry has moved from offering a handful of schemeslike equity, debt or balanced funds to liquid, moneymarket, sector specific funds, index funds and gilt edgedfunds. Beside this recently mutual funds have alsointroduced some special specific funds like children

plans, education plans, insurance linked plans, andexchange traded funds (Vidya, 1990). The result is thatover the time Indian investors have started shiftingtowards mutual funds instead of traditional financiaavenues.

With the entry of private sector funds in 1993, a newera started in the Indian mutual fund industry giving theIndian investors a wider choice of fund families. Also1993 was the year in which the first Mutual FundRegulations came into being, under which all mutuafunds, except UTI were to be registered and governed

The erstwhile Kothari Pioneer (now merged with Franklin


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037 Res. J . Bus. Manage. Acc.

Figure 1. Working of a mutual fund.

Templeton) was the first private sector mutual fundregistered in J uly 1993. The number of mutual fundhouses went on increasing, with many foreign mutualfunds setting up funds in India and also the industry haswitnessed several mergers and acquisitions.The MF industry has evolved as an important financial

intermediary in the Indian capital market. As of March2009, the industry comprising 37 Asset ManagementCompanies (AMCs) managed financial assets of over4.89 trillions. Domestic MF industry is growing at a CAGRof 30% during the last three years, according to theAssociated Chambers of Commerce and Industry of India(ASSOCHAM). According to the ASSOCHAM study,

Asset Under Management (AUM) as percentage of GDPin India is 4.12% as against those of Australia 88.22%,Germany 10.54%, J apan 7.57%, UK 18.81%, USA61.27%, Canada 34.33%, France 59.63%, Hong Kong101.085 and Brazil 19.95%. The entry of commercialbanks and private players in the MF industry coupled withthe rapid growth of the Indian capital markets during thepast couple of years has fostered an impressive growth inthe Mutual Funds (Samir et al.,1991).The Indian mutual funds business is expected to grow

significantly in the coming years due to a high degree oftransparency and disclosure standards comparable toanywhere in the world, though there are many challengesthat need to be addressed to increase net mobilisation offunds in the sector.

ORGANISATION OF MUTUAL FUNDS

There are many entities involved and Figure 2 illustratesthe organisational set up of a mutual fund. Theorganization of Mutual funds has a unique structure notshared with other entities such as companies of firms. Itis important for employees & agents to be aware of thespecial nature of this structure, because it determines the

rights & responsibilities of the funds constituents viz.sponsors, trustees, custodians, transfer agents & ocourse, the fund & the Asset ManagemenCompany(AMC) the legal structure also drives the interrelationships between these constituents.The structure of the mutual fund India is governed by

the SEBI (Mutual Funds) regulations, 1996. Theseregulations make it mandatory for mutual funds to have astructure of sponsor, trustee, AMC, custodian. Thesponsor is the promoter of the mutual fund, & appointsthe trustees. The trustees are responsible to the investorsin the mutual fund, & appoint the AMC for managing theinvestment portfolio.

The AMC is the business face of the mutual fund, as imanages all affairs of the mutual fund. The mutual fund &the AMC have to be registered with SEBI (Securities andExchange Board of India). Custodian, who is alsoregistered with SEBI, holds the securities of variousschemes of the fund in its custody.

Role of decision making process

In financial markets, expectations of theinvestors play a vital role. They influence the price of thesecurities; the volumes traded and determine quite a loof things in actual practice. These expectations of theinvestors are influenced by their perception and humanbeings generally relate perception to action. The beliefsand actions of many investors are influenced by thedissonance effect and endowment effect. The tendencyto adjust beliefs to justify past actions is a Psychologicaphenomenon termed by Festinger (1957) as CognitiveDissonance. We find ample proof for the wide prevalenceof such a psychological state among Mutual Fund (MFinvestors in India.

However, in the financial literature, there are no modelswhich explain the influence of these perceptions and


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Figure 2. Organisational set up of a mutual fund.

beliefs on Expectations and Decision Making.Because of our own inability to understand the sources of

motivations and the basis of these expectations we tendto ignore it (Ippolito, 1992). No doubt, reality is socomplex that trying to fit an individual investors beliefsinto a model is impossible. But, to a certain extent, wecan borrow concepts from social psychology wherebehavioural patterns, rational or irrational, are developedand empirically tested (Sharma, 1991). On the samelines, we can develop certain models to test the financialbehaviour, to the extent of the availability of theexplanatory variables. Such models can help tounderstand the Why? and How? aspect of investorbehaviour, which can have managerial implications forpolicy makers( Freeman, Romney and Freeman. 1987).

Review of literature

The existing Behavioural Finance studies are very fewand very little information is available about investorperceptions, preferences, attitudes and behaviour. Allefforts in this direction are fragmented (De Bondt and

Thaler, 1985) while investigating the possiblepsychological basis for investor behaviour, argue thatmean reversion in stock prices is an evidence of investorover reaction where investors overemphasize recent firmperformance in forming future expectations (Gupta, 1994)

made a household investor survey with the objective toprovide data on the investor preferences on MFs andother financial assets.The findings of the study were more appropriate, at that

time, to the policy makers and mutual funds to design thefinancial products for the future, Madhusudhan and

J ambodekar (1996) conducted a study to assess theawareness of MFs among investors, to identify theinformation sources influencing the buying decision andthe factors influencing the choice of a particular fund. Thestudy reveals among other things that Income Schemesand Open Ended Schemes are more preferred than

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Growth Schemes and Close Ended Schemes during thethen prevalent market conditions. Investors look fosafety of Principal, Liquidity and Capital appreciation inthe order of importance; Newspapers and Magazines arethe first source of information through which investors geto know about MFs/Schemes and investor service is a

major differentiating factor in the selection of Mutual FundSchemes. (Goetzman, 1997) state that there is evidencethat investor psychology affects fund/scheme selectionand switching. Shanmugham (2000) conducted a surveyof 201 individual investors to study the informationsourcing by investors, their perceptions of variousinvestment strategy dimensions and the factorsmotivating share investment decisions, and reports thaamong the various factors, psychological and sociologicafactors dominated the economic factors in shareinvestment decisions (Anjan and Harsh, 2000) stressedthe importance of brand effect in determining thecompetitive position of the AMCs. Their study reveals thabrand image factor, though cannot be easily captured bycomputable performance measures, influences theinvestors perception and hence his fund/schemeselection.

Need of the study

The mutual funds industry has grown by leaps andbounds in last couple of years. Following thestrengthening of regulatory framework there is nowgreater transparency and credibility in the functioning omutual funds and has been successful in regaininginvestors faith. But to sustain the momentum it should

start focusing on the areas where greater accountabilityand transparency could propel the industry towards anew growth trajectory (Sarkar, 1991). As of now bigchallenge for the mutual fund industry is to mount oninvestor awareness and to spread further to the semiurban and rural areas. These initiatives would helptowards making the Indian mutual fund industry morevibrant and competitive.To make this happen it calls for a greater role not only

part of the regulator but also on industry and distributorsand ensure that investor confidence is maintainedthrough consistent performance and best businesspractices. (Shankar, 1996). In this context, the need of

study has been aroused in order to see the preferenceawareness and the investors perception regarding themutual funds in public and private sectors.

Objectives of the study

The study has been undertaken with the followingobjectives.

1. To test whether the choice of public and private sector


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mutual funds is independent of demographic profile.2. To identify the factors affecting investors perceptionand the choice of public and private sector mutual funds.

RESEARCH METHODOLOGY

In order to achieve the objective of developing anunderstanding about investors perception towardsmutual funds, a well structured questionnaire wasdesigned. Responses of individual investors werecollected through filled questionnaire with pre explainedobjectives of research. Questionnaires were distributed to400 individual investors-200 each for public and privatesector investors, who were selected from differentregions of Warangal, which included selective investorswho were assumed to be having basic knowledge offinancial environment. Main focus of questionnaire was toobtain responses of individual investors regarding howthey evaluate mutual funds services in terms of variousfactors on their investment. For analyzing primary datapercentage method, cross tabulation, Chi-Squareanalysis and factor analysis were used.

RESULTS OF THE SURVEY

Impact of demographic factors on investment inpubli c and private sector mutual funds

The success of any mutual fund, a popular means ofinvestment, depends on how effectively it has been ableto meet the investor's expectation. The present study

focuses on measuring the investors' expectation and theirpreference. It also attempts to gauge the factors that theytake into consideration for making any investment inmutual fund as well as the awareness level amongindividual investors regarding mutual fund investment.For the purpose of analysis demographic profile of theinvestors is cross tabulated in relation to choosing of theinvestment alternative in public and private sector mutualfunds by the investors. It provides a view on perception ofinvestors based on their social factors like Gender, Age,Educational Qualification, Marital Status, Occupation andLevel of income. Hence an attempt is made to study theimpact of demographic profile of the investor on the

choice of investment in public and private sector mutualfunds.

Gender: Gender is said to be the most significant factorfor investment purpose and as male are the basic breadwinners, they are keener in various investments thanfemales. Table 1 shows the distribution of the samplerespondents based on gender and their investment inpublic and private sector mutual funds.

Table 1 reveals that the percentage of male MF investorsof private sector is 89.5% and female MF investors are

10.5%, whereas in public sector it is84% and 16%respectively. the male constitute 86.8% (347) and female13.2% (53) It clearly implies that mutual fund investmenis more prevalent among men rather women and thafemale investors were not tapped fully in both the sectors

Thus out of 400 investors of public and private secto

MFs the male investors are 86.8% and female investorsare 13.2%. The male investors are dominating theinvestment in MFs both in public and private sectors.To test this saying Chi-Square test is applied and

inferences are drawn. The calculated value is 2.62 at 1degree of freedom and at 5% significance level. The tablevalue is 3.84 which is more than the calculated value

Thus the null hypothesis is accepted indicating that thereis no significant difference of opinion of gender on theinvestment pattern in both public and private sectomutual funds and female investors were not tapped fullyin both the sectors, Table 1.1.

Age: Age is considered as one of the importanparameters in the investment decision because thesaving pattern usually differs according to age. Table 2shows the distribution of the sample respondents basedon age and their investment in public and private sectormutual funds.

It can be observed from Table 2 that majority of theinvestors belong to the age group of 20 to 30 and 51 to60 in both the public and private sector mutual funds,followed by the age group of 31 to 40 where majorityinvestors are from public sector. Very few constitute themiddle aged group of 41 to 50 in public sector and nonein private sector. Thus, we can infer that middle agedpersons are more cautious in their investment and don

like to take risk.

We can also conclude with the chi-square result that, asthe calculated value is more than the table value, nulhypothesis is rejected and there is a significant differencein the investment pattern in both public and private sectomutual funds as people belonging to different age groupshave different perception in both the sectors, Table 2.2.

Marital Status: It is a known fact that married peoplehave more responsibilities and they are known for theisaving spree. They also carefully invest their hard earnedmoney so that it will be useful in the future for various

needs and expenditure. Table 3 shows the distribution othe sample respondents based on marital status and theiinvestment in public and private sector mutual funds.Table 3 shows that, majority of the investors both in

public and private sectors are married people. Comparingboth the sectors, there is more number of married peoplein public sector (171) than in private sector (120). But intotal, even though unmarried constitute very less, thepercentage of investment by the unmarried in privatesector is high (40%). The results of the chi-square showsthat the calculated value is more than the table value


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Table 1. Gender.

Type

GenderTotal

Male Female

Private

179 21 200

89.5% 10.5% 100.0%

Public

168 32 200

84.0% 16.0% 100.0%

Total

347 53 400

86.8% 13.2% 100.0%

(Source; P rimary Data)

Table 1.1. Result showing relationship between gender and investment decision in public and private sector.

Test Statist ic Degrees of Freedom Signi ficance Level Calculated Value Table Value Result

Chi-Square 1 5% 2.62 3.84 Accept Ho

Table 2. Age.

Type

AgeTotal

20-30 31-40 41-50 51-60 61 & above

Private

76 8 0 94 22 200

38.0% 4.0% .0% 47.0% 11.0% 100.0%

Public

49 59 15 68 9 200

24.5% 29.5% 7.5% 34.0% 4.5% 100.0%

Total

125 67 15 162 31 400

31.2% 16.8% 3.8% 40.5% 7.8% 100.0%

(Source: primary data)

Table 2.2. Result showing relationship between age and investment decision in public and private sector mutual funds.

Test Statist ic Degrees ofFreedom

SignificanceLevel

CalculatedValue

Table Value Result

Chi-Square 4 5% 69.277 9.488 Reject Ho

Table 3. Marital status.

TypeMarital s tatus

TotalMarried Unmarried

Private120 80 200

60.0% 40.0% 100.0%

Public171 29 200

85.5% 14.5% 100.0%

Total291 109 400

72.8% 27.2% 100.0%



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Table 3.3. Result showing relationship between marital status and investment decision in public and private sector.

Test Statistic Degrees ofFreedom

SignificanceLevel

CalculatedValue

Table Value Result


and null hypothesis is rejected implying that there is asignificant difference in the investment pattern in bothpublic and private sector investors with regard to themarital status, Table 3.3.

Occupation: Occupation is also one of the vital socialfactors that is to be considered for knowing theperception of the investors in their saving and investmentpattern. Table 4 shows the distribution of the samplerespondents based on occupation and their investment inpublic and private sector mutual funds.

Table 4 shows that, among the total sample respondents,majority were from the business sector (41.8%)in bothpublic and private sector but comparatively the privatesector constitutes more number of investors(51.5%),followed by Govt. employees (20.8%) in both thesectors-but majority are from public sector, and thenfollowed by self employed(15.5%).Chi-square result shows that the calculated value(69.725) is more than the table value (11.071) rejectingnull hypothesis. Hence concluding that there is asignificant difference in the pattern of investment in boththe sectors and the perception is not the same. Andcertainly the level of occupations plays a significant

impact on the investment pattern, Table 4.4.

Educational Qualification: General perception is thatthe investment pattern differs according to the level ofliteracy. Higher the qualification, higher the awarenesslevels.

Table 5 shows that majority (58.50%) investors are fromthe post graduate level in both the sectors and 30% aregraduates. The least percentage goes to the nongraduates.From the results of the chi-square we can infer that thecalculated value is less than the table value, acceptingthe null hypothesis which implies that, in both the sectorseducation plays a prominent role and there is nosignificant difference of opinion in the perception of theinvestors, Table 5.5.

Level of Income: The investment of an individual isdirectly correlated with the income of the investors. It is asaying that high income people tend to save and investmore because their disposable income after meeting theirfixed obligation is high. Also the investment preferencesand investment objectives differ according to incomelevel.

Table 6 shows that majority of investors in both publicand private sectors fall in the monthly income group oRs.10, 000-20,000(35.8%) followedbyRs.20, 000-Rs.30000(22.2%) and then 30,000 and above.

Chi-square result shows that at 5% significance leveand at 3degrees of freedom the calculated value is lessthan the table value implying that null hypothesis isaccepted and there is no significant difference in theinvestment pattern in both the sectors and people frommiddle income level are the highest investors in mutuafunds. It is also a known fact that, middle income peopletend to take minimum risk and thus might have invested

more in mutual funds.

II. (A).Factors affecting investors perception towardsmutual funds

The perceptions of various investment strategydimensions and the factors motivating fund investmendecisions are very important to bring out a propeconclusion and in this context, it becomes crucial tounderstand the psychological and economic factors thainfluence the level of satisfaction of the investors.

With the growing risk appetite, rising income, and

increasing awareness, mutual funds in India arebecoming a preferred investment option compared toother investment avenues like Fixed Deposits (FDs) andpostal savings that are considered safe but givecomparatively low returns (Sadhak, 1991). But beforeinvesting in mutual funds, investors have to analyse thefactors of the economy, industry and company within theinvestment environment in which they operate. There areseveral macro economic factors having influence on theinvestment choices.

In response to the changing circumstances, the fundhouses have introduced a host of interestingtechnological innovations to grab the attention of theinvestors. Investors need to correctly appraise the risksand rewards of investing in schemes which seek to offeattractive returns. Against this backdrop, the factorsidentified and considered to compare betweenperceptions of public and private sector mutual fundinvestors are Liquidity, Flexibility, Management fee, Taxbenefits, Service Quality, Returns, Transparency andSecurity. Chi-square test is applied to test and analysetheir significance and importance attached in selection omutual funds in public and private sectors.

Table 7 gives a perusal view of the hypothesis framedthe results of the test and inferences drawn from it.


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Table 4. Occupation.

TypeOccupation

TotalAgricul tur ist Pvt. Employee Govt . Employee Businessman Self- employed Pensioner

Private

0 14 23 103 47 13 200

.0% 7.0% 11.5% 51.5% 23.5% 6.5% 100.0%

Public

15 9 60 64 15 37 200

7.5% 4.5% 30.0% 32.0% 7.5% 18.5% 100.0%

Total

15 23 83 167 62 50 400

3.8% 5.8% 20.8% 41.8% 15.5% 12.5% 100.0%


Table 4.4. Result showing relationship between occupation and investment decision in public and private sector.

Test Statistic Degrees ofFreedom

SignificanceLevel

CalculatedValue

Table Value Result


Table 5. Educational Qualification.

TypeEducation

TotalSSC Intermediate Graduate Post Graduate

Private

9 10 51 130 200

4.5% 5.0% 25.5% 65.0% 100.0%

Public

9 18 69 104 200

4.5% 9.0% 34.5% 52.0% 100.0%

Total

18 28 120 234 400

4.5% 7.0% 30.0% 58.5% 100.0%

Table 5.5. Result showing relationship between educational qualification and investment decision in public and private sector.

Test Statist ic Degrees of Freedom Signi ficance Level Calculated Value Table Value Result


Table 6. Level of Income.

TypeIncome

TotalBelowRs.10,000

Rs.10,000-Rs.20,000

Rs.20,000-30,000

Rs.30,000&above

Private

51 75 38 36 200

25.5% 37.5% 19.0% 18.0% 100.0%

Public

30 68 51 51 200

15.0% 34.0% 25.5% 25.5% 100.0%

Total

81 143 89 87 400

20.2% 35.8% 22.2% 21.8% 100.0%



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Table 6.6. Result showing relationship between level of income and investment decision in public and private sector.

Test Statistic Degrees of Freedom Signi ficance Level Calculated Value Table Value Result


Table7. Factors influencing investors perception towards mutual funds.

HypothesisChi SquareValue

Remarks

Ho: Perception of Public and private sector mutual fundinvestors are independent ofliquidity factor.Ha: Perception of Public and private sector mutual fundinvestors is not independent ofliquidity factor..

X2=25.460X2 4.005=9.488

Thus, Ho Hypothesis is rejected and it canbe said that the Perceptions of Public andPrivate sector mutual fund investors are notindependent of Liquidity factor.

Ho: Perception of Public and private sector mutual fundinvestors are independent ofFlexibility factor.Ha: Perception of Public and private sector mutual fundinvestors is not independent ofFlexibility factor.

X2=9.534X2 4.005=9.488

Thus, Ho Hypothesis is rejected and it canbe said that the Perceptions of Public andPrivate sector mutual fund investors are notindependent of Flexibility factor.

Ho: Perception of Public and private sector mutual fundinvestors are independent ofManagement Fee factor.Ha: Perception of Public and private sector mutual fundinvestors is not independent ofManagement Fee factor.

X2=7.326

X23.005=7.815

Thus, Ho Hypothesis is accepted and it canbe said that the Perceptions of Public andPrivate sector mutual fund investors areindependent of Management Fee factor.

. Ho: Perception of Public and private sector mutual fundinvestors are independent ofTax Saving factor.Ha: Perception of Public and private sector mutual fundinvestors is not independent ofTax Saving factor.

X2=16.275X24.005=9.488

Thus, Ho Hypothesis is rejected and it canbe said that the Perceptions of Public andPrivate sector mutual fund investors are notindependent of Tax Saving factor.

Ho: Perception of Public and private sector mutual fundinvestors are independent ofService Quality factor.Ha: Perception of Public and private sector mutual fundinvestors is not independent ofService Quality factor.

X2=28.391X24.005=9.488

Thus, Ho Hypothesis is rejected and it canbe said that the Perceptions of Public andPrivate sector mutual fund investors are notindependent of Service Quality factor.

Ho: Perception of Public and private sector mutual fundinvestors are independent ofReturn on Income factor.Ha: Perception of Public and private sector mutual fundinvestors is not independent ofReturn on Income factor.

X2=6.574X

24.005=9.488

Thus, Ho Hypothesis is accepted and it canbe said that the Perceptions of Public andPrivate sector mutual fund investors areindependent of Return on Income factor.

Ho: Perception of Public and private sector mutual fundinvestors are independent ofTransparency factor.Ha: Perception of Public and private sector mutual fundinvestors is not independent ofTransparency factor.

X2=11.622X2 4.005=9.488

Thus, Ho Hypothesis is rejected and it canbe said that the Perceptions of Public andPrivate sector mutual fund investors are notindependent of Transparency factor.

Ho: Perception of Public and private sector mutual fundinvestors are independent ofSecurity factor.Ha: Perception of Public and private sector mutual fundinvestors is not independent ofSecurity factor.

X2=4.314

X2 4.005=9.488

Thus, Ho Hypothesis is accepted and it canbe said that the Perceptions of Public andPrivate sector mutual fund investors areindependent of Security factor.


DISCUSSION

From the analysis it is clear that the significantlyinfluencing factors on the investment made by theinvestors of public and private sector mutual funds areliquidity, flexibility, and savings on tax, service quality andtransparency. As per the table 7 above, at 5% significant

level and at 4 degrees of freedom, the calculated valuesof all these factors were greater than the table valueswhich implies that the perception of investors aredependent on these factors and there is no significantdifference in the opinion of both the public and privatesectors mutual fund investors. As far as the other factorslike Management Fee, Return on Income and Security


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are concerned, there is a significant difference in theperceptions of the investors of the public and privatesector mutual funds and needs to be concentrated on.Management fee is the minimum fee charged by theAMC for floating different investment schemes, and fromthe study the investors opine that private sector mutual

fund companies charge more fees compared to that ofpublic sector mutual fund companies and thus there isdissatisfaction regarding this factor among the privatesector investors. Hence fund manager of the privatesectors should concentrate on this aspect and try tocome up to the expectations of the investors andmaintain the costs at low level similar to that of publicsector mutual funds.

Investors investment in any particular fund scheme ofmutual funds depends upon anticipated return that willaccrue from that particular investment. The analysisshows that there is a significant difference in theperception of the investors of public and private sectormutual funds and feel that the returns from the publicsector are not satisfactory and upto their expectations. Itis a known fact that most of the public sector MFcompanies invest in safe instruments which have lessreturns but surer returns, where as the private sector MFcompanies invests in equities which are highly risky butget greater returns . So this can be the differentiatingfactor in the perceptions of the investors. Thereforerequisite steps should be taken by the public sector MFcompanies to develop such schemes which will ultimatelysatisfy the investors by giving appropriate returns.

Security is one area where investors like to bank on.The main reason behind saving and investing in any ofthe financial investments is to secure for the future. As

per the analysis it is quite evident that there is asignificant difference in the perception of the investors onpublic and private sector mutual funds. The investors ofthe public sector feel more secured compared with that ofprivate sector mutual funds even though the returns arenot that much expected because they feel that the publicsector MFs are well regulated and are less riskycompared to that of private sector MFs. This may be dueto lack of awareness or very cautious nature of theinvestors as many of the investors are risk averters.

Therefore the investors should be well educated with thedos and donts of investment.

Factors influencing investment decision in mutualfunds

Apart from the above factors, the following factors suchas Monetary, Core product, Fund strength, Promotionalmeasures, Customer expectation and Service qualitywere identified as the major factors along with 30variables for preferring mutual funds. The investors viewon the variables influencing their investment decision inmutual funds is measured at five point Likert scale. The


assigned scores on these scales range from 5 to 1marks. These scores were analysed by factor analysis inorder to identify the important factors leading to theiinvestment decision. Before applying the factor analysisKaiser- Meyer- Ohlin measure of sample adequacy andBartletts test of sphericity has been conducted to test the

validity of data for factor analysis. The 30 identifiedvariables have been coded against a five point likerscale. The Rotated Component Matrix (RCM) for the 30variables measuring the preference level in fund markehas been obtained in seven iterations usingSPSS(version16).To have more clarity the factorsinfluencing the public sector mutual funds and privatesector mutual funds are taken separately and analysedand later on compared. The factor analysis results in siximportant factors leading to investment in mutual funds

The factor loading of the variables in each factor, itsreliability coefficient, its eigen value and the percent ofvariation explained of public sector mutual funds aregiven in table 8.

According to table 8, the narrated six factors explainthe variables leading to investment in mutual funds. Thefirst two important factors given by the factor analysis aremonetary and core product factors since the respectiveeigen values are 4.1159 and 3.6086. The monetary factoconsists of seven variables with the reliability coefficienof 0.7149. It informs that the included seven variables inmonetary factor explain it to the extent of 71.49%.Thesecond factor namely core product consists of sevenvariables with the reliability coefficient of 0.7326 whichexplains to the extent of 73.26%.The next two important factors identified by the facto

analysis are fund strength and promotional measures

since their eigen value are 2.5868 and 2.1141respectively. The fund strength factor consists of fouvariables with the reliability coefficient of 0.8188.Thepercent of variation explained by this factor is 15.84percent. It infers that this factor alone explains avariables leading to investment on mutual funds to theextent of 15.84 percent. The promotional measuresconsist of four variables with the reliability coefficient o0.8093 and 11.17 as percent of variation. The last twofactors narrated by the factor analysis are customeexpectation and service quality with the eigen values of1.3632 and 1.2145 respectively.

Each factor consists of four variables with the reliability

coefficient of 0.7883 and 0.7117 respectively. Toconclude the public sector mutual fund investors highlyperceive monetary and core product as the influencingfactors for their investment in mutual fund, followed byfund strength and promotional measures. Hence theplayers of the public sector mutual funds should preparea suitable strategy to meet the customer needs andexpectations.

According to table 9, the assigned six factors explainthe variables leading to investment in mutual funds. Theprivate sector investors also view the first two factors


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Table 8. Factor loading of the variables influencing the investment decision on mutual funds Public sector

FactorVariables Factor

loadingReliabilityCoefficient

EigenValue

Percent of variationexplained

Monetary

Range of schemesLoad conditionsMinimum amount required

Entry and exit loadsPast performanceExpenses chargedCollaboration with reputed banks

0.92340.81190.7968

0.73360.68940.62370.5494

0.7149 4.1159 21.33

Coreproduct

Back ground of the promotersReputation of fund managersType of portfolio and schemesFund sizeLiquidity factorsCorpus of the fundPerformance

0.89970.82360.74940.72110.68040.62460.5917

0.7326 3.6086 20.26

Fundstrength

Brand imageUtilities offeredPrevious interactionResearch team strength

0.92960.83340.80710.7493

0.8188 2.5868 15.84

Promotionalmeasures

AdvertisementsTiming of the scheme launchingRedemption durationDistribution networks

0.85960.80910.75690.7224

0.8093 2.1141 11.17

Customerexpectation

SafetyConvenience of investingRegular incomeConsistency in income

0.90830.83340.76960.6969

0.7883 1.3632 8.22

Servicequality

TransparencyReliabilityResponsivenessLevel of technology application

0.85080.76690.71230.6039

0.7117 1.2145 7.14

KMO measures of sampling adequacy :0.7894 Bartletts test of sphericity:

Chi-square value : 183.34 at 5%sig.level(source: primary data)

monetary and core product as important factors, given bythe factor analysis since the respective eigen values are4.1041 and 3.5976. The monetary factor consists ofseven variables with the reliability coefficient of 0.7094. Itinfers that the included seven variables in monetaryfactor explain it to the extent of 70.94%.The secondfactor namely core product consists of seven variableswith the reliability coefficient of 0.7243 which explains to

the extent of 72.43%.The next two important factors identified by the factoranalysis are fund strength and promotional measuressince their eigen values are 2.5431 and 2.1039respectively. The fund strength factor consists of fourvariables with the reliability coefficient of 0.8090 .Thepercent of variation explained by this factor is 14.94percent. It infers that this factor alone explains allvariables leading to investment on mutual funds to theextent of 14.94 percent. The promotional measuresconsist of four variables with the reliability coefficient of0.8055 and 10.85 as percent of variation.

The last two factors narrated by the factor analysis arecustomer expectation and service quality with the eigenvalues of 1.3558 and 1.2122 respectively. Each factoconsists of four variables with the reliability coefficient o0.7767 and 0.7221 respectively. We can come to theconclusion that even the private sector mutual fundinvestors give priority to the factors, monetary and coreproduct as the influencing factors for their investment in

mutual fund, followed by fund strength and promotionameasures. Therefore it becomes the responsibility of thefund managers to concentrate more on these factors sothat the investors confidence can be retained therebysatisfying the investors, and also improvise on thoseareas and factors which the investors strongly aspire(Agarwal, 1992) thereby disbursing a wholesomepackage of fulfillment and contentment which surely wilbe an ever shining star and never sun setting kingdomBy comparing both the sectors, we can deduct that itbecomes highly essential for the policy makers tounderstand the expectations of various investors in the


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Table 9. Factor loading of the variables influencing the investment decision on mutual funds Private sector.

Factor VariablesFactorloading

ReliabilityCoefficient

EigenValue

Percent of variationexplained

Monetary

Range of schemesLoad conditionsMinimum amount required

Entry and exit loadsPast performanceExpenses chargedCollaboration with reputed banks

0.91230.80090.7658

0.71060.63240.61170.5744

0.7094 4.1041 21.03

Core product

Back ground of the promotersReputation of fund managersType of portfolio and schemesFund sizeLiquidity factorsCorpus of the fundPerformance

0.86920.81330.73860.72000.67640.61570.5812

0.7243 3.5976 19.46

Fundstrength

Brand imageUtilities offeredPrevious interactionResearch team strength

0.91210.80360.79170.7349

0.8090 2.5431 14.94

Promotionalmeasures

AdvertisementsTiming of the scheme launchingRedemption durationDistribution networks

0.84690.70910.73570.7024

0.8055 2.1039 10.85

Customerexpectation

SafetyConvenience of investingRegular incomeConsistency in income

0.90580.82640.76900.6769

0.7767 1.3558 7.76

Servicequality

TransparencyReliabilityResponsivenessLevel of technology application

0.85080.76690.71230.6039

0.7221 1.2122 7.14

KMO measures of sampling adequacy :0.7699 Bartletts test of sphericity:

Chi-square value : 183.34 at 5%sig.level

capital market and also should have an idea on thesignificantly influencing factors which influence theperception of the investors of both the public and privatesector investors so that the fund managers can develop asuitable strategy to meet the investors needs and also byproviding service to the investors in full fledged mannerthrough the modern and innovative mutual fund schemes.Effective and ongoing communication with unit holdersheightens the importance for the mutual fund industries.

Conclusion

Mutual Funds have emerged as an important segment offinancial markets and so far have delivered value to theinvestors. The study reveals that the investors perceptionis dependent on the demographic profile and assessesthat the investors Age, Marital status and occupation hasdirect impact on the investors choice of investment. Thestudy further reveals that female segment are not fullytapped and even there is low target on higher income

group people. Hence fund managers should take steps totap the female segment and higher income groupsegment to enhance more investment in mutual fundInvestment Avenue, which would really help the industryto flourish.Furthermore the findings of the research were on thefactors influencing investors perception on public- privateMFs. It reveals that Liquidity. Flexibility, Tax savingsService Quality and Transparency are the primary factorswhich have a higher impact on perception of investorsand monetary and core product are the influencingfactors which give them the required boosting in theinvestment process. Therefore it becomes imperative onpart of the fund managers to enhance these features foattracting more investors and also to retain the trust, theinvestors have in them.

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