CHAPTER 1

INTRODUCTION ABOUT THE PROJECT

1.1 EXECUTIVE SUMMARY

In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being. Mutual
Funds have not only contributed to the India growth story but have also helped families tap into
the success of Indian Industry. As information and awareness is rising more and more people are
enjoying the benefits of investing in mutual funds. The main reason the number of retail mutual
fund investors remains small is that nine in ten people with incomes in India do not know that
mutual funds exist. But once people are aware of mutual fund investment opportunities, the
number who decide to invest in mutual funds increases to as many as one in five people. The
trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer
is to understand which of the potential investors are more likely to buy mutual funds and to use
the right arguments in the sales process that customers will accept as important and relevant to
their decision.

This Project gave me a great learning experience and at the same time it gave me enough scope
to implement my analytical ability. The analysis and advice presented in this Project Report is
based on market research on the saving and investment practices of the investors and preferences
of the investors for investment in Mutual Funds. The first part gives an insight about Mutual
Fund and its various aspects, the Company Profile, Objectives of the study, Research
Methodology. One can have a brief knowledge about Mutual Fund and its basics through the
Project.

The second part of the Project consists of data and its analysis collected through survey done on
100 people. For the collection of Primary data I made a questionnaire and surveyed of 100
people. I also taken interview of many People those who were coming at the SBI Branch where I
done my Project. I visited other AMCs in Mumbai to get some knowledge related to my topic. I
studied about the products and strategies of other AMCs in Mumbai to know why people prefer
to invest in those AMCs.

1
This Project covers the topic “INVESTORS PERCEPTION ABOUT INVESTMENT IN
MUTUAL FUND.” The data collected has been well organized and presented. I hope the
research findings and conclusion will be of use.

In this era of globalization and competition, the success of an industry is determined by

the market performance of its stock. The investors too like to invest only in the stock of those
companies from which they can get maximum gains. In early years of growth of mutual fund
industry, investors were available only with few investment avenues to invest their money. But
with the passage of time a lot of opportunities are available to the investors for investing their
money in different investment channels. One such channel is to invest in mutual funds along
with effective financial management. Mutual funds have seen a tremendous growth in the last
few years. This is the result of combined efforts of the brokerage houses and the fund managers
who come to one’s rescue by educating the investors and making them aware of the mutual fund
schemes by different modes of promotion.

The currently common mode of community investments, mutual funds have taken time in
coming to India, while these have been a dominant feature for the last several years in the
investment markets in the west and in the country of their origin, in USA they have become as
ancient as money itself. Their slow coming into the country is due essentially to the Unit Trust of
India having dominated the scene as the only institution of its kind all this time. After two
decades of UTI monopoly some public sector organizations like LIC (1989), GIC (1991), SBI
(1987), Can Bank (1987), and India Bank (1990) have been permitted to set up mutual funds.
The important characteristics of mutual funds are:

 Investors purchase mutual fund shares from the fund itself (or through a broker for the
fund) instead of from other investors on a secondary market, such as the New York Stock
Exchange or Nasdaq Stock Market.
 The price that investors pay for mutual fund shares is the fund's per share net asset value
(NAV) plus any shareholder fees that the fund imposes at the time of purchase (such as
sales loads)
 Mutual funds generally create and sell new shares to accommodate new investors. In
other words, they sell their shares on a continuous basis, although some funds stop selling
when, for example, they become too large.

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1.2 OBJECTIVE OF STUDY

 To analyze investors perspective towards investment in mutual fund.

 To understand the desirable characteristics of mutual fund schemes / fund.
 To know the various factors that may affect selection of mutual fund schemes / fund
directly or indirectly.
 To analyses the risk and returns in different schemes.
 To present a summarized picture of different qualitative aspects which are essential to
secure investor’s patronage to mutual fund.

1.3 SCOPE OF STUDY

 The present study is an attempt to study the investor’s attitude towards mutual fund of
SBI. It involves understanding the basic concept of mutual fund, various concepts of
mutual fund, various schemes of mutual fund, investment alternatives.
 Factor influencing to investment in mutual funds, investors expectations regarding the
mutual fund and investors attitudes of different mutual funds.
 Even though people invested their money in mutual funds as these funds offered them
diversified investment option for the first time. By investing in these funds they
wearable to diversify their investment in common Mutual, preferred Mutual, bonds
and other financial securities.
 At the same time they also enjoyed the advantage of liquidity. With Mutual Funds,
they got the scope of easy access to their invested funds on requirement But, in
today’s world, Scope of Mutual Funds has become so wide, that people sometimes
take long time to decide the mutual fund type, they are going to invest in.

3
1.4 RESEARCH METHODOLOGY

The data is collected using both primary as well as secondary method. It is very simple & more
specific than explanatory study.
Primary data
 Primary data has been collected with the help of the questionnaire via Google forms.
The sample is a convenience sample and constitutes 54 respondents. People from
different groups are included in the sample which consist of people from different
sectors and profession viz. Public sector, private sector, government, businessmen,
self employed, students, homemakers and other professionals with different income
levels.
 The questionnaire is aimed to understand the investors’ preferences of mutual funds
and its relationship with the socio-economic profile of the respondents.

Secondary data
 Secondary data for the study were collected from the various books, journals,
government reports, publications from various websites which focused on various
aspects of goods and service tax.

1.5 LIMITATION OF THE STUDY

For the research work, data was collected and interpreted with utmost reliability and consistency
but due to prejudices of a few respondents, certain limitations of the study are as follows:

 The study depicts the present scenario in the selected city of Mumbai and hence the
result may not be applicable to another period of time.
 The study is limited to 54 respondents of the selected city of Mumbai.
 It is assumed that respondents are true and honest in expressing their views and have
filled the questionnaire honestly and without any bias.

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 CHAPTER 2
REVIEW OF LITERATURE

Ippolito (1992) states that an investor is ready to invest in those fund or schemes which
have resulted in good rewards and most investors’ are attracted by those funds or
schemes that are performing better over the worst.

Goetzman (1997) opined that investor’s psychology affects mutual fund selection for
investment and to withdraw from the fund.

Goetzman (1997) opined that investor’s psychology affects mutual fund selection for
investment and to withdraw from the fund.

De Bondt and Thaler (1985) submitted that mean reversion in prices of stock is backed
by investor’s retrogression which is based upon investor’s psychology to overvalue
firm’s recent performance in forming future expected results which is also known as
endowment effect. Gupta (1994) surveyed household investor to find investors’
preferences to invest in mutual funds and other available financial assets. The findings of
the study were more relevant, at that time, to the policy makers and mutual funds to
design the financial products for the future.

Kulshreshta (1994) in his study suggested some guidelines to the investors’ that can help
them to select needed mutual fund schemes.

Shanmugham (2000) conducted a survey of individual investors with the objective to

find out what information source investor depends on. The results explained that they are
economical, sociological and psychological factors which control investment decisions.

5
Madhusudhan V Jambodekar (1996) conducted his study to size-up the direction of
mutual funds in investors and to identify factors that influence mutual fund investment
decision. The study tells that open-ended scheme is most favored among other things and
that income schemes and open-ended schemes are preferred over closed- ended and
growth schemes.
News papers are used as information source, safety of principal amount and investor
services are priority points for investing in mutual funds.

SujitSikidar and Amrit Pal Singh (1996) conducted a survey to peep in to the
behavioral aspects of the investors of the North-Eastern region in direction of equity and
mutual fund investment. The survey showed that because of tax benefits mutual funds are
preferred by the salaried and self-employed individuals. UTI and SBI schemes were most
preferred in that region of the country over any other fund and the other funds had been
proved archaic during the time of survey.

Syama Sunder (1998) conducted a survey with an objective to get an in-depth view into
the operations of private sector mutual fund with special reference to Kothari Pioneer.
The survey tells that knowledge about mutual fund concept was unsatisfactory during that
time in small cities like Visakapatanam. It also suggested that agents can help to catalyse
mutual fund culture, open-ended options are much popular than any other schemes, asset
management company’s brand is chief consideration to invest in mutual fund.

AnjanChakarabarti and Harsh Rungta (2000) emphasised the importance of brand in

ascertaining competence of asset management companies.

Shankar (1996) suggested that for penetrating mutual fund culture deep in to society
asset management companies have to work and steer the consumer product distribution
model.

Raja Rajan (1997) underlined segmentation of investors and mutual fund products to
increase popularity of mutual funds.

6
Lenard et., al. (2003) empirically investigated investor’s attitudes toward mutual funds.
The results indicate that the decision to switch funds within a fund family is affected by
investor’s attitude towards risk, current asset allocation, investment losses, investment
mix, capital base of the fund age, initial fund performance, investment mix, fund and
portfolio diversification. The study reported that these factors are crucial to be considered
before switching funds regardless of whether they invest in non-employer plans or in
both employer and non-employer plans.

Bollen (2006) studied the dynamics of investor fund flows in a sample of socially
screened equity mutual funds and compared the relation between annual fund flows &
lagged performance in SR funds to the same relation in a matched sample of conventional
funds.
The result revealed that the extra-financial SR attribute serves to dampen the rate at
which SR investors trade mutual funds. The study noted that the differences between SR
funds and their conventional counterparts are robust over time and persist as funds age.
The study found that the preferences of SR investors may be represented by conditional
multiattribute utility function (especially when SR funds deliver positive returns). The
study remarked that mutual fund companies can expect SR investors to be more loyal
than investors in ordinary funds.

Walia and Kiran (2009) studied investor’s risk and return perception towards mutual
funds. The study examined investor's perception towards risk involved in mutual funds,
return from mutual funds in comparison to other financial avenues, transparency and
disclosure practices. The study investigated problems of investors encountered with due
to unprofessional services of mutual funds. The study found that majority of individual
investors doesn’t consider mutual funds as highly risky investment. In fact on a ranking
scale it is considered to be on higher side when compared with other financial avenues.
The study also reported that significant relationship of interdependence exists between
income level of investors and their perception for investment returns from mutual funds
investment.

7
Saini et., al. (2011) analyzed investor’s behavior, investors’ opinion and perception
relating to various issues like type of mutual fund scheme, its objective, role of financial
advisors / brokers, sources of information, deficiencies in the provision of services,
investors’ opinion relating to factors that attract them to invest in mutual and challenges
before the Indian mutual fund industry etc. The study found that investors seek for
liquidity, simplicity in offer documents, online trading, regular updates through SMS and
stringent follow up of provisions laid by AMFI. Singh (2012) conducted an empirical
study of Indian investors and observed that most of the respondents do not have much
awareness about the various function of mutual funds and they are bit confused regarding
investment in mutual funds. The study found that some demographic factors like gender,
income and level of education have their significant impact over the attitude towards
mutual funds. On the contrary age and occupation have not been found influencing the
investor’s attitude. The study noticed that return potential and liquidity have been
perceived to be most lucrative benefits of investment in mutual funds and the same are
followed by flexibility, transparency and affordability.

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 CHAPTER 3

CONCEPTUALFRAMEWORK

3.1 INTRODUCTION OF MUTUAL FUND

A mutual lfund is a professionally managed type of collective investment scheme that pools money
from many investors and invests it in stocks, bonds, short-term money market instruments,
and/or other securities. The mutual fund will have a fund manager that trades the pooled money
on a regular basis. Currently, the worldwide value of all mutual funds totals more than $26
trillion. The mutual fund organization earns profit by using people's money for investment and
the persons who invest in mutual fund acquire financial Profit without going into intensive
analysis and research on bonds and stocks. The work of stock and bond Market Analysis, Market
Research and Market Speculation is done by the mutual fund managers. The people who invest
in Mutual Funds are generally exposed to much lower Risk compared to those who directly
invest in bonds and stocks. Mutual Fund Investment involves lower Risk as the investment is
diversified in to different bonds and stocks. So, if at any time Market Value of one particular
bond or value of the stocks of any particular company drops, then the loss incurred by the mutual
fund can be offset by the Market Gain of any other bonds or stock

9
3.2 CONCEPT OF MUTUAL FUND

A mutual fund is a common pool of money into which investors place their contributions that are
to be invested in accordance with a stated objective. The ownership of the fund is thus joint or
“mutual”; the fund belongs to all investors. A single investor’s ownership of the fund is in the
same proportion as the amount of the contribution made by him or her bears to the total amount
of the fund. Mutual Funds are trusts, which accept savings from investors and invest the same in
diversified financial instruments in terms of objectives set out in the trusts deed with the view to
reduce the risk and maximize the income and capital appreciation for distribution for theembers.
A Mutual Fund is a corporation and the fund manager’s interest is to professionally manage the
funds provided by the investors and provide a return on them after deducting reasonable
management fees.

3.3 DEFINITION:

“A mutual fund is an investment that pools your money with the money of an unlimited number
of other investors. In return, you and the other investors each own shares of the fund. The fund's
assets are invested according to an investment objective into the fund's portfolio of investments.
Aggressive growth funds seek long-term capital growth by investing primarily in stocks of fast-
growing smaller companies or market segments. Aggressive growth funds are also called capital
appreciation funds”.

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3.4 WHY SELECT MUTUAL FUND?

The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt for bank
FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital
protected funds and the profit-bonds that give out more return which is slightly higher as
compared to the bank deposits but the risk involved also increases in the same proportion. Thus
investors choose mutual funds as their primary means of investing, as Mutual funds provide
professional management, diversification, convenience and liquidity. That doesn’t mean mutual
fund investments risk free. This is because the money that is pooled in are not invested only in
debts funds which are less riskier but are also invested in the stock markets which involves a
higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly
traded in the derivatives market which is considered very volatile.

RETURN RISK MATRIX

HIGHER RISK HIGHIER RISK

MODERATE RETURNS HIGIER RETURNS

Venture capital Equity

LOWER RISK LOWER RISK

LOWER RETURNS HIGHIER RETURNS

Mutual funds
Bank FD

Postal saving

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3.5 OPPORTUNITIES OF MUTUAL FUNDS

Opportunities of Mutual Funds are tremendous especially when investment is concerned. Forany
individual who intends to allocate his assets into proper forms of investment and want to
diversify his Investment Portfolio as well as the risks, Mutual Funds can be proved as the biggest
opportunity. Investors get a lot of advantages with the Mutual Fund Investment. Firstly, they are
not required to carry on intensive research and detailed analysis on Stock Market and Bond
Market. This work is done by the Fund Mangers of the Investment Management Company on
behalf of the investors. In fact, the professional Fund Managers who handle the mutual funds of
any particular company are able to speculate the market trend more correctly than any common
individual. Good Speculation about the trends of stock prices and bond prices leads to right
allocation of funds in the right stocks and bonds resulting in good Rate of Returns. Investors also
get the advantage of high Liquidity of the mutual funds. This means the investors can enjoy easy
access to the funds invested in the mutual funds whenever they require the money. When the
investors invest in any mutual fund, they are given some equity position in that fund. The
investors can any time sell their mutual fund shares to get back the money invested in mutual
funds. The only thing is that the Rate of Return that they will get may not be favorable as the
return depends on the present market condition. The greatest opportunity that the mutual funds
offer is the opportunity of diversifying their investments. Investment Diversification actually
diversifies the Risk associated with investment. This is because, if at a time, if prices of some
stocks are declining, decreasing the Value of Investment, prices of some other stocks and bonds
may tend to rise and in this way the loss of the mutual fund is offset by the strength of the stocks
whose prices are rising. A sell the mutual funds diversify their investments in various common
stocks, preferred stock sand different bonds, the risk to be borne by the investors are well
diversified and in other terms lowered.

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3.6 CHALLENGES FOR INVESTING IN MUTUAL FUND

People find mutual fund investment so much interesting because they think they can gainhigh
rate of return by diversifying their investment and risk. But, in reality this scope of highrate of
returns is just one side of the coin. On the other side, there is the harsh reality of highly
Fluctuating Rate of Returns. Though there are other disadvantages also, this concernof
fluctuating returns is most possibly the greatest challenge faced by the mutual fund.
 The Issue of Fluctuating Returns
In spite of being a diversified investment solution, mutual funds investment in no wayguarantees
any return. If the market prices of major shares and bonds fall, then the value of mutual fund
shares are sure to go down, no matter how diversified the mutual fund portfolio. It can be said
that mutual fund investment is somewhat lower risky thanDirectInvestmentin stocks. But, every
time a person invests in mutual fund, he unavoidably carriesthe risk of losing money.

 Diversification or Over Diversification

In order to diversify the investment, many timesthe mutual fund companies get involved
inOverDiversification.The risk of holding asingle financial security is removed by
diversification. But, in case of over diversification,investors diversify so much that many time
they end up with investing in funds that arehighly related and thus the benefit of risk
diversification is ruled out.

 Taxes
Every year, most of the mutual funds sell substantial amount of their holdings. If they earn profit
by this sell, then the investors receive theProfit Income. For most of themutual funds, the
investors are bound to pay taxes on these incomes, even if they reinvestthe income.

 Costs
Most of the mutual funds chargeShareholderFeesand Fund Operating Fees fromthe investors. In
the year, in which mutual fund fails to make profit and the investors get noreturn, these fees only
blow up the losses.

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3.7 ROLE OF SEBI

To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds.Mutual Funds either promoted by public or by private sector entities including those
promoted by foreign entities are governed by these Regulations.SEBI approved Asset
Management Company (AMC) manages the funds by making investments in various types of
securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in
its custody. According to SEBI Regulations, two thirds of the directors of Trustee Company or
board of trustees must be independent. The Association of Mutual Funds in India (AMFI)
reassures the investors in units of mutual funds that the mutual funds function within the strict
regulatory framework. Its objective is to increase public awareness of the mutual fund industry.

3.8 HISTORY OF MUTUAL FUND

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank of India. The history of mutual funds in
India can be broadly divided into four distinct phases.

First Phase(1964-87)
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 of 1988 UTI had
Rs.6,700crores of assets under management

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

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India(GIC). SBI
Mutual Fund was the first non- UTI Mutual Fund established in June 1987followed by Canbank
Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),Indian Bank Mutual Fund

14
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund(Oct 92). At the end of 1993, the
mutual fund industry had assets under management ofRs.47, 004 cores.
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, exceptUTI 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.1,21,805crores. The Unit Trust of India with Rs.44,541crores of assets under
management was way ahead of other mutual funds.
Fourth Phase (February 2003)
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcatedinto two separate entities. One is the Specified Undertaking of the Unit Trust of India
with assetsunder management of Rs.29,835crores as at the end of January 2003, representing
broadly, theassets of US 64 scheme, assured return and certain other schemes. The Specified
UndertakingofUnit Trust of India, functioning under an administrator and under the rules framed
byGovernment of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered
withSEBI and functions under the Mutual Fund Regulations. With the bifurcation of the
restwhileUTI which had in March 2000 more than Rs.76,000crores of assets under management
and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and growth.

15
3.9 TYPES OF MUTUAL FUND SCHEME IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. Thus mutual funds have a variety of flavors. There are over
hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in
categories, mentioned below.

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A) BY STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that is available for subscription all through the year. These do not have
a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")
related prices. The key feature of open-end schemes is liquidity.

2. Close - Ended Schemes:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.
The fund is open for subscription only during a specified period. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one
of the two exit routes is provided to the investor.

3. Interval Schemes:

Interval Schemes are that scheme, which combines the features of open-ended and close- ended
schemes. The units may be traded on the stock exchange or may be open for sale or redemption
during pre-determined intervals at NAV related prices.

B) BY NATURE

1. Equity Fund:

These funds invest a maximum part of their corpus into equities holdings. The structure of the
fund may vary different for different schemes and the fund manager’s outlook on different
stocks. The Equity Funds are sub-classified depending upon their investment objective, as
follows:

• Diversified Equity Funds

• Mid-Cap Funds

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• Sector Specific Funds

• Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-
return matrix.

2. Debt Funds:

The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers. By
investing in debt instruments, these funds ensure low risk and provide stable income to the
investors. Debt funds are further classified as:

• Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated with
Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

• Income Funds: Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.

• MIPs: Invests maximum of their total corpus in debt instruments while they take minimum
exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly
high on the risk-return matrix when compared with other debt schemes.

• Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds
primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers
(CPs). Some portion of the corpus is also invested in corporate debentures.

• Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity
and preservation of capital. These schemes invest in short-term instruments like Treasury Bills,
inter-bank call money market, CPs and CDs. These funds are meant for short-term cash
management of corporate houses and are meant for an investment horizon of 1day to 3 months.
These schemes rank low on risk-return matrix and are considered to be the safest amongst all
categories of mutual funds.

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3. Balanced Funds:

As the name suggest they, are a mix of both equity and debt funds. They invest in both equities
and fixed income securities, which are in line with pre-defined investment objective of the
scheme. These schemes aim to provide investors with the best of both the worlds. Equity part
provides growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter
viz,

Each category of funds is backed by an investment philosophy, which is pre-defined in the

objectives of the fund. The investor can align his own investment needs with the funds objective
and invest accordingly.

C) BY INVESTMENT OBJECTIVE:

Growth Schemes:

Growth Schemes are also known as equity schemes. The aim of these schemes is to provide
capital appreciation over medium to long term. These schemes normally invest a major part of
their fund in equities and are willing to bear short-term decline in value for possible future
appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes
is to provide regular and steady income to investors. These schemes generally invest in fixed
income securities such as bonds and corporate debentures. Capital appreciation in such schemes
may be limited.

Balanced Schemes:

Balanced Schemes aim to provide both growth and income by periodically distributing a part of
the income and capital gains they earn. These schemes invest in both shares and fixed income
securities, in the proportion indicated in their offer documents (normally 50:50).

19
Money Market Schemes:

Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate
income. These schemes generally invest in safer, short-term instruments, such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money.

Load Funds:

A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or
sell units in the fund, a commission will be payable. Typically entry and exit loads range from
1% to 2%. It could be worth paying the load, if the fund has a good performance history.

No-Load Funds:

A No-Load Fund is one that does not charge a commission for entry or exit. That is, no
commission is payable on purchase or sale of units in the fund. The advantage of a no load fund
is that the entire corpus is put to work.

OTHER SCHEMES

Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to
time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings
Scheme (ELSS) are eligible for rebate.

Index Schemes:

Index schemes attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that
constitute the index. The percentage of each stock to the total holding will be identical to the
stocks index weight age. And hence, the returns from such schemes would be more or less
equivalent to those of the Index.

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Sector Specific Schemes:

These are the funds/schemes which invest in the securities of only those sectors or industries as
specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods
(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of
the respective sectors/industries. While these funds may give higher returns, they are more risky
compared to diversified funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time.

NET ASSET VALUE (NAV):

Since each owner is a part owner of a mutual fund, it is necessary to establish the value of his
part. In other words, each share or unit that an investor holds needs to be assigned a value. Since
the units held by investor evidence the ownership of the fund’s assets, the value of the total
assets of the fund when divided by the total number of units issued by the mutual fund gives us
the value of one unit. This is generally called the Net Asset Value (NAV) of one unit or one
share. The value of an investor’s part ownership is thus determined by the NAV of the number of
units held.

Calculation of NAV:

Let us see an example. If the value of a fund’s assets stands at Rs. 100 and it has 10 investors
who have bought 10 units each, the total numbers of units issued are 100, and the value of one
unit is Rs. 10.00 (1000/100). If a single investor in fact owns 3 units, the value of his ownership
of the fund will be Rs. 30.00(1000/100*3). Note that the value of the fund’s investments will
keep fluctuating with the market-price movements, causing the Net Asset Value also to fluctuate.
For example, if the value of our fund’s asset increased from Rs. 1000 to 1200, the value of our
investors holding of 3 units will now be (1200/100*3) Rs. 36. The investment value can go up or
down, depending on the markets value of the fund’s assets.

21
3.10 SELECTION PARAMETERS FOR MUTUAL FUND

Your objective:

The first point to note before investing in a fund is to find out whether your objective matches
with the scheme. It is necessary, as any conflict would directly affect your prospective returns.
Similarly, you should pick schemes that meet your specific needs. Examples: pension plans,
children’s plans, sector-specific schemes, etc.

Your risk capacity and capability:

This dictates the choice of schemes. Those with no risk tolerance should go for debt schemes, as
they are relatively safer. Aggressive investors can go for equity investments. Investors that are
even more aggressive can try schemes that invest in specific industry or sectors.

Fund Manager’s and scheme track record:

Since you are giving your hard earned money to someone to manage it, it is imperative that he
manages it well. It is also essential that the fund house you choose has excellent track record. It
also should be professional and maintain high transparency in operations. Look at the
performance of the scheme against relevant market benchmarks and its competitors. Look at the
performance of a longer period, as it will give you how the scheme fared in different market
conditions.

Cost factor:

Though the AMC fee is regulated, you should look at the expense ratio of the fund before
investing. This is because the money is deducted from your investments. A higher entry load or
exit load also will eat into your returns. A higher expense ratio can be justified only by
superlative returns. It is very crucial in a debt fund, as it will devour a few percentages from your
modest returns.

Also, Morningstar rates mutual funds. Each year end, many financial publications list the year's
best performing mutual funds. Naturally, very eager investors will rush out to purchase shares of
last year's top performers. That's a big mistake. Remember, changing market conditions make it
rare that last year's top performer repeats that ranking for the current year. Mutual fund investors

22
would be well advised to consider the fund prospectus, the fund manager, and the current market
conditions. Never rely on last year's top performers.

Types of Returns on Mutual Fund:

There are three ways, where the total returns provided by mutual funds can be enjoyed by
investors:

 Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly
all income it receives over the year to fund owners in the form of a distribution.
 If the fund sells securities that have increased in price, the fund has a capital gain. Most
funds also pass on these gains to investors in a distribution.

If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase
in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you
a choice either to receive a check for distributions or to reinvest the earnings and get more
shares.

3.11 ORGANISATIONAL PROFILE

With 25 years of rich experience in fund management, The SBI Funds Management Pvt.
Ltd. bring forward their expertise by consistently delivering value to their investors. They have a
strong and proud lineage that traces back to the State Bank of India (SBI) - India's largest bank.
They are a Joint Venture with the SBI and AMUNDI (France), one of the world's leading fund
management companies. With their network of over 222 points of acceptance across India, They
deliver value and nurture the trust of their vast and varied family of investors. Excellence has no

23
substitute. And to ensure excellence right from the first stage of product development to the post-
investment stage, they are ably guided by their philosophy of growth through innovation
And their stable investment policies. This dedication is what helps their customers achieve their
financial objectives.

Their vision

“To be the most preferred and the largest fund house for all asset classes, with a consistent track
record of excellent returns and best standards in customer service, product innovation,
technology and HR practices.”

Their services

Mutual Funds
Investors are their priority. Their mission has been to establish Mutual Funds as a viable
investment option to the masses in the country. Working towards it, They developed innovative,
need-specific products and educated the investors about the added benefits of investing in capital
markets via Mutual Funds. Today, they have been actively managing their investor's assets not
only through their investment expertise in domestic mutual funds, but also offshore funds and
portfolio management advisory services for institutional investors. This makes us one of the
largest investment management firms in India, managing investment mandates of over 5.4
million investors.

Portfolio Management and Advisory Services

SBI Funds Management has emerged as one of the largest player in India advising various
financial institutions, pension funds, and local and international asset management companies.
They have excelled by understanding their investor's requirements and terms of risk / return
expectations, based on which They suggest customized asset portfolio recommendations. They
also provide an integrated end-to-end customized asset management solution for institutions in
terms of advisory service, discretionary and non-discretionary portfolio management services.

24
Offshore Funds

SBI Funds Management has been successfully managing and advising India's dedicated offshore funds
since 1988. SBI Funds Management was the 1st bank sponsored asset management company fund to
launch an offshore fund called 'SBI Resurgent India Opportunities Fund' withan objective to provide their
investors with opportunities for long-term growth in capital, throughTheyll-researched investments in a
diversified basket of stocks of Indian Companies.

3.12 RISK V/S. RETURN

RISK RETURN ANALYSIS OF THE SCHEMES

A rational investor before investing his or her money in any stock analyses the risk associated
with the particular stock. The actual return he receives from a stock may vary from the expected
one and thus an investor is always cautious about the rate of risk associated with the particular
stock. Hence it becomes very essential on the part of investors to know the risk as the hard
earned money is being invested with the view to earn good return on the investment.

Risk mainly consists of two components

25
 1. Systematic risk

The systematic risk affects the entire market. The economic conditional, political situations,
sociological changes affect the entire market in turn affecting the company and even the stock
market. These situations are uncontrollable by the corporate and investor.

2. Unsystematic risk

The unsystematic risk is unique to industries. It differs from industry to industry. Unsystematic
risk stems from managerial inefficiency, technological change in the production process,
availability of raw materials, changes in the consumer preference, and labor problems. The
nature and magnitude of above mentioned factors differ from industry to industry and company
to company.

In a general view, the risk for any investor would be the probable loss for investing money in any
mutual fund. But when we look at the technical side of it, we can’t just say that this
schemes/fund carry risk without any proof. They are certain set of formulas to say the percentage
of risk associated with it.

There are certain tools or formulas used to calculate the risk associated with the schemes. These
tools help us to understand the risk associated with the schemes. These schemes are compared
with the benchmark BSE 100.

3.13 FACTORS TO BE CONSIDERED BEFORE SELECTING A MUTUAL

FUND
1. Making Risk- adjusted returns comparison. By doing this the investor will know whether the
returns generated by the scheme have been adequately compensated for the extra risk undertaken
by the scheme.

2. The investor depending upon his risk appetite and preferences should sub-classify the schemes
on the basis of the characteristics of the schemes, which may be defensive or aggressive in
nature.

3. Portfolio concentration is also an important factor to be considered. It is always advisable to

choose a scheme, which has a well-diversified portfolio rather than a concentrated portfolio, as it

26
carries lesser risk.

4. Liquidity of the portfolio is also one of the critical parameters.

5. The corpus size of the scheme is also of importance. A large corpus size firstly denotes
investor’s confidence in the scheme and its fund manager abilities over the years and, secondly it
allows the fund manager to diversify the portfolio, which reduces the overall market risk.

6. Other factors like turnover rates, low expense ratio, load structure etc. of the schemes etc.
should also be considered before finally zeroing down on a scheme of your choice.

7. The rankings undertaken by ICRA are an initiative to inform the investors- who does not have
the time or the expertise to undertake the analysis on their own- about the relative performance
of the schemes. It considers all important parameters to arrive at a comprehensive rank with a
view to help investors decide the scheme which may suit their investment profile.

8. Although much neglected, the due diligence in selection of the right mutual fund scheme is of
utmost importance as an investor cannot move in and out of a particular scheme on a regular
basis, because of the high costs involved, and investments made into a particular scheme should
be looked on a long-term basis as a wealth creation tool.

3.14 MERITS OF MUTUAL FUNDS

1. Diversification.

Mutual funds invest in a broad range of securities. This limits investment risk by reducing the
effect of a possible decline in the value of any one security. Mutual fund shareowners can benefit
from diversification techniques usually available only to investors wealthy enough to buy
significant positions in a wide variety of securities.

2.LowCost.

If you tried to create your own diversified portfolio of 50 stocks, you'd need at least $100,000
and you'd pay thousands of dollars in commissions to assemble your portfolio. A mutual fund
lets you participate in a diversified portfolio for as little as $1,000, and sometimes less. And if
you buy a no-load fund, you pay no sales charges to own them.

27
3. Convenience and Flexibility.

You own just one security rather than many, yet enjoy the benefits of a diversified portfolio and
a wide range of services. Fund managers decide what securities to trade, clip the bond coupons,
collect the interest payments and see that your dividends on portfolio securities are received and
your rights exercised. It's easy to purchase and redeem mutual fund shares, either directly online
or with a phone call.

4. Quick, Personalized Service.

Most funds now offer extensive websites with a host of shareholder services for immediate
access to information about your fund account. Or a phone call puts you in touch with a trained
investment specialist at a mutual fund company who can provide information you can use to
make your own investment choices, assist you with buying and selling your fund shares, and
answer questions about your account status.

5. Total Liquidity

Easy Withdrawal You can easily redeem your shares anytime you need cash by letter, telephone,
bank wire or check, depending on the fund. Your proceeds are usually available within a day or
two.

6. Dividend Options

You can receive all dividend payments in cash. Or you can have them reinvested in the fund free
of charge, in which case the dividends are automatically compounded. This can make a worrying
about checks being lost in the mail.

7. Online Services

The internet provides a fast, convenient way for investors to access financial information. A host
of services are available to the online investor including direct access to no-load companies.

3.15 DEMERITS OF MUTUAL FUNDS

1. Professional Management.

Did you notice how we qualified the advantage of professional management with the word
"theoretically"? Many investors debate whether or not the so-called professionals are any better
than you or I at picking stocks. Management is by no means infallible, and, even if the fund loses

28
money, the manager still takes his/her cut. We'll talk about this in detail in a later section.

2. Costs.

Mutual funds don't exist solely to make your life easier - all funds are in it for a profit. The
mutual fund industry is masterful at burying costs under layers of jargon. These costs are so
complicated that in this tutorial we have devoted an entire section to the subject.

3. Dilution.

It's possible to have too much diversification. Because funds have small holdings in so many
different companies, high returns from a few investments often don't make much difference on
the overall return. Dilution is also the result of a successful fund getting too big. When money
pours into funds that have had strong success, the manager often has trouble finding a good
investment for all the new money.

4. Taxes.

When making decisions about your money, fund managers don't consider your personal tax
situation. For example, when a fund manager sells a security, a capital-gains tax is triggered,
which affects how profitable the individual is from the sale. It might have been more
advantageous for the individual to defer the capital gains liability.

3.16 SYSTEMATIC INVESTMENT PLANNING

What is an SIP?

SIP, also known as Regular Savings Plan (RSP) in some countries, allows you to invest a fixed
amount at pre-defined frequencies in mutual funds. A bank / post office recurring deposit is the
only other investment option that is similar to SIP. There are basically two options that an
investor could take when they are making investments, one would be to invest lump sum into
mutual funds and the other would be to invest using an SIP. The following are some of the
benefits associated with investing in an SIP: SIP is actually a Systematic Investment Plan of
investing in Mutual Fund. It is specially designed for those who aim to build wealth over a long
period and want a better future for him and their dependents. The investment in a Mutual fund
can be done in two ways. First way is onetime payment i.e. making payment to a fund at once
and gets the units of the fund as per the Net Asset Value (NAV) of the fund on that day. A
person wishes to invest in a fund Rest. 24,000/- . On the day of Investment, the NAV of the fund

29
was Rest. 10/-. He gets 2400 units @ Rest. 10/- per unit. The other way of investment is making
payment to the fund periodically, which is termed as Mutual Fund SIP. When you commit to
invest a fixed amount monthly in a fund, it is called as Systematic Investment. It is actually
beneficial for those investors who wish to invest a large amount in a fund and wishes to create a
large chunk of wealth for long term but due to financial constraints are able to do so. The SIP
provides them a way to invest in the fund of their choice in installments. Egg. A person wishes to
invest Rest. 24000/- in a fund but due to other obligations, it is not possible for him to invest
such an amount in a fund. He takes the SIP route and contributes to the fund Rest. 2000/-
monthly for a year. At the end of the year, he’ll have invested Rest. 24,000/- in the fund. When
the NAV is high, he will get the fewer units and when the NAV is low, he’ll get the more units.
So, he’ll get the benefit of averaging through the SIP route. The NAV in the first month was
Rest. 10/-, he’ll get 200 units in the first month. The NAV in the second month was Rest. 9.50/-,
he’ll get 210.52 units in second month The NAV for the following month was Rest. 10, he’ll get
200 units in the next month So, at the end of the year he may get more units as compared to the
units he’ll get through single investment. Systematic investment plans are a systematic and
disciplined approach to investment and wealth creation. Instead of making a large investment at
one time, in SIP you can invest small sums at regular intervals thus creating a habit of regular
savings. If you are a big spender and find your expenditures are more than your earnings then go
for SIP mutual funds. This will force you to spend at least some part of your earnings every
month. Mutual funds are a very safe way of investing money and SIP mutual funds are even
better. These are perfect solutions to most of us who cannot afford to make a large investment at
one go. This is a good way to save for your child's education, marriage or comfortable retirement
for you and your spouse. The lowest start up investment amount is 500 rupees per month which
is affordable by most people.

State Bank of India is one of the most trusted public sector banks in India. SBI mutual funds,
has launched equity-based Micro Systematic Investment Plan (Micro SIP) aimed at getting in
low income households in rural and semi-urban areas to benefit from the long-term investment in
‘Equity’ as an asset class. This plan will be called SBI Chita SIP.

The minimum amount that has to be paid every month is Rest 500. Recently SBI has launched
another fund "SBI Chita SIP Scheme" in which the minimum investment amount is Rest 100.
This scheme was introduced to encourage more retail participation. The low income people will

30
be more benefited from this scheme as this type of investment is similar to investing in a
recurring deposit and they can get the benefits of the stock markets.

SBI Chita SIPS:

Recently SBI has launched micro systematic investment plan called "SBI Chita SIP", where you
can make a minimum payment of Rest 100 every month. This helps the low income people in the
rural areas to invest their money in the equity. There is also SIP auto debit facility for this plan.
If you have opted for this option, then your monthly installment will be withdrawn automatically
from your bank savings account each month. You can get the sip application form from the
various SBI Mutual fund offices available all over India or in the designated state bank of India
branches.

You have to fill the form and submit a PAN Card copy along with the application form. If you
apply for a sip auto debit facility, you should also fill an authorization form for the banks. Once
the application form is processed, you will get a statement indicating the number of units allotted
for you and also the price at which it is allotted. This statement you will get every month when
the monthly payments are sent from the bank and credited to the fund account. The price at
which the new units are allotted will change depending on the latest NAV.

Advantages of SIP

 Encourages Regular and Disciplined Investments

 A Convenient way to invest regularly

 Long term perspective

 Rupee Cost Averaging Benefit to counter volatility

 Compounding Benefits

 Simple and convenient

 A larger target segment due to lower initial investment

31
3.17HOW TO INVEST IN MUTUAL FUNDS

Steps One - Identify your investment needs.

Your financial goals will vary, based on your age, lifestyle, financial independence, family
commitments, level of income and expenses among many other factors. Therefore, the first step
is to assess your needs. Begin by asking yourself these questions:

1. What are my investment objectives and needs?

Probable Answers: I need regular income or need to buy a home or finance awedding or educate
my children or a combination of all these needs.

2. How much risk am I willing to take?

Probable Answers: I can only take a minimum amount of risk or I am willing to accept the fact
that my investment value may fluctuate or that there may be short term loss in order to achieve a
long term potential gain.

3. What are my cash flow requirements?

Probable Answers: I need a regular cash flow or I need a lump sum amount to meet a specific
need after a certain period or I don’t require a current cash flow but I want to build my assets for
the future.

By going through such an exercise, you will know what you want out of your investment and can
set the foundation for a sound Mutual Fund Investment strategy.

Step Two - Choose the right Mutual Fund.

Once you have a clear strategy in mind, you now have to choose which Mutual Fund and scheme
you want to invest in. The offer document of the scheme tells you its objectives and provides
supplementary details like the track record of other schemes managed by the same Fund
Manager. Some factors to evaluate before choosing a particular Mutual Fund are:

 The track record of performance over the last few years in relation to the appropriate
yardstick and similar funds in the same category.

32
  How well the Mutual Fund is organized to provide efficient, prompt and personalized
service.

 Degree of transparency as reflected in frequency and quality of their communications.

Step Three - Select the ideal mix of Schemes.

Investing in just one Mutual Fund scheme may not meet all your investment needs. You may
consider investing in a combination of schemes to achieve your specific goals.

The following charts could prove useful in selecting a combination of schemes that satisfy your
needs.

33
34
Step Four - Invest regularly

For most of us, the approach that works best is to invest a fixed amount at specific intervals, say
every month. By investing a fixed sum each month, you get fewer units when the price is high
and more units when the price is low, thus bringing down your average cost per unit. This is
called rupee cost averaging and is a disciplined investment strategy followed by investors all
over the world. With many open-ended schemes offering systematic investment plans, this
regular investing habit is made easy for you.

35
Step Five - Keep your taxes in mind

As per the current tax laws, Dividend/Income Distribution made by mutual funds is exempt from
Income Tax in the hands of investor. However, in case of debt schemes Dividend/Income
Distribution is subject to Dividend Distribution Tax. Further, there are other benefits available
for investment in Mutual Fund sunder the provisions of the prevailing tax laws. You may
therefore consult your tax advisor or Chartered Accountant for specific advice to achieve
maximum tax efficiency by investing in mutual funds.

Step Six - Start early

It is desirable to start investing early and stick to a regular investment plan. If you start now, you
will make more than if you wait and invest later. The power of compounding lets you earn
income on income and your money multiplies ate compounded rate of return.

Step Seven - The final step

All you need to do now is to get in touch with a Mutual Fund or your advisor and start investing.
Reap the rewards in the years to come. Mutual Funds are suitable for every kind of investor
whether starting a career or retiring, conservative or risk taking, growth oriented or income
seeking.

36
 CHAPTER 4

RESEARCH METHODOLOGY

Research methodology is the way to do systematically solve the research problem.

In it we study the various steps that are generally adopted by a researcher in studying his
research problem logically.

When we talk of Research Methodology, we not only talk of research methods but also consider
the logic behind the methods we use in the context of our research study and explain why we are
using a particular method or we are not using a particular method or technique so that research
results are capable of being evaluated either by the researcher or others.

The population for the study consisted of Individual Investors from borivali to kandivali. A
sample of
50 respondents were selected on random basis. To meet the objective of the study, primary data
and secondary information were collected. Primary data was collected through a questionnaire.
To study the each questions based on the scores, respondents have been categorized on the basis
of level of awareness i.e. highly aware, moderately aware and low level of awareness. Research
design is the conceived plan and structure of investigation to obtain answers to the research
questions. This research was organized in the following manner. Initial step is to analyze the past
and present investment. Where Investors invest their hard earn money and how investment
portfolio is constructed.

4.1 RESEARCH DESIGN USED:

Research design is the conceptual structure within which research is conduction. It constitutes
the blue print for the collection, measurement and analysis of data.

Type of Research used for the study:

Descriptive Research

37
  Survey or fact finding enquires of different kinds. It describes the actual prevailing state
of affairs, existing at present.
 Otherwise known as ex post facts means existing position of facts / issues.
 Here the variable influencing the research has no control or the researcher has no control
over the variables.
Eg: Frequency of shopping, customer preference etc.

In this case, a Descriptive Research study was used to study the relationships in question.
Descriptive research facilitates the study to obtain accurate and complete information regarding a
concept or a situation or a practice.
Therefore, survey method was followed for the study.

4.2 DATA COLLECTION:

Here, both Primary and Secondary data were considered.

Primary Data
Primary data were gathered using questionnaire as a tool for data collection. The data was
collected through personal contact with the help of a well designed structured and pretested
questionnaire given in Appendix. The questionnaire was drafted in order to study the preferences
of individual investors and collected relevant information about their Investment portfolio and
investment behavior. The questionnaires were distributed among the respondents by the
researcher through the mail. The respondents found the topic and the questionnaire very
interesting. The researcher was required to explain the purpose of the research and investment
avenues to the respondents. Some respondents refused to complete the questionnaire because of
an inquiry into their personal income. The researcher assured the respondents to use the
information strictly for research purposes.

Secondary Data
were collected from books, journals, magazines, reports and websites. For this purpose the
library and internet were used.

38
4.3 SAMPLING

 All the items considered in any field of inquiry constitutes a “universe” or population.
Study of the entire population without leaving out a single item is known as “Census
Study”
 This type of census study is practically not possible.
 So we select few items from the entire population for our study purpose. The items so
selected constitute what is technically called “sample”.
 The way of selecting such a “sample” is known as the “Sample Design”.
 These samples can be either probability samples or non probability samples

Sample unit - Samples are collected from college students and relatives.

Sample Size - The population being large the survey was carried among 50 respondents

Sampling Procedure -The sampling procedure followed in this study is non-probability

convenient sampling. Simple random procedures are used to select the respondent from the
available database. Investment pattern of investors on different products research work will be
carried on the basis of structured questionnaire.

4.4 TECHNIQUES FOR DATA ANALYSIS:

The purpose of analyzing data is to obtain usable and useful information. The analysis,
irrespective of whether the data is qualitative or quantitative.

The analysis of data collection is completed and presented systematically with the use of
Microsoft Excel and MS-Word.

Pie chart, column and doughnut were used for the study.

39
 CHAPTER 5

DATA INTERPRETATION

Table no.1 Age group

Age group No. of respondent

Below 18 yrs 5

18-25 yrs 10

25-40 yrs 24

Above 40 15

Graph no. 1

Age distribution

10%

28%
below 18
18% 18-25
25-40
above 40

44%

Here, it is been found that most of the investors i.e,35% of the investors who invest in Mutual
Fund lies in between the age group of 25-40, they are more reluctant as well as experienced
in this field of Mutual Fund. Then the Second highest age group lies above the age group of
40 years (28%), they are also aware of the benefits in investing in mutual fund. The least
interested group is the Youth Generations.

40
 Table no. 2 Investor’s qualification

Qualification No. of respondent

Graduate 30

Under graduate 18

Un graduate 6

Graph no. 2

Qualification
12%

graduation
under graduation
ungraduate
55%
33%

Out of my survey of 54 people, 55% of the investors are Graduates and 33% are Under
Graduates, around 12%, which may include persons who have passed their 10th standard or
12th standard invests in Mutual Funds.

41
Table no. 3: Occupation

Occupation No. of respondent

Govt. service 12
Private service 13
Business 16
Agriculture 6
Others 7

Graph no. 3

Occupation

13%
22%

govt. service
11% private service
business
agriculture
others

25%
29%

Here it is amazed to see that around 25% of the investment is been invested by
the persons working in Private sectors, according to them investing in Mutual
Funds is more safer as well as more gainer. Then we find that the businessmen
of around 29%gives more preference in investing in mutual funds, they think
that investing in mutual fund is better than investing in shares as well as Post
office. Next we see that the persons working in Government sectors of around
22% only invests in Mutual Fund

42
 Table no. 4 : Income range

Income range No. of respondent

Below 1lakhs 5

1-5lakhs 23

5-10lakhs 15

Above 10lakhs 11

Graph no. 4

Income of investors
9%
20%

below 100000
100000-500000
500000-1000000
above 1000000

44%
27%

Here , we find that investors of around 44% with the monthly income of 1L-5L are the most
likely to invest in Mutual fund , than any other income group. After that around 27% & 20%
with income of 5L-10L & above 10L invest in mutual fund. There are only 9% people with
the monthly income of below 1L invest in mutual fund.

43
 Kind of investments: Table no. 5

Kind of investment No. of respondents

Saving account 14
FD 12
Insurance 7
Mutual funds 8
Shares/debentures 9
Gold/silver 4
Graph no. 5

kind of investment
7%

15% 28%
saving account
fixed deposit
insurance
mutual funds
shares/debentures
gold/silver
15%

22%
13%

Out of 54 investors 15% are investing in mutual funds,13% are investing in insurance,22%
are in investind in FD,28% are investing in saving account,15% are investing in shares and
debentures,7% are investing in gold/silver and others are investing in other instrument.

Table no. 6

44
 While investing your money, which factor will you prefer most?

Factors affecting investment No. of respondents

Liquidity 12
Low risk 22
High return 18
Company reputation 2
Graph no. 6

Preference of Investment
1%

21%
liquidity
36% low risk
high return
company reputation

42%

As it can be clearly Stated from the above Diagram that investors before investing, the main
criteria that they used to give more Preference is Low Risk. According to them, if a scheme is
low risk, it may or may not give a very good return , but still 42% of the investors choose low
risk as the option while investing in Mutual Funds.

Then we see that 36% of the investors take High return as one of their most important criteria.
According to them, if there is no high return then we should opt for Post office and not mutual
fund. 21% of the investors take liquidity as one of their important factors Only 1% of the
Investors think company reputation as their most preferable options

45
Table no. 7

Have you ever invested your money in mutual funds?

Investment No. of respondents

Yes 31
no 23
Graph no. 7

Investment

yes
44% no

56%

Out of a lot of 54 investors, 56% invest in mutual funds & 44% do not invest.

If yes,

a) where do you find yourself a mutual fund investor?

46
 No. of respondents
Totally ignorant 6
Partial knowledge 12
Aware only of any specific scheme 5
Fully aware 8
Table no. 8

Awareness

20%
26%
totally ignorant
partial knowledge of mutual
fund
aware only of any specific
scheme in which you have
invested
fully aware

15%

39%

Chart no. 8

Out of 31 investors, 21% ignored it , 58% of investors have partial knowledge of mutual
fund,20% are aware of few and 1% are fully aware.

b) In which kind of mutual fund you would like to invest?

No. of respondents

47
 Public 31
private 23
Table no. 9

Kind of Investment

41% public
private

59%

\
Chart no. 9

Out of 31 investors, 59% investors invest in public & 41 % invest in private .

c) How do you come to know about mutual funds?

No. of respondents

48
 Advertisement 8
Peer group 6
Banks 3
Financial advisors 14
Table no. 10

Information about mutual fund

advertisement
24%
financial ad-
visors
46%
peer group
21%

banks
9%

Chart no. 10

Here it can be clearly stated that around 46% of the investors came to know the benefits of
Mutual Fund from Financial Advisors. According to the suggestions given by the financial
advisors, people use to choose Mutual Funds Scheme. Then Secondly,24% and 21% of the
people used to know from Advertisement and Peer group respectively. Lastly 9% of the
investors do invests after being intimated by the Banks about the benefits of Mutual Funds.

d) Which mutual fund scheme have you used?

Schemes No. of respondents

Open ended 8

49
 Close ended 11
Liquid fund 15
Mid cap 9
Growth fund 8
Large cap 3
Table no. 11

Schemes
7%
13%

15% open ended

close ended
liquid fund
20% mid cap
growth fund
large cap
16%

29%

Chart no. 11

Out of 31 investors, 13% investors invest in open ended scheme , 20% invest in close ended,
29% in liquid fund, 15 % in growth fund, 16% in mid cap and 7% investors invest in large
cap.

If no,

a) If not invested in mutual fund then why?

If not then why No. of respondents

Not aware 13

50
 High risk 22
Not any specific reason 19

Table no. 12

if not invested then why?

24%

35%
not aware
high risk
not any specific reason

41%

Chart no. 12

Out of 23 investor, 24% were not aware, 41% investor are not investing due to higher risk &
35% are other not specific reason.

5. Which feature of the mutual fund allure you most?

Features No. of respondents

Diversification 12
Better return and safety 20
Reduction in risk and transaction 9
cost

51
 Regular income 5
Tax benefit 8
Table no. 13

Features

15%
20%

diversification
9% better return and safety
reduction in risk and transaction
cost
regular income
tax benefit

17%

39%

Chart no. 13

Out of 31 investors, 20% invest due to diversification, 39% invest due to better return and
safety, 17% invest due to reduction in risk and transaction,15% invest due to tax benefit,9%
invest due to regular income & 24% others.

6. In which mutual fund you have invested?

Investment No. of respondents

SBI 11
UTI 9
HDFC 14

52
 REALIANCE 10
OTHERS 6
Table no. 14

Different mutual fund company

13%

SBI
UTI
17% HDFC
45%
REALIANCE
other

15%

10%

Chart no. 14

From this above Pie Chart it can be clearly stated that 45% , 17%of the people like to invest
in large cap companies where return is comparatively less but risk is low thus they invest in
Reliance, SBI respectively. 15%, 10% of the people like to invest in Mutual Fund Companies
like HDFC, UTI, etc. where risk is slightly higher than the above two mentioned companies
as well as return is also slightly high 13%of the investors like to invest in the Small Cap’s
and Mid Cap’s companies.

7. When you invest in mutual funds which mode of investment will you
prefer?

MODE No. of respondents

One time investment 26
SIP 28

53
 Table no. 15

Mode of Investment
one time investment SIP

46%

54%

Chart no. 16

It can be clearly stated from the above Figure that 54% of the investors like to invest in SIP,
as the investor feels that they are more comfortable to save via SIP than the Long term i.e.
one time investment. While 46% of the investors find SIP as very burdensome, and they are
more reluctant to save in Long term investment.

8. From where do you purchase mutual funds?

Investment options No. of respondents

Directly from AMCs 22
Brokers only 11
Brokers/sub-brokers 14
Other sources 8
Table no. 17

54
 Investment options

15%

directly from AMCs

39% brokers only
brokers/sub-brokers
other sources
26%

20%

Chart no. 17

Out of 31 investors, 39% investors purchase directly from AMCs, 20% investors purchase
from only brokers,26 % investors purchase from brokers as well as sub brokers & 15%
investors from other sources.

9. Which AMCs you prefer the most?

AMC preference No. of respondents

SBI 14
UTI 11
HDFC 12
REALIANCE 11
KOTAK 2
OTHERS 4
Table no. 18

55
 AMC preference
30

25 24.1
22.2 22.2
20.4
20
AMC preference
15

10
7.2

5 3.7

0
SBI UTI HDFC RELIANCE KOTAK ICICI

Chart no. 18

Out of 31 investors 22.2% investors prefer AMC SBI.22.2% investors prefer UTI, 24.1%
investors prefer HDFC, 20.4% investors prefer RELIANCE,3.7% investors prefer
KOTAK,7.2% investors prefer ICICI.

10.Which sector are you investing in mutual fund?

Type of fund No. of respondents

General 20
Debt fund 17
Banking fund 12
Gold 5
Table no. 19

56
 Type of fund

9%

35% general
22% debt fund
banking fund
gold

33%

Chart no. 19

Out of 31 investors,33%are investing in debt fund ,35%in general , 22%in banking fund &
10% in gold.

11.How would you like to receive the returns every year?

Returns No. of respondents

Dividend payout 23
Dividend re-investment 25
Growth in NAV 6
Table no. 20

57
 Returns
48.1
50
40.7
45
40
35
30
Returns
25
20
15
10 11.1
5
0
dividend payment
dividendre investment
growth in NAV

Chart no. 20

Out of 31investors,48.1%investor are like to receive return dividend re-investment,40.7% are

like to receive dividend payout & are like to receive return on growth in NAV.

58
 CHAPTER 6

FINDINDS&CONCLUSION

6.1 FINDINDS

The study was conducted with the help of primary data which was collected from the
respondents with the help of a Questionnaire. The detailed data analysis was made and the
findings were drawn in the tabular format. The following are the main Findings.

1. According to the survey in Mumbai maximum numbers of investors falls in the age group of
30-40 years. The second most Investors were in the age group of above 40 years and the least
were in the age group of below 30 years.

2. According to my research in Mumbai most of the Investors were Graduate or Post Graduate
and below HSC there were very few in numbers.

3. Around 25% of the investment is been invested by the persons working in Private
sectors, according to them investing in Mutual Funds is more safer as well as more gainer.

4. In annual Income group, between 100,000-500,000 were more in numbers invested in mutual
fund, the second most were in the Income group between Rs.5-10lakh and the least were in the
group of below Rs. 1lakh.

5. According to the survey only 15 % people like to invest in mutual fund.

6. Mostly Respondents preferred low risk while investment, the second most preferred high
return then liquidity and the least preferred company reputation.

7. Among 54 Respondents only 56%had invested in Mutual Fund and 44% did not have
invested in Mutual fund and most of them invest in close ended scheme.

8. Most of the investors did not invested in SBIMF due to higher risk , the second most due to
not any reason and rest due to unawareness.

59
9. Around 46% of the investors came to know the benefits of Mutual Fund from Financial
Advisors. According to the suggestions given by the financial advisors, people use to choose
Mutual Funds Scheme.

10. Investors like to invest in large cap companies where return is comparatively less but risk is
low thus they invest in Reliance, SBI.

11. Out of 31people, 54% preferred One Time Investment and 46% preferred SIP out of both
type of Mode of Investment.

12. Maximum Number of Investors Preferred dividend reinvestment,, the second most preferred
Dividend Payout and then growth in NAV.

6.2 CONCLUSION

The project that I undertook in my MUTUAL FUND provided me a good experience of

Investment Avenues like Mutual Funds, Insurance, Fixed Deposits and related activities. It was a
good experience for me as it helped me enhance my knowledge as well as gave a good industry
exposure for the period which would definitely prove to be very useful at the time of placements.
The complete project helped me gain knowledge and at the same time it was very beneficial for
the company. The study performed using the historical data will help the company in two ways.
Firstly, it would let the company know which of the funds under the given category works well
and which does not. It can design certain strategies for the funds which are still underperforming
and are in their nascent stages.

Secondly, it would help the organization, the financial consultants and the marketing team to
provide a strategy for the investors who can now easily decide where to invest and where not to.
The Market Research performed gave an insight of the actual investors, their investment
behavior and their investment trends which would again help the company to make correct
strategies to attract more customers and provide them with what they are comfortable with.
Summing up, I am thankful to the Company and the Project that gave me an opportunity where I
could learn new things, enhance my knowledge, gain some industry exposure and at the same
time, do something that could be beneficial for the company and the investors.

60
 Chapter 7

RECOMMENDATIONS AND SUGGESTIONS

a. To regulate entry and exit loads effectively as it creates a lot of confusion during actual
settlement of costs and bills.

b. To better operations management so as to reduce the time lag and improve customer
feedback.

c. To improve market penetration by targeting not only metros but mini-metros and smaller
towns more effectively.

d. To come up with more innovative schemes and products so as to expand over the largest
customer base as possible.

e. The most vital problem spotted is of ignorance. Investors should be made aware of the
benefits. Nobody will invest until and unless he is fully convinced. Investors should be made
to realize that ignorance is no longer bliss and what they are losing by not investing.

f. Mutual funds offer a lot of benefit which no other single option could offer. But most of
the people are not even aware of what actually a mutual fund is? They only see it as just
another investment option. So the advisors should try to change their mindsets. The advisors
should target for more and more young investors. Young investors as well as persons at the
height of their career would like to go for advisors due to lack of expertise and time.

g. Mutual Fund Company needs to give the training of the Individual Financial Advisors
about the Fund/Scheme and its objective, because they are the main source to influence the
investors.

h. Before making any investment Financial Advisors should first enquire about the risk
tolerance of the investors/customers, their need and time (how long they want to invest). By
considering these three things they can take the customers into consideration.

61
 i. Younger people aged under 35 will be a key new customer group into the future, so
making greater efforts with younger customers who show some interest in investing should
pay off.

j. Customers with graduate level education are easier to sell to and there is a large untapped
market there. To succeed however, advisors must provide sound advice and high quality.

k. Systematic Investment Plan (SIP) is one the innovative products launched by Assets
Management companies very recently in the industry. SIP is easy for monthly salaried person
as it provides the facility of do the investment in EMI. Though most of the prospects and
potential investors are not aware about the SIP. There is a large scope for the companies to
tap the salaried persons.

62
BIBLIOGRAPHY & ANNEXURE

BOOKS

Rakesh Kumar, Mutual Fund in India, Partridge India, 25 June 2016.

Dr. PreetiSingn, Study of the Performance of Mutual Fund in India, Galgotia Publications
Pvt. Ltd, 2 may 2012.

ARTICLES

Times Of India

Economic Times

WEBSITE

www.amfiindia.com

www.investopedia.com

www.sbimf.com

ANNEXURE

63
1. What is your age group?
o below 18 years
o 18-25 years
o 25-40 years
o Above 40 years
2. Investor qualification?
o Graduate
o Under graduate
o Un graduate

3. What is your occupation?

o Govt. service
o Private service
o Business
o Agriculture
o others

4. Under which range your household income falls?

o Below 1 lakh
o 1-5 lakhs
o 5-10 lakhs
o Above 10 lakhs

5. What kind of investments you prefer the most?

o Saving account
o Fixed Deposit
o Insurance
o Mutual Funds
o Share/Debenture
o Gold/Silver

64
6. While investing your money, which factor will you prefer most?
o Liquidity
o Low Risk
o High Return
o Company reputation

7. Have you ever invested your money in mutual funds?

o Yes
o No

If yes,

a) Where do you find yourself a mutual fund investor?

o Totally ignorant
o Partial knowledge
o Aware only of any specific scheme
o Fully aware
b) In which kind of mutual fund you would like to invest?
o Public
o Private

c) How do you come to know about mutual funds?

o Advertisement
o Peer Group
o Banks
o Financial Advisors

d) Which mutual fund scheme have you used?

o Open ended
o Close ended

65
o Liquid fund
o Mid cap
o Growth fund
o Large fund

If no,

a) If not invested in mutual fund then why?

o Not aware
o High risk
o Not any specific reason

8. Which feature of the mutual fund allure you most?

o Diversification
o Better return and safety
o Reduction in risk and transaction cost
o Regular income
o Tax benefit

9. In which mutual fund you have invested?

o SBI
o UTI
o HDFC
o REALIANCE
o KOTAK
o OTHERS

10.When you invest in mutual funds which mode of investment will you
prefer?
o One time investment
o SIP

66
11.From where you purchase mutual funds?
o Directly from AMCs
o Brokers only
o Brokers/ sub-brokers
o Other sources

12.Which AMCs you prefer the most?

o SBI
o UTI
o HDFC
o REALIANCE
o KOTAK
o OTHERS

13.Which sector are you investing in mutual fund?

o General
o Debt fund
o Banking fund
o Gold

14.How would you like to receive the returns every year?

o Dividend payout
o Dividend re-investment
o Growth in NAV

67
68