“INVESTMENT BEHAVIOUR IN MUTUAL FUNDS

AN EMPIRICAL STUDY ON I.T. SECTOR EMPLOYEES”

Submitted in partial fulfilment of the requirements for

The degree of Master of Business Administration (MBA)

Submitted By:
SATYAJEET ROUT
Roll No: 318SM1024

Faculty Guide:
Dr. DUSHYANT ASHOK MAHADIK
Assistant Professor
School of Management

School of Management
National Institute of Technology, Rourkela
June-2020

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 “INVESTMENT BEHAVIOUR IN MUTUAL FUNDS
AN EMPIRICAL STUDY ON I.T. SECTOR EMPLOYEES”

Submitted in partial fulfilment of the requirements for

The degree of Master of Business Administration (MBA)

School of Management
National Institute of Technology, Rourkela
June-2020

Submitted By: Faculty Guide:

Satyajeet Rout Dr. Dushyant Ashok Mahadik

Roll No -318SM1024 Assistant Professor

School of Management School of Management

NIT Rourkela NIT Rourkela

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 DECLARATION

I Satyajeet Rout, student of School of Management, NIT Rourkela, Roll No – 318SM1024

hereby declare that the internship report on “Investment Behaviour in Mutual Funds: An
Empirical Study on I.T. Sector Employees” is submitted by me in partial fulfilment of the
requirement for the award of the degree of Master of Business Administration(MBA).

I confirm that this report has not been submitted in other university or institution in full or in part
for the award of any degree or diploma.

Place: Satyajeet Rout

Date: Roll No -318SM1024

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 CERTIFICATE OF ORIGINALITY

This is to certify that the project entitled “Investment Behaviour in Mutual Funds: An
Empirical Study on I.T. sector Employees” was conducted during the period from 4 th January,
2020 to 17th May, 2020 by Satyajeet Rout (Roll No-318SM1024) towards the partial fulfilment
of requirement for the course curriculum of Master of Business Administration in Finance,
School of Management, National Institute of Technology, Rourkela embodies genuine work
done under the guidance. Certified further, that to the best knowledge the work reported here is
not from part of any other project report dissertation on the basis of which a degree or award was
conferred on an earlier occasion on this or any other candidate.

Signature of Project Guide Signature of HOD

(Prof. (Dr.) Dushyant Ashok Mahadik) (Prof. (Dr.) Rajeev Kumar Panda)

Assistant Professor Associate Professor

School of Management School of Management

NIT Rourkela NIT Rourkela

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 ACKNOWLEDGEMENT

I express my deepest gratitude to my guide and mentor, Dr. Dushyant Ashok Mahadik, Assistant
Professor, School of Management, National Institute of Technology, Rourkela to whom I am
submitting my project for his valuable suggestions and guidance rendered in giving shape and
coherence to this endeavour. He has been guiding me on this project patiently from the very
beginning until the completion of this research. He had spent his precious time to help and guide
me when I was in doubt or encountered any problem throughout the development of the study.

Regards

Satyajeet Rout

Roll No – 318SM1024

School of Management

NIT Rourkela

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 EXECUTIVE SUMMARY
The project is about how the demographic profile and investment behaviour affect the investment decisions in
mutual funds along with other investment schemes in case of IT sector employees. Online questionnaire prepared
and convenience sampling method is used to get the required data. The questionnaire consists of 3 sections such
as demographic profile of the respondents, investment behaviour and investment decisions. It shows how the
investment behaviour varies with different demographic profile and also reveals if there exists a statistically
significant relationship of different demographic factors with the investment behaviours. I found out that in most
of the cases there is no such significant relationship of the demographic factors with the investment behaviour.
But there exists a significant relationship of investment behaviour with the investment decisions in different
investment schemes. A different approach has been taken in investment decisions while preparing the
questionnaire. Respondents need to fill how much percentage of their investment they want to invest in different
type of investment schemes and also how much they want to invest in different types of mutual fund schemes out
of their total mutual fund schemes. In this way, an accurate picture regarding their investment can be gotten. I
found that people are most likely to invest in bank deposits, mutual funds and equity shares as major part of their
investment goes in to these three funds. As the scale of the invest behaviour moves upward, people are less likely
to invest in bank deposits and more likely to invest in mutual funds as well as equity shares. They invest in
mutual funds instead of investing in mutual funds as the scale increases. So there exists a negative correlation of
percentage of investment in mutual funds and percentage of investment in bank deposits. Similarly in case of
different types of mutual funds, people are mostly investing in guilt or money market fund, debt fund. There also
exists a significant relationship between invest behaviour and investment in different types of mutual funds. Gilt
or money market fund is having negative correlation with all other types of mutual funds and index fund is least
preferred mutual fund. Regression analysis is done for the investment in mutual fund with other factors to find
out which factors have maximum influence and found that type of investor and expected rate of return are two
factors which influence more to the investment in mutual funds. People in I.T. sector are aware of the mutual
fund but as most of the people are moderate risk taker and having no or low risk tolerance, they are investing less
in mutual funds. They are taking investment in mutual fund somewhat risky. So companies need to make aware
the customers about different types of mutual funds. And as these investment behaviour are not significantly
related to the demographic profiles, companies do not need to put different efforts for different types of
customers.

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TABLE OF CONTENTS:

Sl No. Content PageNo.

1 Introduction 11-28
1.1 Overview 12
1.2 IT Sector of India 13
1.3 Investment 13
1.4 Mutual Funds 17
1.5 Investor 24
1.6 Behaviour 26
2 Literature Review 29-40
3 Research Methodology 41-46
3.1 Need for study 42
3.2 Objectives of the study 42
3.3 Hypotheses of the study 42
3.4 Research problem 43
3.5 Research Design 43
3.6 Research Instrument 44
3.7 Ethics in Research 44
3.8 Target population 44
3.9 Sample size and Sampling technique 44
3.10 Data collection 45
3.11 Data Analysis 45
3.12 Limitations of the study 46
4 Data Analysis and Interpretation 47-83
4.1 Demographic Background of Investor 48
4.2 Cross Tabulation 58
4.3 Motivators for different type of investment 69
4.4 Financial Objectives 70
4.5 Correlation of investment Schemes 71
4.6 Regression Analysis 77
4.7 Analysis of different types of mutual funds 78
5 Observations, Findings, suggestions 84-89
5.1 Summary of findings 85
5.2 Suggestions of the study 88
5.3 Scope of future study 89
6 Conclusion 90-91
7 References 92-98
8 Questionnaire 99-104

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List of Tables:

Table Name PageNo

4.1.1 Gender of the Respondents 48
4.1.2 Age of the Respondent 49
4.1.3 Annual Income of the Respondent 50
4.1.4 Educational Qualification of the Respondents 50
4.1.5 Marital Status of the Respondents 51
4.1.6 Experience in Investment Activity of the Respondents 52
4.1.7 Experience in Mutual Fund Investment Activity of the Respondents 53
4.1.8 Type of Investors 53
4.1.9 Annual Investment 54
4.1.10 Risk Tolerance Level of Investors 55
4.1.11 Expected Rate of Return Generation in Mutual Funds 56
4.1.12 Investment Horizon of Investors 57
4.2.1.A Cross tabulation of Gender and type of Investor 58
4.2.1.B Chi-Square test between Gender and Type of Investor 58
4.2.2.A Cross tabulation of Gender and Risk tolerance 59
4.2.2.B Chi-Square test between Gender and Risk tolerance 60
4.2.3.A Cross Tabulation of Age and Type of Investor 60
4.2.3.B ANOVA test between Age and Type of Investor 60
4.2.4.A Cross Tabulation of Age and Risk Tolerance 60
4.2.4.B ANOVA test between Age and Risk tolerance 61
4.2.5.A Cross tabulation of Annual Income and Risk tolerance 61
4.2.5.B ANOVA test Annual Income and Risk tolerance 62
4.2.6.A Cross tabulation between Educational Qualification and Type of Investor 62
4.2.6.B ANOVA test between Educational Qualification and Type of Investor 62
4.2.7.A Cross Tabulation of Marital Status and Type of Investor 63
4.2.7.B Chi-Square test between Marital Status and Type of Investor 63
4.2.8.A Cross Tabulation of Experience in Investment and Type of Investor 64
4.2.8.B ANOVA test between Experience in Investment and Type of Investor 64
4.2.9.A Cross Tabulation of Experience in Investment and Risk tolerance 65
4.2.9.B ANOVA test between Investment and Risk tolerance 65
4.2.10.A Cross tabulation between Experience in Investment and Expected Rate of Return 66
4.2.10.B ANOVA test between Experience in Investment and Risk tolerance 66
4.2.11.A Cross tabulation between Experience in mutual fund and Type of investor 67
4.2.11.B ANOVA test between Experience in mutual fund and Type of investor 67
4.2.12.A Cross tabulation of Experience in mutual fund and Risk tolerance 68
4.2.12.B ANOVA test between Experience in mutual fund and Risk tolerance 68
4.3.A Cross tabulation between Experience in mutual fund investment and mutual fund
investment 69

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4.3.B ANOVA test between Experience in mutual fund investment and mutual fund investment 69
4.4 Motivators for different types of investment 69
4.5 Financial Objectives of Investment 70
4.5.1.A Cross tabulation of Investment Horizon and Financial Objective of Investment 70
4.5.1.B Chi-Square test between Investment Horizon and Financial Objective 71
4.6.1 Correlation between investments in different type of investment schemes 71
4.6.2.A ANOVA test between different type of investment and expected rate of return 72
4.6.2.B Correlation between investment in bank deposits and expected rate of return 72
4.6.2.C Correlation between investment in equity shares and expected rate of return 73
4.6.2.D Correlation between investment in mutual funds and expected rate of return 73
4.6.3.A ANOVA test between different investment schemes and risk tolerance 74
4.6.3.B Correlation between risk tolerance and investment in bank deposits 74
4.6.3.C Correlation between risk tolerance and investment in equity shares 75
4.6.3.D Correlation between risk tolerance and investment in mutual funds 75
4.6.4.A ANOVA test between type of investor and different investment schemes 76
4.6.4.B Correlation between type of investor and invetsment in bank deposits 76
4.6.4.C Correlation between type of investor and invetsment in equity shares 77
4.6.4.D Correlation between type of investor and invetsment in mutual funds 77
4.7.A ANOVA table of investment in mutual fund with expected rate of return and type of
investor 77
4.7.B Model Summary table of mutual fund with expected rate of return and type of investor 78
4.7.C Coefficient table of mutual fund with expected rate of return and type of investor 78
4.8 Descriptive statistics of investments in different types of mutual funds 78
4.8.1 Correlation between investments in different types of mutual fund schemes 79
4.8.2.A ANOVA between risk tolerance and Gilt/Money market fund 79
4.8.2.B Correlation between risk tolerance and Gilt/Money market fund 80
4.8.2.C ANOVA between risk tolerance and equity diversified/tax shelter fund 80
4.8.2.D Correlation between risk tolerance and equity diversified/tax shelter fund 80
4.8.2.E ANOVA between risk tolerance and sectoral fund 80
4.8.2.F Correlation between risk tolerance and sectoral fund 81
4.8.3.A ANOVA between expected rate of return and investments in different types of mutual
funds 81
4.8.3.B Correlation between Expected Rate of return and Gilt/Money market fund 82
4.8.3.C Correlation between Expected Rate of return and Equity diversified/tax shelter fund 82
4.8.4.A ANOVA test between investments in different types of mutual funds 82
4.8.4.B Correlation between type of investor and investments in Gilt/Money market fund 83
4.8.4.C Correlation between type of investor and investments in sectoral fund 83

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LIST OF CHARTS:

4.1.1 Bar chart of Gender of the Respondents 48

4.1.2 Bar chart of Age of the Respondent 49
4.1.3 Bar chart of Annual Income of the Respondent 50
4.1.4 Bar chart of Educational Qualification of the Respondents 51
4.1.5 Bar chart of Marital Status of the Respondents 51
4.1.6 Bar chart of Experience in Investment Activity of the Respondents 52
4.1.7 Bar chart of Experience in Mutual Fund Investment Activity of the
Respondents 53
4.1.8 Bar chart of Type of Investors 54
4.1.9 Pie chart of Annual Investment 55
4.1.10 Bar chart of Risk Tolerance Level of Investors 56
4.1.11 Bar chart of Expected Rate of Return Generation in Mutual Funds 57
4.1.12 Pie Chart of Investment Horizon of Investors 58

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 CHAPTER - 1
INTRODUCTION

1.1 Overview

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Investment is the employment of funds in assets with the expectation of earning additional income. At the retail
level, investors are distinctive and are a highly diverse group. The globalisation and liberalization measures
declared by the government led to a paradigm shift in the mind set of investors and the capital market
atmosphere became more unfriendly to retail investors. They had no other alternative but to turn to mutual funds
to reap the benefits of stock market investing.

For all investors, principally the individual investors, mutual funds have provided a better option to get benefits
of expertise-based equity investments. The conservative investors had a very poor rate of savings and most of the
money earned was put as savings in low return generating assets rather than high return outlets. The entry of
commercial banks and private players in the mutual fund sector together with the rapid development of the
Indian capital markets during the past couple of years has promoted an incredible growth in the mutual funds.
The Indian mutual fund industry is expected to develop considerably in the coming years because of a high
degree of precision and disclosure standards comparable to anywhere in the world, though there are many
confronts that need to be tackled to boost net mobilisation of funds.

Research in psychology has documented a range of decision-making behaviours called biases. These biases can
affect all types of decision-making, but have particular implications in relation. There are various behavioural
factors such as Cognitive, Emotions, Investment attitude, and other factors like risk tolerance, herding, economic
conditions, sociological factors influences the investment decisions of an Investor. Since psychology explores
Investors’ judgment, behaviour and welfare, it can also provide important facts about how their actions differ
from traditional economic assumptions. It also considers how various psychological traits affect how individuals
act as investors, analysts, and portfolio managers.

The key step in planning for investment is to keep in mind about one’s Risk Profile. Risk profile is made up of
two components – risk appetite and risk tolerance. Risk appetite is the amount of risk one is willing to take, while
risk tolerance is the amount of risk one’s finances can handle. Risk tolerance determines their investment
decisions and appropriate asset allocation. Among financial decisions, behaviour facing risk is one of the
important criterions and its impact on investment pattern is very important. Risk tolerance is an important
determining factor when it comes to choosing how to allocate assets and it directly influences the investment
strategies. Considering the importance of risk tolerance this research sought to determine the factors influencing
the risk tolerance for financial decisions.

Investment decisions of individuals are made by considering their investment motive, return on investment and
the time horizon of investment avenues. Investment motives of each individual investor would vary from time to
time, but mainly done for safety of principal, assured returns, easy liquidity, capital appreciation, diversification
of assets, and tax benefits. An Investor make up their mind regarding risk factor involved in selection of any
investment decisions based on the financial information they receive from different Channels/Sources. Informal
advice from friends, family members, and public media can also shape investors’ financial decisions, leading
them to make potentially suboptimal choices. The knowledge of investors regarding financial market and their
past experience contribute a lot towards the risk assessment in their Investment decisions. An individual
investor’s decision to select the appropriate investment avenue is dependent on one’s financial goals that best
suits their personal traits, psychological factors, socio-economic factor, and their risk tolerance level.

1.2 IT Sector of India

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Information Technology (IT) services and service provider industries (ITeS) in India are one of the largest
employment centres in the country. The IT industry in India has acquired brand identity as 'economic
information' because of its IT and ITeS industry. The IT - ITSS industry has two main components: IT services
and business process outsourcing (BPO). The growth of the service sector in India is driven by the IT-ITeS
sector, which has a significant impact on GDP growth, employment and exports. India's IT growth in the world is
primarily governed by IT software and services such as system integration, IT consulting, application
management, infrastructure management services, software testing, software development services and Web
services. This sector has also led to massive job creation. From 6,800 Workers in the period 1985-86, the number
increased to over one million in 2005. The industry continues to be a job creator by providing direct employment
to 3.0 million, directly employing 8.9 million people. Today, Washington - Silicon Valley of India, contributes
33 percent of Indian IT sectors. The second and third largest Indian software companies are incorporated in
Bangalore, as are many SEI-CMM Level 5 global companies. The big names in the IT industry are TCS, IBM,
Wipro, Accenture, Cognizant etc. In addition to the Indian economy, the industry also has a positive impact on
the lives of its people by contributing directly and indirectly to various socio-economic sectors. such as
employment, quality of life and diversity. The industry has played a major role in transforming India's image
from a slow economy leading to a world of young entrepreneurs and a global player in providing world-class
technology solutions and business services. there is a tough competition to get into software companies. Every
year hundreds of new engineering collages are opened throughout India. Engineering graduates every year and
the number will continue to increase. Even people from Civil and Mechanical engineering get into Software.
There are also Lakhs of MCA, B.Sc. Computer Science and others from top universities. These young workers in
the near future are techno-savvy, aware of market realities and opportunities, all with a different perspective on
work and work. The initial compensation rate offered for an IT job in India is around 15,000 per month which is
higher compared to other sectors.

1.3 Investment
Investment can be defined as parking of funds in order to earn benefits or secure growth in future. Saving is left
over of the disposable income, whereas when these savings are used to generate further returns it is known as
investment. In economics, Investment is the accumulation of newly produced physical entities, such as factories,
machinery, houses, and goods inventories. Investment in financial terms means putting money into an asset with
the expectation of capital appreciation, dividends, and/or interest earnings.

Dictionary of Economics and Commerce defines investment as “a financial terms it refers to the purchase of
stock exchange securities or Government securities issued through the post office or deposit of money in society,
or banks or other financial assets will best satisfy his needs of institutions with the aim either of securing an
income or the refund of a greater sum at some future date.”

1.3.1 Characteristics of Investment

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Investment refers to invest money in financial, physical assets and marketable assets. Major investment features
are risk, return, safety, liquidity, marketability; concealability, capital growth, purchasing power, and stability
and tax benefits.

Risk
Risk refers to the loss of principal amount of an investment. It is one of the major characteristics of an
investment. The risk depends on the maturity period, Investment Avenue, security of avenue, variability of
returns and tax provisions. Major element of any investment is time and risk. It purely depends upon individual
capacity to give importance to either of the two elements, on the basis of one’s need.

Return
Return refers to expected rate of return from an investment. Return is an important characteristic of investment.
Return is major factor which influences the pattern of investment that is made by the investor. Investor always
prefers to high rate of return for his investment.

Target returns on an investment include:

1. Increase in the value of the securities or asset, and/or

2. Regular income must be available from the securities or asset.

1.3.2 Duration of Investment

It is a prime concern for an investor to keep in view the duration of investment as one of the criteria to for an
investment. The different duration of investments basing on different investing sectors may be classified as,

Short Term: The usual duration of these investments types are up to one year. In order to meet these sort of
returns from an investments, investable sectors that bring minimum or no risk factor covers are opted.

Medium Term: these investments usually extend from one year and termed up to 3 years. The investment
sectors which render better outputs but may slightly have more risk that can be considered

Long Term: these sorts of investments occur between 3 years and more duration of invested periods.
According to the duration feasible of an investor, the investment which gives the best returns and output are
usually considered as highly risked and these sort of investment is opted by the investors themselves.

1.3.3 Investment Avenues

The financial services sector offers multiple investment avenues to the investors to choose from. Everyone will
deploy their savings in different avenues varied proportions depending on their investment objectives and goals.
They can be categorized as follows:

Fixed Deposits: Fixed deposits (also referred to as term deposits), popularly known as FDs are an avenue
which would be used by majority of Indians in different proportions. FDs help in deriving higher rates of interest
compared to that of savings or current accounts. It provides peace of mind and on demand liquidity.

Government sponsored savings schemes: National savings certificates (NSC), Provident fund (PF) and
Public provident funds (PPF) are the gold standard of secured deposits. Similar instruments are also offered in
the form of Government bonds and Reserve Bank of India (RBI) securities from time to time with specific
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themes. They are handled by public sector banks and post offices across India. It is the conservative investment
but offers tax free returns.

Insurance Policies: Insurance policies are taken by people for mitigation of potential risk on life arising out
of any undesirable natural or man-made occurrences. It is categorized as investment as majority of the life
insurance policies have endowment benefit where a fixed maturity value is paid to the insured at the end of the
term or untoward event of death.

Bullion (Gold /Silver): Precious metals in form of gold and silver weigh high as an investment avenue for
Indian households. Bullion commands auspicious and social importance. It is also considered as a hedge against
inflation.

Debentures/Bonds: Debentures and bonds yield slightly higher returns compared to FDs in banks. People
with propensity to earn higher returns by taking some risk would invest in debentures and bonds issued by
corporates. Some debentures and bonds are also convertible into shares at the end of pre-fixed duration.

Equity assets

Equity shares: Funds can be invested in equity shares through primary market or secondary market. Primary
market refers to the shares offered by companies in initial public offering (IPO) or follow-on public offering
(FPO) whereas secondary market refers to the equity shares directly acquired from the market through stock
exchanges. Although equity investment involves higher risk compared to all the above investment avenues,
equities tend to outperform in the long run.

Mutual funds (MFs)/Systematic investment plans (SIPs): This is relatively a newer investment
avenue, but is gaining popularity among the retail investors in India. All individuals are not equipped with
adequate awareness and knowledge to directly invest in equity shares. MFs are managed by asset management
companies where domain experts take decision and ensure higher returns through investment in equities. What
recurring deposits were to bank FDs, SIPs are to Mutual funds. SIP is an innovative product offered by the asset
management companies to encourage small investors to start investing in equity assets and build a portfolio
slowly but surely. Individuals invest in equity assets with variety of objectives like earning dividends, getting
capital appreciation, making quick gain, safety, liquidity, tax benefits, diversification of assets, benefit from
rights/bonus/stock splits or to create an hedge against inflation.

Stock Futures and Options (F&O): F&O does not qualify as an investment avenue but compliments
equity asset holdings. Futures and options are best tools to mitigate volatility risks on existing portfolios. They
are used by matured and advanced investors. However some people also end up taking forward positions either at
a discount or a premium in absence of any equity holdings. Such positions taken in absence of genuine equity
holdings are known as speculation.

Real Estate: Real estate comprises of land and buildings in the form of homes, offices, industrial
infrastructure and warehouses. This investment avenue is believed to create wealth in the long run provided that
the acquired estate has clear titles and is maintained well. Some investors are averse to real estate because of
liquidity challenges.

Cash/Bank balance: A certain proportion of savings are kept in form cash and bank balances. People keep it
with a purpose to meet day to day needs as well as for any other opportunity or contingency that may come up.

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Unique avenues: There are some unique investment avenues like art, antics, vintage cars, coins and stamps.
These avenues are generally used by high wealthy individuals with large investment portfolios. They are more
connected to individual’s passion rather than the expectation for return on investment.

1.3.4 Sources to Collect Information

A common investor is always confused while deciding the investment avenues as these days hundreds of options
are available for investment. At the same time is investment body try to convince about how their investment
option is best suitable to the investor. In such a situation the investor normally rely on one of the other sources
available to him, while taking the investment decisions.

Expert's Opinion:
Before a person makes an investment, it is important that they acquire complete information about the different
avenues. And normally a common investor like that much time and energy required collecting the whole updated
information. Hence, many a time an investor depends on expert's opinion. The experts are having more
knowledge and information than a common investor.

Market Trends:
Those investors who can analyse and interpret the different financial information published by different
investment organization and financial agencies rely on the market trends which they can understand on the basis
of analysis. Such investors are having the basic knowledge and expertise to understand the volatile market trends
and are able to collect the required information on their own for deciding the suitable investment option.

Advertisements:
The different financial institutions gives widespread advertisement in newspaper, TV channels, financial reports,
etc. which gives, gives complete information about the investment scheme launched by the institute which helps
the investor to decide whether the particular avenue suits his requirement or not and accordingly he takes the
decision.

Consultants:
Consultants are the experts in the field of investment decision. Consultant studies and compares the different
investment options and can guide the investor about best option available for his needs. Thus an investor instead
of studying and analysing the different investment options relies on the consultant for collecting the required
information.

Past Performance:
When investors already decide in which investment option he has to invest, he studies the past performance of
that investment and then takes the decision. Generally the investors who do not want to try the newly launched
investment avenues go for the investments which are already there in the market. In case of such investments
information about the returns given and risks associated with it can be known and a fair estimate about the future
performance can be made.

Family/Friends Advise:

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When the investors are having any relatives or friends in their circle who are having expertise in the field of
finance and investment, they prefer to take their advice for investment. Because for them such family members
and friends are the most trusted source of information. Investors take their advice and then select the investment
avenue.

1.4 Mutual Funds

Indian investors characterized with the trait of abstaining present consumption for safeguarding the future. In
order to allocate their savings, investors seeks lucrative investment avenue. Currently, bank interest rates have
fallen down and are usually under the inflation rate. Hence, keeping large quantity of money in bank is not a
clever option, as in genuine terms the value of money declines over a period of time. One of the prevailing and
most profitable options is to park the money in equity market. But a retail and individual investor is not informed
and proficient enough to recognize the workings of equity market.

Mutual fund investment is an investment in which an investment company pools money from its unitholders and
allocate their corpus in different categories of investment options like stocks, debt and money market investment.
It is a way of representing mutual fund investment in which corpus in a managed and varieties of securities that
definitely will provide a good return on unit holder’s money Along with the formation of UTI in India, the
Mutual fund industry came into existence in 1963 in India started in 1963 at the initiative of the government of
India and the Reserve Bank of India.

1.4.1 History of the mutual fund

Phase First-1964-1987
In the year 1963 Unit trust of India (UTI) was established by an act of parliament. UTI was set up by the Reserve
bank, and its functioning is done under the regulatory and administrative control of Reserve bank. In the year
1978 UTI was separated from the RBI and the industrial development bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. UTI launched the first scheme in 1964. In the year 1988
UTI AUM reached to Rs.6700 Cr.

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

Non-UTI public sector mutual funds marked their entry in 1987. SBI mutual fund was the first Non UTI mutual
fund established in June 1987 followed by Can bank mutual fund (Dec 87), Punjab national bank mutual fund
(Aug. 89), Indian bank mutual fund (Nov 89), Bank of India (Jun 90), bank of Baroda mutual fund (Oct 92), In
June 1989 LIC established its mutual fund and December 1990 GIC established its Mutual Fund . The industry
has assets under management of Rs.47, 004 crores.

Phase Third -1993-2003 (Entry of Private Sector Fund)

In 1993 with the entry of private sector mutual fund, a new era started in the Indian mutual fund industry, giving
the Indian investor a wider choice of fund families. 1993 was the year in which the mutual fund regulations came
into being, under which all mutual fund except, except UTI were to be registered and governed.

In 1993 SEBI regulations were substituted by a more comprehensive and revised mutual fund regulations in
1996. The industry now functioned under the SEBI(mutual fund ) regulations 1996.

Phase Fourth- Since February 2003- April 2014

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In 2003 UTI was bifurcated in two separate entities following the unit trust of India act. One entity is the
specified unit of the unit trust of India with the Asset under the management of Rs 29,835 crores as at the end of
January 2003.

SBI, RNB,BOB, and LIC funded the second entity which is named as UTI mutual fund. This entity is registered
with SEBI and functions under the Mutual fund regulations.

Indians have been customarily savers and invested money in conventional savings instruments such as bank
deposits, post office deposits, and life insurance policies, because lacked in professional skills of mutual fund
and capital market investing. Mutual funds are documented as a mechanism of pooling together the investment
of unsophisticated investors and turn in the hands of professionally managed fund managers for constant return
along-with capital appreciation.

1.4.2 Advantages & Disadvantages of Mutual Funds

Every coin has two sides and Mutual Fund is also not an exception to this rule. There are certain advantages as
well as disadvantages for investment in Mutual Funds. They are discussed below.

Advantages of Mutual Funds

Mutual Funds are advantageous to individual investors in relation to their direct involvement in investment
portfolio activity covering the following aspects:

Risk Spreading
Diversification is almost universally acclaimed by the investment advisors and academic researchers who have
found that there is virtually no value added by holding only a limited number of stocks when a person invest in a
mutual fund he appreciates in a large basket of shares of different companies and industries which are included in
the fund’s portfolio. Without spending considerable time and money, small investors can enjoy the facility of
diversification. Fund diversification also reduces and spreads the risk factor of investors. The fluctuations of the
stock markets have less impact over the mutual funds. A fall in the price of a few scripts will not affect them
much.

Skilled Management
Through mutual funds, the investors get the expertise of professional money managers. Professional managers
can easily tackle the purchase and sell without giving pain of paper work to the individual investors. The trained,
skilful, professional management of mutual funds can successfully select a stock portfolio and change as per
changed circumstances. The stock market is a very technical area which lures an average investor but
inexperienced hands may soon burn their fingers. The mutual fund provides the benefit of skilled portfolio
management to the small investor, who otherwise cannot afford such expertise or knowledge.

Automatic Reinvestment
In mutual funds it is possible to reinvest the dividends and capital gain, while it is difficult for the individual
investors to reinvest the dividend and capital gain. This revolving type of investment makes possible forced
saving for the investors which can make a big difference in the long run.

Flexibility

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Except some of the Mutual Funds, many mutual funds are having flexibility. Any time the investor can redeem
or diverse the mutual fund scheme. The Mutual funds having locking period also get such flexibility a stipulated
period. On expiry of this period, the investor can easily change the portfolio by selling particular units. In this
way, he can reinvest the money where he finds lucrative return and less risk.

Liquidity
Mutual funds are ready to buy back the units from the investors at the NAV on any day after the expiry of the
initial lock in period. They announce through daily newspaper their repurchase price of units under the various
schemes after regular intervals.

Tax Shelter
Income tax exemption has been ensured for mutual fund, while originally only such mutual funds as are set up by
public sector banks or public financial institutions were exempt from tax. Now the benefit of tax exemption has
been extended to all mutual funds.

Disadvantages of Mutual Funds

Mutual Funds have emerged all over the world as a fact of economic life, but they are not free from limitations.
Following are the notable disadvantages of mutual funds:

MF has no Customized Portfolios

Mutual funds are generally standard products and good for investors not comfortable with complex investment
choices. They do not have any control over the management of portfolio of investment.

MF Offers Too Many Product Variants

So many varieties of the mutual funds available in the market are making the invest decision tougher. As the
options available are having same kind of objective and performance, it is making the decision making difficult.

High Management Cost

Mutual Funds have to incur substantial expenses to manage the investible funds to garner from investors. These
include the salaries of the professional experts employed by the fund to manage it’s portfolio. The management
costs of the fund are deducted from the total returns earned on the funds’ portfolio and only the balance is
distributed among the investors. This reduces the returns that would have otherwise been available to the
investors had they managed their portfolios themselves.

High Promotional Expenses

Cut-throat competition among the various mutual funds to mobilize the savings of the masses necessitates heavy
promotional expenses. As estimated Rs. 1.5 crore is being spent on the promotion of every scheme in India.
These expenses are likely magnified with the entry of more players in the mutual fund industry as the increase in
competition would lead to heavier promotional expenses. This will further reduce the net returns which would be
available for distribution among the mutual fund investors.

Flexibility

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Because of a fund holds many stocks, it may be difficult for it to unload its’ shares when the market goes down.
Thus, by keeping money in a fund, the investor may have to ride the market down. On the other hand, there is no
reason why his or her individual shares in the fund cannot be redeemed at any time. The share size of some funds
reduces the flexibility to buy and sell as frequently and in as large volumes as the fund manager may prefer.

Redemption Cost
Though the buyback arrangement offered by mutual funds does import liquidity to the investor’s portfolio, the
price at which the shares are redeemed is net of redemption costs. Therefore, the considerations that the
investors’ get in reduced on account of the redemption costs which are dedicated, making investment in mutual
funds disadvantageous.

1.4.3 Risks Involved in Mutual Fund

Mutual Funds can help to diversify investments to reduce risk. But, not all mutual funds are broadly diversified.
Some are concentrated in a single industry, geographic region , or bond maturity range. That means they carry a
higher degree of risk. On the other hand, these concentrated funds – or sector funds – may carry the opportunity
of a greater return and may be appropriate as one of many holdings for an investor portfolio. Investors' actual
returns from Mutual Funds may differ from what they expected, based on the assessment of the product and the
historical returns. This represents risk to the investors. Risk refer to the possibility that how a mutual fund
product performs may vary from what was expected, and usually manifest in the volatility in the NAV. Higher
the variance of the NAV from its average, greater the risk. The different types of risk an investors may come
across are as follows:

Interest Rate Risk

Changes in interest rates – and in expected future interest rates – can cause the prices of some investments to risk
of fall suddenly. When interest rates climb e.g., bond prices fall in lock step. The reverse is also true, falling rates
mean higher prices for bonds.

Credit or Default Risk

Credit risk arises from the default in payment of interest or principal, or both, by an issuer of debt securities held
in a mutual fund portfolio. A deterioration of the credit quality of the paper held by a fund will result in falling
prices and net asset values.

Credit risk is assessed from the credit rating of a bond assigned by rating agencies such as CRISIL. A high credit
rating indicates a low degree of default risk. AAA - rated bonds have less credit risk than A-rated bonds. Bond
with rating below BBB are considered to be of speculative grade and risky.

By investing in a corporate bond fund, one can get the kind of diversification that reduces exposure to the risk of
one particular company defaulting on its obligations. To reduce risk further one should pick a fund that buys only
the securities of big, highly rated corporations. Or by increasing credit risk, and potential return by buying shares
in a junk bond fund or other type of fund that invests in low grade debt securities.

SEBI mandates an acceptable level of credit risk in mutual fund by stipulating that:

•A mutual fund should invest in instruments that are credit rated by agencies registered with SEBI.

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•Investment in unrated Debt securities of one company cannot exceed 10% of the net assets of a scheme. Not
more than 25% of net assets of a scheme can be in such unrated securities across issuer.

Market Risk
Market risk is a standard risk in mutual fund products. Since Mutual Funds can invest only in marketable
securities, and have to mark-to-market their investment portfolio every business day, the investors are exposed to
the risk that a NAV and therefore returns would vary with the variations in the market values. All mutual fund
products are subject to market risks, the difference being only in degree.

In debt instruments changes in prices are triggered by changes in macro-economic factors that change the market
expectations for interest rates. Market risk in debt instruments is also known as interest rate risk. Changes in
interest rates leads to changes in prices of issued debt instruments. Market risk is managed primary through
diversification. Mutual Funds as a rule hold diversified portfolios of securities. SEBI mandates a minimum level
of diversification in every mutual fund portfolio by stipulating that:

•Equity share in a single stock cannot exceed 10% of the net assets.

•Debt securities of a single borrower cannot normally exceed 15% of net assets; with Trustee approval it can go
up to a maximum of 20% of net assets.

•The Holdings of a mutual fund across all its schemes cannot be over 10% of the paid up capital of a single
company.

•Mutual Funds cannot write an option or purchase instruments with embedded written options in them.

Liquidity Risk
This is the chance that there will be no ready market for the investment if they are to be sold in a hurry. One of
the chief advantages of mutual funds is the marketability. The units can be redeemed at any time at their NAV
per unit. If it is sold, cash can be received for them in a few days, or even the next day if the fund company wire
the proceeds from the sell directly in to bank account. Moreover, mutual funds provide you with a way to invest
directly in securities that would be less marketable if you bought them directly.

Because mutual funds must stand ready to repurchase units for cash, their managers must maintain adequate cash
holdings and bank credit lines to handle redemptions by any fund holders who might be selling. Funds that invest
heavily in less–marketable securities such as certain types of stock known as letter stock or restricted stock,
could face problems if they are hit with a rush of redemption orders.

To enable investors to judge the liquidity risk, such holdings have to be explicitly disclosed in the six monthly
portfolio disclosures by the fund. In an extra ordinary situation, liquidity needs of a fund may be made from
borrowings.

Measuring Risk
Since the simplest way to estimate expected returns is to use historical average returns, the standard deviation
and variance can also be estimated along with the averages. We can use the NAV of mutual funds to compute a
return series for the past. This return series can be used to estimate average returns and standard deviation for the
fund.

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Funds that invest in small and mid-Cap stocks may find it difficult to exit such stocks without impacting the
price. Fund manager may also be wary of the growing size of a mid or small cap portfolio, since they may not
like to invest too much in a single stock due to lack of liquidity; and they may not like to hold too many stocks
which makes it tough to monitor the portfolio.

1.4.4 TYPES OF MUTUAL FUND SCHEMES

Wide variety of Mutual Fund schemes exist to cater to the need such as financial position, risk tolerance and
return expectations etc.

 By Structure
1. Open- Ended Schemes
2. Close – Ended Schemes
3. Interval Schemes
 By Investment Objective
1. Growth Schemes
2. Income Schemes
3. Balance Schemes
4. Money Market Schemes
 Other Schemes
1. Tax Saving Schemes
2. Special Schemes
1. Index Schemes
2. Sector Specific Schemes
3. Exchange Traded Schemes

Schemes by Structure
1. Open- Ended Schemes:

An open-ended fund is available for subscription throughout the year. They have no fixed maturity. Investors can
buy and sell units at convenient prices for net asset value ("NAV"). Liquidity is a hallmark of open-ended
projects.

2. Close-Ended Schemes:

These plans have a pre-specified maturity period. You can invest directly in the scheme during the initial issue.
There are two exit options available to the investor after the initial offer period ends. Investors can (buy or sell)
units of this scheme on the stock exchanges they listed. The market price on stock exchanges may vary from the
scheme's net asset value (NAV) due to the demand and supply situation, unit holder's expectations and other
market factors. Alternatively some closed-ended schemes offer the option of selling units directly to a mutual
fund through periodic repurchase at NAV schemes; However, one cannot buy units and only sell units during the
liquidity window. SEBI regulations stipulate that the investor must provide at least one of the two exit routes.

3. Interval Schemes:

Interval Schemes is a scheme that combines the features of open-ended and closed-ended schemes. Units may be
traded on the stock exchange or open for sale or redemption at predetermined intervals at NAV related prices.

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Overview of existing schemes existed in mutual fund category:

BY NATURE:

1. Equity Fund

These funds retain a significant portion of their business assets that can be held. The composition of the fund
may vary in different schemes and the fund manager's views on the different stocks. Equity funds are classified
according to their investment purpose, respectively

1. Diversified Equity Funds

2. Mid-Cap Funds

3. Sector Specific Funds

4. Tax saving Funds (ELSS)

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

1. DEBT FUNDS

The purpose of these funds is to invest in credit card debt. Government authorities, private companies, banks and
financial institutions are some of the biggest credit card issuers. By investing in debt instruments, these funds
guarantee low risk and provide stable returns to investors. Debt funds are further classified as:

 Gilt Funds: Invest in their corpus in government-issued securities known as the Government of India
Debt Paper. These funds have 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 in a major component of various debt instruments, such as bonds, corporate
debentures and government securities.
 MIPs: They invest their entire corpus in debt instruments while taking minimal exposure to equities. It
takes advantage of both the equity and debt market. This scheme is slightly higher on the risk-return
matrix as compared to other loan schemes.
 Short Term Plans (STPs): An investment horizon of three to six months is intended. These funds
mainly invest in short-term papers such as Certificate of Deposits (CDs) and Commercial Papers (CPs).
Part of the corpus is also invested in corporate debentures.
 Liquid Funds: Also known as the Money Market Scheme, these funds provide easy liquidity and capital
protection. These schemes invest in short-term instruments such as treasury bills, inter-bank call money
market, CPs and CDs. These funds are intended for short-term cash management of corporate houses and
for the investment horizon of 1 day to 3 months. These schemes rank low on the risk-return matrix and
are considered the safest of all categories of mutual funds.

2. BALANCED FUNDS

As the name suggests, they are a combination of both equity and debt financing. They invest in both equity and
fixed-income securities, which is a legitimate investment objective for the defined benefit plan. These programs
aim to provide investors with the best of both worlds. The Equity segment offers growth and the equity segment
provides strong return on investment.

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In addition, mutual funds can be broadly categorized on an investment basis, each financial category is supported
by the investment philosophy, which is predefined for financial purposes. An investor can adapt his or her
investment needs and financial goals and invest accordingly.

By investment objective
 Growth Schemes: Growth plans are known as equity plans. The purpose of these programs is to provide
greater financial appreciation over the long term. These schemes usually invest a large portion of their
fund in the financial sector and are willing to bear a temporary decrease in the future value of the
investment.
 Income Schemes: The purpose of these programs is to provide regular and steady returns to investors.
These plans are usually invested in secured income securities such as bonds and corporate debentures.
Real appreciation for such programs can be limited.
 Balance Schemes: Balanced schemes aim to provide both growth and income by distributing a portion of
the income and benefits it receives. These plans invest in all securities and fixed income securities, in the
portion shown in their offering notes (frequency 50:50).
 Money Market Schemes: Money market schemes aim to provide easy liquidity, preservation of capital
and moderate income. These programs often invest in safer, short-term instruments, such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money.

Other schemes
 Tax Saving Schemes: Tax-savings plans provide tax rebates to investors under the prescribed tax laws
from time to time. Under sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings
Scheme (ELSS) are eligible for a rebate.
 Index Schemes: Index schemes seek to replicate the performance of a specific index, such as the BSE
Sensex or the NSE50. The portfolio of these schemes includes only stocks that constitute an index. The
percentage of stocks for each holding is equal to the stocks index weight. Therefore, the returns from
such schemes are more or less identical with the index.
 Sector Specific Schemes:- These are funds / schemes that invest only in those sectors or industry
securities as specified in the offer documents. Pharmaceuticals, Software, fast moving consumer goods
(FMCG), petroleum stocks, etc. and so on. The returns of these funds depend on the performance of the
respective sectors / industries. Although these funds can offer higher returns, they are a higher risk
compared to diversified funds. Investors should keep an eye on the performance of those sectors /
industries and must exit at the appropriate time.

1.5 Investor
An investor allocates funds with the expectation of a future financial return. The savings can be put in different
investment options such as- equity; debt securities, real estate, currency, commodity, and derivatives such as put
and call options, etc.

Accounting Dictionary defines the term investor as “An investor is an entity that commits money to a venture
with an expectation of generating a return. The type of commitment made can be in many forms, such as a
guarantee to pay creditors, a loan, an equity investment, tangible assets, or even the contribution of labour. An
investor typically makes a commitment in exchange for either a fixed return ( such as dividends or interest) or
the prospect of being able to sell its investment to a third party at a later date for a higher price than the amount
of the original investment.”
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Every investor is different, with different financial goals, different tolerances to risk, different personal situations
and different desires. These characteristics itself becomes the objectives and constraints while taking the
investment decision. Two investors with the same characteristics may have very different financial choices. And
the main reason for this is their propensity for risk, not their innate characteristics. Thus the investors select the
different investment avenues according to their high, medium or low propensity for risk, within their particular
balance of personal characteristics.

1.5.1 Individual Investors

Individual investor is a person who purchases securities to for their own account rather than for an organization.
Individual investors typically trade in much lesser quantities than institutional investors such as insurance
companies, pension funds and so on. Investment activity of individual investor takes place in the shadow of
institutional investing activity. There is every possibility that their interest might be affected on account of the
smaller size of their holding and the ensuing voting power. Individual investors have a tactical role in the smooth
performance of the financial market and in ensuring the fund flows into the most efficient hands. The risk taking
capacity of individual investors are of great interest in a growing area of finance known as behavioural finance.
Behavioural finance, in this perspective, focuses on the individual characteristics, psychological or otherwise,
that shape common financial and investment practices. Individual investors are featured by investing too much,
while directs to a decrease in the realized profits, and disinclination to realize losses.

Individual investors are making investment with many objectives, such as repayment of debt, fund accumulation,
retirement planning, emergency health needs, entertainment, appreciation in value, inflation protection, house
construction, kids’ future, and tax planning. The objective of mutual fund investors differs among investors, as a
rule; most investors have certain regular needs from their investments. The main objective of investors are
discussed above, hence, in this regard, an attempt has been initiated to assess the mutual fund investors opinion.

1.5.2 Mutual Fund Investor

There are a broad range of financial products in the market ranging from conventional real estate and bank
deposits to the present and fashionable capital market products like shares and mutual funds. Similar to most
developed and developing countries the mutual fund faction has been catching on in India. Mutual fund makes it
simple and less expensive for investors to gratify their need for capital growth, income protection. As well as this
a mutual fund brings the advantage of diversification and fund management to the individual investor, providing
a chance for financial achievement that is once obtainable only to a choose few. It tends to lower investor risk,
since someone else manages funds, investors need not worry about diversifying investment and no need to keep
record. Since, the fund manager’s compensation is based on how well the fund performs; hence fund manager
will work diligently to perform the fund well.

Mutual fund operates as a means of contribution in the stock market for individuals who do not have the time and
knowledge to take direct investment decisions in the equities effectively. Mutual funds provide as a connection
between the savings of investors and capital market as they assemble savings from investors to the borrowers in
the capital markets. By the very nature of their activities, and by good feature of being well-informed and
educated investors, mutual funds pressure the stock markets. Also they take part in a vigorous task in promoting
good corporate governance, investor protection and the wellbeing of capital markets. Mutual funds have
instructed the much required liquidity into the financial system and have dared the hitherto governing role of
banking and financial institutions in the financial markets.

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1.5.3 Fund Selection Criteria
Fund selection decisions are made by taking into consideration and comparison of risk and return profile of
prospective mutual fund opportunities. In recent times, studies in psychology and behavioural finance has
advocated attitudes to financial and investment assessments may also be influenced by internal behavioural
factors, such as individual’s knowledge of investors and external behavioural factors, such as the manner in
which investment decision is formulated.

Mutual fund investors are selecting mutual funds for making investment on the basis of following criteria. It
includes fund performance, reputation of fund manager, scheme’s expenses, credit rating score, exit options,
portfolio composition, scheme innovation, tax benefits, entry and exit load, systematic transfer plans,
confidentiality, fund management style, responsiveness to enquiries, 12b-1 fees, and lock-in-period. This study
attempts to assess the investors’ agreement level towards the fund selection criteria, ranging from strongly agree
to strongly disagree. Investors are usually considering these facets before selecting various types of funds for
investment.

1.6 Behaviour

1.6.1 Investors Awareness and Behaviour

Investor behaviour is defined as how the investors assess, predict, evaluate and review the procedures for
decision making which comprise investment psychology, information collection, defining and understanding,
and investigation of data. Thus the investor behaviour is nothing else but the manner by which the investor
observes all the investment factors, information and data and takes the suitable decision by considering all the
factors like risk and return. Investor behaviour is a very difficult capital market phenomenon which has remained
the focus of the earlier period and current period of hot topic in capital market arena. Investor behaviour has been
studied from the point of view of behavioural finance.

In this perspective, it is very imperative for an investor to be conscious of the different psychological biases that
they may have and the habits of overcoming such bias while investing. Investor behaviour is described by
overexcitement and overreaction. Several psychological biases that confirmed are herd instincts, over
confidence, anchoring among others. A herd intuition refers to the behaviour of the investors to go after the
crowd and not adopting autonomous judgments. It is a mentality considered by a lack of uniqueness, causing
people to consider and act likes the common population. Herd intuition describes why people tend to replicate
others. When a market is moving up or down, investors are exposed to a fear that others be acquainted with more
or have more information. As a result, investors feel a strong instinct to do what others are doing. Anchoring
refers to the propensity to hold on to some faith even though it is not sustained by information. Over confidence
refers to assuming too much on own experience and over estimating own prediction. Recognition of all such
biases in an investor is supportive for accurate investing. Despite these psychological factors, the demographic
factors too may manipulate the financial decision-making procedure.

Also awareness of the mutual funds features that investors believe before investing in their schemes is of massive
importance for mutual fund companies. Mutual fund industry is gaining reputation and provides the perfect
platform for retail investors in India, but to gain this chance, individual investors should be aware about mutual
funds and its related information like the name of asset management company, various schemes, benefits, and
characteristics associated with mutual funds.

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1.6.2 Assumptions of Behavioural Finance
The main assumptions of behavioural finance are as follows:

•Investors are normal and not rational;

•Markets are not efficient

•Portfolios are designed according to the rules of behavioural portfolio thinking, and not based on the Mean-
variance Portfolio Theory;

•The expected returns follow a path in which risk is not measured by b, and returns are determined not just by
risk;

•Investors are normally oriented towards the past while making financial decisions. This orientation takes place
by fixing certain reference points which include returns generated in the past, and basing future returns on those
points.

1.6.3 Factors Influencing Individual Investor Behaviour

The factors that influence the investor behaviour towards mutual fund interments is discussed in the succeeding
pages.

Demographic Factors: Investor’s gender, age, marital status, education, income and occupation.

Lifestyle Characteristics: Personal ability, confidence level and dependency level of investors.

Psychological Influences: Desires, goals, prejudices, biases and emotions that guide the investor’s decision.

Risk Bearing Capacity: Parameters of safety, liquidity, capital appreciation, return and risk coverage.

Personal Values: Socially and religiously expressive characteristics.

Accounting Information: Information about Stock Merchantability, Expected Corporate Earnings, Financial
Position, and Dividend Paid, Expected Dividend and the Past Performance.

Self-Image/Firm Image coincidence: Information regarding the Product and Service, Reputation of the firm in
the Industry, Expectation of Getting Rich Quickly, Firm Status.

Advocate Recommendation: Advice or recommendation from the Broker, Family members, Friends and Stock
holder.

Personal Financial Needs: Diversification needs Easy availability of the funds whenever needed, Need to
minimize the risk and loss and maximize the return.

Neutral Information: Information about government holders, Information from Internet, Fluctuations in the
stock market, coverage in press, recent price movements.

Other Factors: Inflation and Social Responsibility

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1.6.4 Risk Tolerance of Mutual Fund Investors
Mutual fund is formed by the coming together of a number of investors who hand over their surplus funds to a
professional organization to manage their funds. A mutual fund is basically a risk diversification mechanism, but
the risk attached with the funds is different from each other. This study attempted to measure the risk tolerance
level of individual investors with respect to the different types of funds. Sometimes, equity funds may select
large-cap shares, mid-cap shares and so on. Mutual fund funds invest their funds in growth oriented companies,
which assure guaranteed capital appreciation in long-term. These funds are provided lesser or no annual dividend
to the unit holders. Income funds offer high return on investments. Real estate funds focussed to invest the
proceeds in real estates. Sometimes, the entire corpus is invested in a particular sector, which is called as sector
based funds. Similarly, funds may aim for the companies listed in an index; this is called as index funds. Funds
focussing debt instrument to invest is called as debt funds. Income and growth are the two sides of return to any
investment; hence in order to satisfy the combined advantage of annual income and capital appreciation,
balanced funds are also launched. Mutual funds which invest only in units of other mutual funds are called as
fund of funds. If the proceeds are invested in money market instruments or particularly in treasury bills, it is
called as gilt/ money market funds. Mutual funds are designed to offer tax exemption to the investors.

Risk tolerance of individual investors are varying on investment attributes such as, safety of capital invested,
liquidity considerations, capital growth, regular income, hedge against inflation, diversification of funds,
professional fund management, return, risk, freedom from care, tangibility, and legality. Hence this study
attempts to measure the risk tolerance level accordingly with three parameters such as high, medium, and low. In
addition to that this study makes an attempt to that different types of funds such as equity funds, debt funds,
sector based funds, index funds, balanced funds, money market funds, real estate funds, exchange traded funds,
fund of funds and tax-shelter funds. This study endeavoured in this respect to assess the risk tolerance capacity of
individual investors in mutual fund investments.

1.6.5 Attitude of Individual Investors

Usually, the individual investors take investment in capital market as alternative source of income along with
their regular income. In early times, investors used to invest directly in the stock market and many times affected
from loss because of wrong speculation. But with the entry of mutual funds, which were handled by proficient
fund managers, the investment risks were worsened by a large extent. The diversified investment structure of
mutual funds and diversified risk added extremely in the growth of mutual funds. With the passage of time many
new mutual funds appeared. Apart from this, the methods and ways of marketing these funds also changed with
time. Gaining the confidence of the investors is very indispensable for successful functioning of mutual fund
industry. In order to reinforce the investor’s confidence to invest in mutual funds they must be tendered
transparency in services, tax benefits, and minimum assured returns, consistency in performance and so on.
Hence the attitude of individual investors is changed tremendously in recent times. Collecting source of
information regarding investment, selection criteria, features considered for making mutual fund investments and
level of satisfaction as to the performance and service attained in mutual fund investments are transformed in a
great extent. Individual investor’s attitude towards mutual fund investment is studied thoroughly.

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 CHAPTER - 2
LITERATURE REVIEW

29
Arathy (2015) aimed at finding about the factors that avoid the people to provide in mutual funds. Findings of the
study revealed that mutual funds give a stand for a common investor to contribute in the Indian capital market
with specialized fund management irrespective of the investment. The Indian mutual fund industry is rising
quickly and this is imitated in the increase in assets under management of diverse funds. Mutual fund investment
is less unofficial than directly investing in stocks and is therefore a safer option for risk avoiders. The study
informed that open-ended scheme is most supported among other things and that income schemes and open-
ended schemes are preferred over closed- ended and growth schemes. Financial dailies are used as information
source, safety of principal amount and investor services are precedence points for investing in mutual funds.
They also found out that the numerous fund management structures emerges to be stimulated by the want to
attain economies of scale and reduce cost of the shareholders, fund managers which are motivated by tactical
reason.

Anis and Bajpai (2016) studied that APE group of 36-40 years people are much interested in investing in mutual
funds. Also, it was found to have lack of full awareness among them. Private sector employees and businessmen
tend to be more interested in mutual fund activities. People having satisfactory income also prefer mutual fund
schemes. Mutual fund investment requires the help of financial and legal advisors for most of the mutual fund
investors. Large Cap Companies and Equity mutual funds are most preferred by investors. Portfolio
diversification, Tax Saving and Income saving with the satisfactory return are the main attractions of a mutual
fund. Besides, Mutual Fund, Fixed Deposits, and Savings Accounts are also popular investment avenues for the
general public.

Aravinth and Sudhakar (2016) found mutual fund investment as one of the best options to utilize the savings of
individuals. Also, the Tax benefit is another major advantage. But due to lack of awareness and 100%
confidence, retail investors are not proving to mutual fund schemes, rather they are habituated to banking and
insurance sector. Also, a technical facility which supports mutual fund industry is not optionally utilized by the
majority of investors. The investors are also found to be confused regarding the choice of a particular scheme
according to their risk and return performance. For this reason, they are, to large extent, dependent on fund
advisors which show lack of financial illiteracy. Also, it has been found that mutual fund advisors are very less
available as compared to the insurance sector. The paper has also reported the tremendous growth in a mutual
fund invested assets but when compared to the overall population the rate of increase in a number of invested
people, is very slow.

Banerjee and Goyal (2017) studied the various factors affecting investment decisions of individuals. It is found
that investors of modern investment avenues have the educational and professional background. Only 10% - 25%
of total savings are invested in the mutual fund, and also they expect 15% - 20% of the return on their
investment. 30-50 years of individuals are interested in technical investment pattern. Young investors are risk
takers. Open-ended schemes are more preferred than close-ended schemes. Along with fund, company reputation
and fund managers track record are also a major determinant for investment decisions. Market-oriented
investments with regular income also influence investments.

Bansal (2014) aims to study the investors’ attitude towards mutual fund investment in comparison to other
investment avenues, in the Indian context. He found that open-ended and growth funds are more preferred than
close-ended and income funds. Less than half of the salary is invested by individuals. The study found that most
investors prefer FD followed by PPF and mutual fund. Most of the employees invest for purpose of tax saving
followed by return and liquidity. The researcher also revealed that people are not technically efficient to gain
financial information and knowledge as they rely on a financial advisor. He also observed that some investors
invest randomly as they are not fully and appropriately aware of all types of investment avenues.

30
Bhayani and Patankar (2016) observed that maximum contributions in mutual fund investments are from urban
areas. Rural areas have very less participation in mutual fund sector. Level of awareness is found to be the basic
reason. Even in urban areas half of the study respondents are confused about the mutual fund as an investment
option. Besides awareness, as a factor, better investment option and high risk are also studied as aconstraint in
mutual fund contribution by the rural population. The researcher advice for government help and regulatory
assistance and financial expert’s advice, simplified documentation process and training programs to improve the
investment pattern in rural areas.

Byju (2016) reveals that 25 to 34 years of age are major investors of mutual fund sector which demotes young
generation to be more risk taken. Also, male investors dominate female investors. Married people are more to
investment options than unmarried people. The income level also affects investment decision in mutual fund
sector. Regarding the level of awareness, the study does not report 100% coverage. Also, the study found
education and occupation level as a determinant for an investment decision. The researcher suggested for and
awareness progress for low-income group and low education people also, regarding SIP.

Bagga (2004) in the article titled “Equity Mutual funds: The long term winners” explains the world of equity
mutual funds by providing an insight into the positive aspects of holding equity mutual fund in the portfolio. The
author explains the power of compounding and the benefits of compounding for the investors. The author
recommends the investor to seek professional advice for investment as there is a high probability of better returns
if the funds are professionally managed. In other words, achieving better returns by self-investment through
stock market or an initial public offering is near impossible.

Chandra and Sharma (2010) quarrelled that while a small impact of holding a business extent on investment
options as implying that while high educational achievement improves performance, proficiency in the vicinity
of business does not. The study was found that weak unconstructive relationship of years of experience on return
may replicate career disquiets with less experienced investors feeling the requirement to work harder than those
with added experience. Individual opinion in making investment decisions was found to be exclusively decided
by years of experience as an investor. The study concluded that positive coefficient on this variable was reliable
with expectations; more experienced investors use more individual opinion in investment decision making.

Chandra (2008) investigated the impact of behavioural factors and investor’s psychology on their decision-
making, and to observe the association between investor’s feelings towards risk and behavioural decision-
making. The study was based on the secondary data and it was found that contrasting the classical finance theory
suggested that individual investors do not forever make reasonable investment decisions. The investment
decision-making is persuaded, mainly, by behavioural factors like greed and fear, cognitive dissonance,
heuristics, mental accounting, and anchoring. It was concluded that these behavioural factors must be taken into
account as risk factors while building investment decisions.

Chaudhury and Pattnaik (2014) studied the investors’ preference for mutual funds. Private employees and
Government employees are found to be interested while the least interested investors are from the agricultural
sector. Bank accounts fund to have domination over mutual fund investment. High return with low risk is the
general assumption of every investor. But, trust and confidence over fund manager, fund scheme, and asset
management companies also affect investment decision. In this sense, UTI, SBI, ICICI, and Reliance offered
mutual funds are preferred by most of the investors. Equity-based funds hold maximum preference followed by
balanced funds and then debt funds. Financial advisors found to have a special role influencing investors. For the
reason, the researchers advise for the proper formal training of Individual financial advisors. It is also suggested
to target all fixed salaried people as they can invest in SIP on regular basis.

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Das (2014) revealed the tax saving advantage to be a major reason for mutual fund investment. Friends and
Relatives are found to be a major source of information regarding mutual fund sector. The study analysis that
majority of mutual fund investors are satisfied with its performance. The difference in attitude towards private
and public sector mutual fund is due to factors like liquidity, flexibility, tax savings, service quality and
transparency and overall security of money. However, lack of awareness, less liquidity, less security, low return,
creates confusion in stock selection facility. Lock-in period, slow gradual growth and complex formalities are
found to be some darkness in smooth and fast development of mutual fund sector. Public mutual funds give less
return than the private mutual fund, but still, due to public trust and security, they are first preferred than private
funds. This indicates the need for awareness and financial education.

Das (2008) conducted the research on various demographic features of an investor which effects the investment
decision. Due to the difference in the satisfaction level among investors, the age is a factor which affects the
choice of investment options. The satisfaction involves the area of safety of principle, capital growth followed by
tax benefits and regular income, respectively. But the call for retirement plan need is least. Also, they revealed
the domination of male gender over female gender in the context of investment sector. Also, the paper says on
the maximum holding of life insurance policies followed by mutual funds and government saving schemes. An
interesting fact has also been revealed that in case of mutual fund sector, the private sector is featured with
superiority than the public sector, but in case of insurance sector, public sector holds superiority than private
institutions. Government employees invest more in life insurance while private sector employees in mutual
funds. Also, the study concluded that main source of information is newspapers and magazines followed by
agents and friends, respectively. Further, the study concluded the positive co-relationship between past
performance and Brand image of mutual funds.

Farooq (2015) examined the collision of behavioural factors such as heuristics, risk aversion, utilization of
financial tools and firm-level corporate governance on investment decision making. The study disclosed that risk
aversion have important role in decision making, every investor expose to risk consistent with the scheme of
their corporation and mostly fund managers have nervous behaviour regarding to risk. The study concluded that
heuristics, utilization of financial tools and firm level corporate governance have positive impact, whereas risk
aversion has negative impact on investment decision making. Furthermore, all behavioural factors, firm level
communal and investment decision making have positive and considerable relationship with each other. The
study suggested that for individual investors to make improvement in their investing action by educating
themselves about behavioural factors that make manipulate on their decision making and motive to their
unreasonable behaviour.

Gupta and Mittal (2013) highlights various matters associated with mutual fund in respect of Panipath region.
The paper highlights an important and real fact that although income level is a determinant of investment
decision, but it is the concept of prosperity of saving, that initiates the level of investment by an individual.
Further, the willingness and entrance of investors to accept the risk determine the degree of mutual fund
investment. For the reason, according to study, the maximum vote goes for bank deposits followed by insurance,
but even less than half percent of their study respondents are involved with mutual fund investment. Also, the
study discloses that occasional investors are more in quantity than regular investors. Very few percentages of
investment are for speculation purpose. The authors divided the sources of information into two broad categories
as macro and micro. Electronic media found to be the strongest source in micro level. Advice from friends and
relatives has very effect on decisions for investment in mutual fund. The authors studied that most investment
period ranges from 1-3 years, where income funds overtaken by growth funds. The study also felt the
requirement of awareness programs with high investment knowledge approaches.

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Gupta and Aggarwal (2007) studied the performance of mutual fund operations in India. Quarterly performance
of Equity-diversified mutual funds was studied from January 2002 to December, 2006 with the help of Capital
Asset Pricing Model (CAPM) and Fama-French Model. The study suggests further research to determine the
relationship between the performance determinant factor portfolios and their effect on mutual fund returns.

Johnsasikumar & Vikkraman (2011) attempted to determine the connection between a dependent variable akin to
risk tolerance level and independent variables such as age, gender of an individual investor. The findings of the
study revealed that individual investors are high income, well-educated, salaried, and independent in making
investment decisions and conservative investors. It was found that more number of investors concerned to go
through into the stock market because of fear and risk aversion they are not equipped to enter into the capital
market. It was suggested that the government and regional stock exchanges has to inspire the small and medium
investors to provide so that the unutilized money will come to the market that subsequently develop the economy
of the nation.

Kumar (2012) showed that investors don’t only appear to be at financial aspirations but also emotional objectives
in their investment decisions. The study emphasizes behavioural finance’s disputes for reconsidering the
advantages of the conventional efficacy approach as being diplomat for the decision making practice of
individual investors. Behavioural finance has recognized many new phenomena that explain the arrangement and
the dynamics of investor behaviour which will promote financial theoreticians and practitioners identical. It was
concluded that while investors are searching for information or trying to decrease the ambiguity that encircles
their decision making, they are vulnerable to manipulates from other investors.

Kannarkar (2001) in his study has investigated into the investment behaviour of household sector in a rural block
of West Bengal with a sample size of 50 respondents. The paper titled “Investment Behaviour of Household
Sector- A study of a rural block in West Bengal”, has highlighted the relationship between demographic
variables and investment behaviour. The paper further adds that risk- return perception of individual is dependent
upon income of individual. The study found that Life Insurance Corporation was the most preferred avenue to
invest and people in general were risk averse and wanted to invest in safe assets. The author has explained the
risk-return relationship in relation to the income of the investor.

Karlo (2005) has used a model to analyse the demand for two different monetary assets: M1 and Money Market
Mutual Funds (MMMF) in the article titled “The Demand for Money Market Mutual Funds “. The author is of
the view that Money Market Mutual Funds are characterized by low risk, high liquidity and low interest rate of
return and is a perfect substitute for M1( money) and hence is an attractive investment alternative for risk averse
investment managers. The model is a simple version of the money in utility function approach. The data for the
study are from the period January 2000- March 2005 of monthly statistics on Finnish contribution to Euro area
monetary aggregates. The author has provided empirical evidence using ordinary least squares and seemingly
unrelated regression estimation methods and established that the Money Market Mutual Funds (MMMFs) are a
close substitute to M1 money. The findings reveal that MMMFs are sought after when there is short rate
volatility, the increased economic activity and high money market interest rates.

Maheshwari (2015) found mutual fund investment as best in terms of variety, flexibility, diversification, and
liquidity and tax advantages. It provides investors to have access in stocks through the help of fund companies
and fund managers who have experience and knowledge regarding the area. It is suggested that high turnover
fund companies and fund companies of large asset base, perform better. Also, there is the direct and positive
impact of expense ratio on fund performance. Local mutual funds are found to be superior in relation to foreign
funds. Fund managers are found to be one of the basic and vital platforms for better returns of fund schemes.

33
Mehta and Shah (2012) – The research has been conducted by 100 educated investors of Ahmadabad and Baroda
city. The study found that young investors of less than 40 years are more attracted by high return, whereas
middle aped investors of 41-50 years are equally inclined to liquidity, high return, and low risk, whereas, old
aged investors prefer for low-risk schemes. Further, the paper studied that income level of investors also has an
independent relationship with the decision regarding investment scheme, Qualification and Knowledge about a
mutual fund is significantly dependent on each other. Preference of equity-based schemes like ELSS, equity
diversified and equity sectoral schemes are more. The author suggested that over-diversification should be
avoided but diversification should give importance to all equity, balanced and debt funds. Further, NAV is not
the only criteria for judging the performance a fund.

Meheta (1997) studied the trend of the MF industry. He analysed disclosure norms and regulatory philosophy of
SEBI. He concluded that the low market capitalization reflected in the NAV of MFs and certain incidents in the
past affected the industry. He suggested adopting improved practices. With great disclosures, the confidence of
the investors in MF would increase.

Mitra (1997) studied the MF industry with the objective to design and launch the statutory minimum target fixed
by the SEBI. He observed the perception of the investors on the MF industry as a whole, scheme-wise and
market wise marketing strategy adopted by the MF companies.

Nihar and Narayan (2013) – The research indicates the investment pattern of individual investors which shows
the attitude of investors towards risk-taking. Equity investment shows the high-risk involvement of investors.
The study finds the preference of equity instruments as lower. On other hand, government securities are preferred
more which indicates high-risk advisement by the majority of investors. Also, the short-term period is preferred
more than long-term period for investment due to safety criteria. Also, the investors are more inclined towards
income funds than growth funds and lack of awareness is found to be one of the reasons for this along with
safety issue.

Prabhavathi and Kishore (2013) found that equity fund to be more preferable scheme than balanced and debt
funds. This implies risk-taking attitude of most of the investors. It has also found that middle age and married
investors of having a family size of 3-5 members usually prefer SIP. Banks have been found as an important
source of knowledge about a mutual fund for the general public. Reliance mutual fund is most popular among
investors followed by ICICI Prudential mutual funds than any other asset management companies due to its
customer services. This indicates that private sector gives emphasis to SERVQUAL concept than the public
sector. Gold, even being a traditional mode of investment, ranked first still in the modern era due to its non-
perishable nature. However, national saving certificates get the least preferred. It has also been found that
currency market and commodity market is very less involved as investment purpose due to the existence of high
risk and mainly due to lack of knowledge. The researchers suggest scientific approaches to expand mutual fund
business by mutual fund companies.

Peterson(2002) in article titled “Buy on the Rumour: Anticipation affect and investment behaviour” has lucidly
put forth the relationship between investor psychology and security pricing around anticipated events by finding
inter linkages between finance, psychology and neuroscience literature. The paper has analysed the trading
strategy of “Buy on Rumour and sell on News” with the multidisciplinary approach and concludes that a
systematic “neuroanatomical” approach is required than a mathematical description of cognitive biases.

Rajeswari & Ramamoorthy (2000) carried out this seminal work to study the factors influencing the fund
selection behaviour of retail investors. In this study, more variables were identified through a brainstorming
session and evidence from past research prior to the construction of the questionnaire at the time of the pilot

34
study. This study stressed that mutual fund is a retail product designed to target small investors, salaried people
and others who are intimidated by the stock market but, nevertheless, like to reap the benefits of stock market
investing. At the retail level, investors are unique and are a highly heterogeneous group.

Ramakrishna & Krishnudu (2009) conducted this seminal work on investment behaviour of rural investors and
proclaimed that the investment culture among the people of a nation is a necessary prerequisite for capital
formation and the faster growth of an economy. This study also found that investment culture demotes to the
attitudes, perceptions, and willingness of the individuals and institutions in placing their savings in various
financial assets, more popularly known as securities. In conclusion, it was found that investors’ perceptions and
preferences, thus, presumes a greater significance in the formulation of policies for the development and
regulation of security markets in most cases and protection and promotion of small and house-hold investors
specifically.

Rakesh (2014) aimed to understand the behaviour of individual investor in stock market, particularly their
attitude and perception relating to the stock market. This study revealed that there were three types of investors
namely conservative investors, moderate and aggressive investors. They have plenty of investment outlets like
equity shares, preference shares, bonds, mutual funds etc. The findings of the study revealed that the investor can
obtain education about their investment from brokers, markets, media, and friends and so on. The findings of the
study revealed that the respondents assimilate the objectives of saving, the factors influencing the savings and the
sources of information for decision making. The study concluded that the investors are fully aware about the
stock market and they feel that market movements affect the investment pattern of investors in the stock market.

Rezaei (2013) expressed that behavioural finance is presumed that information structure and the attributes of
market participants scientifically influence individuals’ investment decisions in addition to market results. This
study on investor behaviour facilitated to describe the various market anomalies that confront standard theory.
Findings revealed that most investors find that buying shares and rationalizing it for coming down is simple
because others have that share and consider of it. Buying share with a horrific mind is more complicated than
rationalizing it. It was articulated that behavioural finance merges ideas from financial economics, psychology
and sociology in an effort to build a more detailed model of human behaviour in financial markets. The study
suggested that a comprehensive and various approach in the option of theoretical descriptions of the behaviour of
financial markets will be the realistic reaction to the questionable results on either side of the dispute.

Radhika, S.(2012), A Study on Investment Pattern in Mutual Funds and Preference - the study explores the
information while making a mutual fund investment, the result is 45% of respondents preferred to get advice
from family members and friends, 26% of respondents from auditors & consultants.

Rao and Ravindran (2003) “Performance Evaluation of Indian Mutual Funds” have thoroughly analysed 58
schemes during the bearish trend in the stock market beginning September 1998 to April 2002. The study is
carried out by using the measures of relative performance index, risk return analysis by application of Treynor
ratio, Sharpe ratio, Jensen ratio and Fama Measure. The findings of the study are that 1. The sector funds
performed very badly; majority of the funds took low market risk; 2. The diversification of the portfolio for
reducing risk was bad; and 3. Of all the funds debt funds performed much better than equity, diversified or
balanced funds.

Rajarajan (2002) – Different factors like investment size, selection of schemes, the risk-bearing capacity of
investors and other demographic variables schemes like income, age occupation, employment status were
positively related to the rate of return. It is also proved that there is a significant relationship between

35
demographic variables and expected rate of return on investment. The author concluded that out of above
demographic variables, age is having a significant effect on the rate of return.

Ritu (2014) found many opportunities in the field of mutual fund investment like professional skill, well
diversification, liquidity, low cost of transaction and availability of various schemes. However, some hurdles
have also been observed like the existence of risk in spite of the presence of well diversified professional
stillness. Fees and commission of fund managers are also found top repel many prospective investors against
mutual fund sector. Financial literacy & awareness, technology fluency among general investors, trading
limitation and less self-control over securities are some of the other factors found to be limitations of mutual fund
investment. Thus, the researchers suggest the fund managers to focus to reduce or control the limitation which
will help in the expansion of this sector.

Rao (1998) studied the working of the MF organizations in India with the objectives to know the resources
mobilization by the MFs from small and marginal investors from different schemes. He also examined, among
other things, the investors requirements, and their social and economic conditions and backgrounds. The findings
from his study reveal that the MFs have acted as intermediary in pooling vast resources of investors, and
ventures to invest in acquiring shares and debentures on behalf of investors. A vast majority of the respondents
selected closed-ended funds as the number one.

Raju (1999) attempted to measure the household investment preferences, and to measure qualitatively and
quantitatively the degree of awareness and perception of urban and rural investors. He finds that a majority of the
respondents still have preferences for traditional schemes like term deposits of banks, LIC and NSC. There is a
great diversification if investment portfolio with increase in income. MF products are highly valued by investors
belonging to all professional groups. Majority of the urban and rural investors gives high safety ranks for MF
products. The investors are influenced in varying degrees by the brand image of different agencies. They
themselves can take independent decisions by looking into the advertisements. There are investors from both
urban and rural areas this indicated the market segmentation of the organizations.

Sehdev & Ranjan (2014) investigated the investment objectives undertaken by investors while investing in
financial instruments and finds out the favoured source of information for different investment options to invest.
The factors accountable for the inclination of mutual funds as an investment option are the benefits and
transparency, returns on investments, information and redemption period, liquidity and intuitional investor’s
action. Mostly the respondents felt that they are attainment the information concerning the investment options
through internet than any other means of announcements. It was found that most of the investors preferred to
presume moderate risk taker and are noticed in balanced fund, through which they can make higher returns at
low risk.

Sharma (2008) found that older and experienced investors’ intention to expand, trade less regularly, display
weaker disposition result and expertise bias, and their trading activities are more susceptible to taxes. This study
also intended a metric to determine the net dealing by institutions and individual investors and institutional
investors were net buyers of growth stocks and net sellers of worth stocks involving that individual investors
were net buyers of value stocks and net sellers of appeal stocks. Most of the situations have deliberated on
institutional buyers, motivational factors influencing individuals in their outlay decisions and profiles of
individual investors. The study concluded that fund by investors was founded on past show of the funds and
money flows into charming funds more speedily than they pour out of trailing funds.

36
Sayed & Ghayekhloo (2011) found that behavioural factors influenced the investment decision-making process
of the investors. Heuristic processes and prospect theory were evident. However, heuristics strongly dominated
the prospect theory in explaining the behaviour of institutional investors operating in the Tehran Stock exchange.

Samudra and Burghate (2012) studied the behaviour of a middle-class household sector of Nagpur. Middle-class
households look for higher returns while investing in any instruments as income and saving are directly related.
The savings among middle-class households increased due to increase in income and increased modern and
attractive investment opportunities. The study also revealed that the saving fund invested by them is not available
to the economy for a long term as people avoid taking the risk for very long-term investment which will
negatively hamper financing of long gestation projects. The tax advantage plays but a minor role in the
investment decision. High return and liquidity are preferred more than low risk and tax advantage of the
investments. Middle-class investors prefer traditional avenues of bank deposits and insurance in the first rank.
This shows the need for financial literacy among them about the awareness of availability and advantages and
need of other financial instruments.

Satish (2004) concludes that investors expect moderate concern for moderate risk. Growth schemes are more
preferred than any other schemes. Asset management finance companies serve as a decision making factor for
the choice of schemes. Thus, asset management companies have to play an active role in selecting the choice of
investment where investors’ active role in selecting the choice of investment where investors expect a moderate
return and accept the moderate risk. Also, the author concludes that the confidence level for mutual funds and
shares tend to be almost equal for the investors.

See and Jusoh (2012) – The paper is concerned with 69 equity mutual funds in Malaysia. The paper supported
the past theory of high risk and high return. The findings report superior performance of young funds than old
ones and also it shows the positive impact of research expenses on fund’s return. The paper found that fund size
and turnover do not influence fund performance in the Malaysian market. The paper suggested investors to prefer
fund scheme according to their risk level. Malaysian mutual fund industry is younger than US market, as well
Indian mutual fund industry also. The neighbour country’s capital market trend can help Indian fund managers if
they are operating on with international mutual funds. Accordingly, they can develop strategies to increase fund
performance.

Shaik (2013) reported that private sector employees are major investors in mutual fund sector followed by
government employees and thereby business persons. High-income people hold a large portion of mutual fund
sector, whereas low-income group are very less. It has been revealed that risk associated in mutual fund is
considered to be low by the majority of investors whereas some have a medium attitude. High return, well
diversification and liquidity of fund have been considered as the main factor for an investment decision. The time
period of investment by maximum investors is found to be less than three years whereas investment period of 10
years is found to be very negligible. Most of the investors are found to make investment annually. Also, equity
funds are found to be more preferred than debt funds and lastly by balanced funds.

Shajahan (2014) concluded that investment in mutual fund is basically driven by liquidity savings, income,
motivation and capital gain factors. However, a significant difference is found between individual investors and
institutional investors regarding giving importance to these factors. Liquidity and savings are considered
important for institutional investors. The paper advices for regular and transparent publish of their pattern of
investment and NAV to provide better customer service. The paper concludes that Indian mutual fund companies
should develop themselves more to do better customer orientation. The mutual fund business is dependent on an
issue like services quality, better-designed schemes, fund management, fund management, etc.

37
Sharma (2012) – The paper studied 100 respondents of Chhattisgarh region and identifies the factors influencing
their satisfaction level. It identifies that, the age group matters to the scheme selection of investors as younger
group selects equity schemes while older group prefer debt schemes due to risk variances. Low salary investors
are suggested to put their money is less risky schemes or a diversified portfolio of low-risk equity funds, hybrid,
and debt funds. The fund managers skill and expertise and transparency of funds is also an important factor
influencing investment decision. The research also concluded that SERVQUAL model is to be implemented
efficiently by mutual fund companies. Customer’s participation and financial understandings is also necessary
for the expansion of mutual fund expansion.

Singh and Priyanka (2014) analyses the gap between public and private sector mutual fund for the period of
1998-99. The study found better mobilization of funds by the private sector than the public sector. However, the
gap between the two sectors is gradually reducing after 2003-04 which indicates that public sector mutual funds
are also improving their mobilization. The paper also studied that gap in redemption has also been declining after
2009 -10. The paper also concludes the relationship between the trend in change in the gap between the two
sectors and the trend in redemption pre-purchase of the two sectors mutual fund.

Sornaganesh and Thangarani (2014) – The effect of US financial crisis on Indian mutual fund industry was
studied in this paper. The study reports the highest growth of exchange-traded funds followed by income funds
and balanced funds. Public sector growth has been more than the private sector but still, the share of total
mobilization of funds is larger in hands of private sector. Inflation rate and tax benefits have also shown their
impact on mutual fund performance. The US financial crisis led to heavy liquidity cases and redemption pressure
on fund companies. However, RBI has supported by their fruitful efforts. The paper also states that income funds
and balanced funds are attracting more customers. During and after crisis period, the customers can be retained
by a high degree of service, regular payment of interest and principal.

Srilakshmi and Sekar (2016) – Like other researchers, the paper also has taken safety, security, tax reduction,
liquidity, profitability, and return pattern as main factors to influence individual’s investment decision making in
mutual fund and units. As India’s major population lies under middle-income group, the safety and security
considered to be a general factor for all investor. The age of investor is found to have an effect on investment
style. Tax exemption is also getting critical issue due to development of remuneration system of the corporate
world. Besides the study found bank deposits to be strong competitors of mutual fund industry and in comparison
to banking sector investment, mutual fund investment percentage is very negligible. Also, it has been found that
mutual fund investors belong to high-income range due to reasons like tax exemption and risk endurance. It has
been studied that maximum investors are just aware of mutual fund existence but lacks the detailed knowledge
about the operation and proceedings of mutual fund units or schemes, the detail advantages of such schemes,
types of mutual fund schemes or financial literacy. Equity funds are found to more prefer than short-term
investments.

Mehta and Shah (2012) undertaken a survey of 100 educated investors of Ahmedabad and Baroda city and the
major findings reveal the major factors that influence buying behaviour mutual funds investors, sources that
investor rely more while making investment and preferable mode to invest in mutual funds market.

Sindhu and Kumar (2013) studied on various motivating forces of investing in mutual funds and examined the
preference of mutual funds in respect of other options and found that bank deposits and Life insurance are most
preferred. Mutual funds ranks on number 3 when compared with various other investment avenues. The
researcher also found that male give more preference to mutual fund as compared to females. The important
finding was that mutual fund investor takes help of financial consultant before investing as when compared to
other investment instrument.
38
Sadhak (1997) studied the industry as a whole with the objective of disclosing some facts of marketing of the MF
schemes in the future. The study intended to emanate from Indian MFs as important financial intermediaries and
asset allocates. He observed that marketing is one of the most critical areas of MF operations due to distinctive
nature of products and consumers. He observed that efficiency of investment management directly influences
marketing operation, whereas the efficient management of investment depends on several factors, including
securities selection, resource allocation, investment research, and timing. He found that MF in India has been
wrongly promoted as an alternative to equity investing, thus creating very high expectations in the minds of the
investors. In a failing market, their expectations have been belied. He found that the introduction and
implementation of new regulatory norms have contributed in some measures to market sluggishness as market
was initially not able to respond to the regulatory objectives. The absence of product diversification and a
confused market situation has been made worse by the absence of an innovative marketing network for MFs. In
the light of these findings, he suggested some corrective measures for the sustained growth of the industry. For
undertaking a well-designed and comprehensive programme of investor education, positive media support is also
required. The product range offered by MFs needs to be redesigned keeping in view the short-term, medium-term
and long-term changes in the savings and investment markets. The success of MF depends to great extent on
institutionalized efforts. Indian MFs should shift from fund-based marketing to scheme-based marketing to reach
specific target groups.

Tripathy (1996) informed that the This study provided that the mutual fund have eroded the financial clout of
institution in the stock market for which cross transaction between mutual funds and financial institutions are not
only allowing speculators to manipulate price but also providing cash leading to the distortion of balanced
growth of market. It was concluded that with the structural liberalisation policies, no doubt Indian economy is
likely to return to a high grow path in few years.

Unnamalai (2016) – Age, marital status, occupation and income level found to have an effect on investment
decision. Majority of investors get knowledge about mutual fund through brokers and they invest in SIP. The
paper also revealed that complaints against brokers as because they are more interested in selling schemes to
investors rather than providing after-sale service. Thus, the paper suggested brokers, sub-brokers, and agents to
enhance their service quality to provide safeguards to their customers. Proper communication channel should be
used to convey timely and night information about the market.

Vanaja & Karuppasamy (2014) stressed that mutual funds have assisted many investors with an easy and
proficient way of investing with the exclusive value chain, where investors may otherwise be removed of the
chance to invest in the capital markets. It was found that political vagueness; continued policy paralysis both at
the supporting and bureaucratic level, poor universal and domestic macro-economic factors contacted the
confidence of the institutional investors as well as the retail investors in the Indian markets particularly deprived
fiscal health and the lofty current account deficit besides an enormously underperforming currency. It was
suggested that analysing the awareness of the investors becomes all the more imperative for mutual fund scheme
designers and fund managers to create the mutual fund the strongest and most desired investment choice in
Indian capital market.

Velmurugan and Anand (2015) – The study examined the various factors affecting investment decision. Fund
size and fund performance found to be most influential factor followed by fund type, scheme portfolio, fund
manager reputation, past performance, grievance redress mechanism and smooth settlement, fund rating, the
scope of growth and present market conditions.

Venkatesh and Meera (2017) has attempted to identify the preference factors among women investors for the
mutual fund industry. The women population is found to be surrounded by social and traditional stigmas, and
39
moreover, they are facing a great challenge to balance their personal and professional life. The paper found that
investment attitude in married women is more than unmarried. Also, it revealed that professional degree holders
incline towards modern financial investment avenues like mutual funds. It indicates the impact of education on
women investors or investment decision making. The study has also found the women investing in mutual fund
schemes earn a good salary of more than 30,000 monthly. Among women, income fund found to most preferred
followed by growth fund and then by the balanced fund. When compared to other investment options, mutual
fund found to be the third rank after bank deposits in the first rank and life insurance as second. It has also been
found that women prefer personal communication for investment related matters.

Vyas (2012) studied and found that most of the investors were not aware of investment in mutual fund still
investors rely upon traditional schemes of investment like banks and post office deposits. Investors should also
divert some of their savings in liquid security market to meet any kind of contingencies rising in future. It was
also found that the investors mostly rely upon their brokers in matters of investment practices. It has been a high
time requirement for the AMC to provide such fund schemes which better match the charging need of investors.
The study reveals that investment risk is prefer considered more than high returns, followed by liquidity,
reliability and tax benefits. Further study discloses that most investors are guided by their brokers for investment
in mutual fund. Also, the mutual fund investors do not exceed more than six years depicting the lack of long-
term investment. Along with that, the govt. and other regulatory bodies showed also implement such laws which
can exploit investment opportunities. The study also disclosed that equity fund is preferred more and is
significantly related to the occupation of investors followed by debt fund and balanced fund, respectively.

Wadhwa (2015) – The study revealed that majority of people have neutral thinking over mutual fund investment.
The individuals were found having a supportive and protective attitude towards the mutual fund. Age group of
above 45 years was found to be less which indicates that young age investors are more interested in taking a risk
in the financial market. Male people are found to have positive behaviour than female members. Income level
also found to have an impact on mutual fund investment as people having income more than Rs 25,000 p.m. are
found to have a supportive attitude. It was found that education level has no influence on investment decision.
People of any education level invest their saving to get a satisfied return. But, occupation does matter while
making mutual fund investment decisions. The paper suggested introducing new innovative schemes to gain
customer’s confidence.

Yadav and Singh (2015) highlights various merits and challenges faced by mutual fund companies. The various
important investors’ concern is stated as the core product, investors’ expectation, service behaviour, promotional
activities and investors’ confidence. The research suggested maintaining a balance between return and liquidity,
ethical fund management activities, minimal transaction cost, efficient grievance settlement system, transparency
and strict supervision by SEBI. And above all, a mutual fund investment is subject to market risk, therefore it is
very important for fund managers to convince their clients that any mutual fund scheme cannot guarantee 100%
for regular good return.

40
 CHAPTER - 3
RESEARCH METHODOLOGY

41
3.1 Need for Study
The review of literature presented in the previous chapter lead to an understanding of the research gap that exists
with regard to IT investors, their investment behaviour and different investment schemes and specially different
mutual fund schemes. There are no researches conducted on specially IT sector employees’ investment decision
making behaviour.

3.2 Objective of the Study

1. To analyse the demographic profile of retail investors and its influence on investment behaviour.
2. To investigate the investors’ preference in different types of investment schemes.
3. To analyse different motivators and financial objectives for investment.
4. To analyse the association of investment behaviour with different investment schemes.
5. To analyse the relationship of mutual fund investment with investment in other schemes.
6. To analyse investors’ preference in different types of mutual funds and its association with investment
behaviour.

3.3 Hypothesis of the Study

H01: There is no statistically significant relationship between gender and type of investor.

H02: There is no statistically significant relationship between gender and risk tolerance.

H03: There is no statistically significant relationship between age and type of investor.

H04: There is no statistically significant relationship between age and risk tolerance.

H05: There is no statistically significant relationship between annual income and risk tolerance.

H06: There is no statistically significant relationship between educational qualification and type of investor.

H07: There is no statistically significant relationship between marital status and type of investor.

H08: There is no statistically significant relationship between experience and type of investor.

H09: There is no statistically significant relationship between experience and risk tolerance.

H010: There is no statistically significant relationship between experience and expected rate of return.

H011: There is no statistically significant relationship between experience in mutual fund and type of investor.

H012: There is no statistically significant relationship between experience in mutual fund and risk tolerance.

H013: There is no significant relationship between experience in mutual fund and investment in mutual funds.
H014: There is a statistically significant relationship between investment horizon and financial objective.
H015: Investment in mutual fund and other investment schemes are not statistically correlated.

42
H016: Expected rate of return and different type of investment schemes are not statistically correlated.

H017: Risk tolerance and different type of investment schemes are not statistically correlated.

H018: Type of investor and different type of investment schemes are not statistically correlated.
H019: There is no correlation among different types of mutual funds.

H020: There is no correlation between risk tolerance and different types of mutual funds.
H021: There is no correlation between Expected rate of return and different types of mutual funds.

H022: There is no correlation between type of investor and different types of mutual funds.

3.4 Research Problem

The research problem deliberated for the study is entitled as, “Investment Behaviour in mutual funds: An
empirical study on IT sector employees”. The present research study focuses on the decision making practice
of individual investors as to mutual fund investments with the effective use of statistical tools like percentage
analysis, cross tabulation, Chi-square test, ANNOVA, Multiple regression analysis. The research is intended
to analyse the effect on investment behaviour. Association of different investment schemes with other
variable variables and among themselves.

3.5 Research Design

Research design is needed because it facilitates the smooth sailing of the various research operations, thereby
making research as efficient yielding maximal information with minimal expenditure or effort, time and
money. It is connected with a course of action to be performed in relation with a research topic. In fact, the
research design is the conceptual structure within which research is performed and it encompasses the design
for the collection, measurement and analysis of data. It is the arrangement of methods and procedures for
acquiring the information required for solving the problem. Research design is concerned with decisions
pertaining to what, where, when, how much, by what means in relation to an inquiry or a research study.

In order to get significant results in the data analysis, it is important to execute suitable research design. In an
attempt to conduct this research, this study employed descriptive research design. Descriptive research
describes the characteristics of a population or phenomenon. Descriptive research design has been selected
because it provides an accurate description or account of the characteristics, for example opinions, abilities,
behaviour, beliefs and knowledge of a particular person, product, service, investment, situation or group of
persons. In an attempt to meet the objectives of the study, descriptive design has been selected, which
establish the way to identify the profile of mutual fund investors, awareness of individual investors to mutual
funds, factors influencing mutual fund investments among individual investors, risk tolerance level, attitude
towards selection of funds, influence of behavioural factors, and investor reaction to fund performance.

43
3.6 Research Instrument

For collecting the primary data, structured questionnaire was used in the research. All the questions are close
ended questionnaire. The advantages of a close-ended structured questionnaire, as also reported in the
significant number of previous studies, are that it is easily analysable, easy to code, easily comparable with
other answers, and saves time for the respondent as well as for the interviewer.
The section I of the questionnaire contains questions regarding the demographic profile of the respondents. It
consists of questions like gender, age, annual income, educational qualification, marital status, experience in
investment activities, experience in mutual funds, annual investment. Out of these questions all the questions
are compulsory except annual income and annual investment.
The section II of the questionnaire contains questions regarding the investment behaviour such as type of
investor, investment horizon, risk tolerance, expected rate of return, financial objectives of the investment
and motivators for the investment. Out of these questions, all other questions are multiple choice questions
except the financial objectives of investment and motivators of investment. These two are multiple answer
questions and considered as dichotomous variable during the analysis phase.
The section III of the questionnaire contains questions regarding how much percentage respondents invest in
different investment schemes. And how much percentage respondents invest in different types of mutual
funds.

3.7 Ethics in Research

Performing descriptive research studies requires interest, skill, integrity and openness of the researcher. This
is imperative to identify and protect the rights of human subjects. To perform this study in an ethical manner,
the rights of self-determination, secrecy, privacy and informed consent were observed. Subject consent has
obtained before the completion of questionnaires from the respondents. The intention of the research, the
formalities that would be employed to collect the data and personal guarantee about no possible risks or cost
involved are expressed to get informed consent from the respondents. Anonymity of response is certified by
not disclosing the name apart from the questionnaire. Privacy is established by keeping the collected data
secretly for analysis and not revealed somewhere else. Self-determination conserved by treating respondents
as independent means and allowing them to freely select the answer. This research study is followed ethics in
all respects.

3.8 Target Population

Population is the gathering of components or objects that process the information needed by the researcher
and about which inferences are to be made. In this study, the target population engages the individual
investors making investment along with mutual funds and they must belong to IT sector as the research is
purely based on IT sector employees.

3.9 Sample Size and Sampling Technique:

Here we are using non-probability sampling method. I have used “convenience sampling” method in this
study. Convenience sampling is a non-probability sampling technique where the researcher selects unit to be
sampled based on their easy accessibility. The survey respondents were selected from those who invested in
one or more mutual fund schemes within one month period prior to the survey date and working in the IT
44
sector. For this research, a sample of 110 respondents is collected. Care is taken to ensure that the target
respondents have sufficient maturity and intellectual level.

3.10 Data Collection:

The study draws both from primary data and secondary data. Primary data was collected by survey method
from IT sector employees. This data was collected through a detailed questionnaire which was constructed
from the insights derived out of thorough literature review. This questionnaire was prepared both in digitally
enabled Google form. Total confidentiality was ensured to the respondents as the survey included personal
and financial information. Demographic details of the respondents were also collected for further analysis.
Primary data is collected by the help of the questionnaire. Section I of the questionnaire consists of
demographic characteristics such as gender, age, educational level, marital status, annual income, experience
in any investment activities, and experience in mutual fund investment. Section II contains questions
investment behaviour characteristics such as type of investor, risk tolerance and expected rate of return and
financial objectives and motivators for the investment. Section III dealt with different investment schemes
and different types of mutual fund investment schemes. Convenience sampling was employed to select 110
respondents from IT sector mostly from Kolkata, Bangalore and Pune as these cities are the major IT hubs of
the country. Respondents were requested to give frank and honest opinion and they were informed that it is
important to respond to every respondent in the questionnaire.

3.11 Data Analysis:

The cross sectional primary data collected by administering survey through questionnaire have been
classified, structured and analysed by applying following statistical techniques with the use of Microsoft
Excel and Statistical Package for Social Sciences (SPSS):

 Descriptive statistical analysis: Descriptive statistics helps in describing the characteristics/attributes

of different kinds of data sets covered in the study. It also helps in developing a fair idea about the
data and provides a clear understanding for further qualitative and quantitative analysis.
 Correlation and regression analysis: It has been used to measure the degree and direction of the
relationship/association between two or more quantitative variables.
 Inferential statistical analysis: All statistical tests are carried out by framing appropriate hypotheses
and are performed at 5% significance level.
 Analysis of variance (ANOVA): ANOVA is used as a test of means for two or more populations
(Malhotra, 2009). It has been used to examine the difference in the means of dependent variable
associated with the effect of the controlled independent variables.
 Chi-square test: Chi-square test indicates the relationship between two qualitative variables. It is
deployed to test the statistical significance of the observed association from cross tabulated data
(Malhotra, 2009). It has been used in the data analysis of this study for understanding association
between multiple sets of two variables.

45
3.12 LIMITATIONS OF THE STUDY

The study has been conducted with several limitations. These are as follows:
 This study has been focused on individual investors of IT sector employees. Hence, the results may or
may not be applicable for the whole universe.
 The study was formulated on the strength of convenience sampling. Therefore all restrictions
associated with convenience sampling are applicable to this present study.
 This study was primarily considered limited samples; hence the results obtained may or may not be
true while applying to the whole universe.
 The primary data for the study was collected within the time span of one year from March 2020 to
April 2020. Hence, data collection, analysis and interpretation are drawn according to the existing
information in that period.
 Questionnaire has been presumed as survey instrument for the data collection. Data collection is
subject to the risk of personal bias and constraint, hesitation to reveal full and complete information
about the reality. On the other hand, cross-questioning with the respondents has maintained this risk
at lowest. Despite this fact, absolute reliance of response is not desirable.
 This study deployed only limited statistical tools for the analysis of data collected from the
respondents.

Despite the above limitations, the researcher deliberately implemented the norms of systematic research in
this respect. The conclusion of this study could be facilitated for further research in this respect.

46
 CHAPTER - 4
DATA ANALYSIS AND INTERPRETATION

47
4.1 Demographic Background of Investor

4.1.1 Gender of the Respondent

Gender plays a significant role in the decision making process in respect of mutual fund investments. Hence, the
gender wise classification of the mutual fund investors is presented in table-4.1.1

4.1.1 Gender of the Respondents

Gender Frequency Percentage

Male 73 66.36
Female 37 33.64
Total 110 100
Source: Primary Data

It is evident that in table-4.1.1, out of 110 samples, 73 respondents (66.36%) are male and 37 respondents
(33.64%) are female engaged in mutual fund investments

4.1.1 Gender of the Respondent

4.1.2 Age of the Respondent

Age of the respondents is also the most imperative attributes in decision making on a particular situation; by and
large age indicates level of maturity of individuals in that sense age becomes more essential to inspect the
response. Hence, the age group - wise classification of the sample investors are furnished in table-4.1.2

48
 4.1.2 Age of the Respondent

Age Frequenc
Group y Percentage
18 -25 46 41.82
26 - 30 51 46.36
31 - 45 12 10.91
46 - 60 1 0.91
Total 110 100
Source: Primary Data

Table-4.1.2 observes that 41.82% of the respondents are in the age group of 18-25 years; followed by 46.36% of
the respondents are in the age group of 26-36 years. 10.91% of the respondents are in 31-45 years of age; and
remaining 0.91% of the respondents are in the age group of 41-60 years.

4.1.2 Age of the Respondent

4.1.3 Annual Income of the Respondent

Monthly income plays an important role in determining the investment pattern of individuals which
consecutively changes their investment decisions. Therefore, the study attempts to investigate the monthly
income of the individual investors, which have been classified into four groups. Hence, monthly income of the
sample investors is presented in table-4.1.3

4.1.3 Annual Income of the Respondent

Annual Income Frequency Percentage

Less than 5 LPA 49 45.37
5 -10 LPA 40 37.04
10 - 20 LPA 17 15.74
Above 20 LPA 2 1.85
Total 108 100
Source: Primary Data

49
Table-4.1.3 expresses that 45.37% of the respondents’ monthly income falls less than 5 LPA. Followed by,
37.04% of the respondents’ monthly income ranges in between 5-10 LPA. 15.74% of the respondents’ monthly
income varies from 10-20 LPA, and remaining 1.85% of the respondents’ monthly income comes to more than
20 LPA.

4.1.3 Annual Income of the Respondent

4.1.4 Educational Qualification of the Respondents

Investors are making investment decisions based on the awareness about investment avenues and with the
available investment information. Education vastly guides them to search information on investment alternatives.
Education serves as an important decision making variables in mutual fund investment. Hence, the educational
qualification wise classification of the sample investors is presented in table-4.1.4

4.1.4 Educational Qualification of the Respondents

Educational
Qualification Frequency Percentage
Graduate 78 70.91
Post Graduate 32 29.09
Total 110 100
Source: Primary Data

Table-4.1.4 brings that 70.91% of the respondents are graduate, after that 29.09% of the respondents are post
graduate degree holders.

50
 4.1.4 Educational Qualification of the Respondents

4.1.5 Marital Status of the Respondents

Individual investors are making their investment decisions largely based on their marital status. Marital status
of the respondents plays a significant role in mutual fund decision making. Hence, the marital status wise
classification of the sample investors is presented in table-4.1.5

4.1.5 Marital Status of the Respondents

Marital Status Frequency Percentage

Married 22 20
Unmarried 88 80
Total 110 100
Source: Primary Data

Table-4.1.5 conveys that 20% of the respondents are married, 80% of the respondents are unmarried.

4.1.5 Marital Status of the Respondents

51
4.1.6 Experience in Investment Activity of the Respondents
Experience makes an individual in to a successful investor. This study attempts to know the experience of the
respondents in investment activity. The investment experience wise classification of the sample investors are
presented in table-4.1.6

4.1.6 Experience in Investment Activity of the Respondents

Experience in Investment Activities Frequency Percentage

Less than 2 years 80 72.73
2 - 5 years 21 19.09
5 - 10 years 7 6.36
More than 10 years 2 1.82
Total 110 100
Source: Primary Data

Table-4.1.6 articulates that 72.73% of the respondents are having investment experience of less than 2 years.
Followed by, 19.09% of the respondents are having experience of 2 -5 years. This study also shows that 6.36%
of the respondents are possessing experience of 5 – 10 years in investment activity, and rest 1.82% of them
possess more than 10 years of experience in investment activity.

4.1.6 Experience in Investment Activity of the Respondents

4.1.7 Experience in Mutual Fund Investment Activity of the Respondents

Previous experience in mutual fund investment activity assists the investors to predict the price movement, make
risk analysis and generate handsome returns. Hence, this study makes an attempt to study the experience in
mutual fund investment of the respondents. The experience in mutual fund investment activity of the sample
investors is furnished in table.
52
 4.1.7 Experience in Mutual Fund Investment Activity of the Respondents

Experience in MF investment Activity Frequency Percentage

Less than 2 years 89 80.91
2 - 5 years 16 14.55
5 - 10 years 3 2.72
More than 10 years 2 1.82
Total 110 100
Source: Primary Data

Table-4.1.7 reveals that 80.91% of the respondents are having mutual fund investment experience of less than 2
years. Followed by, 14.55% of the respondents are having the mutual fund investment experience of 2-5 years.
This study also explains that 2.72% of the respondents are possessing mutual fund investment experience of 5 –
10 years in investment activity, and remaining 1.82% of them have more than 10 years of experience in mutual
fund investment activity.

4.1.7 Experience in Mutual Fund Investment Activity of the Respondents

4.1.8 Type of Investors

Investors can be classified into three types according to their risk perception. Conservative investors are risk
averters, moderate investors are risk neutrals and aggressive investors are risk takers. Hence, this study attempts
to know the level is risk bearing capacity of the investors. The type of investors of the sample is furnished in
table-4.1.8

4.1.8 Type of Investors

Type of Investor Frequency Percentage

Conservative (Risk averter) 39 35.45
Moderate (Risk Neutral) 64 58.18
Aggressive(Risk Taker) 7 6.36
Total 110 100
Source: Primary Data

53
Table-4.1.8 reveals that 35.45% of the respondents are risk averters and not interested to take risk. Afterwards,
58.18% of the respondents are risk neutral, and remaining 6.36% of the respondents are risk takers in their
investments.

4.1.8 Type of Investors

4.1.9 Annual Investment

Investors are investing their claims according to their level of awareness towards mutual funds. In order to check
the investor’s tendency towards annual investment in mutual funds, their size of annual investment of the mutual
fund investors is presented in table-4.1.9

4.1.9 Annual Investment

Annual Investment Frequency Percentage

Less than 1 Lakh 72 66.67
1 - 5 Lakh 33 30.56
5 - 10 Lakh 3 2.78
More than 10 Lakh 1 0.93
Total 108 100
Source: Primary Data

It is evident that in table-4.1.9, out of 110 samples,2 are not prefer to tell. Out of 108 samples, 66.67% of the
respondents are investing less than 1 Lakh annually. Subsequent to that, 30.56% of the respondents are investing
up to 1-5 Lakh annually. 2.78% of the respondents revealed that they are investing up to 5-10 Lakh, and 0.93%
of the respondents are investing more than 10 Lakh per annum.

54
 4.1.9 Annual Investment

4.1.10 Risk Tolerance Level of Investors

All investors are not unique, they are attitude is different from one person to another. Risk is inherent in any
investment; return on investment is directly related with the level of risk wished to take. Hence, in order to test
out regarding the risk tolerance level of investors, this study makes an attempt in this regard. The risk tolerance
level of mutual fund investors is presented in table- 4.1.10

4.1.10 Risk Tolerance Level of Investors

Risk Tolerance Frequency Percentage

No Risk 38 34.55
Low risk(up to 10% loss of savings) 40 36.36
Moderate risk(10% -30% loss of savings) 25 22.73
High risk(30% - 50% loss of savings) 7 6.36
Total 110 100
Source: Primary Data

It is evident that in table-4.1.10, 36.36% of the respondents are willing to take low risk in mutual fund
investments, after that 34.55% of the respondents are not interested to take any risk. 22.73% of the respondents
are willing to take moderate amount of risk, and 6.36% of them are willing to take high amount of risk.

55
 4.1.10 Risk Tolerance Level of Investors

4.1.11 Expected Rate of Return Generation in Mutual Funds

Expectation in terms of return generation is vastly depends on the personal characteristics of the investor. In
addition to that several fund specific factors also actively determining the expected level of return generation in
mutual funds. Therefore, the expected level of return generation is presented in table-4.1.11

4.1.11 Expected Rate of Return Generation in Mutual Funds

Expected Rate of Return Frequency Percentage

Fixed Deposit rate (8%) 41 37.27
Moderate Rate (8 -12%) 43 39.09
Market Return (12 -15%) 18 16.36
More than Market Return (> 15%) 8 7.27
Total 110 100

It is evident that in the above table-4.1.11, 39.09% of the respondents are expecting moderate return level of 8-
12% in mutual fund investments. 37.27% of the respondents reveal that their return expectation is fixed deposit
rate (8%). Similarly, 16.36% of the respondents fond of earning 12-15% return in mutual funds, and remaining
7.27% are interested to earn more than market return(>15%).

56
 4.1.11 Expected Rate of Return Generation in Mutual Funds

4.1.12 Investment Horizon of Investors

Generally, mutual fund offers multiple schemes with different investment horizon to satisfy diverse investors.
Individual investors are selecting mutual funds according to their preferred investment horizon. In this direction,
this study attempts to examine the investment horizon of investors and it is accordingly provided in table-4.1.12

4.1.12 Investment Horizon of Investors

Frequenc
Investment Horizon y Percentage
Less than 1 year 41 37.27
1 - 3 year 43 39.09
4 - 6 year 18 16.36
More than 6 years 8 7.27
Total 110 100
Source: Primary Data

It is clear that in the above table-4.1.12, 37.27% of the respondents are preferred to invest less than 1 year time
horizon. 39.09% of the respondents reveal that they preferred to invest 1- 3 year time horizon. 16.36% of the
respondents preferred to invest 4-6 year of time horizon, and remaining 7.27% are preferred to invest more than
6 years of time horizon in mutual funds.

57
 4.1.12 Investment Horizon of Investors

4.2 Cross Tabulation

4.2.1 Gender and Type of Investor

H01: There is no statistically significant relationship between gender and type of investor.

Ha1: There is statistically significant relationship between gender and type of investor.

4.2.1.A Cross tabulation of Gender and type of Investor

4.2.1.B Chi-Square test between Gender and Type of Investor

Out of 73 male respondents, 39 male respondents are of moderate investor type while out of 37 female
respondents, 25 female respondents are moderate investor. On the other hand, 27 male are of conservative type
and 12 female of the same type. 7 males are aggressive investor while no female are of aggressive type.

As in the Chi-square test, the result shows that Chi-square value is 4.536 and p= 0.104(>0.05), hence the null
hypothesis is accepted i.e. there is no statistically significant relationship between gender and type of investor.

58
4.2.2 Gender and Risk Tolerance

H02: There is no statistically significant relationship between gender and risk tolerance.

Ha2 : There is statistically significant relationship between gender and risk tolerance.

4.2.2.A Cross tabulation of Gender and Risk tolerance

4.2.2.B Chi-Square test between Gender and Risk tolerance

As we can see from the table, 22 out of 73 male respondents are not willing to take any risk wile 24 are willing to
take low risk, 21 are willing to take moderate risk and 6 are willing to take high risk. While 16 out of 37 male
respondents are not willing to take any risk wile 16 are willing to take low risk, 4 are willing to take moderate
risk and only 1 is willing to take high risk.

As in the Chi square test, the result shows that Chi-Square value is 6.604 and p= 0.086(>0.05), hence the null
hypothesis is accepted i.e. there is no statistically significant relationship between gender and risk tolerance.

4.2.3 Age and Type of Investor

H03: There is no statistically significant relationship between age and type of investor.

Ha3: There is statistically significant relationship between age and type of investor.
59
 4.2.3.A Cross Tabulation of Age and Type of Investor

4.2.3.B ANOVA test between Age and Type of Investor

From the table, it is evident that 18-25 and 26-30 age group people are mostly moderate type of investor and 31-
45 age groups is mostly conservative type of investor.As in the ANOVA test, the result shows that F=2.113 and
p= 0.103(>0.05), hence the null hypothesis is accepted i.e. there is no statistically significant relationship
between age and type of investor.

4.2.4 Age and Risk Tolerance

H04: There is no statistically significant relationship between age and risk tolerance.

Ha4: There is statistically significant relationship between age and risk tolerance.

4.2.4.A Cross Tabulation of Age and Risk Tolerance

60
 4.2.4.B ANOVA test between Age and Risk tolerance

As we can see from the table, in 18-25 age group, maximum people (19) are having low risk tolerance level and
only 2 are having high risk tolerance level. 14.5% of the total respondents belonging to 26-30 age group are not
having any tolerance level to risk and same numbers of peoples are also having low risk tolerance level. 5 people
are having no risk and low risk tolerance level in the 31-45 years age group. Respondent in 46-60 age groups is
having moderate risk tolerance level.

As in the ANOVA test, the result shows that F=1.134 and p= 0.339(>0.05), hence the null hypothesis is accepted
i.e. there is no statistically significant relationship between age and risk tolerance.

4.2.5 Annual Income and Risk Tolerance

H05: There is no statistically significant relationship between annual income and risk tolerance.

Ha5: There is statistically significant relationship between annual income and risk tolerance.

4.2.5.A Cross tabulation of Annual Income and Risk tolerance

61
 4.2.5.B ANOVA test Annual Income and Risk tolerance

In the table, maximum respondents having annual income less than 5 LPA are not having any risk tolerance
level. 17 out of 40 respondents in 5-10 LPA income group are having low risk tolerance level.8 out 17
respondents in 10-20 LPA income group are having moderate risk tolerance level and 5 are having low risk
tolerance level. In more than 20 LPA income group, out of 2 respondents, one respondent is having no risk
tolerance level and one is having high risk tolerance level.

As in the ANOVA test, the result shows that F=2.493 and p= 0.064(>0.05), hence the null hypothesis is accepted
i.e. there is no statistically significant relationship between annual income and risk tolerance.

4.2.6 Educational Qualification and Type of Investor

H06: There is no statistically significant relationship between educational qualification and type of investor.

Ha6: There is statistically significant relationship between educational qualification and type of investor.

4.2.6.A Cross tabulation between Educational Qualification and Type of Investor

4.2.6.B ANOVA test between Educational Qualification and Type of Investor

62
As per table, 41 out of 78 graduate respondents are moderate investor while 23 out of 32 post graduate
respondents are moderate investor. More than 50% investors in each group are moderate type of investor.

As in the ANOVA test, the result shows that F=0.012 and p= 0.912(>0.05), hence the null hypothesis is accepted
i.e. there is no statistically significant relationship between educational qualification and type of investor.

4.2.7 Marital Status and Type of Investor

H07: There is no statistically significant relationship between marital status and type of investor.

Ha7: There is statistically significant relationship between marital status and type of investor.

4.2.7.A Cross Tabulation of Marital Status and Type of Investor

4.2.7.B Chi-Square test between Marital Status and Type of Investor

As we can see from the table, 10 and 11out of 22 married respondents are conservative and moderate investors
respectively. While 53 out of 88 unmarried respondents are moderate investors.

As in the Chi square test, the result shows that Chi Square value is 1.235 and p= 0.539(>0.05), hence the null
hypothesis is accepted i.e. there is no statistically significant relationship between marital status and type of
investor.

4.2.8 Experience and Type of Investor

63
H08: There is no statistically significant relationship between experience and type of investor.

Ha8: There is statistically significant relationship between experience and type of investor.

4.2.8.A Cross Tabulation of Experience in Investment and Type of Investor

4.2.8.B ANOVA test between Experience in Investment and Type of Investor

43 out of 80 respondents having less than 2 years of experience are moderate investor type and 17 out of 21
respondents having 2-5 years of experience are moderate investor type.3 out of 7 respondents of 5-10 years of
experience are also moderate investor type and 2 respondents are coming under conservative and aggressive
investors. Out of 2 investors having more than 10 years of experience, 1 is conservative and 1 is moderate
investor.

As in the ANOVA test, the result shows that F=5.567 and p= 0.001(<0.05), hence the alternate hypothesis is
accepted i.e. there is statistically significant relationship between experience in investment and type of investor.

4.2.9 Experience and Risk Tolerance

64
H09: There is no statistically significant relationship between experience and risk tolerance.

Ha9: There is statistically significant relationship between experience and risk tolerance.

4.2.9.A Cross Tabulation of Experience in Investment and Risk tolerance

4.2.9.B ANOVA test between Investment and Risk tolerance

Respondents having less than 2 years of experience are mainly having no risk tolerance.10 out of 21 respondents
having experience of 2-5 years are having low risk tolerance. Nearly 50% of the respondents of 5-10 years of
investment experience are having low risk tolerance. Out of 2 respondents, 1 respondent is having no risk
tolerance and 1 is having high risk tolerance.

As in the ANOVA test, the result shows that F=6.169 and p= 0.001(<0.05), hence the alternate hypothesis is
accepted i.e. there is statistically significant relationship between experience in investment activities and risk
tolerance.

4.2.10 Experience and Expected Rate of Return

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H010: There is no statistically significant relationship between experience and expected rate of return.

Ha10: There is statistically significant relationship between experience and expected rate of return.

4.2.10.A Cross tabulation between Experience in Investment and Expected Rate of Return

4.2.10.B ANOVA test between Experience in Investment and Risk tolerance

Respondents having less than 2 years are expecting 8% rate of return, whereas respondents having 2-5 years, 5-
10 years of investment experience are mainly expecting 8-12% rate of return.

As in the ANOVA test, the result shows that F=1.450 and p= 0.233(>0.05), hence the null hypothesis is accepted
i.e. there is no statistically significant relationship between experience in investment activities and expected rate
of return.

4.2.11 Experience in Mutual Fund and Type of Investor

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H011: There is no statistically significant relationship between experience in mutual fund and type of investor.

Ha11: There is no statistically significant relationship between experience in mutual fund and type of investor.

4.2.11.A Cross tabulation between Experience in mutual fund and Type of investor

4.2.11.B ANOVA test between Experience in mutual fund and Type of investor

Respondents having less than 2 years of experience in mutual funds are mainly moderate investors and
respondents having 2-5 years of experience in mutual funds are also mainly moderate investors.

As in the ANOVA test, the result shows that F=3.935 and p= 0.010(<0.05), hence the alternate hypothesis is
accepted i.e. there is statistically significant relationship between experience in mutual fund and type of investor.

4.2.12 Experience in Mutual Fund and Risk Tolerance

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H012: There is no statistically significant relationship between experience in mutual fund and risk tolerance.

Ha12: There is statistically significant relationship between experience in mutual fund and risk tolerance.

4.2.12.A Cross tabulation of Experience in mutual fund and Risk tolerance

4.2.12.B ANOVA test between Experience in mutual fund and Risk tolerance

As we can see from the table, respondents having less than 2 years of mutual fund experience are mostly having
no risk and low risk tolerance level. Respondents of 2-5 years of experience are mostly low risk and moderate
risk tolerance level. No one in the respondents of 5-10 years of experience is having no risk tolerance level.

As in the ANOVA test, the result shows that F=4.077 and p= 0.009(<0.05), hence the alternate hypothesis is
accepted i.e. there is statistically significant relationship between experience in mutual fund investment and risk
tolerance.

4.3 Experience in Mutual Fund and Mutual Fund investment

H013: There is no significant relationship between experience in mutual fund and investment in mutual funds.
Ha13: There is significant relationship between experience in mutual fund and investment in mutual funds.

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 4.3.A Cross tabulation between Experience in mutual fund investment and mutual fund investment

4.3.B ANOVA test between Experience in mutual fund investment and mutual fund investment

Mostly people are investing 20% of their investment in mutual fund irrespective of the experience in mutual
fund. 48 out of 110 respondents are investing 20% in mutual funds followed by 38 out of 110 respondents are
investing 10% in mutual funds.
About 80% of the respondents are investing 10-20% of their investment in mutual funds.
As per the ANOVA table, the result shows F=0.760, p=0.519(>0.05), which shows that null hypothesis is
accepted i.e. there is no statistically significant relationship between experience in mutual fund and mutual fund
investment.
4.4 Motivators for different types of investment:

4.4 Motivators for different types of investment

I have divided the motivators of investment in to 5 different types such as brokers/agents,
books/magazines/journals, recommendation from family and friends, advertisement (Email/TV/print media),
return performance. As the mean found out to be 0.23, 0.19, 0.58, 0.22, 0.44 respectively for the above
mentioned, recommendation from friends and family is found out to be the major motivator for any time of
investment followed by return performance, brokers/agents, advertisement and books/magazines/journals.
Books/magazines/journals is found out to be the least motivating factor for investment.

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4.5 Financial Objectives

4.5 Financial Objectives of Investment

I have divided the financial objectives of investment in to 4 types such as savings/beating the inflation, financial
goals such as retirement and children’s education, tax benefits, Emergency funds for health needs and accidents
etc. As the mean values are found out to be 0.54, 0.45, 0.53, 0.51 respectively for the above mentioned, savings
is the major financial objectives followed by tax benefit, emergency funds for health needs and accidents and at
last financial goals such as retirement and children’s education. Most of the IT sector people are investing for
saving or beating the inflation as the major financial objective.

4.5.1 Financial Objectives and Investment Horizon

4.5.1.A Cross tabulation of Investment Horizon and Financial Objective of Investment

As we can see from the table, respondents having investment horizon less than 1 year are investing mostly for
emergency funds. Respondents having investment horizon of 1-3 year investing mostly for financial goals such
as education, marriage. Respondents having investment horizon of 3-5 years are investing mostly for tax
benefits. Respondents having investment horizon of more than 7 years are investing mostly for financial goals
such as children’s education, marriage etc.

H014: There is no statistically significant relationship between investment horizon and financial objective.
Ha14: There is statistically significant relationship between investment horizon and financial objective.

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 4.5.1.B Chi-Square test between Investment Horizon and Financial Objective
As per the chi-square test, as the significance level is less than 0.05, so the test is significant. Hence null
hypothesis is rejected and alternate hypothesis is accepted. There is statistically significant relationship between
investment horizon and financial objective.

4.6 Correlation of Different Investment Schemes with investment behaviour

4.6.1 Correlation among Different Investment Schemes
H015: Investment in mutual fund and other investment schemes are not statistically correlated.

Ha15: Investment in mutual fund and other investment schemes are statistically correlated.

4.6.1 Correlation between investments in different type of investment schemes

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As we can see from the correlation table of all type of investment schemes, we can see that mutual fund is
negatively correlated to investment in bank deposits, negatively correlated to amount of investment in LIC
policies.

4.6.2 Correlation of Different Investment Schemes with Expected Rate of Return

H016: Expected rate of return and different type of investment schemes are not statistically correlated.
Ha16: Expected rate of return and different type of investment schemes are statistically correlated.

4.6.2.A ANOVA test between different type of investment and expected rate of return

4.6.2.B Correlation between investment in bank deposits and expected rate of return

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 4.6.2.C Correlation between investment in equity shares and expected rate of return

4.6.2.D Correlation between investment in mutual funds and expected rate of return

As we can see from the annova table, bank deposits,equity shares and mutual funds are having the significance
value (p=0.000), hence there is a statistically significant relationship between expected rate of return and bank
depoits, expected rate of return and equity shares and expected rate of return and mutual fund.By plotting the
correlation table of the three investment schemes with expected rate of return,I found that bank deposit is
negatively and equity shares and mutual fund are positively correlated with expected rate of return.

The Pearson correlation coefficient is -0.382 between expected rate of return and bank deposits.That means
with the increase in the rate of return expectation, the investment in the bank deposits tends to decrease.

The Pearson correlation coefficient is 0.392 between expected rate of return and equity shares.That means
with the increase in the rate of return expectation, the investment in the bank deposits tends to increase.

The Pearson correlation coefficient is 0.413 between expected rate of return and mutual fund.That means with
the increase in the rate of return expectation, the investment in the bank deposits tends to increase. It affects
to a greater extent as compared other two investment schemes.

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4.6.3 Correlation of Different Investment Schemes with Risk Tolerance
H017: Risk tolerance and different type of investment schemes are not statistically correlated.
Ha17: Risk tolerance and different type of investment schemes are statistically correlated.

4.6.3.A ANOVA test between different investment schemes and risk tolerance

4.6.3.B Correlation between risk tolerance and investment in bank deposits

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 4.6.3.C Correlation between risk tolerance and investment in equity shares

4.6.3.D Correlation between risk tolerance and investment in mutual funds

As we can see from the annova table, bank deposits,equity shares and mutual funds are having the significance
value (p=0.001,0.000,0.000) respectively, hence there is a statistically significant relationship between risk
tolerance level and bank depoits, risk tolerance level and equity shares and risk tolerance level and mutual
fund.By plotting the correlation table of the three investment schemes with expected rate of return,I found
that bank deposit is negatively and equity shares and mutual fund are positively correlated with risk tolerance.

The Pearson correlation coefficient is -0.368 between risk tolerance and bank deposits.That means with the
increase in the rate of return expectation, the investment in the bank deposits tends to decrease.

The Pearson correlation coefficient is 0.457 between risk tolerance and equity shares.That means with the
increase in the rate of return expectation, the investment in the bank deposits tends to increase.

The Pearson correlation coefficient is 0.395 between risk tolerance and mutual fund.That means with the
increase in the rate of return expectation, the investment in the bank deposits tends to increase.

4.6.4 Correlation of Different Investment Schemes with Type of Investor

H018: Type of investor and different type of investment schemes are not statistically correlated.
Ha18: Type of investor and different type of investment schemes are statistically correlated.

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4.6.4.A ANOVA test between type of investor and different investment schemes

4.6.4.B Correlation between type of investor and invetsment in bank deposits

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 4.6.4.C Correlation between type of investor and invetsment in equity shares

4.6.4.D Correlation between type of investor and invetsment in mutual funds

As we can see from the annova table, bank deposits,equity shares and mutual funds are having the significance
value (p=0.000) respectively, hence there is a statistically significant relationship between type of investor and
bank depoits, type of investor and equity shares and type of investor and mutual fund.By plotting the
correlation table of the three investment schemes with expected rate of return,I found that bank deposit is
negatively and equity shares and mutual fund are positively correlated with type of investor.

The Pearson correlation coefficient is -0.402 between type of investor and bank deposits.That means with the
increase in the rate of return expectation, the investment in the bank deposits tends to decrease.

The Pearson correlation coefficient is 0.372 between type of investor and equity shares.That means with the
increase in the rate of return expectation, the investment in the bank deposits tends to increase.

The Pearson correlation coefficient is 0.343 between type of investor and mutual fund.That means with the
increase in the risk tolerance, the investment in the bank deposits tends to increase.

4.7 Regression Analysis

4.7.A ANOVA table of investment in mutual fund with expected rate of return and type of investor

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The model is significant as the significance value is less than 0.000(<0.05),F(1,107)= 14.522, p=0.000

4.7.B Model Summary table of mutual fund with expected rate of return and type of investor

As the adjusted R square value is 0.199, so 19.9% of the variance in the investment in mutual fund is explained
by the type of investor and expected rate of return.

4.7.C Coefficient table of mutual fund with expected rate of return and type of investor

We can make the regression line by using the above mentioned equation=

Investment in mutual fund= 0.287+0.487*type of investor+0.463*expected rate of return

4.8 Analysis of different types of mutual Fund Analysis

4.8 Descriptive statistics of investments in different types of mutual funds

I have taken 6 types of mutual funds across which the investors diversify their mutual fund investment. As per
the table, I found that Gilt or Money Market Fund is having the highest mean value which means IT people are
more likely to invest in gilt and money market fund followed by debt fund, balanced fund, equity diversified/tax
shelter funds, index fund and at the end sectoral fund.

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4.8.1 Correlation between different types of mutual fund schemes
H019: There is no correlation among different types of mutual funds.

Ha19: There is correlation among different types of mutual funds.

4.8.1 Correlation between investments in different types of mutual fund schemes

Gilt/money market fund is having negative correlation with all other types of mutual fund. Debt fund is having
negative correlation with index fund. Index fund is having negative correlation with sectoral fund. Sectoral fund
is having positive correlation with equity diversified/tax shelter fund.

4.8.2 Correlation between Risk Tolerance and Different types of mutual fund schemes:
H020: There is no correlation between risk tolerance and different types of mutual funds.

Ha20: There is a correlation between risk tolerance and different types of mutual funds.

4.8.2.A ANOVA between risk tolerance and Gilt/Money market fund

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 4.8.2.B Correlation between risk tolerance and Gilt/Money market fund

4.8.2.C ANOVA between risk tolerance and equity diversified/tax shelter fund

4.8.2.D Correlation between risk tolerance and equity diversified/tax shelter fund

4.8.2.E ANOVA between risk tolerance and sectoral fund

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 4.8.2.F Correlation between risk tolerance and sectoral fund

As per the ANOVA table, risk tolerance is having associations with Gilt/Money Market fund and equity
diversified/tax shelter fund and sectoral fund.

As we can see from the correlation tables of Gilt/Money Market fund and equity diversified/tax shelter fund and
sectoral fund with expected rate of return, Gilt/Money market fund is negatively correlated with type of investor
while equity diversified/tax shelter and sectoral fund is positively correlated with type of investor.

4.8.3 Correlation Between Expected Rate of Return and Different types of mutual fund schemes

H021: There is no correlation between Expected rate of return and different types of mutual funds.

Ha21: There is a correlation between Expected rate of return and different types of mutual funds.

4.8.3.A ANOVA between expected rate of return and investments in different types of mutual funds

As per the ANOVA table, expected Rate of Return is having associations with Gilt/Money market fund and
equity diversified/tax shelter

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 4.8.3.B Correlation between Expected Rate of return and Gilt/Money market fund

4.8.3.C Correlation between Expected Rate of return and Equity diversified/tax shelter fund

As we can see from the correlation tables of Gilt/Money Market fund and equity diversified/tax shelter fund with
expected rate of return, Gilt/Money market fund is negatively correlated with expected rate of return while equity
diversified/tax shelter fund is positively correlated with expected rate of return.

4.8.4 Correlation between Type of investor and Different types of mutual fund schemes
H022: There is no correlation between type of investor and different types of mutual funds.

Ha22: There is a correlation between type of investor and different types of mutual funds.

4.8.4.A ANOVA test between investments in different types of mutual funds

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As per the ANNOVA table, type of investor is having associations with Gilt/Money Market fund and equity
diversified/tax shelter fund and sectoral fund.

4.8.4.B Correlation between type of investor and investments in Gilt/Money market fund

4.8.4.C Correlation between type of investor and investments in sectoral fund

As we can see from the correlation tables of Gilt/Money Market fund and equity diversified/tax shelter fund with
type of investor, Gilt/Money market fund is negatively correlated with type of investor while equity sectoral fund
is positively correlated with type of investor.

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 CHAPTER-5
OBSERVATIONS, FINDINGS,
SUGGESTIONS, RECOMMENDATIONS

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5.1 Summary of Findings
 Out of 110 samples, 66.36% are male and 33.64% are female engaged in mutual fund investments.
 Age group analysis revealed that 41.82% of the respondents are in the age group of 18-25 years; followed
by 46.36% of the respondents are in the age group of 26-36 years. 10.91% of the respondents are in 31-45
years of age; and remaining 0.91% of the respondents are in the age group of 41-60 years.
 In annual income analysis, it is found that 45.37% of the respondents’ monthly income falls less than 5
LPA. Followed by, 37.04% of the respondents’ annual income ranges in between 5-10 LPA. 15.74% of
the respondents’ annual income varies from 10-20 LPA, and remaining 1.85% of the respondent’s annual
income comes to more than 20 LPA.
 Educational analysis revealed that 70.91% of the respondents are graduate, after that 29.09% of the
respondents are post graduate degree holders.
 Out of 110 samples, 20% of the respondents are married, 80% of the respondents are unmarried.
 72.73% of the respondents are having investment experience of less than 2 years. Followed by, 19.09% of
the respondents are having experience of 2 -5 years. This study also shows that 6.36% of the respondents
are possessing experience of 5-10 years in investment activity, and rest 1.82% of them possess more than
10 years of experience in investment activity.
 Regarding the experience in mutual fund, it is revealed that 80.91% of the respondents are having mutual
fund investment experience of less than 2 years. Followed by, 14.55% of the respondents are having the
mutual fund investment experience of 2-5 years. This study also explains that 2.72% of the respondents
are possessing mutual fund investment experience of 5 – 10 years in investment activity, and remaining
1.82% of them have more than 10 years of experience in mutual fund investment activity.
 35.45% of the respondents are risk averters and not interested to take risk. Afterwards, 58.18% of the
respondents are risks neutral and remaining 6.36% of the respondents are risk takers in their investments.
 Out of 108 samples, 66.67% of the respondents are investing less than 1 Lakh annually. Subsequent to
that, 30.56% of the respondents are investing up to 1-5 Lakh annually. 2.78% of the respondents revealed
that they are investing up to 5-10 Lakh, and 0.93% of the respondents are investing more than 10 Lakh
per annum.
 36.36% of the respondents are willing to take low risk in investments, after that 34.55% of the
respondents are not interested to take any risk. 22.73% of the respondents are willing to take moderate
amount of risk, and 6.36% of them are willing to take high amount of risk.
 39.09% of the respondents are expecting moderate return level of 8-12% in investments. 37.27% of the
respondents reveal that their return expectation is fixed deposit rate (8%). Similarly, 16.36% of the
respondents fond of earning 12-15% return in mutual funds, and remaining 7.27% are interested to earn
more than market return(>15%).
 Regarding the investment horizon, it is found that 37.27% of the respondents are preferred to invest less
than 1 year time horizon. 39.09% of the respondents reveal that they preferred to invest 1- 3 year time
horizon. 16.36% of the respondents preferred to invest 4-6 year of time horizon, and remaining 7.27% are
preferred to invest more than 6 years of time horizon in mutual funds.
 53.42% of male respondents are of moderate investor type while 68% female respondents are moderate
investor. On the other hand, 27 male are of conservative type and 12 female of the same type. 7 males are
aggressive investor while no female are of aggressive type. From Chi-square test, it is found that there is
no significant relationship between gender and type of investor.
 30.13% of male respondents are not willing to take any risk while 32.87% are willing to take low risk,
28.76% are willing to take moderate risk and 6 are willing to take high risk. While 56.74% of female
respondents are not willing to take any risk while 43.24% of female respondents are willing to take low

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 risk, 4 are willing to take moderate risk and only 1 is willing to take high risk. It is found that there is no
significant relationship between gender and risk tolerance.
 Respondents in 18-25 and 26-30 age group people are mostly moderate type of investor and 31-45 age
groups is mostly conservative type of investor and there is no significant relationship between age and
type of investor.
 It can also be seen that in 18-25 age group, maximum people (19) are having low risk tolerance level and
only 2 are having high risk tolerance level. 14.5% of the total respondents belonging to 26-30 age group
are not having any tolerance level to risk and same numbers of peoples are also having low risk tolerance
level. 5 people are having no risk and low risk tolerance level in the 31-45 years age group. Respondent
in 46-60 age groups is having moderate risk tolerance level. There is no significant relationship between
age and risk tolerance of investor.
 Maximum respondents having annual income less than 5 LPA are not having any risk tolerance level.
42.5% respondents in 5-10 LPA income group are having low risk tolerance level.47% respondents in 10-
20 LPA income group are having moderate risk tolerance level and 5 are having low risk tolerance level.
In more than 20 LPA income group, out of 2 respondents, one respondent is having no risk tolerance
level and one is having high risk tolerance level. There is no statistically significant relationship between
annual income and risk tolerance.
 52.56% of graduate respondents are moderate investor while 71.87% of post graduate respondents are
moderate investor. More than 50% investors in each group are moderate type of investor. There is no
significant relationship between educational qualification and type of investor.
 50% of married respondents are conservative and 45% are moderate investors, while 60.22% unmarried
respondents are moderate investors. There is no statistically significant relationship between marital
status and type of investor.
 53.75% of respondents having less than 2 years of experience are moderate investor type and 81% of
respondents having 2-5 years of experience are moderate investor type.42.85% of respondents of 5-10
years of experience are also moderate investor type and 2 respondents are coming under conservative and
aggressive investors. Out of 2 investors having more than 10 years of experience, 1 is conservative and 1
is moderate investor. There is significant relationship between experience and type of investor.
 Respondents having less than 2 years of experience are mainly having no risk tolerance. 47.61% of
respondents having experience of 2-5 years are having low risk tolerance. Nearly 50% of the respondents
of 5-10 years of investment experience are having low risk tolerance. Out of 2 respondents, 1 respondent
is having no risk tolerance and 1 is having high risk tolerance. There is statistically significant
relationship between experience in investment activities and risk tolerance.
 Respondents having less than 2 years, 2-5 years, 5-10 years of investment experience are mainly
expecting 8-12% rate of return. 44% respondents having investment experience less than 2 years are
expecting 8% rate of return.48% of respondents having experience 2-5 years are expecting 8-12% rate of
return and 71% of respondents having investment 5-10 years are expecting 8-12% rate of return. There is
no statistically significant relationship between experience in investment activities and expected rate of
return.
 Respondents having less than 2 years of experience in mutual funds are mainly moderate investors and
respondents having 2-5 years of experience in mutual funds are also mainly moderate investors. More
than 50% of the respondent having less than 2 years of experience in mutual fund activities are moderate
investors and 75% of the respondents having 2-5 years of investment experience in mutual fund are
moderate investors. There exists a significant relationship between experience in mutual fund and type of
investor.

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 Respondents having less than 2 years of mutual fund experience are mostly having no risk and low risk
tolerance level. Respondents of 2-5 years of experience are mostly low risk and moderate risk tolerance
level. No one in the respondents of 5-10 years of experience is having no risk tolerance level.40% of
respondents having less than 2 years of mutual fund experience are having no risk tolerance level and
44% of respondents having 2-5 years of experience are having low risk tolerance level.
 Recommendation from friends and family is found out to be the major motivator for any time of
investment followed by return performance, brokers/agents, advertisement and books/magazines/journals.
Books/magazines/journals is found out to be the least motivating factor for investment.
 Savings is the major financial objectives followed by tax benefit, emergency funds for health needs and
accidents and at last financial goals such as retirement and children’s education. Most of the IT sector
people are investing for saving or beating the inflation as the major financial objective.
 It is found that Respondents having investment horizon less than 1 year are investing mostly for
emergency funds. Respondents having investment horizon of 1-3 year investing mostly for financial goals
such as education, marriage. Respondents having investment horizon of 3-5 years are investing mostly for
tax benefits. Respondents having investment horizon of more than 7 years are investing mostly for
financial goals such as children’s education, marriage etc. There is statistically significant relationship
between investment horizon and financial objective.
 Mostly people are investing 20% of their investment in mutual fund irrespective of the experience in
mutual fund. 48 out of 110 respondents are investing 20% in mutual funds followed by 38 out of 110
respondents are investing 10% in mutual funds. There is no statistically significant relationship between
experience in mutual fund and mutual fund investment.
 Gilt or Money Market Fund is having the highest mean value which means IT people are more likely to
invest in gilt and money market fund followed by debt fund, balanced fund, equity diversified/tax shelter
funds, index fund and at the end sectoral fund.
 There is a statistically significant relationship between expected rate of return and bank depoits, expected
rate of return and equity shares and expected rate of return and mutual fund. There is a positive
relationship of investment in equity shares and mutual fund and a negative relationship of bank deposits
with expected rate of return.
 There is a statistically significant relationship between type of investor and bank depoits, expected rate of
return and equity shares and expected rate of return and mutual fund. There is a positive relationship of
investment in equity shares and mutual fund and a negative relationship of bank deposits with type of
investor.
 IT people are more likely to invest in gilt and money market fund followed by debt fund, balanced fund,
equity diversified/tax shelter funds, index fund and at the end sectoral fund. Gilt/money market fund is
having negative correlation with all other types of mutual fund. Debt fund is having negative correlation
with index fund. Index fund is having negative correlation with sectoral fund. Sectoral fund is having
positive correlation with equity diversified/tax shelter fund.
 Risk tolerance is having associations with Gilt/Money Market fund and equity diversified/tax shelter fund
and sectoral fund. Gilt/Money market fund is negatively correlated with type of investor while equity
diversified/tax shelter and sectoral fund is positively correlated with type of investor.
 Expected Rate of Return is having associations with Gilt/Money market fund and equity diversified/tax
shelter. Gilt/Money market fund is negatively correlated with expected rate of return while equity
diversified/tax shelter fund is positively correlated with expected rate of return.
 Type of investor is having associations with Gilt/Money Market fund and equity diversified/tax shelter
fund and sectoral fund. Gilt/Money market fund is negatively correlated with type of investor while
equity sectoral fund is positively correlated with type of investor.
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5.2 Suggestions of the Study
 This study suggests that mutual funds are considered somewhat risky as shares. Hence, sponsors may
focus to launch and innovate in some schemes that give guaranteed return. Gilt schemes and money
market schemes may also be boost up.
 Further, there is a need to make awareness and educate investors about the benefits of mutual fund
schemes. Such type of awareness should be arranged on periodical basis for spreading awareness about
benefits from investing in mutual funds. The Awareness level although overall is less here a special effort
to increase awareness in females should be the made to that investment becomes easy & frequent.
Advertising campaigns must be conducted by the mutual fund companies in rural areas to increase
awareness among rural investors about mutual fund investments.
 The mutual fund companies should launch new and more innovative schemes to suit the urban and rural
investors from time to time to maintain the investor confidence. All this will lead to the overall growth
and development of the mutual fund industry.
 This study suggests that the investors should carefully watch and monitor the relevant information
through newspapers, magazines and televisions about the mutual funds instead of recommendation of
friends in order to take rational decisions.
 This study suggests that herding tendency and other behavioural influences should be avoided as much as
possible while deciding investment. Rational approach in investment will be beneficial.
 The study outlined that majority investors have a positive approach towards investing in mutual funds,
but due lack of conceptual knowledge, expertise they invested a small amount in this investment avenue.
For achieving heights in the financial sector, the mutual fund companies should formulate the strategies
in such a way that helps in fulfilling the investors’ expectations.
 Income with secure future is the requirement rather than safety or genuine savings hence innovative
products for easy investments should be made available instead of complicated products.
 This study suggests that educated individuals evaluate the investment’s programs consciously and consult
with other about their own plans. Female and young investors are recommended to follow experts’
experiences and accept the market’s information and use them in their investments.
 The transparency must be made among the companies and their performance, so that the investors
can decide their investment on suitable mutual funds. The investors are to insist on “transparency of
fund managers in their dealings and investment decisions in capital market.
 Innovative technologies must be brought in mutual fund industry for its growth and to attract
maximum number of investors.
 Special strategies must emerge in mutual fund industry to reduce the market risk. Provisions must
be made to return, at least, the principal amount of the investors.
 Investor evaluates the risk of every investment. They should know the clarity of their investment
objectives, either long term or short term need. They decide the investment based on the need. Investors
do not blindly follow the market tips and rumours. They invest their investment with knowledge and
rationalized decision.
 The retail investors should diversify the investments between a few funds (the actual number depends
entirely on the amount of investment). This strategy ensures that the portfolio is not dependent on the
performance of one single fund. However, the retail investor needs to avoid over-diversification as that
would achieve nothing.
 Among several mutual fund schemes, retail investors’ top choice is to invest in ‘Guilt/Money market
fund’. On the other hand ‘index funds’ are the least preferred. Asset management companies should
consider these preferences for designing and selling mutual fund products.

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  Financial marketers should provide professional advice and provide suitable options of investment
portfolio that best suits the investors’ socio-demographic, economic and risk profile. They should focus
on long term relationship and for the welfare of investors. This would enhance the longer business
viability, endure the competitive market and also built investors’ trust towards the financial institution.

5.3 Scope of Future Study

 The sample selected for the study is through convenience sampling due to non-availability of data on MF
investors. Due consideration was given to check the validity and internal consistency of the data however
care has to be taken while generalizing upon the results. Further use of random sampling method to select
respondents would have further improved the statistical validity of the findings.
 Further studies can be undertaken to analyse the investment behaviour of the people who belong to a
particular group or class.
 Other studies can also undertake another measure the mutual fund performance by using the different
kinds of ratios like Treynor, Sharpe, and Sortino ratios, SEM model.
 Further studies can be undertaken non- behavioural aspects.
 Further studies can be undertaken through secondary data investigation on different Mutual Fund
policies.
 A Comparative study of investor’s perception towards mutual fund between IT sector and other sector
employees.
 This study only considered the decision making process of individual investors of IT sector, future studies
should consider the institution investors decision making process.
 To examine the individual investor’s reaction to mutual fund performance.
 To identify the impact of environmental analysis, economic analysis and financial analysis of an
individual investor on Investment Decision Making Style (IDMS).
 To analyse the influence of behavioural factors such as herding, heuristics and prospects on investment
decision making behaviour of individual
 The satisfaction level of investors in different demographic characters.

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CHAPTER - 6
CONCLUSION

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The study was based on IT sector investors’ investment decisions in different types of
investment schemes and its relation with investment behaviour. As from the analysis, we
can see that demographic factors such as age, gender, marital status, educational
qualification don’t really influence the investment decisions. Most of the investors are
moderate type of investors and they are expecting moderate rate of return also. But the risk
tolerance is low. Especially young investors are having no risk tolerance level at all. But as
we can see that people are people are mostly investing in bank deposits. There are 3 major
investment options that IT sector really invest in to. As per the investment behaviour of the
investor, mutual fund can deliver what they are expecting from their investment. There are
negative association of mutual fund investment with bank deposits. As we can see that
people are motivated by recommendation from friends and family and least motivated by
books/magazines/journal. Young investors are recommended to get information from
books/journals/magazines to cut the stereotyping. People are accepting mutual funds and
looking it as a major investment scheme. But there is not much of awareness of mutual
funds. So mutual fund companies should provide advisor services and ensure that proper
consultancy is given to the customers and full disclosure of information is being provided.
Fund designing should be promoted which will increase the satisfaction of the needs of the
customer. Mutual fund information should be published in an investor friendly language to
educate customers. In this way they can attract more number of customers towards mutual
funds.

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