Report

CHAPTER 1

INTRODUCTION:

1.1 MUTUAL FUND

Mutual fund is a pool of money collected from investors and is invested according to certain

investment options. A mutual fund is a trust that pools the saving of a no. of investors who

share a common financial goal. A mutual fund is created when investors put their money

together. It is, therefore, a pool of investor's fund. The money thus collected is then invested

in capital market instruments such as shares, debentures and other securities. The income

earned through these investments and the capital appreciations realized are shared by its unit

holders in proportion to the no. of units owned by them.

The most important characteristics of a fund are that the contributors and the beneficiaries of

the fund are the same class of people namely the investors. The term mutual fund means the

investors contribute to the pool and also benefit from the pool. The pool of funds held

mutually by investors is the mutual fund.

A mutual fund business is to invest the funds thus collected according to the wishes of the

investors who created the pool. Usually the investors appoint professional investment

managers create a product and offer it for investment to the investors. This project represents

a share in the pool and pre status investment objectives.

Thus, a mutual fund is the most suitable investment for a common man as it offers an

opportunity to invest in a diversified, professionally managed basket of securities at relatively

low cost.

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SURESH GYAN VIHAR UNIVERSITY

Figure: - 1

1.2 ORGANIZATION OF MUTUAL FUNDS

There are many entities involved and the diagram below illustrates the organizational set up

of a mutual fund:

Figure: - 2

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FEATURES THOSE INVESTORS LIKE IN MUTUAL FUND:

If mutual funds are emerging as the favourite investment vehicle it is because of the many

advantages. They have over other forms and avenues of investing parties for the investors

who has limited resources available in terms of capital and ability to carry out detailed

reserves and market monitoring. These are the major advantages offered by mutual fund to all

investors:

Professional Management: Mutual Funds provide the services of experienced and

skilled professionals, backed by a dedicated investment research team that analyses

the performance and prospects of companies and selects suitable investments to

achieve the objectives of the scheme.

Diversification: Mutual Funds invest in a number of companies across a broad cross-

section of industries and sectors. This diversification reduces the Ask because seldom

do all stocks decline at the same time and in the same proportion. You achieve this

diversification through a Mutual Fund with far less money than you can do on your

own.

Convenient Administration: Investing At a Mutual Fund reduces paperwork and

helps you avoid many problems such as bad deliveries, delayed payments and follow

up with brokers and companies. Mutual Funds save your time and make investing

easy and convenient.

Return Potential: Over a medium to long-term, Mutual Funds have the potential to

provide a higher return as they invest in a diversified basket of selected securities.

Low Costs: Mutual Funds are a relatively less expensive way to invest compared to

directly investing in the capital markets because the benefits a scale in brokerage,

custodial and other fees translate into lower costs for investors.

Liquidity: In open-end schemes, the investor gets the money back promptly at net

asset value related prices from the Mutual Fund. In closed-end schemes, the units can

be sold on a stock exchange at the prevailing market price or the investor can avail of

the facility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency: You get regular information on the value a your investment in addition

A disclosure on the specific investments made by your scheme, the proportion

invested in each class of assets and the fund manager's investment strategy and

outlook.

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Flexibility: Through features such as regular investment plans, regular withdrawal

plans and dividend reinvestment plans, you can systematically invest or withdraw

funds according to your needs and convenience.

Affordability: Investors individually may lack sufficient funds to invest in high-grade

stocks. A mutual fund because of its large corpus allows even a small investor to take

the benefit of its investment strategy.

Well Regulated: All Mutual Funds are registered with SEBI and they function within

the provisions of strict regulations designed to protect the interests of investors. The

operations of Mutual Funds are regularly monitored by SEBI.

DISADVANTAGES OF MUTUAL FUNDS:

Above I have mentioned the various advantages of Mutual Funds but it also suffers from a lot

of drawbacks as the market is volatile and it is ever affected by national as well as

international factors, these days we can see that crude oil prices in International market has

become an important factor in determining the market movement Here are some

disadvantages as cited by me and by survey:

Fluctuating Returns: Mutual funds are like many other investments without a

guaranteed return: there: always the possibility that the value of your mutual fund will

depreciate. Unlike fixed-income products, such as bonds and Treasury bills, mutual

funds experience price fluctuations along with the stocks that make up the fund. When

deciding on a particular fund to buy, you need to research the risks involved - just

because a professional manager is looking after the fund, that doesn't mean the

performance will be always good.

Diversification: Although diversification is one of the keys to successful

investing„ many mutual fund investors tend to over diversify. The idea of

diversification is to reduce the risks associated with holding a single security; over

diversification (also known as diversification) occurs when investors acquire many

funds that are highly related and, as a result, don't get the risk reducing benefits of

diversification. At the other extreme, just because you own mutual funds doesn't mean

you are automatically diversified. For example, a fund that invests only in a particular

industry or region is still relatively risky. For example: Sectoral Funds

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Cash, Cash and .re Cash: As you know already, mutual funds pool money from

thousands of investors, so everyday investors are putting money into the fund as well

as withdrawing investments. To maintain liquidity and the capacity to accommodate

withdrawals, funds typically have to keep a large portion of their portfolios as cash.

Having ample cash is great for liquidity, but money sitting around as cash is not

working for you and thus is not very advantageous.

Costs: Mutual funds provide investors with professional management, but it comes at

a cost. Funds will typically have a range of different fees that reduce the overall

payout. In mutual funds, the fees are classified into two categories: shareholder fees

and annual operating fees.

The shareholder fees, in the forms of loads and redemption fees are paid directly by

shareholders purchasing or selling the funds. The annual fund operating fees are charged as

an annual percentage - usually ranging from 1-3%. These fees are assessed to mutual fund

investors regardless of the performance of the fund. As you can imagine, in years when the

fund doesn't make money, these fees only magnify losses.

1.3 HISTORY OF MUTUAL FUNDS

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at

the initiative of the Reserve Bank and the Government of India. The objective was to attract

small investors and introduce them to market investments. Since then, the history of mutual

fund in India can be broadly divided into three distinct phases.

Phase I- 1964-1987 (Unit Trust of India)

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

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

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

the Industrial Development Bank of India (IDBI) took over the regulatory and

administrative control in place of RBI. The first scheme launched by UTI was Unit

Scheme 1964, followed by ULIP in 1971, CGGA 1986 Mastershare 1987. UTI was

the only player in the market enjoying the monopoly. At the end of 1988 UTI had

Rs.6, 700 crores of assets under management It was huge mobilization on funds.

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So, Unit Trust of India was the first mutual fund set up in India in the year 1963. In

early 1990s, Government allowed public sector banks and institutions to set up mutual

hinds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The

objectives of SEBI are - to protect the interest fit in securities and to promote the

development of and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates the

mutual funds to protect the interest of the investors. SEBI notified regulations for the

mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities

were allowed to enter the capital market. The regulations were fully revised in 1996

and have been amended thereafter from time to time. SEBI has also issued guidelines

to the mutual funds from time to time to protect the interests of investors.

All mutual funds whether promoted by public sector or private sector entities

including those promoted by foreign entities are governed by the same set of

Regulations. There is no distinction in regulatory requirements for these mutual funds

and all are subject to monitoring and inspections by SEBI. The risks associated with

the schemes launched by the mutual funds sponsored by these entities are of similar

type. It may be mentioned here that Unit Trust of India (UTI) is not registered with

SEBI as a mutual fund (as on January 15, 2002). The total amount mobilized was

2175 crores and assets under management were 6700 crores.

Phase 2-1987-1993(entry of public sector)

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

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

Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund

established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab

National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of

India (June 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual

fund in June 1989 while GIC had set up its mutual fund in December 1990.ln phase 2

also UTI was the undisputed leader.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,

004 crores. It was the time when mindset of the consumer changed to some extent

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Phase 3- 1993-1996(emergence of private funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual

fund industry, giving the Indian investors a wider choice of fund families. Also, 1993

was the year in which the first Mutual Fund Regulations came into being, under which

all mutual funds, except UTI were to be registered and governed. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the Out private sector

mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations hi 1996. The industry .w

functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual

funds setting up funds in India and also the industry has witnessed several mergers

and acquisitions. Indian mutual fund industry also saw many joint venture of foreign

fund management companies with Indian promoters. Competition increased the

investor servicing technique. Investor started becoming selective. As at the end of

January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores.

The Unit mitt of India with Rs.44, 541 crores of assets under management was way

ahead of other mutual funds.

Phase 4-1996(SEBI regulation for mutual funds)

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit

Trust of India with assets under management of 0.29,835 crores as at the end of

January 2003, representing broadly, the assets of US 64 scheme, assured return and

certain other schemes. The Specified Undertaking of Unit Trust of India, functioning

under an administrator and under the rules framed by Government of India and does

not come under the purview of the Mutual Fund Regulations. 1999 marks the

beginning of a new phase in the history of the mutual fund industry in India, a phase

of significant in terms of both amounts mobilized from investor and asset under

management.

The size of the industry is growing rapidly, as seen by the figure of asset under

management that has gone from over Rs. 113,005 crores, a growth of nearly 60%in

just one year. Within the growing industry, by March 2000, the relative market shares

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of different players in terms of amount mobilized and assets management having

undergone a change.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores

of assets under management and with the setting up of a UTI Mutual Fund,

conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking

place among different private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. As at the end of June 2007 there are 33

players in the mutual fund industry.

1.4 ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

With the increase in mutual fund players in India, a need for mutual fund association in India

was generated to function as a non-profit organization. Association of Mutual Funds in India

(AMFI) was incorporated on 22nd August, 1995.

AMFI is an apex body of Al Asset Management Companies (AMC) which has been

registered with SEBI. Till date Al the AMCs are that have launched mutual fund schemes are

its members. It functions under the supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a

professional and healthy market with ethical lines enhancing and maintaining standards. It

follows the principle of both protecting and promoting the interests of mutual funds as well as

their unit holders.

The objectives of Association of Mutual Funds (AMFI) in India

The Association a Mutual Funds of India works with 30 registered AMC s of the country. It

has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The

objectives are as follows: This mutual lid association of India maintains a high professional

and ethical standard in all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of conduct which

s followed by members and related people engaged in the activities of mutual fund and asset

management The agencies who are by any means connected or involved in the field of capital

markets and financial services also involved in this code of conduct of the association.

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AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund

industry. Association of Mutual Fund of India does represent the Government of India, the

Reserve Bank of India and other related bodies on matters relating to the Mutual Fund

Industry.

It develops a team of well qualified and trained Agent distributors. It implements a program

of training and certification for all intermediaries and other engaged in the mutual fund

industry. AMFI undertakes all India awareness programme for investors in order to promote

proper understanding of the concept and working of mutual funds. At last but not the least

association of mutual fund of India also disseminate information's on Mutual Fund Industry

and undertakes studies and research either directly or in association with other bodies.

1.5 REGULATORY FRAMEWORK

Regulatory Jurisdictions of SEBI:

SEBI is the apex regulatory of capital market. SEBI has enacted the SEBI (Mutual Fund)

regulation 1996 which provides the scope of regulation of Mutual Fund in India. All mutual

funds are required to be mandatory registered with SEBI. The structure and formation of

Mutual Funds, appointment of key functionaries, operations of Mutual Funds, accounting and

disclosure norms, rights and obligations of functionaries and investors, investment

restrictions, compliance and penalties all are defined under the SEBI registration. Mutual

Fund has to be sending half yearly compliance reports to SEBI and promote all information

about their operations.

Regulatory Jurisdiction of RBI:

RBI is the monetary authority of the country and is also the regulatory of banking system.

Earlier bank sponsored mutual fund were under the dual regulatory control of RBI and SEBI.

These provisions are no longer in vogue. SEBI is the regulator of all mutual funds. The

present position is that RBI is involved with the mutual fund industry only to the limited

extent of being the regulator of the sponsor of bank sponsored mutual funds.

Role of Ministry of Finance in Mutual Fund:

The finance ministry is the supervisor of both RBI and SEBI. The ministry of finance is also

the appellate authority under SEBI Regulation. Aggrieved parties can make appeal to the

Ministry of Finance on the SEBI ruling relating the Mutual Fund.

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Role of Companies Act in Mutual Fund:

The AMC and the Trustee Company may be structured as limited companies, which may

come under the regulatory purview of the Company Law Board (CLB). The provisions of the

Companies Act 1956, is applicable to these forms of organization. The company law Board is

the apex regulatory authority for company. Any grievance agency the AMC or the trustee can

be addressed to the company law board for redresses.

Role of Stock Exchange:

If a mutual fund is listed its scheme on stock exchange such listing are subject to the listing

regulation of Stock Exchange. Mutual Funds have to sign the listing agreement and abide by

its provisions which primarily deal with the periodic notification and disclosure of

information that may impart the trading of listed units.

1.6 LEGAL STRUCTURE

Mutual Fund has a unique structure not shared with other entities such as companies or the

firms. It is important for the employees and agents to b of the special nature of the structure

because it determines the rights and responsibilities of the fund's constitutes viz. sponsor

trustee, custodian, transfer agents and of course the AMC. The legal structure also drives the

inter relationship between these constituents.

Like other countries India has a legal framework within which Mutual Funds must be

constituted along one unique structure as unit trust. A mutual fund in India is allowed to issue

open ended and a close ended under a common legal structure. Therefore, a mutual fund may

have several different schemes under it at any point of time.

THE FUND SPONSOR: Sponsor is defined by the SEBI regulation as any person who

acting alone or in combination with another body corporate establishes a mutual fund. The

sponsor of a fund is taken as he gets the fund registered With the SEBI.

The sponsor will form a trust and appoints the Board of trustee. The sponsor will also

generally appoint the AMC as the fund managers. The sponsor, either directly or acting

through the trustee will also appoints a custodian to hold the fund asset. All these

appointments are made in accordance with the guidelines of SEBI. As per the existing SEBI

regulations for a person to quantify as the sponsor he must contribute at least 40% of the net

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worth of the AMC and possess a second final track over a period of 5 years prior to

registration.

MUTUAL FUND AS A TRUST: A mutual fund is constituted in form of a public trust

created under the INDIA TRUST ACT, 1882. The fund sponsor act as the settlers of the trust

contributing to its initial capital and appoints a Trustee to hold the asset of the trust for the

benefits of the unit holders who are the beneficiaries of the trust. The fund then invites

investors to contribute their money in a common pool by subscribing to units issued by

various schemes established by the trust unit being the evidence of their beneficial interest in

the fund.

TRUSTEE: The trust — the mutual fund may be managed by a board of trustee — a body of

individuals or a trust company- a corporate body. Most of the funds in India are managed by

the board of trustee while the board is governed by the provisions of the Indian Trust Act

where the trustee is a corporate body, it would also be required to comply the provisions of

the Companies Act 1956 the board as an independent body act as the protector of the interest

of the unit holders. The trustees do not directly manage the portfolio of securities. For this

specialist function, they appoint the AMC. They ensure that the fund is managed by the AMC

as per the defined objective in accordance with the trust deed and regulations of SEBI. The

trust is created through a document called the Trust Deed and is executed by the fund sponsor

in favour of the trustee. The trust deed is required to be stamped as registered under the

provisions of the Indian Regulatory Act and regulation with SEBI clause in the trust deed,

inter alias, deal with the establishment of the trust, the appointment of the trustee , their

powers and duties and the obligation of the trustee towards the unit holders and the AMC.

These clauses also specify activity that the fund / AMC can't undertake. The third schedule of

the SEBI (Mutual Fund) Regulatory Act, 1996 specifies the content of the Trust Deed.

1.7 ASSET MANAGEMENT COMPANY

Its appointment and function:

The role of AMC is to act as the investment manager of the trust. The sponsor, or the trustee,

if so authorized by the trust deed appoints the AMC. The AMC so appointed is required to be

approved by the SEBI. Once approved, the AMC functions under the supervision of its own

directors and also under the direction of the trustee and the SEBI. The trustees are

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empowered to terminate the appointment of the AMC by majority and appoint a new one

with the prior approval of the SEBI and the unit holders.

The AMC would, in the name of the trust, float and then manage the direct investment

schemes as per regulations of the SEBI and as per Investment Management Agreement it

signs with the trustee. Chapter IV of SEBI (MF) Regulations, 1996 describes the issue

relevant to appointment, eligibility criteria and the restrictions on the business activities and

obligations of the AMC.

The AMC of the mutual fund have a net worth of at least Rs. 10 crores at all the time.

Directors of the AMC, both independent and non independent should have adequate

professional experience in the financial services and should be individuals of high moral

standing, a condition also applicable to other key personnel of the AMC. The AMC cannot

act as a trustee of any other mutual fund. Besides it's role as advisory services and consulting,

provided these activities are run independently of one another rand the AMC resources ( such

as personnel, system etc.) are properly segregated by activity. The AMC must always act in

the interest of the unit holders and report to the trustee with respect to its activities.

1.8 TYPES OF MUTUAL FUND

Schemes according to Maturity Period

A mutual fund scheme can be classified into open-ended scheme or close-ended scheme

depending on its maturity period.

Open-ended Fund/ Scheme:

An open-ended fund or scheme is one that is available for subscription and repurchase on a

continuous basis. These schemes do not have a fixed maturity period. Investors can

conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared

on a daily basis. The key feature of open-end schemes is liquidity.

Close-ended Fund/ Scheme:

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is

open for subscription only during a specified period at the time of launch of the scheme.

Investors can invest in the scheme at the time of the initial public issue and thereafter they

can buy or sell the units of the scheme on the stock exchanges where the units are listed. In

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order to provide an exit route to the investors, some close-ended funds give an option of

selling back the units to the mutual fund through periodic repurchase at NAV related prices.

SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor

i.e. either repurchase facility or through listing on stock exchanges. These mutual funds

schemes disclose NAV generally on weekly basis.

Schemes according to Investment Objective

A scheme can also be classified as growth scheme, income scheme, or balanced scheme

considering its investment objective. Such schemes may be open-ended or close-ended

schemes as described earlier. Such schemes may be classified mainly as follows:

Grow. / Equity Oriented Scheme:

The aim of growth funds is to provide capital appreciation over the medium to king- term.

Such schemes normally invest a major part of their corpus in equities. Such funds have

comparatively high risks. These schemes provide different options to the investors like

dividend option, capital appreciation, etc. and the investors may choose an option depending

on their preferences. The investors must indicate the option in the application form. The

mutual funds also allow the investors to change the options at a later date.

Income / Debt Oriented Scheme:

The aim of income funds is to provide regular and steady income to investors. Such schemes

generally invest in fixed income securities such as bonds, corporate debentures, Government

securities and money market instruments. Such funds are less risky compared to equity

schemes. These funds are not affected because of fluctuations in equity markets. However,

opportunities of capital appreciation are also limited in such funds. The NAVs of such funds

are affected because of change in interest rates in the country. If the interest rates fall, NAVs

of such funds are likely to increase in the short run and vice versa. However, long term

investors may not bother about these fluctuations.

Balanced Fund:

The aim of balanced funds is to provide both growth and regular income as such schemes

invest both in equities and fixed income securities in the proportion indicated in their offer

documents. These are appropriate for investors looking for moderate growth. They generally

invest 40-60% in equity and debt instruments. These funds are also affected because of

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fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to

be less volatile compared to pure equity funds.

Money Market or Liquid Fund:

These funds are also income funds and their aim is to provide easy liquidity, preservation of

capital and moderate income. These schemes invest exclusively in safer short-term

instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank

call money, government securities, etc. Returns on these schemes fluctuate much less

compared to other funds. These funds are appropriate for corporate and individual investors

as a means to park their surplus funds for short periods.

Gilt Fund:

These funds invest exclusively in government securities. Government securities have no

default risk. NAVs of these schemes also fluctuate due to change in interest rates and other

economic factors as is the case with income or debt oriented schemes.

Index Funds:

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index,

S&P NSE SO index (Nifty), etc. These schemes invest in the securities in the same weightage

comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise

or fall in the index, though n. exactly by the same percentage due to some factors known as

"tracking error" in technical terms. Necessary disclosures in this regard are made in the offer

document of the mutual fund scheme.

Sector specific Funds/schemes:

These are the funds/schemes which invest in the securities of only those sectors or industries

as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer

Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the

performance of the respective sectors/industries. While these funds may give higher returns,

they are more risky compared to diversified funds. Investors need to keep a watch on the

performance of those sectors/industries and must exit at an appropriate time. They may also

seek advice of an expert.

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Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Income Tax

Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g.

Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also

offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities.

Their growth opportunities and risks associated are like any equity-oriented scheme.

Load or no-load Fund

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time

one buys or sells units in the fund, a charge will be payable. This charge is used by the

mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If

the entry as well as exit load charged is 1%, then the investors who buy would be required to

pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only

Rs.9.90 per unit. The investors should take the loads into consideration while making

investment as these affect their yields/returns. However, the investors should also consider

the performance track record and service standards of the mutual fund which are more

important. Efficient funds may give higher returns in spite of loads.

A no-load hind is one that does not charge for entry or exit. It means the investors can enter

the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.

The importance of accounting knowledge

The balance sheet of a mutual fund is different from the normal balance sheet of a bank or a

company. All the fund assets belong to tire investors and no held in the fiduciary capacity for

them. Mutual fund employees need to be aware of the special requirement concerning

accounting for the fund's assets, liabilities and transactions with investors and the outsiders

like banks, custodians and registrars. This knowledge will help them better understand their

responsibilities and their place in the organization, by getting an overview of the functioning

of the fund.

Even the mutual fund agents need to understand the accounting for the funds transaction with

investors and how the fund accounts for its assets and liabilities, as the knowledge is essential

for them to perform their basic role in explaining the mutual fund performance to the

investor.

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For example, unless the agent knows how the NAV is computed, he cannot use even simple

measures such as NAV change to assess the fund performance. He also should understand the

impact of dividends paid out by the fund or entry/exit loads paid by the investors on the

calculation of the NAV and therefore the fund performance.

The mutual funds in India are required to follow the accounting policies as laid down by the

SEBI (Mutual Fund) Regulations 1996 and amendments M 1998.

1.9 NET ASSET VALUE

The performance of a particular scheme of a mutual fund is denoted by Net Asset Value

(NAV). Mutual funds invest the money collected from the investors in securities markets. In

simple words, Net Asset Value is the market value of the securities held by the scheme. Since

market value of securities changes every day, NAV of a scheme also varies on day to day

basis. The NAV per unit is the market value of securities of a scheme divided by the total

number of units of the scheme on any particular date. For example, if the market value of

securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs

units of Rs. 10 each to the investors, then the NAT per unit of the fund is Rs.20. NAV is

required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending

on the type a scheme.

The net asset value of the fund is the cumulative market value of the assets fund net of its

liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets A

the fund, this is the amount that the shareholders would collectively own. This gives rise to

the concept of net asset value per unit, which is the value, represented by the ownership of

one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the

number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring

the "per unit". We also abide by the same convention.

Calculation of NAV:

The most important part of the calculation is the valuation of the assets owned by the fund.

Once it is calculated, the NAV is simply the net value of assets divided by the number of

units outstanding. The detailed methodology for the calculation of the asset value is given

below.

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Asset value is equal to

Sum of market value of shares/debentures

+ Liquid assets/cash held, if any

+ Dividends/interest accrued

Amount due on unpaid assets

Expenses accrued but not paid

For liquid shares/debentures, valuation is done on the basis of the last or closing market price

on the principal for illiquid and unlisted and/or thinly traded shares/debentures, the value has

to be estimated. For shares, this could be the book value per share or an estimated market

price if suitable benchmarks are available. For debentures and bonds, value is estimated on

the basis of yields of comparable liquid securities after adjusting for illiquidity. The value of

fixed interest bearing securities moves in a direction opposite to it rate changes. Valuation of

debentures and bonds is a big problem since most of them are unlisted and thinly traded. This

gives considerable leeway to the AMCs on valuation and some of the AMCs are believed to

take advantage of this and adopt flexible valuation policies depending on the situation

exchange where the security is traded.

Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with

every passing day, interest is said to be accrued, at the daily interest rate, which is calculated

by dividing the periodic interest payment with the number of days in each period. Thus,

accrued interest on a particular day is equal to the daily interest rate multiplied by the number

of days since the last interest payment date.

Usually, dividends are proposed at the time of the Annual General meeting and become due

on the record date. There is a gap between the dates on which it becomes due and the actual

payment date. In the intermediate period, it is deemed to be "accrued".

Expenses including management fees, custody charges etc. are calculated on a daily basis.

1.10 MUTUAL FUND PERFORMANCE

THE INVESTORS PROSPECTIVE:

The investor would actually be interested in tracking the value of investment, whether he

invests directly in the market or indirectly through the mutual funds. . would have to make

intelligent decisions on whether he gets an acceptable return on his investment in the fund

17


selected by him or if he needs to switch to the fund.., therefore, needs to understand the basis

of appropriate performance measurement for the funds a. acquire the basic knowledge of the

different measures of evaluating the performance of a fund. Only then would he be in the

position to judge correctly whether his fund is performing well or not.

THE ADVISOR'S PROSPECTIVE:

If you are an intermediary recommending a mutual fund to a potential investor, he would

expect you to give him proper advice on which funds have a good performance track record.

If you want to be an effective investment advisor, then you too have to know how to measure

and evaluate the performance of the different funds available to the investors. The need to

compare the performance of the different funds requires the advisors to have knowledge of

the correct and appropriate measures of evaluating the fund performance.

DIFFERENT PERFORMANCE MEASURES

Remember that there are many ways to evaluate the performance of the fund. One must find

the most suitable measure, depending upon the type of fund one is looking at, the stated

investment objective of the fund and even depending on the current financial market

condition. Let us discuss few common measures.

Change in NAV: The most common measure.

Purpose: If the investor wants to compute the return on investment between two dates, he

can simply use the Per Unit Net Asset Value at the beginning and the end periods and

calculate the change in the value of the NAV between the two dates in absolute and

percentage terms.

Formula: For NAV change in absolute terms:

(NAV at the end of the period)- (NAV at the beginning of the period)

For NAV change in percentage terms:

(Absolute change in NAV/NAV at the beginning)*100

If period covered is less/more than one year: for annualized NAV change

[{(absolute change in NAV/NAV at the beginning)/months covered)*12)*100]

18


Suitability:

NAV change is the most commonly used by the investors to evaluate fund performance and

so is also most commonly published by the mutual fund managers. The advantage of this

measure is that it is easily understood and applies to virtually any type of fund.

Interpretation:

Whether the return in term of NAV growth is sufficient or not should be interpreted in light

of the investment objective of the fund, current market condition and alternative investment

returns. Thus, a long term growth fund or infrastructure fund will give lower returns when the

market is in bearish phase.

Limitation:

However, this measure does not always give the correct picture, in case where the fund has

distributed to the investors a significant amount of the dividend in the interim period.

If in the above example, yearend NAV was Rs.22 after declaration and payment of dividend

of Re.1, the NAV change of 10% gives an incomplete picture.

Therefore, it is suitable for evaluating growth funds and accumulation plans of debt and

equity funds, but should be avoided for income funds and funds with withdrawal plans.

1.11 LIFE CYCLE STAGES

Life cycle guide to financial planning

Financial goal and plans depends to a large extent on the expenses and cash flow

requirements of individuals. It is well known that the age of the investors is an important

determinant of financial goals. Therefore, financial planners have segmented investors

according to certain stages.

19


Life Cycle Stage Financial Needs Ability to Invest Choice Of Investment

Childhood Stage Taken care of by

parents

Investment of gifts Long term

Young unmarried Immediate and short

term

Limited due to higher

spending

Liquid plans and short

term investment some

exposed to equity and

pension products

Young married with

children

Short and intermediate

term. Housing needs

consumer finance

needs

Limited due to higher

spending cash flow

requirement also

limited

Medium- long term

investment. Ability to

take risks, Fixed

income insurance and

equity

Young married with

children

Medium- long term

children’s education

holidays and consumer

finance housing

Limited financial

planning needs are

highest at this stage is

deal for discipline

spending and saving

regularly

Medium- long term

investments. Ability to

take risks Portfolio of

products for growth

and long term

Married with older

children’s

Medium term need for

children.

Higher saving needs

ratio.

Recommended for

intermittent for

intermittent cash flows

higher

Medium term

investment with high

liquidity needs.

Portfolio of products

including equity debts

and pension plans.

Retirement Stage Short to medium term Lower saving ratio,

higher requirement for

regular cash flows

Medium term

investments preference

for liquid and income

generating products

low appetite for risky

investments.

Table No.:1

20


CHARACTERISSTION OF THE LIFE CYCLE OF INVESTORS

Life cycle can be broadly classified into phases:

Birth and education

Earning Years

Retirement

On an average, the first stage lasts for 22 years, the second for 38 years and the last for 25-30

years. The earning year is when income and expenses are highest. The retirement stage is

when incomes are low and expenses are high.

CLASSIFICATION OF INVESTORS NEEDS

Needs are generically classified into protection needs and investment needs. Protection needs

refer to needs that have to be primarily taken care of to protect the living standards, current

requirements and survival requirement of investors. Need for retirement income and need for

insurance cover are protection needs. Investment needs are additional financial needs that can

be served through saving and investments. These are needs for children's professional

growth.

21


LITERATURE REVIEW: CHAPTER 2

Mutual fund has emerged as one of the best option for investment nowadays. Great amount of

research has been carried out on Investor buying behaviour on mutual fund.

Langer (1983) suggests that when these preferences are based on choices, there is

more ego involvement and attachment to the preferences, suggesting heightened level

of preference bias. This phenomenon is consistent with the prediction from Cognitive

Dissonance theory of Festinger (1957).

De Bondt and Thaler (1985) while investigating the possible psychological basis for

investor behaviour, argue that mean reversion in stock prices is an evidence of

investor over reaction where investors overemphasise recent firm performance in

forming future expectations.

Ippolito (1992) says that fund/scheme selection by investors is based on past

performance of the funds and money flows into winning funds more rapidly than

they flow out of losing funds

Robert J. Shiller (1993) reported that many investors do not have data analysis and

interpretation skills. This is because, data from the market supports the merits of

index investing, passive investors are more likely to base their investment choices on

information received from objective or scientific sources.

Gupta (1994) made a household investor survey with the objective to provide data on

the investor preferences on MFs and other financial assets. The findings of the study

were more appropriate, at that time, to the policy makers and mutual funds to design

the financial products for the future.

Kulshreshta (1994) offers certain guidelines to the investors in selecting the mutual

fund schemes.

Phillip (1995) reported that there is a change in financial decision-making and

investor behaviour as a result of participating in investor education programmes

sponsored by employees.

Sikidar and Singh (1996) carried out a survey with an objective to understand the

behavioural aspects of the investors of the North Eastern Region towards equity and

MF’s investment portfolio. The survey revealed that the salaried and self employed

formed the major investors in MF primarily due to tax concessions.

22


Jambodekar (1996) conducted a study to assess the awareness of MF’s among

investors, to identify the information sources influencing the buying decision and the

factors influencing the choice of a particular fund. The study reveals among other

things that Income Schemes and Open Ended Schemes are more preferred than

Growth Schemes and Close Ended Schemes during the then prevalent market

conditions. Investors look for safety of Principal, Liquidity and Capital appreciation

in the order of importance; Newspapers and Magazines are the first source of

information through which investors get to know about MF’s/Schemes and investor

service is a major differentiating factor in the selection of MF Schemes.

Madhusudhan V Jambodekar (1996) conducted his study to size-up the direction of

mutual funds in investors and to identify factors influence mutual fund investment

decision. The study tells that open-ended scheme is most favored among other things

that income schemes and open-ended schemes and income schemes are preferred over

closed- ended and growth schemes. News papers are used as information source,

safety of principal amount and investor services are priority points for investing in

mutual funds.

Sujit Sikidar and Amrit Pal Singh (1996) conducted a survey to peep in to the

behavioural aspects of the investors of the North-Eastern region in direction of equity

and mutual fund investment. The survey resulted that because of tax benefits mutual

funds are preferred by the salaried and self-employed individuals. UTI and SBI

schemes were catch on in that region of the country over any other fund and the other

fund had been proved archaic during the time of survey.

Alexander et al., (1996) reported that only 18.9% of respondents could provide an

estimate of expenses for their largest MF holding. 57% stated that they did not know

what the expenses were even at the time they made the MF purchase. This suggests

insensitivity to costs and many investors do not use fund costs as an evaluative

criterion in making investment decisions.

Raja Rajan (1997) underlined segmentation of investors and mutual fund products to

increase popularity of mutual funds.

Syama Sunder (1998) conducted a survey to get an insight into the MF operations of

private institutions with special reference to Kothari Pioneer. The survey revealed that

the awareness about MF concept was poor during that time in small cities like

Vishakapatnam. Agents play a vital role in spreading the MF culture; open-end

schemes were much preferred then; age and income are the two important

23


determinants in the selection of fund / scheme; brand image and return are their prime

considerations.

According to Lu Zheng (1999) majority of Investors, making purchase in mutual

fund; do invest on the basis of short-term future performance and they use fund

specific information for their selection decision.

Shanmugham (2000) made a survey of 201 individual and found that psychological

and sociological factors have more influence amongst the all factors which have

influence on the Investors decision towards any financial assets

Lynch and Musto (2003) found that, there would be maximum investment in mutual

fund because ordinary Investors do not have time, experience, expertise and

knowledge to take investment decision independently.

Anand and Murugalah (2004) explored that, in order to attract Investor, financial

industries requires innovation in developing and delivering financial services to

survive and even to earn profit.

Ramamurthy and Reddy (2005) carried out a study to analyze recent trends in the

mutual fund industry and concluded that the major benefits delivered to the small and

retail Investor by mutual funds are professional management, diversification of

investment, convenient administration, return potential, liquidity, transparency,

flexibility, affordability, wide choice and proper regulation.

Desigan et al. (2006) conducted a study on women Investor perception towards

investment selection. Accordingly, women Investors generally avoid mutual fund, the

main reason is lack of awareness, investment procedures, entry and exit move etc.

K. Lashmana Rao (2011) made analysis of perception of Investor towards mutual

fund schemes, he made conclusion SEBI, AMFI, and IRDA should take appropriate

steps to enhance Investors knowledge for making more prudent decisions.

Jain and Jain (2013) made analysis of perception of investors buying behaviour of

urban rural for financial assets specifically focused on mutual fund, they made

conclusion different demographical factors have influence on buying behavioural

pattern of investor. The study shows that each demographical (age, gender, income,

educational qualification, occupation etc.) factor had significant bearing on both urban

and rural investors buying behavioural process.

CHAPTER 3

24


RESEARCH METHODOLOGY

3.1 STATEMENT OF PROBLEM

With the increasing competition in the financial market, you should identify investors buying

behaviour of financial assets. Both researches have shown that there is an impact of

demographic factors such as age, gender, income, culture, etc. in the investment decision; it

has become necessary for companies that are offering financial services to investors to

survive competitive market. This study tries to identify the various factors that can influence

the purchase decision of investors of Jaipur (Rajasthan State). The research is intended to

provide the solution to the question “What kind of factors can influence the buying decision

of investors?

3.2 SIGNIFICANCE OF STUDY

The study is expected to reveal the facts related to the buying behaviour of investors in

financial assets of mutual funds specifically. In August 2012, 44 asset management

companies (AMC) have been operating in India with assets under management (AUM)

reached EUR 6.4 trillion. However, after several years of continued growth, the industry has

seen a steady decline of 6.3 per cent and 5.1 per cent in its AUM in FY11 and FY12

respectively1. One reason could be changes in the regulatory directives such as prohibition of

entry load, KYC standards, guidelines on transaction costs, tighter assessment and advertising

standards - which have been introduced in a short period of time giving less time for the

industry to adjust in the new environment. It has been shown by research, companies that

provide financial services also cannot succeed without proper marketing strategy. Nowadays,

marketing not only meet human needs, but also generates the need. This study will help

companies of investment funds to explore new opportunities for market penetration in urban

and rural regions. Also enable companies of investment funds to identify the relative

importance of the role of financial advisor in the decision making process of the investor.

Finally , it would be possible to assess the impact of demographic factors in the decision

making process of investors, hence the mutual fund companies can prepare marketing

strategies , according to the findings of the investigation.

3.3 OBJECTIVE OF RESEARCH

25


This research paper focused attention on number of factors that highlights investors’

perception about mutual funds, these are to find,

To assess the impact of various demographic factors such as age, gender, income,

education, occupation, etc. on investor buying behaviour in Jaipur city.

To find Form of investment preferred by investor.

To find Preference of investor about different investment avenues.

To find investors’ Knowledge of risk in investment and risk analysis.

To find investors’ Preference for investing.

To find investors’ Preference upon time of holding of fund and preferred information

mode for investing in mutual fund or scheme.

3.4 THE HYPOTHESIS

a) Most of the investors prefer to invest in mutual fund schemes as their saving basket

because they are safe to invest in and a profitable mode among available investment

avenues.

b) Most of the investors prefer to choose short term investment in mutual fund for tax

saving purposes and they rely upon information given by agents and brokers for

investment in mutual funds.

c) Most of the investors know about the risk factors in their mutual fund investment /

scheme.

d) Most of the investor switchover from existing fund / scheme to new fund / scheme

with an object to gain more from changing market situation.

e) Most of the investors prefer to invest in open-end option of mutual fund scheme.

f) Maximum number of investors does not face loss in mutual fund investment hold by

them from more than a year.

3.5 METHODOLOGY

26


This research is Descriptive type of research study. It is related to the analysis of Investor

buying behaviour of Jaipur city for financial assets specifically focused on mutual funds.

The research is being carried with the use of primary data in that structure

Questionnaire is used as a tool for data collection. The questionnaire was personally

administered on the sample size of 120, elected on a convenient base from the city of Jaipur.

Questionnaire was prepared taking into account the various possible outcomes. Care is taken

minimize the possibility of misunderstanding and biased views. The five-point Likert scale

was used to analyze the different variables and their relationship. For analysis of statistical

data methods are applied with the help of SPSS (Statistical Package for Social Science)

software, and Excel.

DATA SOURCE

The source of the data would be primary and secondary, primary data were collected through

questionnaire, the Secondary data were obtained from the related research work, published

books, journals and reports Securities and Exchange Board of India (SEBI), Association of

Mutual Fund in India (AMFI) Funds, Reserve Bank of India (RBI) and other authorized

sources of data.

SAMPLING PLAN

Population: - Jaipur city

Sampling Unit: - Retail Investors

Sampling Method: - Non-Probability Sampling Specially Convenient sampling

Sample Size: - 120

CHAPTER 4

27


DATA ANALYSIS AND INTERPRETATION

4.1 What is the age group you face in?

Age Group Frequency Percent Valid

Percent

Cumulative

Percent

Valid

20-30 24 20.0 20.0 20.0

30-40 28 23.3 23.3 43.3

40-50 20 16.7 16.7 60.0

50-60 22 18.3 18.3 78.3

Above 60 26 21.7 21.7 100.0

Total 120 100.0 100.0

Table no.: 2

Figure No.:3

Interpretation:

This shows that the majority of people, who are being observed, are in the age group of 30-40

years.

4.2 What is your occupation?

28


Statistics

NValid 120

Missing 0

Mean 2.9833

Median 3.0000

Std. Deviation 1.44933

Variance 2.101

Minimum 1.00

Sum 358.00

Table No.: 3

Figure No.: 4

Interpretation:

This shows that most of the people who are investing in mutual fund are in service with

31.7% then followed by business class with 28.3%.

4.3 What is the per month income of your family?

29


Frequency Percent Valid Percent Cumulative

Percent

Service 38 31.7 31.7 31.7

Business 34 28.3 28.3 60.0

Professional 6 5.0 5.0 65.0

Dependent 16 13.3 13.3 78.3

Retired 26 21.7 21.7 100.0

Total 120 100.0 100.0

Statistics

NValid 120

Missing 0

Mean 2.6500

Median 2.0000


Variance 2.448

Minimum 1.00

Sum 318.00

Statistics

NValid 120

Missing 0

Mean 2.3833

Median 2.0000


Variance 1.180

Minimum 1.00

Sum 286.00

Table No.: 4

Figure No.: 5

Interpretation:

This shows that the majority of people, who are being observed, are having monthly income

of 10,000 to 30,000rs. .

4.4 What is your current attitude towards the following financial instruments, in Indian

capital market? (HF- highly favourable, F- favourable, SWF- somewhat favourable,

NVF- not very favourable, NAF- not at all favourable)

Saving

30


Income Frequency Percent Valid Percent Cumulative

Percent

< 10,000 30 25.0 25.0 25.0

10-30,000 40 33.3 33.3 58.3

30-50,000 24 20.0 20.0 78.3

> 50,000 26 21.7 21.7 100.0

Total 120 100.0 100.0


Percent

Valid

HF 20 16.7 16.7 16.7

F 53 44.2 44.2 60.8

SWF 24 20.0 20.0 80.8

NVF 19 15.8 15.8 96.7

NAF 4 3.3 3.3 100.0

Total 120 100.0 100.0

Table No.: 5

FD


Percent

Valid

HF 36 30.0 30.0 30.0

F 50 41.7 41.7 71.7

SWF 16 13.3 13.3 85.0

NVF 13 10.8 10.8 95.8

NAF 5 4.2 4.2 100.0

Total 120 100.0 100.0

Table No.: 6

Shares


Percent

Valid

HF 23 19.2 19.2 19.2

H 18 15.0 15.0 34.2

SWF 22 18.3 18.3 52.5

NVF 36 30.0 30.0 82.5

NAF 21 17.5 17.5 100.0

Total 120 100.0 100.0

Table No.: 7

Bonds


Percent

Valid F 8 6.7 6.7 6.7

SWF 16 13.3 13.3 20.0

NVF 19 15.8 15.8 35.8

31


NAF 77 64.2 64.2 100.0

Total 120 100.0 100.0

Table No.: 8

Mutual Fund


Percent

Valid

HF 1 .8 .8 .8

F 11 9.2 9.2 10.0

SWF 40 33.3 33.3 43.3

NVF 45 37.5 37.5 80.8

NAF 23 19.2 19.2 100.0

Total 120 100.0 100.0

Table No.: 9

Gold/ Real Estate


Percent

Valid

HF 61 50.8 50.8 50.8

F 44 36.7 36.7 87.5

SWF 12 10.0 10.0 97.5

NVF 1 .8 .8 98.3

NAF 2 1.7 1.7 100.0

Total 120 100.0 100.0

Table No.: 10

Statistics

Saving FD Shares Bonds Mutual Fund Gold / Real Estate

NValid 120 120 120 120 120 120

Missing 0 0 0 0 0 0

Mean 2.4500 2.1750 3.1167 4.3750 3.6500 1.6583

Median 2.0000 2.0000 3.0000 5.0000 4.0000 1.0000

Std. Deviation 1.05201 1.10509 1.38530 .95321 .92264 .82499

32


Figure No.:6 Figure No.:7



33


4.5 What is your objective for investing? (Rank from 1- first preference to 3-last

preference)

Income generation


Percent

Valid

1st preference 40 33.3 33.3 33.3

2nd preference 58 48.3 48.3 81.7

3rd preference 22 18.3 18.3 100.0

Total 120 100.0 100.0

Table No.:11

Tax saving


Percent

Valid

1st preference 62 51.7 51.7 51.7

2nd preference 50 41.7 41.7 93.3

3rd preference 8 6.7 6.7 100.0

Total 120 100.0 100.0

Table No.:12

others


Percent

Valid

1st preference 18 15.0 15.0 15.0

2nd preference 12 10.0 10.0 25.0

3rd preference 90 75.0 75.0 100.0

Total 120 100.0 100.0

Table No.:13

Statistics

Income generation Tax savings others

NValid 120 120 120

Missing 0 0 0

Mean 1.8500 1.5500 2.6000

Median 2.0000 1.0000 3.0000

Std. Deviation .70592 .61970 .73793

Table No.:14

34



Interpretation:

Regarding the objective for investing tax saving emerged at a clear cut winner with 51.7%

people preferring it, followed by income generation with 33.3%.

35


4.6 What is your priority while investing your money? (Rank from 1- first preference to

4-last preference)

Safety


Percent

Valid

1st preference 24 20.0 20.0 20.0

2nd preference 22 18.3 18.3 38.3

3rd preference 42 35.0 35.0 73.3

4th preference 32 26.7 26.7 100.0

Total 120 100.0 100.0

Table No.:15

Higher returns


Percent

Valid

1st preference 10 8.3 8.3 8.3

2nd preference 50 41.7 41.7 50.0

3rd preference 24 20.0 20.0 70.0

4th preference 36 30.0 30.0 100.0

Total 120 100.0 100.0

Table No.:16

Liquidity


Percent

Valid

1st preference 44 36.7 36.7 36.7

2nd preference 30 25.0 25.0 61.7

3rd preference 20 16.7 16.7 78.3

4th preference 26 21.7 21.7 100.0

Total 120 100.0 100.0

Table No.:17

36


Tax benefits


Percent

Valid

1st preference 42 35.0 35.0 35.0

2nd preference 18 15.0 15.0 50.0

3rd preference 34 28.3 28.3 78.3

4th preference 26 21.7 21.7 100.0

Total 120 100.0 100.0

Table No.:18

Statistics

VAR00004 VAR00005 VAR00006 VAR00007

NValid 120 120 120 120

Missing 0 0 0 0

Mean 2.6833 2.7167 2.2333 2.3667

Median 3.0000 2.5000 2.0000 2.5000

Std. Deviation 1.07675 .98887 1.16484 1.17347

Table No.:19


37



Interpretation:

Out of the total sample size, priority is given to higher return followed by tax saving then

liquidity. It stated that people is more concerned about higher return.

38


4.7 Are you aware of mutual fund?

Table No.:20

Figure No.:18

Interpretation:

Out of the total sample size, 56.7% of people are aware about mutual fund.

39



Percent

Yes 68 56.7 56.7 56.7

No 52 43.3 43.3 100.0

Total 120 100.0 100.0

Statistics

NValid 120

Missing 0

Mean 1.4333

Median 1.0000

Std. Deviation .49761

Variance .248

Minimum 1.00

Sum 172.00

4.8 From where you get information about mutual fund?

Table No.:21

Figure No.:19

Interpretation:

It is the most important aspect for investment. Accurate and appropriate information helps

investors to make decisions. Electronic media play a vital role in providing information about

mutual fund then followed by print media and brokers.

40


Statistics

NValid 120

Missing 0

Mean 2.4000

Median 2.0000


Variance 1.250

Minimum 1.00

Sum 288.00


Percent

Print Media 30 25.0 25.0 25.0

Electronic Media 42 35.0 35.0 60.0

Friends/Relatives 18 15.0 15.0 75.0

Brokers 30 25.0 25.0 100.0

Total 120 100.0 100.0

4.9 Kindly rank the reason of your not investing into the mutual fund? (Rank from 1-

first preference to 4-last preference)

Lack of confidence


Percent

Valid

1st preference 17 14.2 22.1 22.1

2nd preference 14 11.7 18.2 40.3

3rd preference 28 23.3 36.4 76.6

4th preference 18 15.0 23.4 100.0

Total 77 64.2 100.0

Missing System 43 35.8

Total 120 100.0

Table No.:22

Imperfect knowledge


Percent

Valid

1st preference 4 3.3 5.2 5.2

2nd preference 36 30.0 46.8 51.9

3rd preference 13 10.8 16.9 68.8

4th preference 24 20.0 31.2 100.0

Total 77 64.2 100.0


Total 120 100.0

Table No.:23

Find govt securities better


Percent

Valid

1st preference 29 24.2 37.7 37.7

2nd preference 17 14.2 22.1 59.7

3rd preference 14 11.7 18.2 77.9

4th preference 17 14.2 22.1 100.0

Total 77 64.2 100.0


Total 120 100.0

Table No.:24

41


Other reasons


Percent

Valid

1st preference 27 22.5 35.1 35.1

2nd preference 10 8.3 13.0 48.1

3rd preference 22 18.3 28.6 76.6

4th preference 18 15.0 23.4 100.0

Total 77 64.2 100.0


Total 120 100.0

Table No.:25

Statistics

Lack of

confidence

Imperfect

knowledge

Find govt

securities better

Other reasons

NValid 77 77 77 77

Missing 43 43 43 43

Mean 2.6104 2.7403 2.2468 2.4026

Median 3.0000 2.0000 2.0000 3.0000

Std. Deviation 1.07796 .96522 1.18272 1.19494

Table No.:26

42



43



Interpretation:

This shows that the majority of people rank there reason for not investing in mutual fund is

due to imperfect knowledge. They also rank lack of confidence as a reason for not investing.

44


CHAPTER 5

CONCLUSION AND SUGGESTION

5.1 CONCLUSION

The present study says about the investor’s behaviour towards mutual funds in Jaipur. The

study explains that many investors are preferred to invest in mutual fund in order to have high

return at low level of risk, safety liquidity. The world of investment has been changing day to

day, so investor’s preferences toward investment pattern also changed. Overall it can be

understood that all age groups of investors are participating in mutual fund investments but

more precisely that the investors belonging to the age group 30-40 years have a clear

planning for investments and also prefer to take more risk to yield more returns. Hence it is a

notable point for the organizations to concentrate on this particular age group to attract more

investments through the mutual funds.

There are some suggestions for better investing for investors that they should keep their

investment for long time keeping in mind the level of risk involve and saving pattern, they

should take help of private financial consultants’ to have investment portfolio so as to reduce

risk in investment, they should not invest in high volatile funds, they should collect all

possible information before investment, periodical review should be done for investment and

risk analysis should be done regularly and properly, maintain proper records for each

transaction.

Only a small segment of the investors Will in Mutual Funds and the main source sources of

information are the electronic media followed by advertisements in different media. The

Indian investors generally invest over a period of 2-3 years. Also there is a tendency to invest

in fixed deposits due to the security attached to it.

5.2 SUGGESTION

Some of the important suggestions drawn out of the study are mentioned below:

Markets cover maximum schemes with equity share; hence it is suggested to have

debt schemes, so that it can attract investors who expect better returns.

Like banking, insurance and telecom, penetration of mutual fund schemes into market

is more essential.

45


Since investors will be of different age groups, it is to be advised for the agents to

educate them in detail about various benefits, earnings etc. Also educational levels

should be noted before explaining them about the details of the scheme.

Organizations should improve proper infrastructural facilities to attract and retain the

investors’ of all areas which help them providing best service to investors’.

Monthly educational programs on mutual fund schemes at various levels should be

conducted.

Investors invest in the mutual fund products to get higher returns on their investment

and tax benefits on their investment/income. Mutual fund houses should manage their

assets with least volatility and fluctuations in their returns. They should also convince

the govt. for continuing the tax benefits till the time industry gets maturity. Stable

mutual fund industry will help to keep stable capital market also.

Convenience of investment or location is also important. Mutual fund houses should

open their offices or service centres near to their customers. They should open more

outlets just as banks for the convenience. Technology can help in this regard. They

can use internet/intranet for their transactions. It will save their time and cost and

improve the service standard and more convenience to their customers.

Companies should find out the causes for losing the investor’s preference. They

should change their marketing strategy, if required.

5.3 LIMITATION OF THE STUDY

The study is limited to 120 respondents only, from Jaipur city. The findings of

research may not apply to the Rajasthan state or the country.

The Investors buying pattern keeps changing with the introduction of new innovation

in terms of product, price, place and promotion. If there is introduction of new financial

product, investors buying behavioural pattern may change.

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APPENDIX

REFERENCE

1. www.amfi.com

2. www.moneycontrol.com

3. www.rbi.org

4. www.sebi.gov.in

5. http://business-standard.com/india/news/qa-sandesh-kirkire-kotak-mutual-fund/

459181/

6. http://economictimes.indiatimes.com/Mutual_funds

7. Brown & goetzmann (1997) Mutual fund styles. Journal of Financial Economics,

Volume 43, Issue 3, March 1997, Pages 373-399.

8. Bergstresser, Daniel B., Chalmers, John and Tufano, Peter, Assessing the Costs and

9. Benefits of Brokers in the Mutual Fund Industry (October 1, 2007). AFA 2006 Boston

10. Meetings; HBS Finance Working Paper No. 616981. Available at SSRN:

http://ssrn.com/abstract=616981 or doi:10.2139/ssrn.616981

11. Avadhani, V.A: Investment and Securities Markets in India – Investment

Management - Himalaya Publishing House, Mumbai, 1992.

12. Bhalla V K, Tuteja S K, “Investment Management (Securities Analysis and Portfolio

Management)”, S Chand &Co.Ltd., New Delhi, 1995.

13. Bhole L M,”Financial Markets and Institutions”, Tata McGraw Hill, New Delhi,

1991.

14. D. Kandavel, Asst. Professor International Journal of Research in Commerce &

Management, www.ijrcm.org.in, Volume No. 2 (2011), Issue No. 11 (November)

ISSN 0976-2183.

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QUESTIONNAIRE

1. Name of the Investor

Mr. /Mrs. /Ms......................................................................................................................

2. Address/ Contact

...............................................................................................................................................

3. What is the age group you face in?

4. What is your occupation?

i. Serviceii. Businessiii.Professionaliv.Dependentv. Retired

5. What is the per month income of your family?

i. < 10,000ii. 10-30,000iii.30-50,000 iv. > 50,000

6. What is your current attitude towards the following financial instruments, in Indian capital market?

HF F SWF NVF NAFi. Current savingii. Fixed depositsiii. Sharesiv. Bonds/debenturesv. Mutual fund

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i. 20-30ii. 30-40iii. 40-50iv. 50-60v. Above 60

vi. Gold/real estates (HF- highly favourable, F- favourable, SWF- somewhat favourable, NVF- not very favourable, NAF- not at all favourable)

7. What is your objective for investing? (Rank from 1- first preference to 3-last preference)

i. Income generation ii. Tax saving iii. Others

8. What is your priority while investing your money? (Rank from 1- first preference to 4-last preference)

i. Safety ii. Higher returns iii. Liquidityiv. Tax benefits

9. Are you aware of mutual fund?

i. Yesii. No

10. Have you ever invested in mutual fund?

i. Yes ii. No

11. From where you get information about mutual fund?

i. Print media ii. Electronic mediaiii. Friends/relativesiv. Broker/investmentv. Banks

12. Kindly rank the reason of your not investing into the mutual fund? (Rank from 1- first preference to 4-last preference)

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Ranki. Lack of confidence ii. Imperfect knowledge iii. Find Govt. Securities/bonds better iv. Other reasons

50


Report

Economy & Finance

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