A STUDY ON “CONSUMER PREFERANCE TOWARDS MUTUAL FUNDS AS

AN INVESTMENT “ HDFC BANK

A Project report submitted to Gitam University, Visakhapatnam in

Partial fulfillment for the award of the Degree of

Bachelor of Business Management (BBM)

By

Sharmila ReddyRegd.No:1214110142

Under the guidance ofDr. K Manjusree Naidu

Gitam Institute of ManagementGitam University

Visakhapatnam, Andhra Pradesh

DECLARATION

I hereby declare that the project work titled A study on “CONSUMER

PREFERANCE TOWARDS MUTUAL FUNDS AS AN INVESTMENT” submitted

by me under the guidance of Dr.K Manjusree Naidu is the work done by me and

has not been submitted to any other university or institution for the award of any

certificate or degree or diploma.

Sharmila Reddy 1214110142

1

CERTIFICATE

This is to certify that the project report titled ‘A STUDY ONCONSUMER

PREFERANCE TOWARDS MUTUAL FUNDS AS AN INVESTMENT’ at HDFC

Bank submitted by Sharmila Reddy in the partial fulfillment for the award of the

degree Bachelor of Business Management to Gitam Institute of Management, Gitam

University. It is a bona-fide work carried out by her under my guidance and

supervision.

Date: Dr. K Manjusree NaiduVisakhapatnam Program Coordinator

(BBM)

2

ACKNOWLWDGEMENT

I like to express my profound gratitude to Prof. K. Siva Rama Krishna, Dean &

Principal, GIM, GITAM UNIVERSITY for giving me the opportunity to do this

project work.

I extend my heartfelt thanks to Prof. P. Sheela, Vice-Principal GIM, GITAM

UNIVERSITY who has been a strong pillar of support to do our project.

I take this opportunity to acknowledge my sincere thanks to Dr. K.Manjusree Naidu,

Programme Coordinator of BBM & also my project guide with whose cooperation

and valuable guidance I am successful to complete my project work.

I express my deep sense of gratitude the management of HDFC Bank for giving me

this opportunity to study in their esteemed organisation.

Sharmila Reddy

1214110142

3

CONTENTS

Chapter Title Page

Chapter 1 Theoretical Framework of

HDFC Bank

Introduction

Chapter 2

Methodology

Need of the study

Objectives of the study

Scope

Limitations

Research Design

Data Collection Method

Chapter 3 Industry & Company

Profile

Chapter 4 Analysis

Chapter 5 Findings & Suggestions

Chapter 6 Bibliography

Chapter 7 Annexure

Questionnaire

4

CHAPTER-1

THEORETICAL FRAMEWORK

5

A. Introduction

Indian GDP growth is surging, Markets are at record high, huge surge in FII

and FDI inflows, a great budget with focus on rural development and no alteration in

savings and consumption pattern. All these aspects have resulted in savers looking for

capital markets as an investment option and the better way of investing in this option

of investing is through Mutual Funds.

In the last 5-8 years the Mutual Fund industry has perceived dramatic changes

in terms of the structure of the industry, players in the market, acceptance by the

investors by a sharp increase in the investor base, by a huge surge in asset base

handled by the mutual fund industry, advent of financial planning & asset allocation

as a concept and number of individuals, banks, retail advisors and corporate adding

mutual fund to their client portfolio.

This has led to a sharp rise in the number of new schemes offered by different

Mutual Funds and the amount raised by this offers are unimaginable. In the month of

Jan – Feb 2006 alone there were about 16 New Fund Offers from various Asset

Management Companies and a mopping up a whopping

12000 crs. Of equity money. All of these have to be deployed in the market to gain

returns and pass it on to the investors. In this stiffening of competition in the industry

with 29 players and more number of players set to hit the market soon, there is a huge

pressure on the fund managers to out beat the competitor and its benchmark.

6

Managing this kind of huge amount is a very difficult task for a fund manager. So

there role as the primary managers of the fund is very important and this importance

is growing everyday. They cannot afford to make any mistakes in this respect.

B.Concepts

A Mutual Fund is a form of collective investments that pools money from

many investors and invest s there money in stocks, bonds, short-term money market

instruments, and/or other securities. In a mutual fund, the fund manager, who is also

known as the portfolio manager, trades the fund’s underlying securities, realizing

capital gains or losses, and collects the dividend or interest income. The investment

proceeds are then passed along to the individual investors. The value of a share of the

mutual fund, known as the net asset value per share (NAV), is calculated daily based

on the total value of the fund divided by the number of the shares currently issued and

outstanding.

Types of Mutual Funds

Open Mutual Fund - A fund sponsor, usually a mutual fund company, establishes

open mutual funds. The sponsor has promised in the documents of the fund that it will

issue and refund or units of the fund at the fund unit value

The fund company or an outside valuation agent values this type of fund. This means

that the investments of the fund are valued at "fair market" value, which is the closing

market value for listed public securities. Essentially, the fund company prices all of

the fund's holdings at the market close and adds up their value; it then subtracts

amounts owing and adds amounts to be received by the fund; and finally it divides

this net amount by the number of units outstanding to "strike" the unit value for that

7

day. Any participants withdrawing funds from the fund that day receive this unit value

for their funds withdrawn. Any new purchases are made at the same unit value. Open

mutual funds keep some portion of their assets in short-term and money market

securities to provide available funds for redemptions. A large portion of most open

mutual funds is invested in highly "liquid securities", which means that the fund can

raise money by selling securities at prices very close to those used for valuations.

Funds also have the ability to borrow money for short periods of time to fund

redemptions. The documents of open mutual funds usually provide for the suspension

of unit redemptions in "extraordinary conditions" such as major interruptions to the

financial markets or total demands for redemptions forming a substantial portion of

the fund assets in a short period of time. These clauses were invoked in October,

1987, when the stock market crashed 30% in a few days and the volume of stock

transactions caused trading activity to be hours out date.

Government regulators restrict illiquid investments, those not actively traded on

the public markets, because they are difficult to dispose of in a short period of time. A

fund holding an illiquid investment might not be able to sell it in a short period of

time or would have to take a significant discount to the valuation level the fund was

using. In Canada, most open real estate mutual funds suspended redemptions during

the real estate debacle of the early 1990s. Fund participants did not obtain redeemed

funds until these funds were restructured into closed-end funds in the mid 1990s and

they could sell their units on the stock market.

The valuation of investments that are less liquid and trade infrequently is an important

issue for mutual funds.

Closed Mutual Funds

8

Closed mutual funds are really financial securities that are traded on the stock

market. A sponsor, a mutual fund company or investment dealer, will create a "trust

fund" that raises funds through an underwriting to be invested in a specific fashion.

The fund retains an investment manager to manage the fund assets in the manner

specified. A good example of this type of fund is the "country funds" that were

underwritten during the international investment euphoria of the early 1990s. An

investment dealer would decide that a "Germany" or "Portugal" or "Emerging

Country" fund would sell given the popular consensus that these were "no lose"

investments.

It would then retain a well-respected investment advisor to manage the fund assets for

a fee and underwrite a public issue that it would sell through retail stockbrokers to

individual investors. It is interesting to note that many of these funds were caught in

the sell-off of the stock market of 1994 and have languished ever since. This has led

to the phrase "submerging country" replacing "emerging market" for many of these

funds. This is wry proof of the fickleness of investor fashion!

Once underwritten, closed mutual funds trade on stock exchanges like stocks or

bonds. Their value is what investors will pay for them. Usually closed mutual funds

trade at discounts to their underlying asset value. For example, if the price of the fund

assets less liabilities divided by the outstanding units is $10, the fund might trade on

the stock market at $9. This fund would be said to be trading at a "10% discount to its

net asset value". The reason for this discount is debated by academics, but is due in

large part to the lack of liquidity of the fund units and the presence of the management

fee.

Time Horizon - Your time horizon is the expected number of months, years, or

decades you will be investing to achieve a particular financial goal. An investor with a

9

longer time horizon may feel more comfortable taking on a riskier, or more volatile,

investment because he or she can wait out slow economic cycles and the inevitable

ups and downs of our markets.

By contrast, an investor saving up for a teenager's college education would likely take

on less risk because he or she has a shorter Time Horizon.

Risk Tolerance - Risk tolerance is your ability and willingness to lose some or all of

your original investment in exchange for greater potential returns. An aggressive

investor, or one with a high-risk tolerance, is more likely to risk losing money in order

to get better results. A conservative investor, or one with a low-risk tolerance, tends to

favor investments that will preserve his or her original investment. In the words of the

famous saying, conservative investors keep a "bird in the hand," while aggressive

investors seek "two in the bush."

A vast array of investment products exists - including stocks and stock mutual funds,

corporate and municipal bonds, bond mutual funds, lifecycle funds, exchange-traded

funds, money market funds, and Treasury securities. For many financial goals,

investing in a mix of stocks, bonds, and cash can be a good strategy. Let's take a

closer look at the characteristics of the three major asset categories.

Stocks - Stocks have historically had the greatest risk and highest returns among the

three major asset categories. As an asset category, stocks are a portfolio's "heavy

hitter," offering the greatest potential for growth. Stocks hit home runs, but also strike

out. The volatility of stocks makes them a very risky investment in the short term.

Large company stocks as a group, for example, have lost money on average about one

out of every three years.

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And sometimes the losses have been quite dramatic. But investors that have been

willing to ride out the volatile returns of stocks over long periods of time generally

have been rewarded with strong positive returns.

Bonds - Bonds are generally less volatile than stocks but offer more modest returns.

As a result, an investor approaching a financial goal might increase his or her bond

holdings relative to his or her stock holdings because the reduced risk of holding more

bonds would be attractive to the investor despite their lower potential for growth. You

should keep in mind that certain categories of bonds offer high returns similar to

stocks. But these bonds, known as high-yield or junk bonds, also carry higher risk.

Cash - Cash and cash equivalents - such as savings deposits, certificates of deposit,

treasury bills, money market deposit accounts, and money market funds - are the

safest investments, but offer the lowest return of the three major asset categories. The

chances of losing money on an investment in this asset category are generally

extremely low. The federal government guarantees many investments in cash

equivalents. Investment losses in non-guaranteed cash equivalents do occur, but

infrequently. The principal concern for investors investing in cash equivalents is

inflation risk. This is the risk that inflation will outpace and erode investment returns

over time

Stocks, bonds, and cash are the most common asset categories. These are the asset

categories you would likely choose from when investing in a retirement savings

program or a college savings plan.

But other asset categories - including real estate, precious metals and other

commodities, and private equity - also exist, and some investors may include these

asset categories within a portfolio. Investments in these asset categories typically have

11

category-specific risks. Before you make any investment, you should understand the

risks of the investment and make sure the risks are appropriate for you.

Consumer Behavior

Consumer behavior is the study of how people buy, what they buy, when

they buy and why they buy. It blends elements from psychology, sociology, socio

psychology, anthropology and economics. It attempts to understand the buyer

decision making process, both individually and in groups. It studies characteristics of

individual consumers such as demographics, psychographics, and behavioral variables

in an attempt to understand people's wants. It also tries to assess influences on the

consumer from groups such as family, friends, reference groups, and society in

general.

Consumer behaviour is comparatively a new field of study which evolved just after

the Second World War. The sellers market has disappeared and buyers market has

come up. This led to paradigm shift of the manufacturer’s attention from product to

consumer and specially focused on the consumer behaviour. The evaluation of

marketing concept from mere selling concept to consumer oriented marketing has

resulted in buyer behaviour becoming an independent discipline. The growth of

consumerism and consumer legislation emphasizes the importance that is given to the

consumer.

One of the important ways in which the financial sector influences economic growth

is through the formation of domestic savings. The latter depends largely on the extent

12

of financial deepening in the economy. The steady growth of domestic savings has

been possible in India due to financial deepening, and India is among the few

countries in the world to have achieved a consistently high rate of growth in domestic

savings. According to the RBI, “The Indian savings experience during the period

1970-71 to 1998-99 was marked by a simultaneous secular increase in the rate of

Gross Domestic Savings (GDS as percentage of GDP at current market prices).

During the nineties, household financial savings has emerged as the single most

important contributor to GDS by contributing over 70 to GDS.

13

Chapter-2

Research Methodology

14

A. Need for the study

“Expectations” of investors play a vital role in the financial markets.

They influence the price of the securities, the volume traded and various other

financial operations in actual practice. These “expectations” of investors are

influenced by their “perception” and humans generally relate perception to

action. The beliefs and actions of many investors are influenced by the

dissonance effect and endowment effect.

Hence, with this background, this study evaluates the behavioral

aspects of Asset Allocation techniques of individual investors and also to assess

the conceptual awareness of Mutual Funds during the period, May.2007 to July

2007.

B. Objectives of the study

The study has the following general objectives:

To assess the savings objectives among individual investors

To identify the preferred savings avenue among individual investors.

15

To assess mutual fund conceptual awareness among present investors

To understand the fund sponsor qualities influencing the selection of

mutual funds/schemes

To identify the information sources influencing the scheme selection

decision of investors

To evaluate investor related services that would affect the selection of

mutual funds

C . Scope for further study

The MF operational environment is becoming more competitive. Hence, the

impact of emerging competition on investor behavior/behavioral changes needs to

be studied further. Developments in technology influence the behavior of investors.

Hence, the impact of technology on financial behavior is another potential area for

close study .Since the industry is still struggling to win the investors’ confidence, an

in-depth analysis into investor’s expectations from MF products, its performance,

management, service and other related area could be done.

A study is required to examine the trading behavior of MF investors.

Further, research can be done to identify whether MF investors chase past returns or

16

employ a current performance momentum to pick up their funds i.e. whether they

are active or passive trend chasers.

This study reveals that MF investors feel that currently the two major benefits,

which MFs purpose to offer, namely, diversification benefits and professional

management are not satisfactorily delivered. In spite of this, MF industry is

growing and the study attributes this to investor behavior and other macroeconomic

factors.

D. Research Methodology

Research involves scientific and inductive thinking and promotes the development

of logical habits of thinking and organization. Research also makes its own

contribution to the existing stock of knowledge, enabling its advancement.

Research Design:

A research design is the specification of the methods and procedures for

acquiring the information needed to structure or solve problems. Its overall

operational pattern or frame work of the project that stipulates what information is

to be collected, which sources and with what procedures. The researcher used

descriptive research design for the research study.

17

Descriptive information often provides a sound basis for the solution of marketing

problems, even though it does not explain the nature of relationship involved.

Descriptive research is marked by the prior formulation of specific research

questions. The investigator already knows a substantial amount about the research

problem. Thus the investigator should be able to define clearly what it is that he

or she wants to measure and setup appropriate and specific means for measuring

it.

Sampling Design:

The researcher adopted the convenient sampling method for the research

study. Convenient sampling refers to setting up the sampling size according to the

convenience of the researcher. The sampling unit consisted of mutual fund

investors of HDFC Bank. The sample size is One Hundred and Two (N=102).

Data Collection:

The task of data collection begins after a research problem has been defined

and research design/plan chalked out. While deciding about the method of data

collection to be used for the study the researcher should keep in mind 2 types of

data viz, primary and secondary. In this study the researcher has used the primary

data to carry out the research work. Primary data are those, which are collected

18

afresh and for the first time, and thus happen to be original in character. Primary

data have been collected through the structured questionnaires.

Questionnaire Design:

According to Bogardus, “a questionnaire is a list of questions sent to a

number of persons for their answers and which obtains standardized results that

can be tabulated and treated statistically”. It is treated as the ‘heart of the survey

operation’.

The researcher used structured questionnaire and is in a multiple-choice format.

E. Limitations of the study

Sample size is limited to 102 individual investors in the city of Hyderabad.

The sample size may not adequately represent the national market.

The duration of the study for two months is constraint to get accurate

results..

This study has not been conducted over an extended period of time having

both ups and downs of stock market conditions which has a significant

influence on investor’s buying pattern and preferences.

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CHAPTER-3

PROFILE OF HDFC BANK

20

A.PROFILE OF THE MUTUAL FUND INDUSTRY

Indian Mutual Fund Industry

The origin of mutual fund industry in India is with the introduction of the

concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it

accelerated from the year 1987 when non-UTI players entered the industry. In the past

decade, Indian mutual fund industry had seen dramatic improvements, both quality

wise as well as quantity wise. Before, the monopoly of the market had seen an ending

phase; the Assets Under Management (AUM) was Rs. 67bn. The private sector entry

to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it

reached the height of 1,540 bn. Putting the AUM of the Indian Mutual Funds Industry

into comparison, the total of it is less than the deposits of SBI alone, constitute less

than 11% of the total deposits held by the Indian banking industry. The main reason

of its poor growth is that the mutual fund industry in India is new in the country.

Large sections of Indian investors are yet to be intellectuated with the concept. Hence,

21

it is the prime responsibility of all mutual fund companies, to market the product .

The mutual fund industry can be broadly put into four phases according to the

development of the sector. Each phase is briefly described as under.

First Phase - 1964-87

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

up by the Reserve Bank of India and functioned under the Regulatory and

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

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

regulatory and administrative control in place of RBI. The first scheme launched by

UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets

under management.

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

Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canbank

Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank

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

92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47, 004 as assets

22

under management.

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

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

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

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

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

The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first

private sector mutual fund registered in July 1993.

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

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

and acquisitions. As at the end of January 2003, there were 33 mutual funds with total

assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets

under management was way ahead of other mutual funds.

Fourth Phase - since February 2003

This phase had bitter experience for UTI. It was bifurcated into two separate entities.

One is the Specified undertaking of the Unit Trust of India with AUM of Rs.29, 835

crores (as on January 2003). 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.

23

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 AUM 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 September 2004, there were 29 funds,

which manage assets of Rs.153108 crores under 421 schemes. As of February 2006

the assets managed by Indian Mutual Fund industry stands at Rs.2, 17,471 crores.

B. PROFILE OF HDFC BANK

COMPANY PROFILE:

The Housing Development Finance Corporation Limited (HDFC) was

amongst the first to receive an ‘in principle' approval from the Reserve

Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's

liberalization of the Indian Banking Industry in 1994. The bank was incorporated in

August 1994 in the name of 'HDFC Bank Limited', w i t h i t s r eg i s t e r ed o f f i c e

i n Mumba i , I nd i a . HDFC Bank commenced ope r a t i ons a s a

Scheduled Commercial Bank in January 1995.HDFC is India’s premier housing

finance company and enjoys an impeccable track recording

India as well as in international markets. Since its inception in 1977, the Corporation

24

has maintained a Consistent and healthy growth in its operations to remain the market

leader inmortgages. Its outstanding loan portfolio covers well over a million dwelling

units. HDFC has developed significant expertise in retail mortgage loans to

different market segments and also has a large corporate client base for its

housing related credit facilities. With its experience in the financial markets, a strong

market reputation, large shareholder base and unique consumer franchise, HDFC was

ideally positioned to promote a bank in the Indian environment .HDFC Bank began

operations in 1995 with a simple mission to be a “World Class Indian

B a n k . ” I t r e a l i z e d t h a t o n l y a s i n g l e m i n d e d f o c u s o n

p r o d u c t q u a l i t y a n d s e r v i c e excellence would help us get there.

Today, the Bank is proud to say that it is well on its way towards that goal

THE VARIOUS SERVICE S PROVIDED BY HDFC

1.mobile banking

2.phone banking

3.atms

4.Net banking

5 email statements

6 .Demat account

7.Money transfer from one ac to another or from one bank to another 8.online banking

9.money deposit

10.nri services

11. Savings Accounts

12.Salary Accounts

13.Current Accounts

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14.Deposits

15.Safe Deposit Locker

16.Rural Accounts

17.Credit Cards

18.Debit Cards

19.Prepaid Cards

20.Credit Card Rewards Program

HDFC bank l t d p rov ide s va r i ous f i nanc i a l p roduc t s and s e rv i ce s .

I t ope ra t e s i n t h r ee segments: Retail Banking, Wholesale Banking, and Treasury.

The Retail banking segment provides various deposit products, including

savings Accounts, current accounts, fixed deposits, and demat accounts. It

also offers Auto, personal, commercial vehicle, home,gold, and educational

loans; loans Against securities and property and health care finance Working capital

finance, construction equipment finance, and warehouse Receipt loans, as we l l a s

c r e d i t c a r d s , deb i t c a r d s , depo s i t o ry , i nv es t men t Adv i so ry , b i l l

pay men t s , and transactional services. In addition, this segment Sells third party

financial products, such as mutual funds and insurance, as Well as distributes

life and general insurance products t h rough i t s t i e -ups w i th i n su rance

compan i e s and mu tua l f und house s . The who le sa l e  banking Segment

provides loans, non-fund facilit ies, and transaction services to

large Corporate, emerging corporate, small and medium enterprise, supply

chain, Public sector

undertaking, central and state government departments, and

Institutional customers. It offers deposit and transaction banking products,

26

Supply chain financing, working CapitaLand term finance, agricultural loans, and

funded non-funded treasury, and foreign exchange products. This segment’s

services include trade services, cash management, and money M a r k e t ,

c u s t o d i a l , t a x c o l l e c t i o n , a n d e l e c t r o n i c b a n k i n g . I n

a d d i t i o n , i t p r o v i d e s co r r e sponden t bank s e rv i ce s t o co -

ope ra t i ve banks , p r i va t e banks , f o r e ign banks , and regional rural

banks. The Treasury Services segment operates primarily in areas, such

as foreign exchange, money market, interest rate trading, and Equities. As of March

31, 2009HDFC bank had a network of 1,142 branches And 3,295 automated teller

machines in 528cities in India. The company was founded in 1994 and is based in

Mumbai, India.

ORGANISATION STRUCTURE OF HDFC Bank:

27

S.M. - State Manager

Every manager has a 8 members under him. Hdfc has a tall organization

structure. Tall organization structure characterized by more hierarchical level and

narrow span of control. This type of organization provides closer supervision and

narrow span of control. This type of organization facilitates relations between

supervisors and subordinates. However some times too close supervision also may

some time strain the relations.

Customers:

It is important for the customers to understand that according to the typical

stage of the life, which they are currently and based upon that their financial needs

may differ. Therefore it is vital for the customer to know about their commitment and

S.M.

LOCALMANAGER

RELATIONSHIPMANAGER

ASST. RELATIONSHIPMANAGER

BRANCH HEAD

28

long term financial need before choosing a product. HDFC is one of growing bank in

the market.

At HDFC they classify their customers on the basis of following;

The Financial needs

The Age group

The Financial status

SWOT Analysis of HDFC Bank :

Strengths:

o In depth knowledge about prospective customers

o In depth knowledge about the rural and semi-urban areas

o Presence in most prospective cities in the form of branches

o Experienced board and executive management team

Weakness:

o Lack of a banking arm to complete the broker depository chain

o Lack of technology and equipment

o Insignificant presence in institutional segment.

29

Opportunities:

o Changing demographics with higher disposable income and

increasingly complex

o Financial instruments will drive demand for investment advisory

services.

o Rapid penetrations of internet and computer means that technology

enabled financial services will gain market.

Threats:

o There is a big threat to the company from its competitors like

karvy ,religare, and way2wealth.

o As the competitors is growing day by day, all the leading companies

like way2wealth, religare, and karvy etc. there is a cut throat

competitors to capture the 12 lakh population of vizag.

30

CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

31

4.1 AGE GROUP OF THE RESPONDENTS

Age No of respondents Percentage

Between 18-25 17 16.7

Between 25-50 57 55.9

More than 50 28 27.5

Total 102 100

Table 4.1

Graph 4.1

32

Interpretation:

It is inferred that majority of respondents are of the age 25-50 (55.9%) and more

than 50 years old (27.5%). This is because there are very few among the age group of 18-

25 who are job holders and do not think of immediately investing. Where as in the age

group where the respondents were more than 50 years, are either retired or nearing

retirement and do not normally invest as actively as before.

4.2 GENDER OF THE RESPONDENTS

Gender No of respondents Percent

Male 68 66.7

Female 34 33.3

Total 102 100

Table 4.2

33

0

10

20

30

40

50

60

70

80

gender classification

Per

cen

t

Male

Female

Graph 4.2

Interpretation:

It is inferred from the above table and graph that 66.7% of respondents are male and

33.3% are female. This is so because the number of working male is more than the

number of working female.

4.3 MARITAL STATUS

Status No. of Respondents Percentage

34

Married 74 77

Single 28 23

Total 102 100

Table 4.3

Graph 4.3

Interpretation:

It is inferred from the above table and graph that 77% of respondents are married

and 23% of respondents are single. This is the case as majority of the respondents are

of marriageable age.

4.4 OCCUPATION OF RESPONDENTS

Occupation No of respondents Percentage

Student 2 2.0

35

Housewife 8 7.8

Professional 20 19.6

Services 6 5.9

Retired 7 6.9

Total 102 100

Table 4.4

Graph 4.4

Interpretation:

It is inferred from the above table and graph that most of the respondents are either

from business or profession.

4.5 INCOME OF RESPONDENTS

S. No. Options No. of respondents Percentage (%)

36

1. Below Rs.1,00,000/ 23 22.5

2.Between Rs.1,00,000/

and Rs.3,00,000/-42 41.1

3.Between Rs.3,00,000/

and Rs.5,00,000/-33 32.3

4. above Rs.5,00,000/ 4 3.9

Table 4.5

Graph 4.5

Interpretation:

It is inferred that 42.1% of respondents income is between 1,00,000 – 3,00,000 and

32.3% of respondents income lies between 3,00,000 – 5,00,000

4.6 NUMBER OF DEPENDENTS

Dependents No of respondents Percentage

37

1 dependent 22 22.6

2 dependents 21 21.6

3 dependents 42 41.2

More than 4 dependents 15 14.7

None 2 2.0

Total 102 100

Table 4.6

Graph 4.6

Interpretation:

It is inferred that majority of respondents have 3 dependents (41.2%) and 21.6% of

respondents have 1 dependent. This is the case mostly in nuclear families as the

number of dependents is generally more than 2.

4.7 KNOWLEDGE ABOUT MUTUAL FUND INVESTMENT

38

Knowledge No of respondents Percentage

Excellent 20 19.6

Good 54 52.9

Average 12 11.8

Bad 16 15.7

Total 102 100

Table 4.7

Graph 4.7

Interpretation:

It is inferred that 52.9% of respondents have a good knowledge about mutual

funds investment while 19.6% of respondents have an excellent knowledge about

mutual funds investment.

4.8 REASONS FOR INVESTING IN MUTUAL FUNDS

39

Factors No of respondents Percentage

Safety 21 20.6

High returns 11 10.8

Liquidity 27 26.5

Capital appreciation 9 8.8

Tax benefits 3 2.9

Total 102 100.0

Table 4.8

0

5

10

15

20

25

30

factors that allow to prefer the above said fund

Perc

ent

safety

high returns

liquidity

capital appreciation

tax benefits

Graph 4.8

Interpretation:

It is inferred from the above table and graph that most respondent are concerned

in safety (51%) and 27.5 of the respondents are concerned in getting high returns

40

4.9 RETURNS EXPECTED BY INVESTOR

Returns expected No of respondents Percentage

15% - 30% 71 69.6

30% - 50% 19 18.6

50% and above 12 11.8

Total 102 100.0

Table 4.10

0

10

20

30

40

50

60

70

80

return expected

Perc

ent

15% - 30%

30% - 50%

50% and above

Graph 4.10

Interpretation:

It is inferred from the above table and graph that 69.6% of respondents expect

15% - 30% returns on their investments in mutual funds and 18.6% of respondents

expect a return of 30% - 50%.

41

4.10 INVESTORS INVESTMENT HORIZON

Investment horizon No of respondents Percentage

< 1 year 37 39

1 year – 3 years 33 33

3 years – 5 years 17 15

> 5 years 15 13

Total 102 100.0

Table 4.11

Graph 4.11

Interpretation:

It is inferred from the above table that 39% of respondents prefer investing in mutual

funds with a time period less than 1 year and 33% of respondents prefer investing in

mutual funds with a time period of 1 year – 3 years.

42

4.11 GROWT RATE OF INVESTMENT

Growth No of respondents Percentage

Steadily 38 37.3

Rapidly 27 26.5

Average rate 37 36.3

Total 102 100.0

Table 4.13

0

5

10

15

20

25

30

35

40

rate at wich investment should grow

Perc

ent

steadily

rapidly

average rate

Graph 4.13

Interpretation:

43

It is inferred from the above table and graph that 37.3% of respondents wish

their investments to grow at a steady rate and 36.3% of respondents expect their

investments to grow at an average rate.

4.12 PERCENTAGE OF INCOME INVESTED

Percentage of income invested No of respondents Percentage

< 5% 47 46.1

5% - 10% 36 35.3

10% - 25% 15 14.7

> 25% 4 3.9

Total 102 100.0

Table 4.14

0

5

10

15

20

25

30

35

40

45

50

percentage of income invested

Perc

ent

< 5%

5% - 10%

10% - 25%

< 25%

Graph 4.14

Interpretation:

44

It is inferred from the above table and chart that 46.1% of respondents invest

less than 5% of their income and 35.3% of respondents invest up to 10% of their

income in mutual funds.

4.13 INVESTMENT OBJECTIVE

Investment objective No of respondents Percentage

Regular income 38 37.3

Growth only 12 11.8

Income and growth 41 40.2

Dividend 11 10.8

Total 102 100.0

Table 4.15

0

5

10

15

20

25

30

35

40

45

investment objective

Perc

ent

regular income

growth only

income and growth

dividend

Graph 4.15

Interpretation:

45

It is inferred from the above table and chart that 40.2% of respondents invest to

achieve the objective of income and growth and 37.3% of respondents invest for

regular income.

4.14 DURATION OF MONITORING INVESTMENTS

Duration No of respondents Percentage

Daily 12 11.8

Weekly 40 39.2

Monthly 27 26.5

Yearly 21 20.6

Occasionally 2 2.0

Total 102 100.0

Table 4.16

0

5

10

15

20

25

30

35

40

45

duration of monitoring investments

Perc

ent

daily

weekly

monthly

yearly

occasionally

Graph 4.16

46

Interpretation:

It is inferred from the above table and chart that 39.2% of respondents monitor

their investments weekly and 26.5% of respondents monitor their investments

monthly.

47

CHAPTER-5

Summary, Findings & Conclusions

48

A. SUMMARY

Mutual funds in India have come of age to cater to the needs of

investors. SEBI, which also controls the stock market operations, is the regulatory

body of the Indian mutual fund industry. Mutual funds can be classified into open-

ended funds, close-ended funds, and interval funds, based on the fund structure. Based

on the investment objectives, they are divided into growth funds, income funds,

balanced funds, and money-market funds. Based on the specific purpose of use,

mutual funds are classified into tax savings schemes, index funds, and theme-based

funds (including industry-specific or sectoral funds). Many fund marketers have come

out with innovative and customer friendly products that aim at satisfying the

investors’ financial goals. Systematic Investment Plan (SIP) is an innovation in

payment option for mutual fund investors. It is designed for those who are interested

in gradually accumulating wealth in a disciplined manner over a long term. Mutual

funds are priced based on their net asset value, which the fund houses declare on a

daily basis. Investors can sell their units back to the fund at the prevailing NAV.

Some funds attract entry and exit loads. Such loads are used to recover the costs spent

on distribution and other marketing costs. Mutual funds are distributed through five

channels of distribution, namely, direct channel, advice channel, retirement plan

channel, fund supermarket channel, and institutional channel. Apart from these

channels, mutual banking is also adopted, where cross-selling is used in association

with banks to sell the fund schemes through the banks’ branches.

Mutual fund marketers use advertising, sales promotions, brand

communications, and public relations to attract investors and to increase their sales.

Advertising includes print and electronic media, including the Internet. Fund

marketers give away incentives and gifts to the investors for investing in their funds

49

and such incentives and gifts may act as a catalyst for attracting more sales. They also

give incentives (in cash or kind) to their trade partners and their representatives.

Further, the fund houses have started the process of overhauling their brand image to

promote themselves more effectively to the customers. AMFI, the industry

association, has been actively involved in public relations (PR), by promoting the

mutual fund industry, both at the domestic level and in the international arena.

B. FINDINGS

Age group of the Respondents:

It is inferred that majority of respondents are of the age 25-50 (55.9%) and more

than 50 years old (27.5%). This is because there are very few among the age group of 18-

25 who are job holders and do not think of immediately investing. Where as in the age

group where the respondents were more than 50 years, are either retired or nearing

retirement and do not normally invest as actively as before.

Marital status:

It is inferred from the above table and graph that 77% of respondents are

married and 23% of respondents are single. This is the case as majority of the

respondents are of marriageable age.

Occupation of Respondents:

It was found that of the respondents are either from business or profession.

Income of Respondents:

The study shows that 42.1% of respondents income is between 1,00,000 –

3,00,000 and 32.3% of respondents income lies between 3,00,000 – 5,00,000.

50

Number of Dependents:

Majority of respondents have 3 dependents (41.2%) and 21.6% of

respondents have 1 dependent.

Knowledge about Mutual fund Investment:

About 52.9% of respondents have a good knowledge about mutual funds

investment while 19.6% of respondents have an excellent knowledge about mutual

funds investment

Reasons for Investing in Mutual funds:

Most respondent are concerned in safety (51.0) and 27.5 of the respondents

are concerned in getting high returns

Returns expected by Investor:

About 69.6% of respondents expect 15%-30% returns on their

investments in mutual funds and 18.6% of respondents expect a return of 30% - 50%.

Investors Investment Horizon:

Around 39% of respondents prefer investing in mutual funds with a

time period less than 1 year and 33% of respondents prefer investing in mutual funds

with a time period of 1 year – 3 years.

51

Growth Rate of Investment:

It was found from the study that 37.3% of respondents wish their

investments to grow at a steady rate and 36.3% of respondents expect their

investments to grow at an average rate.

Percentage of Income Invested:

About 46.1% of respondents invest less than 5% of their income and

35.3% of respondents invest up to 10% of their income in mutual funds.

Investment objective:

The study shows that 40.2% of respondents invest to achieve the

objective of income and growth and 37.3% of respondents invest for regular income.

Duration of monitoring investments:

About 39.2% of respondents monitor their investments weekly and

26.5% of respondents monitor their investments monthly.

C. CONCLUSION

The emergence of an array of savings and investment options and the

dramatic increase in the secondary market for financial assets in the recent years in

India has opened up an entirely new area of value creation and management. An

average Indian investor is a greenhorn when it comes to financial markets and the

causes may be many, e.g., lack of opportunity, lack of conceptual understanding and

the influence of a fixed-income orientation in the Indian culture. Salaried persons’

52

savings are most often deposited in investments; the theory behind this is that by

pooling together a huge aggregation of individual savings and investing them, using

the professional judgment of the fund manager, one spreads risk, takes advantage of

volume buying and scientific data analysis, expertise and so on. Therefore, it is seen

as the ideal option for an individual who does not have the time, knowledge or

experience to make a succession of judgments involving his hard-earned savings. MF

industry in India has a large untapped market in urban areas besides the virgin

markets in semi-urban and rural areas. This market potential can be tapped by

scrutinizing investor behavior to identify their expectations and articulate investor’s

own situation and risk preference and then apply to an investment strategy that

combines the usual four: cash and equivalents, Government-backed bonds, debt, and

equity.

Presently, more and more funds are entering the industry and their survival depend on

strategic marketing choices of mutual fund companies, to survive and thrive in this

highly promising industry, in the face of such cutthroat competition. In addition, the

availability of more savings instruments with varied risk-return combination would

make the investors more alert and choosy.

Studies similar to this, if conducted on a large scale at regular intervals by

organizations like AMFI/SEBI, will help capture the changing perceptions and

responses of these groups, and thus provide early warning signals to enable

implementation of timely corrective measures. It is hoped that the survey findings of

the study will have some useful managerial implications for the AMCs in their

product designing, marketing and management of the fund.

53

CHAPTER 6

BIBLIOGRAPHY

54

o Mutual funds in India: marketing strategies and investment

practices. H.Sadhak. Response Books. 2003

o . An Introduction to Mutual Funds World Wide.Russell ray.

John, wisely & son ltd. 2007

o www .hdfcbank.com

o www.bseindia.com

o www.yahoofinance.com

55

CHAPTER 7

ANNEXURE (OUESTIONAIRE)

56

QUESTIONAIRE

1. Name:

2. Age

<18yrs 18yrs-30yrs

30yrs-50yrs more than 50yrs.

3. Gender:

Male Female.

4. Marital Status:

Single Married.

5. Occupation:

Student Housewife Professional

Services Business Retired

57

6. Academic Qualification:

Under Graduate Post graduate

Diploma Others.

7. Annual Income:

< 2,00,000 2,00,000 - 3,00,000

3,00,000 – 5,00,000 >5,00,000.

8. Number Of Dependents:

None 1 dependent 2 dependents

3 dependents 4 and above

dependents.

9. Knowledge about Mutual Fund Investment:

Excellent Good

Average Bad.

58

10.Why do you invest in Mutual Fund?

Capital Appreciation Regular Income

Retirement Tax Savings.

11.Main concern/expectation from an investment made?

High Returns Liquidity

safety Risks.

12.Expected Rate of Returns?

<10% 10% - 15%

15% - 20% > 20%.

.

13. What is your investment horizon?

< 1 year 1yr -3yrs

3yrs – 5yrs >5yrs.

14 .Where do you prefer to invest?

59

Mutual Funds Shares Bonds/Debentures Bank Deposits

Real Estate Post Office NSC/KVP Bullions.

15. The time-period of your above preferred investment?

<1yr 1yr – 3yrs

3yrs – 5yrs >5yrs

16. You would like your investment to grow at:

Steadily Fast At an Average Rate.

17. What percentage of your income do you invest?

< 5% 5% - 15%

15% - 25% >25%.

18. Which best describes your investment objective?

Regular income Growth only

60

Income Growth.

19. Do you keep watch over your investments?

Yes No Sometimes.

20. If yes, how often?

Every day Weekly Monthly

Yearly Occasionally.

61