Investors Perception Towards Equity and Mutual Fund

Investors Perception Towards Equity and Mutual Fund

CHAPTER NO.1

INTRODUCTION

FINANCIAL MARKETS

The Financial markets can be broadly classified into Organized and Unorganized markets. The Unorganized markets include Money lenders, Indigenous Bankers, etc. Whereas, the organized market is classified as shown in the below chart:

CHART NO 1.1

Financial Markets

Primary MarketsIndustrial Securities MarketCommercial Bill MarketCall Money MarketGovt. Sec MarketLong Term Loan MarketIndustrial Securities MarketMoney MarketsCapital Markets

Short Term loan Market

Secondary Markets

The Financial Markets can broadly be divided into Money Market and Capital market. 1. Money market:

Money market is a market for debt securities that pay off in the short term usually less than one year, for example the market for 90-days treasury bills. This market encompasses the trading and issuance of short term non equity debt instruments including treasury bills, commercial papers, bankers acceptance, certificates of deposits, etc.2. Capital market:

The Capital market is a market for financial assets which have a long or indefinite maturity. Generally it deals with long term securities which have a maturity period of above one year. Capital market may be further divided into three, namely:

Government securities market

Industrial securities market

Long term loans market

Government Securities market:

The Government Securities market is otherwise called Gilt-Edged securities market. It is a market where Government securities are traded. Govt. securities are issued in denominations of Rs.100 and interest is payable half yearly. They carry tax exemptions also.

Long term loans market:

Development banks and commercial banks play a significant role in Long term loans market by supplying long term loans to corporate customers. Long term loans can be further classified as:

(i) Term loans market

(ii) Mortgages market

(iii) Financial guarantees market. Industrial securities market:

The Industrial securities market is a market for industrial securities namely, (a) Equity shares or ordinary shares (b) Preference shares, & (c) Debentures or bonds. It is the market where industrial concerns raise their capital or debt by issuing appropriate instruments

The Capital market is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. Capital market can be further divided into;

(A) PRIMARY MARKET OR NEW ISSUE MARKET:

This market deals with those securities which are issued to the public for the first time. This market facilitates capital formation. The most common method of raising capital by new companies is through issue of securities to the public. It is mainly done through IPO (Initial Public Offering).

CHART NO 1.2

Issues

PublicPreferencialRights

Offer For SaleFresh IssueOffer For SaleFresh IssueFurther Public OfferingInitial Public Offering

Primarily issues can be classified as Public, Rights or Preferential issues (also known as Private placements).While public & rights issues involve a detailed procedure, preferential issues are relatively simpler. The classification of issues is illustrated above.

Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves the way for listing and trading of the issuers securities.

A follow on public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders unless they do not intend to subscribe to their entitlements.

A Preferential Issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in SEBI (DIP) guidelines which inter-alia include pricing, disclosures in notice etc.

The primary issuances are governed by SEBI in terms of SEBI (Disclosures and Investor protection) guidelines. SEBI framed its DIP guidelines in 1992. Many amendments have been carried out in the same in line with the market dynamics and requirements SEBI (Disclosure and investor protection) guidelines 2000 are in short called DIP guidelines. It provides a comprehensive framework for issuances by the companies.

(B) SECONDARY MARKET:

Secondary market is a market for secondary sale of securities. The securities which have already passed through new issue market are traded here. Generally such securities are quoted in the Stock Exchange and it provides a continuous and a regular market for buying and selling of securities.Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets.

For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduitby facilitating value-enhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.

DIFFERENCES BETWEEN PRIMARY MARKET AND SECONDARY MARKET:

In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund. Secondary market is an equity trading avenue in which already existing/pre- issued securities are traded amongst investors. Secondary market could be either auction or dealer market. While stock exchange is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer market.

INVESTMENT BASICS:

The idea behind investing is that money is put to use in such a way that it is likely to grow into more money. This could happen because someone is willing to pay interest to use the money or because the value of whatever security the money was used to buy increases during the period of ownership.Destinations for invested money include savings accounts, stocks, bonds, mutual funds, and numerous other investment options. There are many reasons why people save and invest. One reason is financial security. A fund for emergencies helps people cope with unexpected events such as illness, unemployment, and accidents. Saving and investing are also used to reach financial goals such as a new car, a college education, a trip, or a down payment on a house. Of course, one of the most important reasons for people to save and invest is to provide the funds for a comfortable, financially secure life after retirement.

The type of investment option selected by any person depends upon his financial soundness, risk-taking capacity and future expectations/aims. As a general rule, the greater the promised return the greater the risk. Risk tolerance is a person's ability to ride out the ups and downs of the market without panicking when the values of investments go down. Risk tolerances vary from person to person and at different stages in the life cycle.Young adults with growing income potential may take greater investment risks than people who are approaching retirement.

PYRAMID OF INVESTMENT RISK:

Figure no 1.1

Common types of higher risk investments include stocks, corporate and municipal bonds, mutual funds, real estate, collectibles, and futures contracts. The decision about which investment to choose is influenced by factors such as yield, risk, and liquidity. Investments may produce current income while you own the investment through the payment of interest, dividends, or rent payments. When you sell an investment for more than its purchase price, the profit is known as a capital gain, also called growth or capital appreciation.

HIGH RISK CHOICES:

Corporate and Municipal bonds

High-quality Corporate stock with a history of steady earnings

Telephone, Gas, or Electrical utility stocks

Mutual funds that focus on current income

Factors to consider when selecting savings and investments include:

Liquidity,

Risk & Return,

Inflation,

Diversification,

Taxes and

Stage in the life cycle

The basic idea of investing is to commit money today with the expectation of a financial return in the future. The return can come from earnings and from growth.

BOMBAY STOCK EXCHANGE

The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history to the 1850s, when four Gujarati and one Parsi stockbroker would gather under banyan trees in front of Mumbai's Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as 'The Native Share & Stock Brokers Association'.

In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE SENSEX in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading SENSEX futures contracts. The development of SENSEX options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform. Historically from an open outcry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition. This automated, screen-based trading platform called BSE On-line trading (BOLT) currently has a capacity of 8 million orders per day.

Figures no 1.2

Table no 1.1

Hours of operation

SessionTiming

Beginning of the Day Session8:30 - 9:00

Pre-open trading session9:00 - 9:15

Trading Session9:15 - 15:30

Position Transfer Session15:30 - 15:50

Closing Session15:50 - 16:05

Option Exercise Session16:05 16.35

Indices

BSE-100 index BSE-200 index

DOLLEX-200 BSE-500 Index BSE Auto Index BSE BANKEX BSE Capital Goods Index BSE Consumer Durables Index

BSE FMCG Index BSE Healthcare Index BSE IT Index BSE Metal Index BSE Oil & Gas Index BSE Power Index BSE Realty Index

NATIONAL STOCK EXCHANGE OF INDIA

The National Stock Exchange (NSE) is a stock exchange located at Mumbai, Maharashtra, India. It is the 16th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of around US$985 billion and over 1,640 listings as of December 2011. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation.

NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euro next and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities.

Innovations

Being the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India. Since the success of the NSE, existent market and new market structures have followed the "NSE" model. Setting up the first clearing corporation "National Securities Clearing Corporation Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives market) trades in India. Setting up of S&P CNX Nifty. Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India. Co-promoting and setting up of National Securities Depository Limited, first depository in India Indices

NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices, including:

S&P CNX Nifty(Standard & Poor's CRISIL NSE Index) CNX Nifty Junior CNX 100 (= S&P CNX Nifty + CNX Nifty Junior) S&P CNX 500 (= CNX 100 + 400 major players across 72 industries) CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

LIST OF STOCK EXCHANGES IN INDIA:

Bombay Stock Exchange

National Stock Exchange

Regional Stock Exchanges

o Ahmadabad Stock Exchange

o Bangalore Stock Exchange

o Bhubaneswar Stock Exchange

o Calcutta Stock Exchange

o Cochin Stock Exchange

o Coimbatore Stock Exchange

o Delhi Stock Exchange

o Guwahati Stock Exchange

o Hyderabad Stock Exchange

o Jaipur Stock Exchange

o Ludhiana Stock Exchange

o Madhya Pradesh Stock Exchange

o Madras Stock Exchange

o Magadha Stock Exchange

o Mangalore Stock Exchange

o Meerut Stock Exchange

o OTC Exchange Of India

o Pune Stock Exchange

o Saurashtra Kutch Stock Exchange

o Vadodara Stock Exchange

Stock exchanges perform their functions with the help of middlemen called the intermediaries. These intermediaries act as link in between buyer and seller on the stock exchange. Without the presence of these intermediaries it is impossible to trade on the stock exchange.

CHAPTER NO.2

A. ORGANIZATIONAL

STUDY

AnandRathi (AR) is a leading full service securities firm providing the entire gamut of financial services. The firm, founded in 1994 by Mr. AnandRathi, today has a pan India presence as well as an international presence through offices in Dubai and Bangkok. AR provides a breadth of financial and advisory services including wealth management, investment banking, corporate advisory, brokerage & distribution of equities, commodities, mutual funds and insurance, structured products - all of which are supported by powerful research teams. The firm's philosophy is entirely client centric, with a clear focus on providing long term value addition to clients, while maintaining the highest standards of excellence, ethics and professionalism. The entire firm activities are divided across distinct client groups: Individuals, Private Clients, Corporate and Institutions and was recently ranked by Asia Money 2006 poll amongst South Asia's top 5 wealth managers for the ultra-rich. In year 2007 Citigroup Venture Capital International joined the group as a financial partner.

EQUITY & DERIVATIVES BROKERAGE AnandRathi provides end-to-end equity solutions to institutional and individual investors. Consistent delivery of high quality advice on individual stocks, sector trends and investment strategy has established us a competent and reliable research unit across the country.Clients can trade through us online on BSE and NSE for both equities and derivatives. They are supported by dedicated sales & trading teams in our trading desks across the country. Research and investment ideas can be accessed by clients either through their designated dealers, email, web or SMS

MILESTONES:1994: Started activities in consulting and Institutional equity sales with staff of 15.1995: Set up a research desk and empanelled with major institutional investors.1997: Introduced investment banking businesses, Retail brokerage services launched 1999: Lead managed first IPO and executed first M & A deal2001: Initiated Wealth Management Services 2002: Retail business expansion recommences with ownership model 2003: Wealth Management assets cross Rs1500 crores, Insurance broking launched, Launch of Wealth Management services in Dubai, Retail Branch network exceeds 502004: Commodities brokerage and real estate services introducedWealth Management assets cross Rs3000croresInstitutional equities business re-launched and senior research team put in placeRetail Branch network expands across 100 locations within India 2005: Real Estate Private Equity Fund Launched Retail Branch network expands across 200 locations within India 2006: AR Middle East, WOS acquires membership of Dubai Gold & Commodity Exchange (DGCX) Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money 2006 pollRanked 6th in FY2006 for All India Broker Performance in equity distribution in the High Net worth Individuals (HNI) Category Ranked 9th in the Retail Category having more than 5% market share Completes its presence in all States across the country with offices at 300+ locations within India2007: Citigroup Venture Capital International picks up 19.9% equity stake Retail customer base crosses 100 thousand Establishes presence in over 350 locations

ANAND RATHI CORE STRENGTHSBREADTH OF SERVICESIn line with its client-centric philosophy, the firm offers to its clients the entire spectrum of financial services ranging from brokerage services in equities and commodities, distribution of mutual funds, IPOs and insurance products, real estate, investment banking, merger and acquisitions, corporate finance and corporate advisory. Clients deal with a relationship manager who leverages and brings together the product specialists from across the firm to create an optimum solution to the client needs.MANAGEMENT TEAMAR brings together a highly professional core management team that comprises of individuals with extensive business as well as industry experience.IN-DEPTH RESEARCH Our research expertise is at the core of the value proposition that we offer to our clients. Research teams across the firm continuously track various markets and products. The aim is however common - to go far deeper than others, to deliver incisive insights and ideas and be accountable for results.

MANAGEMENT TEAM DETAILSThe senior Management comprises a diverse talent pool that brings together rich experience from across industry as well as financial services.Mr. Anand Rathi - Group ChairmanChartered AccountantPast President, BSEHeld several Senior Management positions with one of India's largest industrial groupsMr. Pradeep Gupta - Vice Chairman Plus 17 years of experience in Financial ServicesMr. Amit Rathi - Managing Director Chartered Accountant & MBAPlus 11 years of experience in Financial Services

ACQUISITION:ANZ Grind lays : $ 1.34 bn from August 2000.Hong Kong Consumer Bank: $ 1.32 bn

Thailand Nakornthan Bank : $ 320 million

Indonesians Bank Per-Mata : $ 366 million from Oct. 2004.

Korea First Bank : $ 3.3 bn from Apr. 2005.

Offices of ANANDRATHI are in 197 cities across 28 states & it has also branches in Dubai & Bangkok with more than 44000 employees. It has daily turnover in excess of Rs.4bn. It has 1, 00,000+ clients nationwide. It is also leading distributor of IPOs.

IN INDIA WHERE ANANDRATHI IS PRESENT IN 21 STATES: Andhra Pradesh Assam Bihar Chhattisgarh Delhi Goa Gujrat Haryana Jammu & Kashmir Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh Uttaranchal West Bengal

List of products: Demat Accounts Mutual Funds Derivatives Commodities Bonds Trading Account Insurance

MISSION

To be India's first Multinational providing complete financial services solution across the globe

VISION

Providing integrated financial care driven by the relationship of trust and confidence.

B. THEORETICAL

BACKGROUND

EQUITY MARKET

In India though the capital market is dominated by the debt market, equity markets are more active with a lot many participants. The government owned securities market constitutes the majority of the total capital market of India. The market is being classified into primary or new issue market, and secondary market. The two segments are interdependent and cannot be viewed in isolation.

The new issues of both government and private corporate sectors are floated in the primary market. The secondary market provides liquidity to the outstanding securities or existing securities. The security market no doubt plays a vital role in the distribution of economic prosperity in a country over the masses when a large number of people invest their surplus in securities. The stock market is an integral part of organized capital market. It facilitates the sale of initial and future issues and subsequently provides liquidity to the securities subscribed by individual and institutional participants. The stock market provides a place where ownership or creditor ship securities are traded. The stock exchange is a market place where industrial securities like equity share, preference shares, debentures and bonds of listed public limited companies and the governments are traded.

MEANING OF EQUITY SHARES:

Equity share capital long-term source of finance represents ownership capital or securities and its owners-equity holders-share the reward and risk associated with the ownership of corporate enterprises. It is also called equity capital in contrast with preference share capital which carries certain preferences/prior rights in regard to income and redemption.

When a company is formed it first issues equity shares to the promoters. As the need for financing increases, the company may issue equity shares to specific and small number privately to promoters, relatives, friends, business associates, employees, financial institutions, mutual funds, venture capital and so on. The first issue of equity shares to the public by an unlisted company is called the initial public offering (IPO). Subsequent offerings are called further issues/offerings.

TYPES OF EQUITY SHARES:

Authorized equity/share capital represents the maximum amount which a company can raise from the ordinary share holder and can be changed in prescribed manner. The portion of the authorized capital offered by the company to the investors in the Issued capital. Subscribed share capital is that part of the issued capital which has been accepted/subscribed by the investors. The actual amount paid by the shareholders is the paid up capital. The issued, subscribed and paid up capitals are generally the same.

Equity shares have typically at par /face value in terms of price for each share, the most popular dominated being Rs.10.The price at which the equity shares are issued is the issue price. The issue price for new companies is equal to the face value. It may be higher for existing companies, the difference/excess being share premium. The book value of ordinary shares refers to the paid up capital plus reserves and surplus (net worth) divided by the number of outstanding shares. The price at which equity shares are traded in the stock market is the market value. However, the market value of unlisted/thinly-traded shares is not available.

FEATURES OF EQUITY SHARES:

The ordinary shares have some special features in terms of the rights and claims of their holders:

Residual Claim to Income: The equity shareholders have residual claim to the income of the company.

Residual claim on Assets: The equity shareholders claim in the assets of the company is also residual in that claim would rank after the claims of the creditors and profiles share holders in the event of liquidation.

Right to Control: As owners of the company of, the equity shareholders have the right to control the operations of /participate in the management of the company.

Voting System: The equity shareholders exercise their right to control through voting in the meetings of the company.

CLEARING & SETTLEMENT PROCEDURES IN THE STOCK EXCHANGESActivityDay

TradingRolling Settlement TradingT

ClearingCustodial ConfirmationT+1 working days

Delivery GenerationT+1 working days

SettlementSecurities and Funds pay inT+2 working days

Securities and Funds pay outT+2 working days

Post SettlementValuation DebitT+2 Working days

AuctionT+3 working days

Bad Delivery ReportingT+4 working days

Auction settlementT+5 working days

Close outT+5 working days

Rectified bad delivery pay-inT+6 working days

and pay-out

Re-bad delivery reporting andT+8 working days

pickup

Close out of re-bad deliveryT+9 working days

The clearing & settlement mechanism in Indian security market has witnessed several innovations during the last decade. These include use of the state-of-art information technology, compression of settlement cycle, dematerialization & electronic transfer of securities, securities lending & borrowing, professionalization of trading members, fine-tuned risk management system, emergence of clearing corporations to assume country party risk, though many of these are yet to permeate the whole market.

Till recently, the stock exchanges in India were following a system of account period settlement for cash market transaction, except for transactions in a few active securities, which were settled under T+3 rolling settlement. The rolling settlement has now been introduced for all securities. With effect from April 1st, 2003 T+2 rolling settlement has been introduced. The transactions are not settled immediately but after 2 days. The member receives the fund/securities in accordance with the pay in/payout schedules notified by the respective stock exchanges. Movement of securities has become almost instantaneous in the dematerialized environment. Two depositories viz. National Securities Depositories Ltd. (NSDL) & Central Depositories Service Ltd. (CSDL) provide electronic transfer of securities & more than 99% of turnover is settled in Demat form.

The obligation of members is downloaded to the member/custodian by the clearing agency. The members / custodian make available the required securities in their pool account with depository participant by the prescribed pay-in time for securities the depository transfer the securities form the pool account of members/custodian to the settlement account of clearing agency. As per the schedule determined by the clearing agency, the depository transfers the securities on the payout day from the settlement account of clearing agency to the pool account' of members/custodians. The pay-in & pay-out of securities is affected on the same day for all settlements.

Selected banks have been empanelled by clearing agency for electronic transfer of funds. The members are required to maintain accounts with any of these banks. The members are informed electronically of their pay-in obligation of funds. The members make available required fund in their accounts with clearing bank by the prescribed pay-in day. The clearing agency forwards fund obligation file to clearing banks which. In turn, debit the account of member & credit the account of clearing agency. In some cases, the clearing agency runs an electronic file to debit members' accounts with clearing banks & credit its own account.

MUTUAL FUND INDUSTRY

The unique thing about the state of mind of investors in stocks or mutual funds nowadays is that there is a huge diversity in their happiness level. The markets are at or near all time high and so are equity mutual funds. Currently almost 95% of equity mutual fund are either at an all time high or within two or three per cent of such high.

Except for a handful of perpetual dullards, there are no equity funds that havent recovered the losses that the market suffered a year ago. Since June 14, 2006 when, the major indices touched the lowest point in recent times, both the Sensex and the Nifty have gained around 63 per cent. During this period, as many as 70 equity mutual funds gained more than the markets did. Of course a large number, 95, performed worse than the markets. Still the fact remain that even these have earned substantial returns over this period.

All in all, there are hardly any investors who are today sitting on losses, no matter when they have invested. Based on analysis done by Value Research, of the Rs.1,10,000 crore of investors money that is being managed by diversified equity mutual funds, around 94 per cent is in profits.

A great deal of money flowed into mutual funds in the first half of 2007. This was the time of mega NFOs like the Reliance Equity Advantage Fund, SBI Infrastructure HDFC Mid Cap Fund and many more.

This is a brief overview on the present scenario of mutual funds. Many people are now aware of mutual funds as compared to earlier and mutual funds have become a part of their portfolio.

INTRODUCTION TO THE MUTUAL FUND INDUSTRY:

Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, as a result of liberalization the Government allowed public sector banks and institutions to set up mutual funds. SEBI formulates policies and regulates the mutual funds to protect the interest of the 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. Thus, SEBI (Securities Exchange Board of India) regulates the security market.

DIAGRAM DEPICTING WORKING MECHANISM OF MUTUAL FUNDS

Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an invest able surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

Mutual funds are financial intermediaries, which collect the savings of investors and invest them in a large and well-diversified portfolio of securities such as money market instruments, corporate and government bonds equity shares of joint stock companies.Mutual funds are conceived as institutions for providing small investors with avenues of investments in the capital market.

Since small investors generally do not have adequate time, knowledge, experience and resources for directly accessing the capital market, they have to rely on an intermediary, which undertakes informed investment decisions and provides consequential benefits of professional expertise.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciations realized by the schemes are shared by its unit holders in proportion to the number of units owned by them.

Thus, a Mutual Fund is the most suitable investment for the common person as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

HOW IS A MUTUAL FUND SET UP?

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian.

The trust is established by a sponsor or more than one sponsor who is like promoter of a company.

The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI, manages the funds by making investments in various types of securities.

Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund.

ORGANISATION OF MUTUAL FUND:

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in the form of a trust by a sponsor to raise money by the Trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations..

There are many entities involved in organization of mutual fund. Diagram given below illustrates the organization set-up of a mutual fund.

Mutual funds have a unique structure not shared with other entities such as companies or firms. It is important for employees and agents to be aware of the special nature of this structure, because it determines the rights and responsibilities of the funds constituents viz. sponsors, trustees, custodians, transfer agents and of course, the fund and the asset management company the legal structure also drives the inter-relationships between these constituent.

1. THE FUND SPONSOR

The sponsor of a fund is akin to the promoter of a company as he gets the fund registered with SEBI. As the promoter of the fund, he is required to appoint the people who will look after the fund.

The sponsor will form a Trust and appoint a Board of Trustees.

The sponsor will also generally appoint an Asset Management Company as fund managers.

The sponsor, either directly or acting through the Trustees, will also appoint a Custodian to hold the fund assets.

All these appointments are made in accordance with SEBI Regulations. For a person to qualify as a sponsor, he must contribute at least 40% of the net worth ofthe AMC and possess a sound financial track record over five years prior to registration.

2. TRUSTEES

The mutual fund may be managed by a Board of Trustees a body of individuals, or a Trust Company - a corporate body. Most of the funds in India are managed by Boards of Trustees. While the Board of Trustees is governed by the provisions of the Indian Trusts Act, where the Trustee is a corporate body, it would also be required to comply with the provisions of the Companies Act, 1956. The Board or the trustee Company, as an independent body, acts as protector of the unit- holders interests. The Trustees do not directly manage the portfolio of securities. For this specialist function, they appoint an Asset Management Company. They ensure that the fund is managed by the AM as per the defined objectives and in accordance with the Trust Deed and SEBI Regulations.

The Trust is created through a document called the Trust Deed that is executed by the Fund Sponsor in favor of the Trustees. The Trust Deed is required to be stamped as registered under the provisions of the Indian Registration Act and registered with SEBI.

The Trustees being the primary guardians of the unit-holders funds and assets, a Trustee has to be a person of high repute and integrity.

Trustees appoint AMC in consultation with the sponsors and according to SEBI regulation.. All mutual fund scheme floated by AMC have to be approved by trustees. Trustees review and ensure that net worth of the company is according to stipulated norms, every quarter

3. CUSTODIAN:

Often an independent organization, it takes custody of securities and other assets of mutual fund. Its responsibilities include receipt and delivery of securities, collecting income-distributing dividends, safekeeping of the units and segregating assets and settlements between schemes. Their charges range between 0.15% - 0.2% of the net asset value of the holding. Custodians can service more than one fund.4. TRANSFER AGENT (ALSO REGISTRAR):

The organization that mutual funds employ to prepare and maintain records relating to unit holder accounts. Some mutual fund groups operate in-house transfer agencies.

5. ASSET MANAGEMENT COMPANY:

The role of an AMC is to act as the investment manager of the Trust. They are the one who manage money of the investors. An AMC takes decisions, compensates investors through dividends, maintains proper accounting and information for pricing of units, calculates the NAV, and provides information on listed schemes. It also exercises due diligence on investments, and submits quarterly reports to the trustees. A funds

AMC can neither act for any other fund nor undertake any business other than asset management. Its net worth should not fall below Rs.10 crore. And, its fee should not exceed 1.25% if collections are below Rs.100 crore and 1% if collections are above Rs.100 crore. SEBI can pull up an AMC if it deviates from its prescribed role.

SOME OF THE AMCS OPERATING AND THE NATURE OF OWNERSHIPName of the AMCNature of ownership

Alliance Capital Asset Management (I) Private Limited

Private foreign

Bank of India Asset Management Company Limited

Private Indian

Bank of Baroda Asset Management Company Limited

Banks

Birla Sun Life Asset Management Company Limited

Banks

Can bank Investment Management Services Limited

Banks

Cholamandalam Cazenove Asset Management Company LimitedPrivate foreign

Dundee Asset Management Company LimitedPrivate foreign

DSP Merrill Lynch Asset Management Company LimitedPrivate foreign

Escorts Asset Management LimitedPrivate Indian

GIC Asset Management Company Limited

Institutions

IDBI Investment Management Company LimitedInstitutions

ING Investment Asset Management Company Private LimitedPrivate foreign

J M Capital Management LimitedPrivate Indian

Kotak Mahindra Asset Management Company LimitedPrivate Indian

Kothari Pioneer Asset Management Company LimitedPrivate Indian

Jeevan Bima Sahayog Asset Management Company LimitedInstitutions

Morgan Stanley Asset Management Company Private LimitedPrivate foreign

Punjab National Bank Asset Management Company LimitedBanks

Reliance Capital Asset Management Company LimitedPrivate Indian

State Bank of India Funds Management LimitedBanks

Shriram Asset Management Company LimitedPrivate Indian

Sundaram Newton Asset Management Company LimitedPrivate foreign

Tata Asset Management Company LimitedPrivate Indian

Credit Capital Asset Management Company LimitedPrivate Indian

Templeton Asset Management (India) Private LimitedPrivate foreign

Unit Trust of IndiaInstitutions

Zurich Asset Management Company (I) Limited

Private foreign

CLASSIFICATION OF MUTUAL FUNDS:

Special SchemesSector FundsIndex FundsTax Saving SchemesGeneral Purpose FundsGilt FundsMoney Market FundsBalanced FundsIncome / Debt FundsGrowth / Equity FundsInterval SchemesClose EndedOpen EndedOther SchemesBased on Investment ObjectiveBased on StructureMutual Funds

SCHEMES ACCORDING TO STRUCTURE:

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 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.

Interval Schemes :

These schemes combine the features of open-ended and Close-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices.

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:

Growth / Equity Oriented Scheme:

The aim of growth funds is to provide capital appreciation over the medium to long-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. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

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 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.

General Purpose Equity Schemes:

The investment objectives of general-purpose equity schemes do not restrict them to invest in specific industries or sectors. They thus have a diversified portfolio of companies across a large spectrum of industries. While they are exposed to equity price risks, diversified general-purpose equity funds seek to reduce the sector or stock specific risks through Diversification. They mainly have market risk exposure. Sahara Wealth Plus Fund is an Equity Fund which is a general-purpose equity scheme.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRYHistory of the Indian Mutual Fund Industry The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

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

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 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 established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

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 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 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

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 Rs.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. The second is the UTI Mutual Fund, 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.

THE GRAPH INDICATES THE GROWTH OF ASSETS OVER THE YEARS.

Note:

Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.

CHAPTER NO.3 RESEARCH DESIGN

RESEARCH DESIGN

TOPIC OF THE STUDY:

Investors perception towards investment in Mutual funds and Equity

NAME OF THE ORGANIZATION: Anand Rathi Financial Services, Hubli.

Objectives of the study

To study the perception of investors regarding Mutual fund and Equity as investment options

To know the investment pattern of the investors based on their income and savings.

To understand, why investors chose equity or mutual fund?

Factors that investors consider, while investing in equity and mutual fund.

Scope of the study:

The scope of the study refers to the place and various aspects covered during the course

of the project work which includes the following:

1) The perception of the investors towards Equity and mutual funds.

2) To know the position of equity and mutual funds as compared to other investment avenues in the minds of investors.

3) This project was carried out at Way2Wealth Brokers Pvt. Ltd. at Hubli branch.

4) All the respondents selected for the survey were from Hubli and Dharwad city.

METHODOLOGY

Exploratory Research:

Exploratory research is concerned with discovering the general nature of the problem and the variables that relate to it. During this study, exploratory research is carried out to identify the variables like- who influences their investment decisions, factors influencing an investor in preferring a mutual fund and Equity, short listing the sectors which are in boom.

Descriptive Research:

After discovering the general nature of problem and the variables relating to it with the help of exploratory research, a descriptive research is carried out during the study for the purpose of accurate description of variables in the problem.

Descriptive research is carried out with the help of primary data collected from the customers, through questionnaire aided with personal interview.

DATA COLLECTION APPROACH

Secondary Data:

The first step in data collection approach is to look for secondary data. Usually secondary data is developed for some purpose other than for helping to solve the problem at hand.

In this study, secondary data includes key information memorandum (KIM) of various funds, data collected from Periodicals, information from the internet (details included in the annexure).

Primary Data:

A systematic collection of information was done directly from respondents.

The survey data collected during the study includes the data collected through administering a well designed questionnaire to the respondents followed by a personal interview. The data was also collected by interacting with branch managers and officials.

SAMPLING DESIGN

This process involves the steps of choosing the samples from the population of

investors in Hubli city. It goes as follows:

Population: Individuals having investments in Mutual fund or Equity markets.

Sampling Frame: Investors from Hubli city

Sample Unit: Individual Investor

Sampling Element: Individual Investor

Sampling Method: Non-probability convenience

Sampling size: 50

MEASUREMENT TECHNIQUE

Questionnaire:

Questionnaire is a formalized instrument for asking information directly from a respondent. During this research questionnaire is used as measurement technique for eliciting information from the chosen respondents. A sample questionnaire is enclosed in the annexure for reference

Chapter No. 4

ANALYSIS,

INTERPRETATION AND

FINDINGS

ANALYSIS AND INTERPRETATION

1. The sample profile.

Table no. 4.1

Male FemaleTotal

361450

Graph No 1

Interpretation:- Out of the 50 samples surveyed, the following observations were derived; 36 people are male and 14 female, these respondents invested in equity and mutual funds. Out of 36 male 10 respondents do not invest in mutual fund and out of 14 female 2 respondents do not invest in mutual funds as they think here returns are low.

2. Investor preference towards investment in equity and mutual fund.Table No 2

EquityMutual fundBothTotal

Investment11023750

Graph No 2

Interpretation:- Out of the 50 samples surveyed, the following observations were derived;

37 respondents invested in equity and mutual funds, 11 persons invested only in equity and only 2 person preferred to invest only in mutual fund.We can derive that investors prefer both equity and mutual funds as equal avenues and also investments in equity is favored.3. Pattern of investors income and their savings allocation.

Table No 3

Percentage of income saved

0%-15%16%-30%31%-45%46%-60%Total

Less than 1 lakh030104

Income of the

respondent1-3 lakh070108

3-5 lakh010809

5-10 lakh04130320

Above 10 lakh0502 0209

Total1528050250

Graph No 3

Interpretation:-Majority of the respondents were in the Income group of 5 lakh to 10lakh and 3 lakh to 5 lakh.

From the above graph it is clear that the allocation of funds towards savings is between 16% to 30% of the income i.e. 28 respondents allocate their income for savings between 16% to 30%.

4. Investment pattern of the investors based on their income and savings.Proportion of Investment (Equity:Mutual

Fund)

MFEq:MFEq:MFEq:MFEq:MFEq:MFEquityEq:MF

0-10040-6050-5060-4070-3080-20100-090:10

0%-15%010202020204

Percentage of02020604070701

income saved16%-30%

31%-45%010302

46%-60%0101

Table No 4

Chart No 4

Interpretation :-It is clear from the above graph, that investors are rational towards investing in both equity as well as in mutual funds. 38 respondents would like to invest in both options. Only 1 respondent is interested and has invested in only mutual fund. 11 persons have invested in the ratio 60:40 (Eq : MF) 07 persons have invested in the ratio 70:30 (Eq : MF) , 09 persons have invested in the ratio 80:20 (Eq : MF) By this it is clear that the most preferred investment in the ratio of 60:40 and 100:0 (Equity) it is good decision in the scenario of volatile market condition, this shows a portfolio which is fairly balanced.

5. Factor influencing investment in equity.FactorFrequencyPercentage

High return3570%

Flexibility048%

Liquidity1020%

Others012%

Table no.4.5

Interpretation:-Investors expect more returns on the investments made. 70% investors invest in equity because of high returns. For equity, the major factor that influences the investors to invest is high returns. Out of the 50 respondents, 70% vote for high returns, 8% for Flexibility, 20% for liquidity, the remaining 2% for others invested.

1) Factor influencing investment in Mutual fund.

Internal factor:

Table no.4.6

FactorFrequency

High returns06

Lower risk24

Liquidity06

Affordability03

Not invested in Mutual Fund11

Graph 4.6

Interpretation:

Respondents believe that low risk is major factor for considering the mutual funds over equity. About 48% of the investors invest in mutual funds because it carries lower risk. 12% of the investors invest expecting high returns. 12% of the investors invested due to liquidity and 6% affordability.

There is no greater advantage investing in mutual fund than diversification. Risk and return are directly proportional, though mutual funds carry less risk they have managed to give better returns.Since Mutual returns are having lower returns 11 of the respondents have not invested in mutual funds. Therefore these investors are termed as Risk Takers.

External factor:

Table no.4.7

External factorFrequency

Friends & relative02

Media02

Financial advisors17

Tax benefits18

Not Invested In Mutual Funds11

Graph No 4.7

Interpretation:-Respondents feel that Tax benefits are the source of reference for investments in mutual funds.. Nearly 36% of the investors invest in mutual funds for Tax Benefits. The 2nd major factor which influences the investors are Financial Advisors, where nearly 34% of investors invest in mutual fund as per the financial advisors.

7. Factors influencing preference of a mutual fund brand.

Internal factor:

Table no. 4.8InternalFrequency

Lock in period06

Expected returns28

Entry & exit load00

Fund manager03

Own experience02

Graph No 4.8 Interpretation:-The respondents look at returns i.e. performance of a mutual fund for investing in any mutual fund scheme. Out of 50 Samples 39 have invested in mutual fund (i.e 71%) of the investors look for the expected returns. The next internal factor that the investor looks for lock in period and where as fund manager & own experience that is 3 & 2 each, and no investor go by entry and exit load.

External Factor:

Table no.4.9

ExternalFrequency

Availability of scheme09

Financial advisor23

Friends & relatives03

Brand04

Graph No 4.9

Interpretation:-Financial advisors are the one of the considered external factor while investing in mutual funds. 59% of investor look for financial advisor for invest in MF, investor have belief on advisors, 23% of investor go by the availability of scheme, 8% of investor go by friends & relatives reference and 10% investor go for brand they belief on companies past result or performance.

8. Time horizon of investment.

Table no. 4.10

Time horizonFrequencyPercentage

Short term2754%

Long term0714%

Both1632%

Total50100%

Graph No 4.10

Interpretation:-Investors appears to be preferring a Short term view while investing in equity or mutual funds. The above graph shows that 54% of the investors invest in short term, 14% of the investors prefer long term and the remaining 32% of the investors prefer both short term as well as long term.

9. Investor preference of investments in Mutual Fund types.

Table no.4.11

PreferenceFrequency

Equity funds27

Balanced funds06

Debt funds01

Tax saving schemes05

Graph No 4.11

Interpretation:-From the survey it was observed that equity funds are the preferred choice in mutual fund investments. Out of 39 people who have invested in mutual funds, 54% of the investors have their investments in equity funds as these funds have been able to give good returns from past one year. The next most sought out type of fund is Balanced Funds. 15% of the investors have invested in balanced funds 13% have their investment in tax saving schemes, and 7.5% of the investors invested in debt funds.

10. Perception of investors regarding Risk and Reward involved in equity and mutual funds.[1-very low; 2-low; 3-moderate; 4-high; 5-very high]

Risk factor:

Table no. 4.12

EquityMutual fund

Risk involved54

Graph No 4.12

Interpretation:-Investors opine that the risk in investing equity is very high and where as risk in investing in mutual funds considerably moderate.

Return factor:

Table no. 4.13

Mutual

Equityfund

Returns43

Graph No 4.13

Interpretation:-Investors opine that the return in equity is high, where as return in mutual fund is moderate or considerably less return.

11. Do you consider sectors while making your investment decisions?

Table no.4.14

FrequencyPercentage

Yes4896%

No24%

Graph 4.14

Interpretation:96% of the investors consider sectors while investing. They prefer to follow the trend rather than experimenting on sectors. On the other side of it, 4% of investors do not consider sectors. They take the advantage of the volatility prevailing rather than concentrating on fundamentals. The investors who plan for long term investment consider sectors that will give them good returns over the period of time.

FINDINGS1) 39 respondents invested in equity and mutual funds, 11 persons invested only in equity We can derive that investors prefer both equity and mutual funds as equal avenues and also investments in equity is favored2) Majority of the respondents were in the Income group of 5 lac to 10 lac and 3 lac to 5 lac. From the above graph it is clear that the allocation of funds towards savings is between 16% to 30% of the income i.e. 29 respondents allocate their income for savings between 16% to 30%.

3) It is clear from the above graph, that investors are rational towards investing in both equity as well as in mutual funds. 39 respondents would like to invest in both options. 11 persons have invested in the ratio 60:40 (Eq : MF) 08 persons have invested in the ratio 70:30 (Eq : MF) , 9 persons have invested in the ratio 80:20 (Eq : MF) only one has invested in 90:10 (Eq:MF) By this it is clear that the most preferred investment in the ratio of 60:40 and and it is good decision in the scenario of volatile market condition, this shows a portfolio which is fairly balanced.

4) 96% of the investors consider sectors while investing. They prefer to follow the trend rather than experimenting on sectors. On the other side of it, 4% of investors do not consider sectors. They take the advantage of the volatility prevailing rather than concentrating on fundamentals. The investors who plan for long term investment consider sectors that will give them good returns over the period of time.

5) Respondents opine that low risk is major factor for considering the mutual funds over equity. About 48% of the investors invest in mutual funds because it carries lower risk. 12% of the investors invest expecting high returns. 12% of the investors invested due to liquidity and 6% affordability. The remaining 22% have not invested in mutual funds.

6) There is no greater advantage investing in mutual fund than diversification. Risk and return are directly proportional, though mutual funds carry less risk they have managed to give better returns.

7) Respondents feels that, financial advisors and tax benefits influence the investment decision. Nearly 34% invest in mutual funds with the help of financial advisors

8) From the survey it was observed that equity funds are the preferred choice in mutual fund investments. Out of 39 people who have invested in mutual funds, 69% of the investors have their investments in equity funds as these funds have been able to give good returns from past one year. The next most sought out type to be balanced funds which is 15%.

RECOMMENDATION

1. Majority of the investors invest in equity and mutual funds in the ratio of 60:40or 100:0.Indian economy is the most emerging economy. There is a huge inflow of money through FDIs and FIIs. The stock market is showing no signs of slowing down. In other words, this is the right time to invest in equity market or to increase the proportion of equity while investing.

The majority of the investors are investing in the ratio of 60:40 or 100:0.As the equity markets are strong, there is a scope to increase the proportion of equity investment to reap (Gather) high returns.2. 96% of the investors consider sectors while investing, 4% of investors do notconsider sectors. In the above finding 4% of the investors do not consider the sectors while investing, this should not be done. If they dont have proper knowledge, they might incur losses. Investors can gather latest information on stock market performance from intelligence report or expert reports. At present investing in sectors like infrastructure, banking, IT and FMCG can give high returns.

3. Nearly 58% of the investors invest in mutual funds for tax benfits. The 2nd major factor which influences 34% of the investors is advice from the Financial Advisors

4. Investors should look at the past track records of the company and the achievements and then invest. They should not make blind investment or go by promises. Instead they should take their own decision keeping all the relevant information in mind.

CONCLUSION

General ConclusionFrom the study we can make out that, there is equal preference for investments in both equity and mutual funds. Though the investment in equity is riskier, survey has revealed that investors with an expectation of high returns prefer equity as an option of investment. The expectation of investors towards investment in mutual funds is for better returns and as a safe option. Further low risk is also one of the factors an investor considers before making investments in either equity or mutual funds.

Specific Conclusion1. Majority of the respondents were in the Income group of 5 lac to 10 lac and 3 lac to 5 lac. And their savings proportion is between 16% to 30%. This is a significant allocation towards the savings, which may be invested in profitable avenues like equity or mutual funds.2. From the observations we can make out that investors are having idea about risk, return and advantage of investing in equity as well as mutual funds. Investors look at financial advisors, friends & relatives for reference before investing in mutual funds. And while investing in equity they prefer advises of financial advisors.3. One of the objectives of investor to invest in equity or mutual fund is from long term perception. Also investors analyze sectors before choosing equity or mutual funds, the reason being performance, safety and expected returns.

ANNEXURE

Annexure:QUESTIONNAIRE

I am the student of JSS DVH Management Studies & Research, Dharwad. I am undertaking a Major Concurrent Project topic is

Investors Perception towards investment in Equity & Mutual Funds. It is a part of MBA Curriculum. I request you to spend your valuable time and provide information. I ensure that information furnished by you will be used for academic purpose only.

1. Personal Details:a. Name : __________________________________________________

b. Address:__________________________________________________ __________________________________________________

c. Phone No: ____________________ d. Occupation: StudentProfessionalEmployedBusinessOthers (specify) __________________

e.Age: i) 18-25 ii) 25-40 iii) 40-55 iv) 55 & above

f.Annual Income: i) Less than 1 lakh ii) 1-3 lakhs

iii) 3-5 lakhs iv) 5-10 lakhs v) 10 lakhs & above

2. What percentage of your income do you save? _______

3. Have you invested in equity market? Yes No If No give reason______________________________________________

4. Have you invested in mutual funds? Yes No

If No Give Reason _______________________________________________

5. Since how many years are you investing? a. In Share Market __________ b. In Mutual Fund __________

6. What is the time horizon for your investment? a.Short-term (less than one year)

b.Long-term (more than one year)

c.Both

7. Given Rs.100, in what proportion would you divide your investment? a. In Share market ___________ b. In Mutual fund ___________

8. Which is the most important factor that influences you to invest in equity market? a.High returns

b.Flexibility

c.Liquidity

d. Others (specify)__________________

9. Do you consider sectors while making your investments in equities? a. Yes b. No

10. If yes which is the sector you prefer the most in future? a. Information technologye. Auto

b. Infrastructuref. FMCG

c. Bankingg. Entertainment

d. Power & Energyh. Communications

11. Which is the most important factor that influences you to invest in mutual funds?

InternalExternal

a. High returnsa. Friend & relatives

b. Lower riskb. Media

c. Liquidityc. Financial Advisors

d. Affordabilityd. Tax Benefits

12. Which is the type of mutual fund you have invested in?a. Equity fundsb. Balanced fundsc. Debt fundsd. Tax saving schemes

13. What are the factors that influence you in preferring a particular mutual fund?

InternalExternal

a. Lock in perioda. Availability of scheme

b. Expected returnsb. Financial advisor

c. Entry & exit loadc. Friend & relatives

d. Fund managerd. Brand

e. Own experience

14. What is your perception about the following parameters regarding equity market and mutual funds? (Please tick the appropriate number)

[1-very low; 2-low; 3-moderate; 4-high; 5-very high]

ParametersEquityMutual Funds

1234512345

a. Risk involved

b. Returns

c. Liquidity

d. Tax benefit

15. How far are you dependent on brokers advice?

a. Highly dependent

b. Dependent

c. Not dependent

16. Rank the following investment avenues according to your preference?

[Rank 1 for the highest preference & so on]

a. Equity[]b. Mutual Funds[]

c. Fixed deposits[]d. Gold[]

e. Commodities[]f. Insurance[]

g. Real estate[]

T h a n k Y o u

Bibliography

Websites:-

www.amfiinidia.com

www.mutualfundsindia.com

www.bseindia.com

www.nseindia.com

www.sebi.com

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