ACKNOWLEGDEMENT

I am using this opportunity to express my gratitude to everyone who supported me

throughout the Mentoring project. I am thankful for their aspiring guidance, invaluably
constructive criticism and friendly advice during the project work. I am sincerely greatful
to them for sharing their truthful and illuminating views on a number of issues related to
the project.
I express my warm thanks to Mr. and Ms. GOPIKA KUMAR for their support and
guidance at project title THE MUTUAL FUND IS BETTER INVESTMENT PLAN.
I would also like to thank my college Director DR.SATISH SETH and all the people who
provided me with the facilities being required and conductive conditions for my
Mentoring Project.

EXECUTIVE SUMMARY

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

This Project gave me a great learning experience and at the same time it gave me
enough scope to implement my analytical ability. The analysis and advice
presented in this Project Report is based on market research on the saving and
investment practices of the investors and preferences of the investors for
investment in Mutual Funds. This Report will help to know about the investors
Preferences in Mutual Fund means Are they prefer any particular Asset
Management Company (AMC), Which type of Product they prefer, Which Option
(Growth or Dividend) they prefer or Which Investment Strategy they follow
(Systematic Investment Plan or One time Plan). This Project as a whole can be
divided into two parts.

The first part gives an insight about Mutual Fund and its various aspects, the
Company Profile, Objectives of the study, Research Methodology. One can have a
brief knowledge about Mutual Fund and its basics through the Project.
The second part of the Project consists of data and its analysis collected through
survey done on 200 people. For the collection of Primary data I made a
questionnaire and surveyed of 200 people. I also taken interview of many People
those who were coming at the HDFC Branch where I done my Project.. I studied
about the products and strategies of other AMCs to know why people prefer to
invest in those AMCs.

This Project covers the topic THE MUTUAL FUND IS

BETTER INVESTMENT PLAN. The data collected has been well organized and
presented. I hope the research findings and conclusion will be of use.

CHAPTER I
INTRODUCTION

What Is Mutual Fund

4

A mutual fund is just the connecting bridge or a financial intermediary that allows a
group of investors to pool their money together with a predetermined investment
objective. The mutual fund will have a fund manager who is responsible for investing the
gathered money into specific securities (stocks or bonds). When you invest in a mutual
fund, you are buying units or portions of the mutual fund and thus on investing becomes
a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to
others they are very cost efficient and also easy to invest in, thus by pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower
trading costs than if they tried to do it on their own. But the biggest advantage to mutual
funds is diversification, by minimizing risk & maximizing returns.
Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost. The flow chart below describes broadly the working of a mutual fund

Unit Trust of India is the first Mutual Fund set up under a separate act, UTI Act in
1963, and started its operations in 1964 with the issue of units under the scheme
US-64.
Overview of existing schemes existed in mutual fund category

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an overview
into the existing types of schemes in the Industry.

Type of Mutual Fund Schemes

BY STRUCTURE

Open Ended Schemes

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

Close Ended Schemes

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

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

BY NATURE

1.

Equity fund:

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

Diversified Equity Funds

Mid-Cap Funds

Sector Specific Funds

Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on
the risk-return matrix.
2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt
papers. By investing in debt instruments, these funds ensure low risk and provide stable
income to the investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly

known as Government of India debt papers. These Funds carry zero Default risk
but are associated with Interest Rate risk. These schemes are safer as they
invest in papers backed by Government.

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

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

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

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

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

Further the mutual funds can be broadly classified on the basis of investment
parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in
the objectives of the fund. The investor can align his own investment needs with the
funds objective and invest accordingly.
8

BY INVESTMENT OBJECTIVE

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

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

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

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

OTHER SCHEMES

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors
under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act,

contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for
rebate.

Index Schemes: Index schemes attempt to replicate the performance of a

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

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

Types of returns

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

Income is earned from dividends on stocks and interest on bonds. A fund pays
out nearly all income it receives over the year to fund owners in the form of a
distribution.

If the fund sells securities that have increased in price, the fund has a capital
gain. Most funds also pass on these gains to investors in a distribution.

If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for
distributions or to reinvest the earnings and get more shares.
10

ADVANTAGE & DISADVANTAGE OF INVESTING IN MUTUAL

FUND:
For investments in mutual fund, one must keep in mind about the Pros and cons of
investments in mutual fund.

Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are

professional managed, by well qualified professional. Investors purchase funds because
they do not have the time or the expertise to manage their own portfolio. A mutual fund
is considered to be relatively less expensive way to make and monitor their
investments.
2. Diversification - Purchasing units in a mutual fund instead of buying individual
stocks or bonds, the investors risk is spread out and minimized up to certain extent. The
idea behind diversification is to invest in a large number of assets so that a loss in any
particular investment is minimized by gains in others.
3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time,
thus help to reducing transaction costs, and help to bring down the average cost of the
unit for their investors.
4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate
their holdings as and when they want.

11

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other

available instruments in the market, and the minimum investment is small. Most AMC
also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with
just Rs.50 per month basis.

Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds doesnt perform in neither the market, as

their management is not dynamic enough to explore the available opportunity in the
market, thus many investors debate over whether or not the so-called professionals are
any better than mutual fund or investor himself, for picking up stocks.
2. Costs The biggest source of AMC income, is generally from the entry & exit load
which they charge from an investors, at the time of purchase. The mutual fund
industries are thus charging extra cost under layers of jargon.
3. Dilution - Because funds have small holdings across different companies, high
returns from a few investments often don't make much difference on the overall return.
Dilution is also the result of a successful fund getting too big. When money pours into
funds that have had strong success, the manager often has trouble finding a good
investment for all the new money.
4. Taxes - when making decisions about your money, fund managers don't consider
your personal tax situation. For example, when a fund manager sells a security, a
capital-gain tax is triggered, which affects how profitable the individual is from the sale.
It might have been more advantageous for the individual to defer the capital gains
liability

12

Mutual Funds Industry in India

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 a 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 in in March 1993 and till April
2004,

it

reached

the

height

of

1,540

bn.

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

abreast

of

selling.

The mutual fund industry can be broadly put into four phases according to the
development of the sector A mutual fund is a professionally-managed firm of collective
investments that pools money from many investors and invests it in stocks, bonds,
short-term money market instruments, and/or other securities.in other words we can say
that A Mutual Fund is a trust registered with the Securities and Exchange Board of India
(SEBI), which pools up the money from individual / corporate investors and invests the
same on behalf of the investors /unit holders, in equity shares, Government securities,
Bonds, Call money markets etc., and distributes the profits.
The value of each unit of the mutual fund, known as the net asset value (NAV), is
mostly calculated daily based on the total value of the fund divided by the number of
shares currently issued and outstanding. The value of all the securities in the portfolio in
calculated daily. From this, all expenses are deducted and the resultant value divided by
the number of units in the fund is the funds NAV.
13

NAV =

Total value of the fund.

No. of shares currently issued and outstanding

14

15

MAJOR MUTUAL FUND COMPANIES IN INDIA

16

Advantages of a MF

Mutual Funds provide the benefit of cheap access to expensive stocks

Mutual funds diversify the risk of the investor by investing in a basket of

assets

A team of professional fund managers manages them with in-depth

research inputs from investment analysts.

Being institutions with good bargaining power in markets, mutual funds

have access to crucial corporate information, which individual investors
cannot access.

History 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. 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 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)
17

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)
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. As at the end of January 2003, there were 33
mutual funds with total assets of Rs. 1,21,805 crores.
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 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. consolidation
and growth. As at the end of September, 2004, there were 29 funds, which manage
assets of Rs.153108 crores under 421 schemes.

18

Categories of mutual funds:

19

Mutual funds can be classified as follow:

20

 Based on their structure:

Open-ended funds: Investors can buy and sell the units from the fund, at any
point of time.

Close-ended funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments can not be made into the
fund. If the fund is listed on a stocks exchange the units can be traded like stocks
(E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of
close-ended funds provided liquidity window on a periodic basis such as monthly
or weekly. Redemption of units can be made during specified intervals.
Therefore, such funds have relatively low liquidity.
Based on their investment objective:
Equity funds: These funds invest in equities and equity related instruments. With
fluctuating share prices, such funds show volatile performance, even losses.
However, short term fluctuations in the market, generally smoothens out in the
long term, thereby offering higher returns at relatively lower volatility. At the same
time, such funds can yield great capital appreciation as, historically, equities have
outperformed all asset classes in the long term. Hence, investment in equity
funds should be considered for a period of at least 3-5 years. It can be further
classified as:
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their

portfolio mirrors the benchmark index both in terms of composition and

individual stock weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities spreading across
different sectors and stocks.
iii) Dividend yield funds- it is similar to the equity diversified funds except that they
invest in companies offering high dividend yields.
21

iv) Thematic funds- Invest 100% of the assets in sectors which are related through
some

theme.

e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund: Their investment portfolio includes both debt and equity. As a result, on
the risk-return ladder, they fall between equity and debt funds. Balanced funds are the
ideal mutual funds vehicle for investors who prefer spreading their risk across various
instruments. Following are balanced funds classes:
i)
ii)

Debt-oriented funds -Investment below 65% in equities.

Equity-oriented funds -Invest at least 65% in equities, remaining in
debt.

Debt fund: They invest only in debt instruments, and are a good option for investors
averse to idea of taking risk associated with equities. Therefore, they invest exclusively
in fixed-income instruments like bonds, debentures, Government of India securities; and
money market instruments such as certificates of deposit (CD), commercial paper (CP)
and call money. Put your money into any of these debt funds depending on your
investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large portion
being invested in call money market.
ii)Gilt funds ST- They invest 100% of their portfolio in government securities of and Tbills.

22

iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
iv)Arbitrage fund- They generate income through arbitrage opportunities due to mispricing between cash market and derivatives market. Funds are allocated to equities,
derivatives and money markets. Higher proportion (around 75%) is put in money
markets, in the absence of arbitrage opportunities.
v)Gilt funds LT- They invest 100% of their portfolio in long-term government securities.
vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in longterm debt papers.
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.
viii)FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that
of the fund.

Working of a Mutual fund:

23

The entire mutual fund industry operates in a very organized way. The investors, known
as unit holders,handover their savings to the AMCs under various schemes. The
objective of the investment should match with the objective of the fund to best suit the
investors needs. The AMCs further invest

the funds into various securities according

to the investment objective. The return generated from the investments is passed on to
the investors or reinvested as mentioned in the offer document

Documents required (PAN mandatory):

24

Proof of identity :
1. Photo PAN card
2. In case of non-photo PAN card in addition to copy of PAN card any one of the
following: driving license/passport copy/ voter id/ bank photo pass book.
Proof of address (any of the following ) :latest telephone bill, latest electricity bill,
Passport, latest bank passbook/bank account statement, latest Demat account
statement, voter id, driving license, ration card, rent agreement.
Offer document: An offer document is issued when the AMCs make New Fund
Offer(NFO). Its advisable to every investor to ask for the offer document and read it
before investing. An offer document consists of the following:
Standard Offer Document for Mutual Funds (SEBI Format)
Summary Information
Glossary of Defined Terms
Risk Disclosures
Legal and Regulatory Compliance
Expenses
Condensed Financial Information of Schemes
Constitution of the Mutual Fund
Investment Objectives and Policies
Management of the Fund
Offer Related Information.
Key Information Memorandum: a key information memorandum, popularly known as
KIM, is attached along with the mutual fund form. And thus every investor get to read it.
Its contents are:
1

Name of the fund.

2. Iestment objective
25

3. Aset allocation pattern of the scheme.

4. Risk profile of the scheme
5. Plans & options
6. Minimum application amount/ no. of units
7. Benchmark index
8. Dividend policy
9. Name of the fund manager(s)
10 . Expenses of the scheme: load structure, recurring expenses
11. Performance of the scheme (scheme return v/s. benchmark return)
12. Year- wise return for the last 5 financial year.
Distribution channels:
Mutual funds posses a very strong distribution channel so that the ultimate customers
doesnt face any difficulty in the final procurement. The various parties involved in
distribution of mutual funds are:
1. Direct marketing by the AMCs: the forms could be obtained from the AMCs directly.
The investors can approach to the AMCs for the forms. some of the top AMCs of India
are; Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, Sundaram,
ICICI, Mirae Assets, Canara Robeco, Lotus India, LIC, UTI etc. whereas foreign AMCs
include: Standard Chartered, Franklin Templeton, Fidelity, JP Morgan, HSBC, DSP
Merill Lynch, etc.

2 .Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/subbroker to popularize their funds. AMCs can enjoy the advantage of large network of
these brokers and sub brokers.
26

3. Individual agents, Banks, NBFC: investors can procure the funds through individual
agents, independent brokers, banks and several non- banking financial corporations
too, whichever he finds convenient for him.

Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we can find
the market flooded with a variety of investment options which includes mutual funds,
equities, fixed income bonds, corporate debentures, company fixed deposits, bank
deposits, PPF, life insurance, gold, real estate etc. all these investment options could
be judged on the basis of various parameters such as- return, safety convenience,
volatility and liquidity. measuring these investment options on the basis of the
mentioned parameters, we get this in a tabular form

Return

Equity

High

Safety

Volatility

Low

High
27

Liquidit

Convenie

nce

High

Moderate

Bonds

Moderate

High

Moderate

Moderate

High

Co.

Moderate

Moderate

Moderate

Low

Low

Co. FDs

Moderate

Low

Low

Low

Moderate

Bank

Low

High

Low

High

High

PPF

Moderate

High

Low

Moderate

High

Life

Low

High

Low

Low

Moderate

Gold

Moderate

High

Moderate

Moderate

Gold

Real

High

Moderate

High

Low

Low

High

High

Moderate

High

High

Debentur
es

Deposits

Insurance

Estate
Mutual
Funds

We can very well see that mutual funds outperform every other investment option. On
three parameters it scores high whereas its moderate at one. comparing it with the
other options, we find that equities gives us high returns with high liquidity but its
volatility too is high with low safety which doesnt makes it favourite among persons who
have low risk- appetite. Even the convenience involved with investing in equities is just
moderate.

28

Now looking at bank deposits, it scores better than equities at all fronts but lags badly
in the parameter of utmost important ie; it scores low on return , so its not an
happening option for person who can afford to take risks for higher return. The other
option offering high return is real estate but that even comes with high volatility and
moderate safety level, even the liquidity and convenience involved are too low. Gold
have always been a favourite among Indians but when we look at it as an investment
option then it definitely doesnt gives a very bright picture. Although it ensures high
safety but the returns generated and liquidity are moderate. Similarly the other
investment options are not at par with mutual funds and serve the needs of only a
specific customer group. Straightforward, we can say that mutual fund emerges as a
clear winner among all the options available.
The reasons for this being:
I)Mutual funds combine the advantage of each of the investment products: mutual
fund is one such option which can invest in all other investment options. Its principle of
diversification allows the investors to taste all the fruits in one plate. just by investing in
it, the investor can enjoy the best investment option as per the investment objective.
II)dispense the shortcomings of the other options: every other investment option
has more or les some shortcomings. Such as if some are good at return then they are
not safe, if some are safe then either they have low liquidity or low safety or
both.likewise, there exists no single option which can fit to the need of everybody. But
mutual funds have definitely sorted out this problem. Now everybody can choose their
fund according to their investment objectives.
III) Returns get adjusted for the market movements: as the mutual funds are
managed by experts so they are ready to switch to the profitable option along with the
market movement. Suppose they predict that market is going to fall then they can sell
some of their shares and book profit and can reinvest the amount again in money
market instruments.
IV) Flexibility of invested amount: Other then the above mentioned reasons, there
exists one more reason which has established mutual funds as one of the largest
29

financial intermediary and that is the flexibility that mutual funds offer regarding the
investment amount. One can start investing in mutual funds with amount as low as Rs.
500 through SIPs and even Rs. 100 in some cases.

How do investors choose between funds?

When the market is flooded with mutual funds, its a very tough job for the investors to
choose the best fund for them. Whenever an investor thinks of investing in mutual
funds, he must look at the investment objective of the fund. Then the investors sort out
the funds whose investment objective matches with that of the investors. Now the tough
task for investors start, they may carry on the further process themselves or can go for
advisors like HDFC . Of course the investors can save their money by going the direct
route i.e. through the AMCs directly but it will only save 1-2.25% (entry load) but could
cost the investors in terms of returns if the investor is not an expert. So it is always
advisable to go for MF advisors. The mf advisors thoughts go beyond just investment
objectives and rate of return. Some of the basic tools which an investor may ignore but
an mf advisor will always look for are as follow:
1. Rupee cost averaging:
The investors going for Systematic Investment Plans(SIP) and Systematic Transfer
Plans(STP) may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost
averaging allows an investor to bring down the average cost of buying a scheme by
making a fixed investment periodically, like Rs 5,000 a month and nowadays even as
low as Rs. 500 or Rs. 100. In this case, the investor is always at a profit, even if the
market falls. In case if the NAV of fund falls, the investors can get more number of units
and vice-versa. This results in the average cost per unit for the investor being lower
than the average price per unit over time.
The investor needs to decide on the investment amount and the frequency. More
frequent the investment interval, greater the chances of benefiting from lower prices.
30

Investors can also benefit by increasing the SIP amount during market downturns,
which will result in reducing the average cost and enhancing returns. Whereas STP
allows investors who have lump sums to park the funds in a low-risk fund like liquid
funds and make periodic transfers to another fund to take advantage of rupee cost
averaging.
2. Rebalancing:
Rebalancing involves booking profit in the fund class that has gone up and investing in
the asset class that is down. Trigger and switching are tools that can be used to
rebalance a portfolio. Trigger facilities allow automatic redemption or switch if a
specified event occurs. The trigger could be the value of the investment, the net asset
value of the scheme, level of capital appreciation, level of the market indices or even a
date. The funds redeemed can be switched to other specified schemes within the same
fund house. Some fund houses allow such switches without charging an entry load.
To use the trigger and switch facility, the investor needs to specify the event, the amount
or the number of units to be redeemed and the scheme into which the switch has to be
made. This ensures that the investor books some profits and maintains the asset
allocation in the portfolio.
3. Diversification:
Diversification involves investing the amount into different options. In case of mutual
funds, the investor may enjoy it afterwards also through dividend transfer option. Under
this, the dividend is reinvested not into the same scheme but into another scheme of the
investor's choice.
For example, the dividends from debt funds may be transferred to equity schemes. This
gives the investor a small exposure to a new asset class without risk to the principal
amount. Such transfers may be done with or without entry loads, depending on the MF's
policy.
4. Tax efficiency:

31

Tax factor acts as the x-factor for mutual funds. Tax efficiency affects the final decision
of any investor before investing. The investors gain through either dividends or capital
appreciation but if they havent considered the tax factor then they may end loosing.
Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and
education cess) on dividends paid out. Investors who need a regular stream of income
have to choose between the dividend option and a systematic withdrawal plan that
allows them to redeem units periodically. SWP implies capital gains for the investor.
If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax
bracket. Investors in higher tax brackets will end up paying a higher rate as short-term
capital

gains

and

should

choose

the

dividend

option.

If the capital gain is long-term (where the investment has been held for more than one
year), the growth option is more tax efficient for all investors. This is because investors
can redeem units using the SWP where they will have to pay 10 per cent as long-term
capital gains tax against the 12.50 per cent DDT paid by the MF on dividends.
All the tools discussed over here are used by all the advisors and have helped investors
in reducing risk, simplicity and affordability. Even then an investor needs to examine
costs, tax implications and minimum applicable investment amounts before committing
to a service.

Portfolio analysis tools:

With the increasing number of mutual fund schemes, it becomes very difficult for an
investor to choose the type of funds for investment. By using some of the portfolio
analysis tools, he can become more equipped to make a well informed choice. There
are many financial tools to analyze mutual funds. Each has their unique strengths and
limitations as well. Therefore, one needs to use a combination of these tools to make a
thorough analysis of the funds.

32

The present market has become very volatile and buoyant, so it is getting difficult for the
investors to take right investing decision. so the easiest available option for investors is
to choose the best performing funds in terms of returns which have yielded maximum
returns.
But if we look deeply to it, we can find that the returns are important but it is also
important to look at the quality of the returns. Quality determines how much risk a fund
is taking to generate those returns. One can make a judgment on the quality of a fund
from various ratios such as standard deviation, sharpe ratio, beta, treynor measure, Rsquared, alpha, portfolio turnover ratio, total expense ratio etc.
Now I have compared two funds of HDFC on the basis of standard deviation, beta, Rsquared, sharpe ratio, portfolio turnover ratio and total expense ratio. So before going
into details, lets have a look at these ratios:
Standard deviation:
in simple terms standard deviation is one of the commonly used statistical parameter to
measure risk, which determines the volatility of a fund. Deviation is defined as any
variation from a mean value (upward & downward). Since the markets are volatile, the
returns fluctuate everyday. High standard deviation of a fund implies high volatility and a
low standard deviation implies low volatility.
Beta analysis:
beta is used to measure the risk. It basically indicates the level of volatility associated
with the fund as compared to the market. In case of funds, as compared to the market.
In case of funds, beta would indicate the volatility against the benchmark index. It is
used as a short term decision making tool. A beta that is greater than 1 means that the
fund is more volatile than the benchmark index, while a beta of less than 1 means that
the fund is more volatile than the benchmark index. A fund with a beta very close to 1
means the funds performance closely matches the index or benchmark.
The success of beta is heavily dependent on the correlation between correlation
between a fund and its benchmark. Thus, if the funds portfolio doesnt have a relevant
33

benchmark index then a beta would be grossly inappropriate. For example if we are
considering a banking fund, we should look at the beta against a bank index.
R-Squared (R2):
R squared is the square of R (i.e.; coefficient of correlation). It describes the level of
association between the funs market volatility and market risk. The value of R- squared
ranges from0 to1. A high R- squared (more than 0.80) indicates that beta can be used
as a reliable measure to analyze the performance of a fund. Beta should be ignored
when the r-squared is low as it indicates that the fund performance is affected by factors
other than the markets.
For example:
Case 1

Case 2

R2

0.65

0.88

1.2

0.9

In the above tableR2 is less than 0.80 in case 1, implies that it would be wrong to
mention that the fund is aggressive on account of high beta. In case 2, the r- squared is
more than 0.85 and beta value is 0.9. it means that this fund is less aggressive than the
market.
Sharpe ratio: sharpe ratio is a risk to reward ratio, which helps in comparing the returns
given by a fund with the risk that the fund has taken. A fund with a higher sharpe ratio
means that these returns have been generated taking lesser risk. In other words, the
fund is less volatile and yet generating good returns. Thus, given similar returns, the
fund with a higher sharpe ratio offers a better avenue for investing .

34

35

CHAPTER -2
COMPANY PROFILE

HDFC Asset Management Company Limited (AMC)

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies
Act, 1956, on December 10, 1999, and was approved to act as an Asset Management
Company for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
The registered office of the AMC is situated at HUL House, 2nd Floor, H. T. Parekh
Marg, 165-166, Backbay Reclamation, Churchgate, Mumbai - 400 020. The Company
Identification Number (CIN) is U65991MH1999PLC123027.

36

In terms of the Investment Management Agreement, the Trustee has appointed the
HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up
capital of the AMC is Rs. 25.241 crore as on September 30, 2014.

The AMC is also providing portfolio management / advisory services and such activities
are not in conflict with the activities of the Mutual Fund. The AMC has renewed its
registration from SEBI vide Registration No. - PM / INP000000506 dated February 12,
2013 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations,
1993. The Certificate of Registration is valid from January 1, 2013 to December 31,
2015.

The Board of Directors of the HDFC Asset Management Company Limited

(AMC) consists of the following eminent persons.

Mr. Deepak S. Parekh

Mr. N. Keith Skeoch
Mr. Keki M. Mistry
Mr. James Aird
Mr. P. M. Thampi
Mr. Humayun Dhanrajgir
Dr. Deepak B. Phatak
Mr. Hoshang S. Billimoria
37

Mr. Rajeshwar Raj Bajaaj

Mr. Vijay Merchant
Ms. Renu S. Karnad
Mr. Milind Barve
Mr. Deepak S. Parekh

Sponsors:
HDFC Ltd. was incorporated in 1977 as the first specialised mortgage company in India.
HDFC provides financial assistance to individuals, corporates and developers for the
purchase or construction of residential housing. It also provides property related
services (e.g. property identification, sales services and valuation), training and
consultancy. Of these activities, housing finance remains the dominant activity. HDFC
has a client base of around 13.25 lac borrowers, over 17.5 lac depositors, over 1.82 lac
shareholders and over 25,000 deposit agents, as at March 31, 2014.
As at March 31, 2014, HDFC had mortgage loan assets of Rs. 1971.00 billion. Since
inception, HDFC has financed over 4.6 million housing units. 74% of shareholders in
HDFC are foreign investors. HDFCs market capitalisation as at March 31, 2014 stood
at approximately Rs 1379.35 billion.
HDFC's borrowings consists of domestic term loans from banks and insurance
companies, bonds and retail deposits. HDFC has received the highest rating for its
bonds and deposits program for the Nineteenth year in succession.
As part of HDFCs developmental initiatives, the company has set up institutions in
various fields including Banking, Insurance; Life and General, Asset Management,
Credit Rating, Consumer Finance, IT- enabled services, Real Estate and Education
Finance.
Over the years, the HDFC group has emerged as a strong financial conglomerate in the
Indian capital markets with a presence in banking, life and general insurance, asset
management and venture capital. HDFCs key associate and subsidiary companies
include HDFC Bank Limited, HDFC Standard Life Insurance Company Limited, HDFC
Ergo General Insurance Company Limited, HDFC Asset Management Company
38

Limited, GRUH Finance Limited, HDFC Venture Capital Limited and Credila Financial
Services Limited.

Trustees:
HDFC Trustee Company Limited, a company incorporated under the Companies Act,
1956 is the Trustee to HDFC Mutual Fund vides the Trust deed dated June 8, 2000, as
amended from time to time. HDFC Trustee Company Ltd is wholly owned subsidiary of
HDFC

The Board of Directors of HDFC Trustee Company Limited consists of the

following eminent persons.
Mr. Anil kumar hirjee
Mr. Vincent joseph obrien
Mr. Shishir k. Diwanji
Mr. Ranjan sanghi
Mr. V. Srinivasa rangan

VISION OF HDFC AMC

39

Registrar & Transfer Agents:

Computer Age Management Services Pvt. Ltd.,
Rayala Towers - I,
158 Anna Salai,
Chennai 600002.
Tel: (+91) 044 2852 0516
Fax: (+91) 044 4203 2952
Website: www.camsonline.com

Custodian:
HDFC BANK LIMITED
Kamala Mills Compound,
Senapati Bapat Marg,
Lower Parel,
Mumbai 400 013.
Website: www.hdfcbank.com
CITIBANK N.A.
Ramnord House,
77, Dr. Annie Besant Road,
40

Worli, Mumbai 400 018.

Website: www.citibank.com

Auditors:
DELOITTE HASKINS & SELLS
Chartered Accountants
12, Dr. Annie Besant Road,
Opp. Shiv Sagar Estate,
Worli,
Mumbai 400 018.
Website: www.deloitte.co

Awards accolades:
Awards won by HDFC Asset Management Co. Ltd
Seria

Name of the Award Award

l no.

Ceremony

Awards#

Agency

Eligible
number

Period for
of the award

Fund Houses
1

ICRA

Mutual ICRA Ltd./ Star

Fund

Year

Fund

ICRA

House

Awards 2011

Online

of the Year 13

Limited

(Equity

Morningstar

Morningsta

Best Equity

India

Fund House

Fund

Awards India

December
31, 2010

Category)
2

ended

Year
19

2011

ended
December
31, 2010

Best

Multi- 16

Year

Asset

ended

Fund House

December

41

31, 2010
3

CNBC

TV18

CRISIL
Mutual

Fund

Fund

Debt Mutual

Services

Fund

CRISIL Ltd. House of the

Awards 2011

Year
41

Year

Year

Mutual
Fund House 41
of

World Fund

Year ended

House of the 41

December

Year

31, 2010

Best

Services

Research

CRISIL Ltd. t

Bloomberg
Leadership

UTV

December

Mutual Fund

-Value
Survey

ended
31, 2010

the Year

Business

December
31, 2010

Equity

ended

Asset

Managemen

Year
23

ended
December

Company

31, 2010

Bloomberg

Best Mutual

Year

UTV

Fund

Equity
of the Year

ended
December
31, 2010

LIPPER FUND AWARDS 2011 HDFC was awarded the Best Group over 3 Years# in
the Overall Group Category (from amongst 14 fund groups) for the 3 year period
ending December 31, 2010 at Lipper Fund Awards- India 2011. The said award has
been given to HDFC as one of the Sponsor Companies.

42

Housing Development Finance Corporation Limited (HDFC) was awarded the Best
Group over 3 Years# in the Mixed Assets Group Category (from amongst 15 fund
groups) for the 3 year period ending December 31, 2010 at Lipper Fund Awards- India
2011. The said award has been given to HDFC as one of the Sponsor Companies.

LIPPER FUND AWARDS 2011 METHODOLOGY:

The essence of the Lipper Fund Awards is to reward consistent out-performance of
individual funds and of fund companies. Winning funds have demonstrated consistently
strong risk-adjusted returns compared with peers.
Asset Class Group Awards: Fund groups with at least three equity, three bonds, or three
mixed asset portfolios in the respective asset classes are eligible for a group award.
The lowest average decile rank of the three years Consistent Return measure of the
eligible funds per asset class and group will determine the asset class group award
winner over the three-year period. In cases of identical results the lower average
percentile rank will determine the winner.
Overall Group Award: Fund groups with at least three equity, three bond, and three
mixed-asset funds are eligible for an overall group award. An overall group award is
given to the group with the lowest average decile ranking of its respective asset class
results based on the methodology described above. In cases of identical results the
lower

average

percentile

rank

will

determine

the

winner.

Asset class and overall group awards are given to the company that is responsible for
establishing the fund by appointing the fund management company, promoting and/or
distributing the fund, the brand of the fund and the product range. This company is also
referred as promoter or Sponsor Company.
ICRA MUTUAL FUND AWARDS 2011- STAR FUND HOUSE OF THE YEAR:
Star Fund House of the Year is determined in the Equity and Debt categories
separately. Star Fund house of the Year Award indicates top overall performance within
43

the eligible fund houses. To qualify for the award a fund house needs to have at least
one scheme ranked 3 star or above in at least three of the equity and debt categories
respectively defined by ICRA. The scoring aims at assessing the number of superior
performing schemes managed by the fund house over the current one-year period. The
result also takes into account qualitative factors of an AMC's structure based on their
responses to a due diligence questionnaire.
MORNINGSTAR INDIA FUND AWARDS 2011:
Best Equity Fund House: The award recognizes sustained outperformance over three
years, based on the Morningstar Risk-Adjusted Return across its equity fund line-ups for
the period ending December 31, 2010. Best Multi-Asset Fund House: The award
recognizes sustained outperformance over three years, based on the Morningstar RiskAdjusted Return across its equity, debt and allocation fund line-ups for the period ending
December 31, 2010.
BUSINESS WORLD -VALUE RESEARCH SURVEY:
Best Asset Management Company: AMCs were ranked based on funds rated either 4star or 5-star by Value Research as a percentage of the total number of rated funds.
AMCs with less than Rs 3,000 crore of average assets under management as of
December 2010 were not included.
BLOOMBERG UTV FINANCIAL LEADERSHIP AWARDS 2011:
Best Mutual Fund - Equity of the Year: All Mutual Funds operating in the country were
evaluated and of them 6 fund houses were shortlisted to make presentations to the jury
based on the performance of their schemes. The final winners were selected by a Jury
panel which considered weighted average Sharpe Ratio achieved by the fund houses in
each of their schemes subject to minimum average assets under management during
FY10 for the debt and equity segments and the submissions made by the fund house
on its risk management processes, investor education and category enhancement
initiatives, leadership initiatives undertaken by the fund house to expand mutual fund
operations.
44

Mutual fund industry and structure:

Mutual funds have organization structure as per the Security Exchange Board of India
guideline; Security Exchange Board of India specified authority and responsibility of
Trustee and Asset Management Companies. The objective is to controlling, to
promoted, to regulate, to protect the investors right and efficient trading of units.
Operation of Mutual fund start with investors saves their money on mutual fund, than
Mutual Fund manager handling the funds and strategic investment on scrip. As per the
objectives of particular scheme manager selected scrip. Unit value will become high
when fund manager Investment policy generate the return on capital market. Unit return
depends on fund return and efficient capital market. Also affects international capital
market, liquidity and at last economic policy. Below the graph indicates how the process
was going on to investors to earn returns. Mutual fund manager having high
responsibility inside of return and how to minimize the risk. When fund provided high
return with high risk, investors attract to invest more funds for same scheme.
The Mutual fund organization as per the SEBI formation and necessary formation is
needed for sooth activities of the companies and achieved the desire objectives.
Transfer agent and custodian play role for dematerialization of the fund and unit holders
hold the account statement, but custody of the unit is on particular Asset Management
Company. Custodian holds all the fund units on dematerialization form. Sponsor had
decided the responsibility of custodian when investor to purchase the fund and to sell
the unit. Application forms, transaction slip and other requests received by transfer
agent, middle men between investors and Assets Management Companies.

Some facts for the growth of mutual funds in India:

Mutual funds have seen 100% growth in the last 6 years.

45

Number of foreign AMCs is in the queue to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management
worldwide.

Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required.

We have approximately 29 mutual funds which is much less than US having

more than 800. There is a big scope for expansion.

'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing
cities.

Mutual fund can penetrate rural like the Indian insurance industry with simple and
limited products.

SEBI allowing the MF's to launch commodity mutual funds.

Emphasis on better corporate governance.

Trying to curb the late trading practices.

Introduction of Financial Planners who can provide need based advice.

According to July 2013, the Indian mutual fund industry has 46 players. The number of
public sector players has reduced from 11 to 5. The public sector has gradually receded
into the background, passing on a large chunk of market share to private sector players.
The Association of Mutual Funds in India (AMFI) is the industry body set up to facilitate
the growth of the Indian mutual fund industry. It plays a pro-active role in identifying
steps that need to be taken to protect investors and promote the mutual fund sector. It is
noteworthy that AMFI is not a Self-Regulatory Organisation (SRO) and its
46

recommendations are not binding on the industry participants. By its very nature, AMFI
has an advisors or a counsellors role in the mutual fund industry. Its recommendations
become mandatory if and only if the Securities and Exchange Board of India (SEBI)
incorporates them into the regulatory framework it stipulates for mutual funds.

The Indian mutual fund industry follows a 3-tier structure as shown below:

Sponsors

Trust
Asset Management
Company

Lets understand what each of these terms means and their roles in the mutual fund
industry.

1. Sponsors:
They are the individuals who think of starting a mutual fund. The Sponsor approaches
SEBI, the market regulator and also the regulator for mutual funds. Not everyone can
start a mutual fund. SEBI will grant a permission to start a mutual fund only to a person
of integrity, with significant experience in the financial sector and a certain minimum net
worth. These are just some of the factors that come into play.

2. Trust:
Once SEBI is satisfied with the credentials and eligibility of the proposed Sponsors, the
Sponsors then establish a Trust under the Indian Trust Act 1882. Trusts have no legal
identity in India and thus cannot enter into contracts. Hence the Trustees are the
individuals authorized to act on behalf of the Trust. Contracts are entered into in the
47

name of the Trustees. Once the Trust is created, it is registered with SEBI, after which
point, this Trust is known as the mutual fund.
3. Asset Management Company (AMC):
The Trustees appoint the AMC, which is established as a legal entity, to manage the
investors (unit holders) money. In return for this money management on behalf of the
mutual fund, the AMC is paid a fee for the services provided. This fee is to be borne by
the investors and is deducted from the money collected from them.
The AMC has to be approved by SEBI and it functions under the supervision of its
Board of Directors, and also under the direction of the Trustees and the regulatory
framework established by SEBI. It is the AMC, which in the name of the Trust, that floats
new schemes and manages these schemes by buying and selling securities.
Apart from these parties, we also have the following:
1. Custodian:
The Custodian maintains the custody of the securities in which the scheme invests. It
also keeps a tab on corporate actions such as rights, bonus and dividends declared by
the companies in which the fund has invested. The Custodian is appointed by the Board
of Trustees. The Custodian also participates in a clearing and settlement system
through approved depository companies on behalf of mutual funds, in case of
dematerialized securities.
2. Transfer Agents:
Registrar and Transfer Agents (RTAs) maintain the investors (unit holders) records,
reducing the burden on the AMCs.

A comprehensive structure of a mutual fund appears as depicted in the chart below:

SEBI Regulations

Custodian

Sponsors
48
Mutual
Fund
Unit Holders

Transfer

Shareholding

Trust deed
Trustees

AMC

IM agreement

PRODUCTS

49

50

Chapter - 3
Objectives and scope

OBJECTIVES OF THE STUDY

To find out the Preferences of the investors for Asset Management
Company.
51

 To know the Preferences for the portfolios.

To know why one has invested or not invested in HDFC Mutual fund
To find out the most preferred channel.
To find out what should do to boost Mutual Fund Industry.

Scope of the study

A big boom has been witnessed in Mutual Fund Industry in recent times. A large
number of new players have entered the market and trying to gain market share in
this rapidly improving market.

I surveyed on my Project Topic A study of

preferences of the Investors for investment in Mutual Fund on the visiting

customers of the HDFC MUTUAL FUND. The study will help to know the
preferences of the customers, which company, portfolio, mode of investment,
option for getting return and so on they prefer. This project report may help the
company to make further planning and strategy.

52

CHAPTER -4
RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
This report is based on primary as well secondary data, however primary data
collection was given more importance since it is overhearing factor in attitude
studies. One of the most important users of research methodology is that it helps
in identifying the problem, collecting, analyzing the required information data and
providing an alternative solution to the problem .It also helps in collecting the vital

53

information that is required by the top management to assist them for the better
decision making both day to day decision and critical ones.
Data sources:
Research is totally based on primary data. Secondary data can be used only for
the reference. Research has been done by primary data collection, and primary
data has been collected by interacting with various people. The secondary data
has been collected through various journals and websites.
Sampling:
Sampling procedure:
The sample was selected of them who are the customers/visitors of HDFC
mutual fund, , irrespective of them being investors or not or availing the
services or not. It was also collected through personal visits to persons, by
formal and informal talks and through filling up the questionnaire prepared.
The data has been analyzed by using mathematical/Statistical tool.

Sample size:
The sample size of my project is limited to 200 people only. Out of which
only 120 people had invested in Mutual Fund. Other 80 people did not
have invested in Mutual Fund.
Sample design:
Data has been presented with the help of bar graph, pie charts, line
graphs etc.
Limitation:
54

 Some of the persons were not so responsive.

Possibility of error in data collection because many of investors may have
not given actual answers of my questionnaire.
Sample size is limited to 200 visitors of HDFC mutual fund , out of these
only 120 had invested in Mutual Fund. The sample size may not adequately

represent the whole market.

Some respondents were reluctant to divulge personal information which
can affect the validity of all responses.

55

Chapter-5
Data analysis & interpretation

ANALYSIS & INTERPRETATION OF THE DATA

1. (a) Age distribution of the Investors .

Age Group

<=
30

31-35

36-40

41-45

46-50

>50

No. of Investors

12

18

30

24

20

16

56

35
3

30

25

5
20
Investors invested in Mutual Fund

15

6
30

1
10
5
0

24
18

20

12

16

<=3031-35
36-40
41-45
46-50>50
Age group of the Investors

Interpretation:
According to this chart out of 120 Mutual Fund investors the most are in the age
group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 4145yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

(b). Educational Qualification of investors

57

Educational
Qualification

Number of
Investors

Graduate/ Post
Graduate

88

Under Graduate

25

Others

Total

120

INTERPRETATION
Out of 120 Mutual Fund investors

71% of the investors are Graduate/Post Graduate, 23% are Under Graduate and
6% are others (under HSC).

C) Occupation of the investors.

Occupation

No. of Investors

Govt. Service

30

Pvt. Service

45

Business

35

Agriculture

Others

58

Interpretation:
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25%
are Businessman, 29% are Govt. Employees, 3% are in Agriculture and
5% are in others.

(d). Monthly Family Income of the Investors .

Income Group

No. of Investors

<=10,000

10,001-15,000

12

15,001-20,000

28

20,001-30,000

43

>30,000

32

59

50
45
40
35
30
25
No. of Investors
20
15
10
5
0

43
32

28
12

5
<=10

10-15

15-20

20-30

>30

Income Group of the Investorsn (Rs. in Th.)

Interpretation:
In the Income Group of the investors , out of 120 investors, 36% investors
that is the maximum investors are in the monthly income group Rs. 20,001
to Rs. 30,000, Second one i.e. 27% investors are in the monthly income
group of more than Rs. 30,000 and the minimum investors i.e. 4% are in
the monthly income group of below Rs. 10,000

Investors invested in different kind of investments.

Kind of
Investments

No. of
Responden

60

ts
Saving A/C

195

Fixed
deposits

148

Insurance

152

Mutual Fund

120

Post office
(NSC)

75

Shares/Debe
ntures

50

Gold/Silver

30
65

Real
Estate

61

865
730
650
5 75
4 120
3 152

Kinds of Investment

2
1
0

148
195
200 400

No.of Respondents
Interpretation:
From the above graph it can be inferred that out of 200 people, 97.5%
people have invested in Saving A/c, 76% in Insurance, 74% in Fixed
Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or
Debentures, 15% in Gold/Silver and 32.5% in Real Estate.

62

 Preference of factors while investing

Factors

No. of

(a) Liquidity

40

Respondents

63

(b) Low

(c) High

Risk

Return

60

64

(d) Trust

36

18%
Liquidity

32%
Low Risk

20%
High 30%
Return

Interpretation:

64

Trust

Out of 200 People, 32% People prefer to invest where there is High Return, 30%
prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer
Trust

Awareness about Mutual Fund and its Operations

Response

Yes

No

No. of Respondents

135

65

33%
Yes

No
68%

Interpretation:

65

From the above chart it is inferred that 67% People are aware of Mutual Fund and
its operations and 33% are not aware of Mutual Fund and its operations.

Investors invested in Mutual Fund

Response

No. of
Respondents

YES

120

NO

80

Total

200

66

No; 40%

Yes; 60%

Interpretation:
Out of 200 People, 60% have invested in Mutual Fund and 40% do not have
invested in Mutual Fund.

Reason for not invested in Mutual Fund

Reason

No. of
Respondents

Not Aware

65
67

Higher Risk

Not any Specific

10

Reason

13% 6%
Not Aware

81%

Higher Risk

Not Any

Interpretation:
Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of
Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any
specific reason

68

 Investors invested in different Assets Management Co. (AMC)

Name of AMC

No. of Investors

SBIMF

55

UTI

75

HDFC

30

Reliance

75

ICICI Prudential

56

Kotak

45

Others

70

69

Others

7
7

HDFC

6
6

Kotak

5
5

SBIMF

4
4

ICICI

3
3

Reliance

2
2

Name of AMC

70
30
45
55
56
75

1
UTI 1

75

0 10 20 30 40 50 60 70 80
No. of Investors

Interpretation:
Most of the Investors preferred UTI and Reliance Mutual Fund. Out of 120
Investors 62.5% have invested in each of them, only 46% have invested in SBIMF,
47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC.

Reason for invested in HDFC MUTUALFUND

Reason

No. of
Respondents

Associated with HDFC

48

Better Return

7
70

Agents Advice

20

27%
9%

Associated with SBI

Better Return

64%
Agents Advice

Interpretation:
Out of 55 investors of HDFC 64% have invested because of its association with Brand
RELIANCE, 27% invested on Agents Advice, 9% invested because of better return.

Preference

of

Investors

for

Mutual Fund
71

future

investment

in

Name of AMC

No. of Investors

SBIMF

76

UTI

45

HDFC

35

Reliance

82

ICICI Prudential

80

Kotak

60

Others

75

72

75

Others
Kotak

Name of AMC

60

77
66

ICICI Prudential

80

55

Reliance

82

44

HDFC
UTI
SBIMF

35 33
45

2
2
76

0 20 40 60 80 100
No. of Investors

Interpretation:
Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential,
63% in SBIMF, 62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC
Mutual Fund.

Channel Preferred by the Investors for Mutual Fund

Investment
73

Channel

Financial Advisor

No. of

72

Bank

AMC

18

30

Respondents

25%
15%
Financial
Advisor

Bank

60%

AMC

Interpretation:
Out of 120 Investors 60% preferred to invest through Financial Advisors, 25%
through AMC and 15% through Bank.

Mode of Investment Preferred by the Investors

Mode of Investment

One time Investment

Systematic Investment Plan

(SIP)

74

No. of Respondents

78

42

35%
One time Investment

65%

SIP

Interpretation:
Out of 120 Investors 65% preferred One time Investment and 35 % Preferred
through Systematic Investment Plan.

Preferred Portfolios by the Investors

75

Portfolio

No. of Investors

Equity

56

Debt

20

Balanced

44

37%
Equity

47%
17%

Debt

Balance

Interpretation:
From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and
17% preferred Debt portfolio

76

Option for getting Return Preferred by the Investors

Option

Dividend Payout

Dividend

Growth

Reinvestment

No. of

25

10

Respondents

21%
71%
Dividend Payout

8%
Dividend Reinvestment

Interpretation:

77

Growth

From the above graph 71% preferred Growth Option, 21% preferred Dividend
Payout and 8% preferred Dividend Reinvestment Option.

Preference of Investors whether to invest in Sectoral

Funds

Response

No. of
Respondents

Yes

25

No

95

21%
Yes
79%

No

78

Interpretation:
Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund
because there is maximum risk and 21% prefer to invest in Sectoral Fund.

Chapter 6

79

Findings and Conclusion

Findings
The Age Group of 36-40 years were more in numbers. The second most
Investors were in the age group of 41-45 years and the least were in the age
group of below 30 years.
Most of the Investors were Graduate or Post Graduate and below HSC there
were very few in numbers.
In Occupation group most of the Investors were Govt. employees, the second
most Investors were Private employees and the least were associated with
Agriculture.
In family Income group, between Rs. 20,001- 30,000 were more in numbers,
the second most were in the Income group of more than Rs.30,000 and the
least were in the group of below Rs. 10,000.
About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed
Deposits, Only 60% Respondents invested in Mutual fund.
Mostly Respondents preferred High Return while investment, the second most
preferred Low Risk then liquidity and the least preferred Trust.
Only 67% Respondents were aware about Mutual fund and its operations and
33% were not.

80

 Among 200 Respondents only 60% had invested in Mutual Fund and 40% did
not have invested in Mutual fund.
Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is
not any specific reason for not invested in Mutual Fund and 6% told there is
likely to be higher risk in Mutual Fund.
Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI
Prudential has also good Brand Position among investors, SBIMF places after
ICICI Prudential according to the Respondents.
.
Most of the investors who did not invested in HDFC due to not Aware of HDFC,

the second most due to Agents advice and rest due to Less Return.
For Future investment the maximum Respondents preferred HDFC Mutual
Fund, the second most preferred ICICI Prudential, SBIMF has been preferred

after them.
60% Investors preferred to Invest through Financial Advisors, 25% through

AMC (means Direct Investment) and 15% through Bank.

65% preferred One Time Investment and 35% preferred SIP out of both type

of Mode of Investment.
The most preferred Portfolio was Equity, the second most was Balance
(mixture of both equity and debt), and the least preferred Portfolio was Debt
portfolio.
Maximum Number of Investors Preferred Growth Option for returns, the second
most preferred Dividend Payout and then Dividend Reinvestment.
Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted
to invest in Sectoral Fund.

81

Conclusion
Running a successful Mutual Fund requires complete understanding of the
peculiarities of the Indian Stock Market and also the psyche of the small investors.
This study has made an attempt to understand the financial behavior of Mutual
Fund investors in connection with the preferences of Brand (AMC), Products,
Channels etc. I observed that many of people have fear of Mutual Fund. They
think their money will not be secure in Mutual Fund. They need the knowledge of
Mutual Fund and its related terms. Many of people do not have invested in mutual
fund due to lack of awareness although they have money to invest. As the
awareness and income is growing the number of mutual fund investors are also
growing.
Brand plays important role for the investment. People invest in those Companies
where they have faith or they are well known with them. There are many AMCs in
Patna but only some are performing well due to Brand awareness. Some AMCs
are not performing well although some of the schemes of them are giving good
return because of not awareness about Brand. HDFC, Reliance, UTI, SBIMF, ICICI
Prudential etc. they are well known Brand, they are performing well and their
Assets Under Management is larger than others whose Brand name are not well
known like Principle, Sunderam, etc.Distribution channels are also important for
the investment in mutual fund. Financial Advisors are the most preferred channel
for the investment in mutual fund. They can change investors mind from one
investment option to others. Many of investors directly invest their money through
AMC because they do not have to pay entry load. Only those people invest directly
who know well about mutual fund and its operations and those have time.

82

Chapter 7
Suggestions
And
Recommendations

83

Suggestions and Recommendations

The most vital problem spotted is of ignorance. Investors should be made aware
of the benefits. Nobody will invest until and unless he is fully convinced. Investors
should be made to realize that ignorance is no longer bliss and what they are
losing by not investing.
Mutual funds offer a lot of benefit which no other single option could offer. But
most of the people are not even aware of what actually a mutual fund is? They
only see it as just another investment option. So the advisors should try to change
their mindsets. The advisors should target for more and more young investors.
Young investors as well as persons at the height of their career would like to go for

advisors due to lack of expertise and time.

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

source to influence the investors.

Before making any investment Financial Advisors should first enquire about the
risk tolerance of the investors/customers, their need and time (how long they want
to invest). By considering these three things they can take the customers into
consideration.
Younger people aged under 35 will be a key new customer group into the future,
so making greater efforts with younger customers who show some interest in

investing should pay off.

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

and high quality.

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

QUESTIONNAIRE

84

A study of preferences of the investors for investment in mutual funds.

1. Personal Details:

(a). Name:-

(b). Add: -

Phone:-

(c). Age:-

(d). Qualification:-

Graduation/PG

Under Graduate

Others

(e). Occupation. Pl tick ()

Govt. Ser

Pvt. Ser

Business

Agriculture

Others

(g). What is your monthly family income approximately? Pl tick ().

Up to
Rs.10,000

Rs. 10,001 to
15000

Rs. 15,001 to
20,000

85

Rs. 20,001 to
30,000

Rs. 30,001
and above

2. What kind of investments you have made so far? Pl tick (). All applicable.

a. Saving account

b. Fixed deposits

c. Insurance

d. Mutual Fund

e. Post Office-

f.

g. Gold/ Silver

h. Real Estate

NSC, etc

Shares/Debenture
s

3. While investing your money, which factor will you prefer?

.
(a) Liquidity

(b) Low Risk

(c) High

(d) Trust

Return

4. Are you aware about Mutual Funds and their operations? Pl tick ().

Yes

No

5. If yes, how did you know about Mutual Fund?

a. Advertisement

b. Peer Group c. Banks

d. Financial Advisors

6. Have you ever invested in Mutual Fund? Pl tick ().

7. If not invested in Mutual Fund then why?

(a) Not aware of MF (b) Higher risk (c) Not any specific reason

86

Yes

No

8. If yes, in which Mutual Fund you have invested? Pl. tick (). All applicable.

a. SBIMF

b. UTI

c.

d.

HDFC

Reliance

e. Kotak

f. Other. Specify

9. When you plan to invest your money in asset management co. which AMC will you
prefer?

Assets Management Co.

a. RELIANCE
b. UTI
c. SBIMF
d. HDFC
e. Kotak
f. ICICI

10. Which Channel will you prefer while investing in Mutual Fund?

(a) Financial Advisor

(b) Bank

(c) AMC

11. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick
().
87

a. One Time Investment

b. Systematic Investment Plan (SIP)

12. When you want to invest which type of funds would you choose?

a. Having only debt

portfolio

b. Having debt & equity

portfolio.

c. Only equity portfolio.

13. How would you like to receive the returns every year? Pl. tick ().

a. Dividend payout

b. Dividend re-

c. Growth in NAV

investment

14. Instead of general Mutual Funds, would you like to invest in sectorial funds?
Please tick ().

Yes

No

BIBLIOGRAPHY

NEWS PAPERS

OUTLOOK MONEY

TELEVISION CHANNEL (CNBC AAWAJ)

88

MUTUAL FUND HAND BOOK

FACT SHEET AND STATEMENT

WWW.MONEYCONTROL.COM

WWW.AMFIINDIA.COM

WWW.ONLINERESEARCHONLINE.COM

WWW. MUTUALFUNDSINDIA.COM
WWW.hdfcfund.com

89

90