Anand Rathi

Investors Perception Towards Equity and Mutual Fund
CHAPTER NO.1
INTRODUCTION
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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
Capital Markets
Govt.
Sec
Market
Industrial
Securities
Market
Primary Markets
Money Markets
Call
Money
Market
Long
Term
Loan
Market
Commercia
l Bill
Market
Industrial
Securities
Market
Secondary Markets
The Financial Markets can broadly be divided into Money Market and Capital market.
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Short
Term
loan
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:
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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
Public
Rights
Initial Public Offering
Fresh Issue
Preferencial
Further Public Offering

Fresh Issue
Offer For Sale
Offer For Sale
Primarily issues can be classified as Public, Rights or Preferential issues (also known as Private
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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:

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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
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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,
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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

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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
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Hours of operation
Session
Beginning of the Day Session
Timing
8:30 - 9:00
Pre-open trading session
9:00 - 9:15
Trading Session
Position Transfer Session
9:15 - 15:30
15:30 - 15:50
Closing Session
Option Exercise Session
15:50 - 16:05
16:05 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
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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.
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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)
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LIST OF STOCK EXCHANGES IN INDIA:
Bombay Stock Exchange
National Stock Exchange
Regional Stock Exchanges

o
Ahmadabad Stock Exchange
Bangalore Stock Exchange
Bhubaneswar Stock Exchange
Calcutta Stock Exchange
Cochin Stock Exchange
Coimbatore Stock Exchange
Delhi Stock Exchange
Guwahati Stock Exchange
Hyderabad Stock Exchange
Jaipur Stock Exchange
Ludhiana Stock Exchange
Madhya Pradesh Stock Exchange
Madras Stock Exchange
Magadha Stock Exchange
Mangalore Stock Exchange
Meerut Stock Exchange
OTC Exchange Of India
Pune Stock Exchange
Saurashtra Kutch Stock Exchange
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.
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CHAPTER NO.2
A. ORGANIZATIONAL
STUDY
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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
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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 deal
2001: 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 50
2004: Commodities brokerage and real estate services introduced
Wealth Management assets cross Rs3000crores
Institutional equities business re-launched and senior research team put in place
Retail 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 poll
Ranked 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
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Completes its presence in all States across the country with offices at 300+ locations within India
2007: Citigroup Venture Capital International picks up 19.9% equity stake

Retail customer base crosses 100 thousand
Establishes presence in over 350 locations
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ANAND RATHI CORE STRENGTHS
BREADTH OF SERVICES
In 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 TEAM
AR 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.
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MANAGEMENT TEAM DETAILS
The senior Management comprises a diverse talent pool that brings together rich experience from
across industry as well as financial services.
Mr. Anand Rathi - Group Chairman

Chartered Accountant
Past President, BSE
Held several Senior Management positions with one of India's largest industrial groups
Mr. Pradeep Gupta - Vice Chairman

Plus 17 years of experience in Financial Services
Mr. Amit Rathi - Managing Director

Chartered Accountant & MBA
Plus 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.
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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
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Bonds
Trading Account
Insurance
MISSION
To be India's first Multinational providing complete financial services
solution across the globe
VISION
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Providing integrated financial care driven by the relationship of trust and
confidence.
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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
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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
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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

EXCHANGES
Activity
Day
Trading
Rolling Settlement Trading
Clearing
Custodial Confirmation
T+1 working days
Delivery Generation
T+1 working days
Securities and Funds pay in
T+2 working days
Securities and Funds pay out
T+2 working days
Valuation Debit
T+2 Working days
Settlement
Post Settlement
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Auction
T+3 working days
Bad Delivery Reporting
T+4 working days
Auction settlement
T+5 working days
Close out
T+5 working days
Rectified bad delivery pay-in
T+6 working days
and pay-out
Re-bad delivery reporting and
T+8 working days
pickup
Close out of re-bad delivery
T+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
st
securities. With effect from April 1 , 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
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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.
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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
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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
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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.
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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.
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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
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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.
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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 of
the 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..
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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 incomedistributing 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.
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SOME OF THE AMCS OPERATING AND THE NATURE OF OWNERSHIP
Investors Perception Towards Equity and
Nature of
ownershipFund
Mutual
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 Limited
Private foreign
Dundee Asset Management Company Limited
Private foreign
DSP Merrill Lynch Asset Management Company Limited

Escorts Asset Management Limited
Private foreign
Private Indian
GIC Asset Management Company Limited
Institutions
IDBI Investment Management Company Limited
Institutions
ING Investment Asset Management Company Private Limited
Private foreign
J M Capital Management Limited

Kotak Mahindra Asset Management Company Limited
Private Indian
Private Indian
Kothari Pioneer Asset Management Company Limited
Private Indian
Jeevan Bima Sahayog Asset Management Company Limited
Institutions
Morgan Stanley Asset Management Company Private Limited
Private foreign
Punjab National Bank Asset Management Company

Limited
Reliance Capital Asset Management Company Limited
Banks
State Bank of India Funds Management Limited
Banks
Shriram Asset Management Company Limited
Private Indian
Sundaram Newton Asset Management Company Limited
Private foreign
Tata Asset Management Company Limited

Credit Capital Asset Management Company Limited
Templeton Asset Management (India) Private Limited
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Unit
Trust of
India
Private Indian
Private Indian
Private foreign
Institutions
Zurich Asset Management Company (I) Limited
Private foreign
Private Indian
CLASSIFICATION OF MUTUAL FUNDS:
Mutual Funds
Based on Structure
Open Ended
Close Ended
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Interval
Schemes
Based on Investment
Objective
Growth /
Equity Funds
Income
Page
37/ Debt
Funds
Balanced
Money
Gilt
General
Funds
Market
Funds
Purpose
Funds
Funds
Other Schemes
Tax Saving
Schemes
Special
Schemes
Sector
Funds
Index
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:
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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.
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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
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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 INDUSTRY

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 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)
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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
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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:
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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
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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?
DVHIMSR DHARWAD
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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.
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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
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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,
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INTERPRETATION AND
FINDINGS
ANALYSIS AND INTERPRETATION

1. The sample profile.
Table no. 4.1
Male
Female
Total
36
14
50
Graph No 1
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Sample Profile
40
35
30
25
Axis Title 20
15
10
5
0
Male
Female
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
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Equity
Mutual fund
Both
Total
11
02
37
50
Investment
Graph No 2
Investment Pattern
40
35
30
25
20
15
10
5
0
Equity
Mutual fund
Both
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%
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16%-30% 31%-45%
46%-60%
Total

Income of the
respondent
Less than 1 lakh
03
01
04
1-3 lakh
3-5 lakh
5-10 lakh
Above 10 lakh
07
01
04
01
08
13
05
03
02
02
08
09
20
09
28
05
02
50
Total
15
Graph No 3
Pattern Of Income Saved

14
12
10
8
6
4
2
0
0%-15%
16%-30%
31%-45%
46%-60%
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)
MF
Eq:MF Eq:MF
Eq:MF Eq:MF
Eq:MF Equity
0-100
40-60 50-50
60-40 70-30
80-20
100-0
0%-15%
01
02
02
02
02
04
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Eq:MF
90:10

Percentage of
income saved
02
16%-30%
31%-45%
Frequency
46%-60%
Factor
High return
Flexibility
Liquidity
Others
02
01
01Percentage
35
04
70%
8%
20%
2%
10
01
06
04
03
01
02
07
07
Table No 4
Chart No 4
Proportion of Investment
8
7
0%-15%
16%30%
31%45%
46%60%
3
2
1
0
0-100
40-60
50-50
60-40
70-30
80-20
100-0 90:10:00
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.
Table no.4.5
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01
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:
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Table no.4.6
Factor
High returns
Lower risk
Liquidity
Affordability
Not invested in Mutual
Fund
Frequency
06
24
06
03
11
Graph 4.6
Internal Factor
Axis Title
30
25
20
15
10
5
0
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
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funds. Therefore these investors are termed as Risk Takers.
External factor:
Table no.4.7
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External factor
Friends &
relative
Media
Financial
advisors
Tax benefits
Not Invested In
Mutual Funds
Frequency
02
02
17
18
11
Graph No 4.7
External Factor
18
16
14
12
10
8
6
4
2
0
Axis Title
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 2
nd
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:
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Table no. 4.8
Internal
Lock in period
Expected returns
Entry & exit
load
Fund manager
Own experience
Frequency
06
28
00
03
02
Graph No 4.8
Preferred Mutual Fund

30
25
20
15
10
5
0
Frequency
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
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External
Availability of scheme
Financial advisor
Friends & relatives
Brand
Frequency
09
23
03
04
Graph No 4.9
Preferred Mutual Fund

25
20
15
10
5
0
Frequency
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
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Time horizon
Short term
Long term
Both
Total
Frequency
Percentage
27
07
16
54%
14%
32%
50
100%
Graph No 4.10
Percentage
32%
Short term
54%
Long term
Both
14%
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.

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Table no.4.11
Preference
Equity funds
Balanced funds
Debt funds
Tax saving schemes
Frequency
27
06
01
05
Graph No 4.11
Invested Mutual Funds
Axis Title
30
25
20
15
10
5
0
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

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equity and mutual funds.
[1-very low; 2-low; 3-moderate; 4-high; 5-very high]
Risk factor:
Table no. 4.12
Risk involved
Equity
5
Mutual fund
4
Graph No 4.12
Chart Title
5
4
Axis Title
3
2
1
0
Equity
Mutual fund
Interpretation:Investors opine that the risk in investing equity is very high and where as risk in investing in mutual
funds considerably moderate.
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Return factor:
Table no. 4.13
Mutual
Equity fund
4
Returns
Graph No 4.13
Returns
Axis Title
4
3.5
3
2.5
2
1.5
1
0.5
0
Equity
Mutual Fund
Interpretation:Investors opine that the return in equity is high, where as return in mutual fund is moderate or
considerably less return.
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11. Do you consider sectors while making your investment decisions?
Table no.4.14
Yes
No
Frequency
48
2
Percentage
96%
4%
Graph 4.14
Percentage
2; 4%
1; 96%
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.
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FINDINGS
1) 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 favored
2) 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.
DVHIMSR DHARWAD
Page 65

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%.
DVHIMSR DHARWAD
Page 66

RECOMMENDATION
1. Majority of the investors invest in equity and mutual funds in the ratio of 60:40
or 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 not
consider 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.
DVHIMSR DHARWAD
Page 67

CONCLUSION
General Conclusion
From 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 Conclusion
1. 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.
DVHIMSR DHARWAD
Page 68
ANNEXURE
Annexure:
DVHIMSR DHARWAD
Page 69

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:
Student
Professional
Employed
Business
Others (specify) __________________

e. Age: i) 18-25
ii) 25-40
iii) 40-55
f. Annual Income: i) Less than 1 lakh
iv) 55 & above
ii) 1-3 lakhs
iv) 5-10 lakhs

v) 10 lakhs & above
iii) 3-5 lakhs
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
________________________________
_______________
DVHIMSR DHARWAD
Page 70

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 technology
e. Auto
b. Infrastructure
f. FMCG
c. Banking
g. Entertainment
d. Power & Energy
DVHIMSR DHARWAD
h. Communications
Page 71
11. Which is the most important factor that influences you to invest in mutual
funds?
Internal
External
a. High returns
a. Friend & relatives
b. Lower risk
b. Media
c. Liquidity
c. Financial Advisors
d. Affordability
d. Tax Benefits
12. Which is the type of mutual fund you have invested in?
a. Equity funds
b. Balanced funds
c. Debt funds
d. Tax saving schemes

13. What are the factors that influence you in preferring a particular mutual
fund?
Internal
External
a. Lock in period
b. Expected returns
a. Availability of scheme
b. Financial advisor
c. Entry & exit load
c. Friend & relatives
d. Fund manager
d. 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]
Parameters
Mutual Funds
2 3
4 5
1
a. Risk involved
b. Returns
c. Liquidity
d. Tax benefit
DVHIMSR DHARWAD
Equity
2 3 4
Page 72
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
DVHIMSR DHARWAD
Page 73
Bibliography
Websites:www.amfiinidia.com
www.mutualfundsindia.com
www.bseindia.com
www.nseindia.com
www.sebi.com
DVHIMSR DHARWAD
Page 74

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Investors Perception Towards Equity and Mutual Fund

Investors Perception Towards Equity and Mutual Fund

Investors Perception Towards Equity and Mutual Fund

Government securities market

Industrial securities market

Long term loans market

Government Securities market:

Investors Perception Towards Equity and Mutual Fund

(A) PRIMARY MARKET OR NEW ISSUE MARKET:

Initial Public Offering

Further Public Offering

Offer For Sale

Offer For Sale

Investors Perception Towards Equity and Mutual Fund

(B) SECONDARY MARKET:

Investors Perception Towards Equity and Mutual Fund

DIFFERENCES BETWEEN PRIMARY MARKET AND SECONDARY

Investors Perception Towards Equity and Mutual Fund

Investors Perception Towards Equity and Mutual Fund

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:

Risk & Return,

Stage in the life cycle

BOMBAY STOCK EXCHANGE

Investors Perception Towards Equity and Mutual Fund

Investors Perception Towards Equity and Mutual Fund

Pre-open trading session

BSE FMCG Index

Investors Perception Towards Equity and Mutual Fund

Investors Perception Towards Equity and Mutual Fund

Setting up of S&P CNX Nifty.

S&P CNX Nifty(Standard & Poor's CRISIL NSE Index)

CNX Nifty Junior

CNX 100 (= S&P CNX Nifty + CNX Nifty Junior)

CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

Investors Perception Towards Equity and Mutual Fund

Bombay Stock Exchange

National Stock Exchange

Regional Stock Exchanges

Ahmadabad Stock Exchange

Bangalore Stock Exchange

Bhubaneswar Stock Exchange

Calcutta Stock Exchange

Cochin Stock Exchange

Coimbatore Stock Exchange

Delhi Stock Exchange

Guwahati Stock Exchange

Hyderabad Stock Exchange

Jaipur Stock Exchange

Ludhiana Stock Exchange

Madhya Pradesh Stock Exchange

Madras Stock Exchange

Magadha Stock Exchange

Mangalore Stock Exchange

Meerut Stock Exchange

OTC Exchange Of India

Pune Stock Exchange

Saurashtra Kutch Stock Exchange

Vadodara Stock Exchange

Investors Perception Towards Equity and Mutual Fund

Investors Perception Towards Equity and Mutual Fund