TERM

PAPER
RESEARCH
METHODOLOGY

MBA 2nd
 SUBMITTED TO:-
SUBMITTED BY:-
Ms. AMIT KUMAR LAL LOKESH
ACHARYA

RT1901 “B52”

10903170

ACKNOWLEDGEMENT:-

LOVELY INSTIYUTE OF
I MANAGEMENT
would like to express my gratitude for the helpful
FACTOR AFFECTING TO INVESTMENT
TOPIC:-
commentDECISION OF VARIOUS
and Suggestions INVESTORS
by my teacher.
TOWARDS MUTUAL FUNDS
Most importantly I would like to thank my lecturer
MR.AMIT KUMAR LAL for her days of supervision. Her
critical commentary on work has played a major role in
both the content and presentation of our discussion and
arguments and I would thank my friends for their help in
making of this term paper

I have extended my appreciation to the several sources

which provided various kinds of knowledge base support
for me this period.
INTRODUCTION TO MUTUAL FUNDS

Mutual Funds over the years have gained immensely in their popularity. Apart from the many
advantages that investing in mutual funds provide like diversification, professional management,
the ease of investment process has proved to be a major enabling factor. However, with the
introduction of innovative products, the world of mutual funds nowadays has a lot to offer
to its investors. With the introduction of diverse options, investors needs to choose a mutual fund
that meets his risk acceptance and his risk capacity levels and has similar investment objectives
as the investor. With the plethora of schemes available in the Indian markets, an investors
needs to evaluate and consider various factors before making an investment decision. Since not
everyone has the time or inclination to invest and do the analysis himself, the job is best left to a
professional. Since Indian economy is no more a closed market, and has started integrating with
the world markets, external factors which are complex in nature affect us too. Factors such as an
increase in short-term US interest rates, the hike in crude prices, or any major happening in Asian
market have a deep impact on the Indian stock market. Although it is not possible for an
individual investor to understand Indian companies and investing in such an environment, the
process can become fairly time consuming. Mutual funds (whose fund managers are paid to
understand these issues and whose Asset Management Company invests in research) provide an
option of investing without getting lost in the complexities. Most importantly, mutual funds
provide risk diversification: diversification of a portfolio is amongst the primary tenets of
portfolio structuring, and a necessary one to reduce the level of risk assumed by the portfolio
holder. Most of the investors are not necessarily well qualified to apply the theories of portfolio
structuring to their holdings and hence would be better off leaving that to a professional. Mutual
funds represent one such option.

Definition- 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 then invested in capital market instruments
such as shares, debentures and other securities. The income earned through these investments and
the capital Appreciation realized 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 man
as it offers an opportunity to invest in a diversified, professionally managed basket of securities
at a relatively low cost.

Mutual Fund Op

The flow char

Any capital gain o
ORGANISATION OF A MUTUAL FUND

the proportion o
There are many entities involved which illustrates the organizational set up of a mutual fund: -
Mutual funds
Mutual fund is vehicle that facilitates a number of investors to pool their money and have it
jointly managed by a professional money manager

Sponsor
Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. The Sponsor is not responsible or liable for any loss or shortfall
resulting from the operation of the Schemes beyond the initial contribution made by it towards
setting up of the Mutual Fund.

Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The
main responsibility of the Trustee is to safeguard the interest of the unit holders and ensure that
the AMC functions in the interest of investors and in accordance with the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.

Asset Management Company (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. At least
50% of the directors of the AMC are independent directors who are not associated with the
Sponsor in any manner. The AMC must have a net worth of at least 10 crores at all times.

Transfer Agent
The AMC if so authorised by the Trust Deed appoints the Registrar and Transfer Agent to the
Mutual Fund. The Registrar processes the application form, redemption requests and dispatches
account statements to the unit holders. The Registrar and Transfer agent also handles
communications with investors and updates investor records.

REVIEW OF LITERATURE

Treynor (1965)developed a methodology for evaluation mutual fund performance that is

referred to as reward to volatility ratio.Sharpe (1966)developed a composite measure for
performance evaluation and reported superior performance for 11 funds out of 54. During
the period 1944-63. Treynor and Mazuy(1966) developed a metrology for testing mutual
fund historical success in stock market and found no evidence that the fund had
successfully outguessed the market. Jensen (1968) classic study developed and absolute
measure of performance based upon capm and reported that mutual fund did not appear
to achieve abnormal performance. Fama (1972) develop a methodology for evaluating
investment performance of management portfolio. Henriksson and marton (1981)
developed a statistical for frame work for both parametric or non-paramatric test of
market timing ability of fund managers. Henriksson (1984) report that mutual fund
managers were not able to follow a investment strategy that successfully times the return
on the basis of market portfolio. William Manhoney (1992) provides a comprehensive
review of the relationship between share holder and board of directors and describes the
powers and influence that various types of share holders can exert on the boards. Cole
and IP(1993) investigate the performance of Australian equity trust they found evidence
that portfolio managers were unable to earn or earn positive return. Porteba and Sandwich
(1995) concludes that people use stock market as an indicator of future labor income.
This theory postulates that growing stock market leads people to belive that economy will
flourish and cause wealth affect there by increasing investors confidence level which will
bring forth a shift in stock market wealth.Matsuaska and Sbordona(1995)finds that
investor confidences does in fact have a positive correlation with gross national product.
The conclusion that investor confidence plays an important role in the business cycle
gives them a reason to believe that a investor confidences has strong relationship with a
stock market as well. Aggarwal Navdeep and Gupta Mohit (1997)study findings suggest
that MF actually added value and investing in them was worthwhile for investors.
However , application of Fama-French model opposes this. This model, which predicates
return on excess market returns, size factors, and value factors, suggested that return earn
by mutual funds were actually due to exposure of these factors only and the fund
managers did not add any value. Moreover , the only one factor that seems to impact MF
return is the excess market return.Allen and tan (1998) who founded both raw return and
risk adjusted return exhibited strong evidence of persisitence in the long
run..Otoo(1999)finds that influence of stock prices on customer confidence and found
positive effect find the positive effects ,while the opposite relationship was not
true.Poterba(2000)explains that there is a direct implication of investors sentiment on
international asset pricing model of institutional and individual investors in developed an
emerging market. . Gupta (2002) examined the growth, regulatory framework and
performance evaluation of Indian mutual fund and reported poor performance. Mishra
vishavdeep (2002) it attempt to evaluate the timing and selectivity skills of mutual funds
it is concluded that the selected mutual fund scheme had no timing ability.Cliff and
Brown(2005)found that the link between asseat valuation and investors sentiment is the
subject considerable debate. If excessive optimism drives prices above intrinsic values ,
periods of high sentiment should be followed by low return, as market prices revert to
fundamental values. Using survey data on investors sentiment they provide evidence that
sentiment effect assest evaluation . Lorne N. Switzer, Yanfen Huang(2007) – This study
sets out to examine whether small and mid-cap fund performance is related to fund
manager human capital characteristics including tenure, investment experience, education
(MBA designation), professional training (CFA), and gender. Findings of the study
shows that – Depending on the benchmark, an optimal size of managed mutual funds is
determined that ranges bet Aween $US1.43 billion and $US3.89 billion.Barker, Wurgler
(2007) explain that broad waves of investors sentiment should have larger impact on
securities that are more difficult to value and to arbitrage..Soumya Guha Deb(2008)it
focus on return based style analysis of equity mutual fund in India using quadratic
 optimization of an asset class factor modelproposed by William sharpe . The study finds
the style benchmarks of each of its sample of equity funds as optim exposure to 11passive
asset class indexes. The study also analysis the relative performance of the funds with
respect to their style benchmark. The results of the study show that the funds have not
been able to beat their style benchmark on the average.Hussein A. Hassan Al-
Tamimi(2009) – The purpose of this paper is to assess the financial literacy of the UAE
individual investors who invest in the local financial markets. In addition, it examines the
relationship

OBJECTIVES:-

1) To identify the features in Mutual fund which the investors look for.
2) To identify the scheme preference of investors
3) To identify the factors that influences the investor’s fund/scheme selection
4) To identify the information sources influencing

Introduction to Research methodology

Research in common parlance refers to a search for knowledge. One can also define research as a
scientific and systematic search for pertinent information on a specific topic. According to
Clifford Woody research comprises defining and redefining problems, formulating hypothesis or
suggested solutions; collecting, organizing and evaluating data; making deductions and reaching
conclusions; and at last carefully testing the conclusions to determine whether they fit the
formulating hypothesis.

Qualitative and Quantitative Research and data gathering

Primary data will be collected by means of preparing a questionnaire and getting it filled by a
large sample space. These questionnaires will help in drawing conclusions about the case.
Secondary data will be gathered from the internet sites, articles and journals on MUTUAL
FUND. -Any new information that could be a source of good learning will be given prime
importance. The main objective of this research will be to analyze and draw conclusions about
the Primary and secondary data so collected will be analyzed with the help of various statistical
tools. These tools will be of two basic forms: tabular and graphical presentation. Under the
graphical presentation, tools such as pie-charts, histograms, line graphs, bar diagrams etc. will
prove to be handy.
With the help of the primary and secondary data so collected, along with the various statistical
tools, an analysis will be performed. A conclusion will be drawn based on this analysis. These
tools will thus provide a water tight conclusion for the case so framed.

Aur research is single cross sectional descriptive research.

DATA ANALYSIS

The data that has been collected is mainly of two types: Primary and Secondary. This data was
classified, compiled and analyzed to reach a definite conclusion. The primary data has been
mainly assimilated from the questionnaires for the purpose of reaching a consensus about the
case. The questions have been framed with the primary motive of leading to the case. The
options so framed helped in capturing a broad and self sufficient view of all the individuals. The
main motive was to collect the data in an unbiased fashion, analyze the data so collected and
draw a conclusion.

The sample size of the primary data will be 90. This facilitated the process of obtaining answers
from a variety of individuals, who provided a wide range of answers. Thus the questionnaires
provided an unbiased variety of answers which in turn helped in reaching a definite conclusion.

QUESTIONNAIRE:-

1) Sex:

Male [ ] Female [ ]

2) Age:

Below 25 [ ]

25 – 40 [ ]

41 – 50 [ ]

Above 50 [ ]

3) Marital Status:

Married [ ]
Unmarried [ ]

4) Occupation:

Professional [ ]

Business [ ]

Salaried [ ]

5) Annual Income in Rs:

Below Rs 1, 00, 000 [ ]

Rs1, 00,000 – 3, 00,000 [ ]

Rs 3, 00,001–5, 00,000 [ ]

Above Rs 5, 00,000 [ ]

6) How much do you save annually (in Rs. Approx)

Less than Rs 50,000 [ ]

Rs 50,000 to Rs 100000 [ ]

Above Rs 100000 [ ]

7) Objectives of your savings are:

To provide for Retirement [ ]

For tax reduction [ ]

To meet contingencies [ ]

For children education [ ]

For purchase of assets [ ]

Others [ ]

8. What is your current attitude (favorability) towards the following investment alternatives?

Highly Favorable Somewhat Not very Not at all

a) Shares [ ] [ ] [ ] [ ] [ ]
b) Debentures [ ] [ ] [ ] [ ] [ ]

c) Mutual Funds [ ] [ ] [ ] [ ] [ ]

d) Bonds [ ] [ ] [ ] [ ] [ ]

e) Bank Deposit [ ] [ ] [ ] [ ] [ ]

f) Life Insurance [ ] [ ] [ ] [ ] [ ]

g) Postal savings [ ] [ ] [ ] [ ] [ ]

9. What is your current preference of savings alternatives? (Rank from 1 to 7)

Shares [ ]

Mutual funds [ ]

Postal Savings [ ]

Bonds [ ]

Debentures [ ]

Bank Deposit [ ]

Life Insurance [ ]

10. Are you aware of the investment schemes/benefits of Mutual funds investment?

Yes [ ]

No [ ]

If No, then go to Q.14

11. How did you come to know about Mutual fund investment schemes?

Reference groups [ ]

Newspapers (general) [ ]

Newspapers (business) [ ]
Financial Magazines [ ]

Television [ ]

Brokers / Agents [ ]

Internet Ads [ ]

12. How will you rate Mutual Fund in terms of the following:

Very high High Some what Not very Not at all

a) Safety [ ] [ ] [ ] [ ] [ ]
b)
c) Cost [ ] [ ] [ ] [ ] [ ]
d)
e) Liquidity [ ] [ ] [ ] [ ] [ ]

f) Return [ ] [ ] [ ] [ ] [ ]

g) Diversification [ ] [ ] [ ] [ ] [ ]

13. You prefer investment in Mutual funds due to (Rank 1 to 7)

Safety [ ]

Liquidity [ ]

Good Return [ ]

Professional Management [ ]

Tax Benefit [ ]

Diversification Benefit [ ]

Low cost [ ]

14. Investing in Mutual funds can provide you with the advantage according to your needs and
expectations. Are you willing to invest more on Mutual fund if the schemes fits your investment
objective?

Yes [ ]
No [ ]

Thank you very much for your kind co-operation and for taking time to complete this
Questionnaire.

HYPOTHESIS
Null:-
1) H0-Sex of respondent have no effect on perception of mutual fund investment.
2) H0-Safety has no effect on mutual fund investment.
3) H0-Cost has no effect on mutual fund investment
4) H0-Liquidity has no effect on mutual fund investment
5) H0-Diversification Returns has no effect on mutual fund investment
6) H0-Return from investment has no effect on mutual fund investment
7) H0-Profession has no effect on mutual fund investment
8) H0-Tax benefits has no effect on mutual fund investment

Alternatives:-

1) H1- Sex has a great significance on mutual fund investment.

2) H1- Safety has a great significance on mutual fund investment.
3) H1- Cost has a great significance on mutual fund investment.
4) H1- Liquidity has a great significance on mutual fund investment.
5) H1- Diversification has a great significance on mutual fund investment.
6) H1- Return from investment has a great significance on mutual fund
investment.
7) H1- Profession has a great significance on mutual fund investment.
8) H1- Tax benefits has a great significance on mutual fund investment.
 T-TEST:-

One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

sex of respondent 90 1.21 .410 .043

One-Sample Test

Test Value = 0

95% Confidence Interval of the

Difference

T df Sig. (2-tailed) Mean Difference Lower Upper

sex of respondent 27.997 89 .000 1.211 1.13 1.30

Null hypothesis Alternative hypothesis

1) H0-Sex of respondent has no H1 – Sex of respondent has effect

effect on perception of mutual on perception of mutual fund
fund investment. investment
Interpretation:

Here we are going to analyses the effect of sex on the customer perception toward
mutual fund investment. After applying t-test on the sex of the respondent we lead
with result that our null hypothesis is rejected because the calculated value of t-
test is less then default value means (significance is less than 0.05) that
respondent’s sex is affect customer perception toward mutual fund.

FACTOR
/VARIABLES safety cost liquidity returns diversification safe liquidityposi retu
rnssss professional taxbenifits diversificatio low
cost
/MISSING LISTWISE
/ANALYSIS safety cost liquidity returns diversification safe liquidityposi retur
nssss professional taxbenifits diversificatio lowc
ost
/PRINT INITIAL EXTRACTION ROTATION
/PLOT EIGEN
/CRITERIA MINEIGEN(1) ITERATE(25)
/EXTRACTION PC
/CRITERIA ITERATE(25)
/ROTATION VARIMAX
/SAVE REG(ALL)
/METHOD=CORRELATION.

- - - - - - - - - - - - - - - - - - - - - - - - F A C T O R A N A L Y S I S - -
- - - - - - - - - - - - - - - - - - - - - -
 Factor Analysis:-

Communalities

Initial Extraction

safety 1.000 .710

cost 1.000 .612

liquidity 1.000 .645

returns 1.000 .529

diversification 1.000 .740

safety 1.000 .653

liquidity 1.000 .677

returns from investment 1.000 .573

profession 1.000 .682

tax benifits 1.000 .583

diversification benifits 1.000 .792

cost benifits 1.000 .727

Extraction Method: Principal Component Analysis.

 Total Variance Explained

Extraction Sums of Squared Rotation Sums of Squared

nitial Eigenvalues Loadings Loadings

% of Cumulative % of % of
Component Total Variance % Total Variance Cumulative % Total Variance Cumulative %

1 2.989 24.911 24.911 2.989 24.911 24.911 2.615 21.793 21.793

2 2.023 16.859 41.770 2.023 16.859 41.770 2.069 17.242 39.034

3 1.593 13.278 55.048 1.593 13.278 55.048 1.660 13.836 52.870

4 1.316 10.971 66.019 1.316 10.971 66.019 1.578 13.149 66.019

5 .918 7.647 73.666

6 .793 6.605 80.271

7 .693 5.771 86.042

8 .580 4.837 90.879

9 .505 4.211 95.089

10 .326 2.717 97.806

11 .251 2.092 99.899

12 .012 .101 100.000

Extraction Method: Principal Component

Analysis.
 Component Matrixa

Component

1 2 3 4

safety .625 .524 .151 -.150

cost .586 .131 -.159 -.476

liquidity .406 .659 .163 .140

returns -.199 .570 -.376 .151

diversification .144 .739 .164 .382

safety -.456 .523 .165 -.380

liquidity -.452 -.058 .643 .237

returns from investment -.733 .115 .002 -.149

profession .771 -.279 .089 .028

tax benifits .632 -.175 .329 -.210

diversification benifits .292 -.133 -.331 .761

cost benifits -.025 .101 -.827 -.178

Extraction Method: Principal Component Analysis.

a. 4 components extracted.
 Rotated Component Matrixa

Component

1 2 3 4

safety .481 .657 .165 .140

cost .557 .160 .482 .208

liquidity .172 .784 .016 .011

returns -.495 .427 .319 -.002

diversification -.147 .834 -.125 -.085

safety -.366 .241 -.041 .678

liquidity -.236 -.040 -.778 .123

returns from investment -.611 -.178 -.117 .393

profession .755 .026 .063 -.326

tax benifits .757 .047 -.082 .024

diversification benifits -.052 .128 .072 -.876

cost benifits -.260 -.091 .804 -.066

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 5 iterations.

Component Transformation Matrix

Compo
nent 1 2 3 4

1 .852 .330 .256 -.315

2 -.279 .893 .162 .313

3 .320 .152 -.883 .308

4 -.305 .264 -.359 -.841

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.
Null hypothesis Alternative hypothesis

1) H0-all variable have same effect H1 – all variable have different

on customer perception toward effect on customer perception
mutual fund.. toward mutual fund

Interpretation;-
Aur null hypothesis is rejected because because all factor have different effect on mutual fund
investment. And aur alternative hypothesis is selected and we conclude that :-

After applying the f test we find that four factors which are most important. because they
contribute about 66%. We named the component as follow;-
1) Profession
2) Economy
3) safety
4) spaciousness

FINDINGS:-

1) We find that sex has significant effect on customer perception toward mutual fund
investment.
2) We also find that these four variables (Profession, Economy safety, spaciousness) are
more important variable which effect to the mutual fund.

REFERENCES: -

• Mishra Bishwadeep(2002)selectivity n timing skills of mutual fund in india : an empirical

analysis –the ICFAI journal of APPLIED FINANCE, VOL.8,pge no.5
• Sondhi h.j and Jain pk(2005)financial management of private n public equity mutual
funds in india and analysis of profiatibility-The ICFAI journal of APPLIED
FINANCE.page no.14-27

• Deb Soumya Guha(2008)performance of Indian equity mutual fund vis a v there style
benchmark- ICFAI journal of APPLIED FINANCE,vol.14,page no.49-77

• Rao P Parsada And Saikai Vedatam(2006)mutual fund exploring the retain customer
expectation-THE ICFAI journal OF SERVICE MARKETING,VOL.4,page no25-33

• Sehgal(2009)vision the journal of business prospective,vol.13,page no.13-21Gupta OP

And Gupta Amitabh(2004)performance evaluation of select mutuyal fund sechme an
empirical study –the ICFAI journalof APPLIED FINANCE,page no81-99

• Switzer N.Lorne, Huang Yanfen (2007)how does human capital effect the performance
of small and mid cap mutual fund-Journal of intellectual capital.VOL-8.ISSUE 4 ,PAGE
NO-666-681.

• Hussein.A. Hassan AL-Tamini(2009)financial literacy and investment decision of UAE

investors –journal of risk finance.VOL.10.issue.5, PAGE NO.500-516