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An Internship Project Report on

INDIVIDUAL PERCEPTION AND CONSUMER


BEHAVIOR ON MUTUAL FUNDS
Done for

Done for

Project report submitted in partial fulfillment of the


requirement of Banaras Hindu University for the award of
the degree of
MASTER OF BUSINESS ADMINISTRATION (FINANCIAL
MANAGEMENT)
Submitted By
MANALI RANA

Under the Guidance of

MR. SUJIT GAUR


(Cluster head of ABSL
Mutual Fund, Varanasi)

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Faculty of Commerce
Banaras Hindu University
Varanasi - 221005

Certificate

This is to certify that this project entitled “INDIVIDUAL PERCEPTION


AND CONSUMER BEHAVIOR ON MUTUAL FUNDS” done for Aditya
Birla Sun Life Mutual Fund, Varanasi is submitted by Manali Rana,
MBA (Financial Management) II year to the Faculty of Commerce,
Banaras Hindu University, Varanasi in partial fulfillment of the degree
requirement for the award of the degree Master of Business
Administration (Financial Management) and is certified to be an
original and bonafide work.

Mr. O.P Rai Mr. H.K Singh


Dean of Faculty of Commerce Professor & Head of Department
Banaras Hindu University of Faculty of Commerce
Banaras Hindu University
Place: Varanasi

Date: …………………

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DECLERATION

I Manali Rana, hereby declare that this Project Report entitled


“INDIVIDUAL PERCEPTION AND CONSUMER BEHAVIOR ON MUTUAL
FUNDS done for Aditya Birla Sun Life Mutual Fund, Varanasi submitted
in the partial fulfillment of the requirement of Master of Business
Administration (Financial Management) of Faculty of commerce,
Banaras Hindu University, Varanasi is based on primary & secondary
data found by me in various departments, books, magazines and
websites & Collected by me in under guidance of Mr. Sujit Gaur
(Cluster Head of ABSL Mutual Funds, Varanasi).

Place: Varanasi Manali Rana


MBA (Financial Management)
Date: ………………… Faculty of Commerce
Banaras Hindu University

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PREFACE
“Give a man a fish, he will eat it.

Train a man to fish, he will feed his family.”

The above sayings highlight the importance of Practical knowledge.


Practical training is an important part of the theoretical studies. It is of
an immense important part of the theoretical studies. It is of an
immense importance in the field of management. It offers the student
to explore the valuable treasure of experience and an exposure to real
work culture followed by the industries and thereby helping the
students to bridge gap between the theories explained in the books
and their practical implementations.

Research Project plays an important role in future building of an


individual so that he/she can better understand the real world in which
he has to work in future. The theory greatly enhances our knowledge
and provides opportunities to blend theoretical with the practical
knowledge.

I have completed the Research Project on “An Individual Perception


and Consumer Behavior on Mutual funds”. I have tried to cover each
and every aspect related to the topic with best of my capability.

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ACKNOWLEDGEMENT
This successful project report has been made possible through the
direct co-operation and guidance of various people for whom I wish to
express my appreciation and gratitude.

First of all I would like to express my sincere gratitude to our


department that has given me an opportunity.

I extend my heartiest thanks to Mr. Sujit Gaur (Cluster Head of ABSL


Mutual Fund, Varanasi) to take up a project in Aditya Birla Capital on
“An Individual Perception and Consumer Behavior on Mutual funds”. I
am also very grateful to him for being able to give me some of his
valuable time and able guidance.

I would like to acknowledge the advice and suggestions of Ashvini Sir,


Alok Sir, Raghvendra Sir and all other staff members of Aditya Birla
Mutual Funds who have directly or indirectly helped me in this project.
Last but not the least I offer my sincere thanks to my parents, siblings
and friends for their encouragement.

THANKING YOU

Manali Rana

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EXECUTIVE SUMMARY
In few years Mutual Fund has emerged as a tool for ensuring one’s
financial well being. Mutual Funds have not only contributed to the
India’s growth story but have also helped families tap into the success
of Indian Industry As information and awareness is rising more and
more people are enjoying the benefits of investing in mutual funds The
main reason the number of retail mutual fund investors remains small
is that nine in ten people with income in India do not know the benefits
of mutual funds. But once, people are aware of mutual fund investment
opportunities and benefits, the number of people who decide to invest
in mutual funds increase to as man as one in five people. The trick for
converting a person with no knowledge of mutual funds to a new
mutual fund customer is to understand which of the potential investors
are more likely to buy mutual funds and to use the right arguments and
the sales process that Customers will accept as important and relevant
to their decision.
This Project gave me a great learning experience and at the same time
it gave me enough scope to implement my analytical ability. The
analysis and advice presented in this Project Report is based on market
research on the saving and investment practices of the investors and
preferences of the investors for investment in Mutual Funds. This
Report will help to know about the investors’ Preferences in Mutual
Fund means Are they prefer any particular Asset Management
Company (AMC), Which type of Product they prefer, Which Option
(Growth or Dividend) they prefer or Which investment strategy they
follow (Systematic Investment Plan or One Time Plan).

I got an opportunity of Summer Internship Program with Aditya Birla


Sun life Mutual fund, VARANASI for 45 DAYS. During the internship I
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had been allotted with one specific channel of distribution (PSU). The
purpose was to visit different branch of banks as it come under PSU
which is one of the channels of ABSL and there the schemes and offers
are to be conveyed and to be converted in lead. In this, banks and end
customer both were targeted. The training included to interact with
bank employees and managers as well but is not only restricted to B2B,
I also got a chance to interact with end customers to not only convert
them for lead but make them aware so that they have knowledge
about Aditya Birla and its schemes.

Also on June 20, 2019 came new funding offer that is an addition to
schemes as name of NFO (PHARMA AND HEALTH CARE FUND) and that
has also to be carried along with other plans in stipulated time of
period.

Along with this I came to know about some minute things such as How
to fill the applicant’s form, Method to correction, How to check KYC
(Know Your Customer) etc.

At last we were introduced with an app as name of Active Account


(Aditya Birla Sun Life AMC Ltd.) which is a liquid fund based app that
allows you to earn interest on your savings every single day.

To meet our objectives we have been provided with the secondary data
on Mutual Fund and PSU Channel through the fact sheet of Aditya Birla
and we interacted one to one with each branch and its customers that
comes under PSU Channel for the primary data.

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

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CONTENTS

About Aditya Birla 10 – 16


History 11 – 12
Achievements 12 – 13
Businesses 14 - 16
Introduction 17 – 32
Mutual Funds Operation 18
Flow Chart
The Goal of Mutual Funds 19
Organization of Mutual 20
Funds
Background 21 – 23
Classification of Mutual 24 – 28
Funds Schemes
Mutual Funds For Whom? 29
Why Mutual Funds? 30 – 32
An Individual Perception 33 – 47
on Mutual Funds
Literature Review 34 – 35
Objective of Study 36
Methodology 36 – 37
Findings & Interpretation 37 - 47

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Consumer Behavior on 48 – 55
Mutual Funds
Literature Review 49 – 51
Objective of Study 52
Methodology 52
Findings of Study 53 – 55
Conclusion 56 - 57

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ABOUT ADITYA BIRLA CAPITAL
Aditya Birla Capital Limited (ABCL) is the financial services platform of
the Aditya Birla Group.
Formerly known as Aditya Birla Financial Services Limited, ABCL has a
strong presence across the life insurance, asset management, private
equity, corporate lending, structured finance, project finance, general
insurance broking, wealth management, equity, currency and
commodity broking, online personal finance management, housing
finance, pension fund management, health insurance and asset
reconstruction business.
Anchored by more than 17,000 employees, ABCL has a nationwide
reach and more than 2, 00,000 agents / channel partners, ABCL is
committed to serving the end-to-end financial services needs of its
retail and corporate customers under a unified brand — Aditya Birla
Capital.
As of December 31st, 2018, Aditya Birla Capital manages aggregate
assets worth Rs. 3,000 billion and has a consolidated lending book of
over Rs. 600 billion, through its subsidiaries and joint ventures.
Aditya Birla Capital is a part of the Aditya Birla Group, a US$ 44.3 billion
Indian multinational, in the league of Fortune 500. Anchored by an
extraordinary force of over 120,000 employees, belonging to 42
nationalities, the Aditya Birla Group operates in 35 countries across the
globe.

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History
Originally incorporated in October 2007 under the Companies Act
1956, Aditya Birla Financial Services Private Limited received the
certificate of registration from the Reserve Bank of India in May 2009 to
commence the business as non-deposit taking NBFC.
In December 2014, the company was converted from a private limited
company to a public limited company, and was renamed as ‘Aditya Birla
Financial Services Limited’.
During past one decade since its incorporation, the Company has come
a long way to become one of the largest financial services players in
India. Year 2017 marks a milestone, with the Company becoming a pure
play listed holding company of all the financial services businesses of
the Aditya Birla Group.

To mark this new phase in its journey, and in line with its new unified
brand identity, the Company was rechristened as ‘Aditya Birla Capital
Limited’ in June 2017. The synopsis of its journey over past 12 years
from 2007-2019 is as follows:
 From 5 business lines to a well diversified portfolio of 13 business
lines
 Aggregate AUM1 has grown to Rs. 3,000 billion
 Lending book (including Housing Finance) has grown to Rs. 601
billion
 Aggregate revenues have grown to Rs. 115 billion
 From Investment phase to aggregate2 earnings before tax of Rs.
12.9 billion

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Aditya Birla Capital is a part of the Aditya Birla Group, a USD 44.3 billion
Indian multinational in the league of Fortune 500. Anchored by an
extraordinary force of over 1, 20,000 employees, belonging to 42
nationalities, the Aditya Birla Group operates in 35 countries across the
globe. About 50 percent of its revenues flow from its overseas
operations.

 Includes AUM of Life & Health Insurance, Private Equity &


quarterly average AUM of Asset Management businesses
 Represents summation of 100% of the Ind AS financials of
subsidiaries/JVs, before inter-company eliminations or minority
interest

Achievements
In pursuit of leadership vision
 They are among the Top 5 Private Diversified NBFCs in India
 They are one of the largest Private Life Insurance Companies in
India
 They are one of the largest Asset Management Companies in India
 They are one of the largest General Insurance Brokers in the
country
In pursuit of desire to be a role model

 They are today, a leading non-bank financial services player with a


strong focus on quality of growth

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 They are renowned for risk management, people practices, sales
management, investor education, product innovation & fund
management capabilities
 They are among the best 3 financial services players to work for
[As per a study by Great Place to Work Institute, 2016]

They have continued to build a Broad based & integrated financial


services business
 They continue to be one of the few players in the industry with a
diversified portfolio that allows us to meet almost any customer
need across the entire spectrum of his / her lifecycle
 Their integrated play has helped us gain a competitive edge by
allowing us to share best practices, derive cross-business
synergies & provide our talent pool an opportunity to grow their
career through cross-functional and cross-sectoral experience
 Their distributors and partners see tremendous value in
association with businesses
 They are successfully expanding the market for offerings, along
with market share in each of businesses
Financial Achievements as of March 31, 2018

 AUM - Rs. 3,053 billion has registered 24% y-o-y growth


 Their Consolidated Lending Book has grown over 32% Y-o-Y to Rs
514 billion

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Businesses
Aditya Birla Health Insurance Company Limited

ABHI focuses on encouraging people to adopt a healthier lifestyle by


using smart technology and innovative product & service offerings.

Aditya Birla Wellness Private Limited

ABWPL brings to you Multiply - India’s first Wellness and Rewards


program that rewards you for staying healthy.

Aditya Birla Insurance Brokers Limited

ABIBL focuses on developing cost-effective and customized insurance


packages while ensuring that the process of claim settlements is swift &
painless.

Aditya Birla Sun Life AMC Limited

ABSLAMC is the investment manager for the 4th largest fund house in
India, Aditya Birla Sun Life Mutual Fund

**Aditya Birla Sun Life Mutual Fund**

Aditya Birla Sun Life AMC Limited (formerly known as Birla Sun Life
Asset Management Company Limited), the investment manager of
Aditya Birla Sun Life Mutual Fund (formerly known as Birla Sun Life

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Mutual Fund), is a joint venture between the Aditya Birla Group and the
Sun Life Financial Inc. of Canada. The joint venture brings together the
Aditya Birla Group's experience in the Indian market and Sun Life's
global experience.

Established in 1994, Aditya Birla Sun Life Mutual Fund (ABSLMF), is co-
sponsored by Aditya Birla Capital Limited (ABCL) and Sun Life (India)
AMC Investments Inc. ABSLMF is India's second largest mutual fund
house.

Having total domestic assets under management (AUM) of close to


Rs.2423 billion for the quarter ended December 31st, 2018, ABSLMF is
one of the leading Fund Houses in India based on domestic average
AUM as published by the Association of Mutual Funds of India (AMFI).
ABSLMF has an impressive mix of reach, a wide range of product
offerings across equity, debt, balanced as well as structured asset
classes and sound investment performance, and around 6.8 million
investor folios as of December 31st, 2018.

Aditya Birla Sun Life Pension Management Limited

ABSPML offers customized solutions to help you plan a comfortable


retirement

Aditya Birla Money Limited

ABML offers solutions for Broking, Portfolio Management Services,


Depository & Repository Solutions and Distributor of other financial
offerings.

Aditya Birla MyUniverse Limited

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ABMU offers the best deals on Personal Loans, Credit Cards, Home
Loans, etc. & allows you to transact in a range of mutual funds.

Aditya Birla PE Advisors Private Limited

ABPEAPL offers investment management and advisory services to


domestic and global investors

Aditya Birla Finance Limited

ABFL offers customized solutions in areas of Capital Markets,


Infrastructure, Real Estate Finance, to name a few

Aditya Birla Housing Finance Limited

ABHFL offers housing finance solutions such as home loans, home


improvement & construction loans, balance transfer, top-up loans etc.

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INTRODUCTION
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 and equity shares of joint stock companies. A
mutual fund is a pool of common funds invested by different
investors, who have no contact with each other. 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. The raison
d’être of mutual funds is their ability to bring down the transaction
costs.
The advantages for the investors are reduction in risk, expert
professional management, diversified portfolios, and liquidity of
investment and tax benefits. By pooling their assets through mutual
funds, investors achieve economies of scale. The interests of the
investors are protected by the SEBI, which acts as a watchdog. Mutual
funds are governed by the SEBI (Mutual Funds) Regulations, 1993.

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Mutual Fund Operations Flow Chart

The flow chart below describes broadly the working of a Mutual Fund:

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The Goal Of Mutual Fund

The goal of a mutual fund is to provide an individual to


make money. There are several thousand mutual funds with different
investments strategies and goals to chosen from. Choosing one can be
over whelming, even though it need not he different mutual funds have
different risks, which differ because of the fund’s goals fund manager,
and investment style.

The fund itself will still increase in value, and in that way you may also
make money therefore the value of shares you hold in mutual fund will
increase in value when the holdings increases in value capital gains and
income or dividend payments are best reinvested for younger investors
Retires often seek the income from dividend distribution to augment
their income with reinvestment of dividends and capital distribution
your money increase at an even greater rate. When you redeem your
shares what you receive is the value of the share.

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Organization Of Mutual Fund
There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:

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Background

HISTORY AND STRUCTURE OF INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of
Unit Trust of India, at the initiative of the Government of India and
Reserve Bank. The history of mutual funds in India can be broadly
divided into four distinct phases:

First Phase — 1964-8


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 dc-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI
was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of
assets under management.

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


1987 marked the entry of non- UTI, public sector mutual funds set up
by public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non- UTI Mutual Fund established in June 1987 followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89). Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in
June 1989 while GIC had set up its mutual fund in December 1990. At
the end of 1993, the mutual fund industry had assets under
management of Rs.47, 004 crores.

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Third Phase — 1993-2003 ( Entry ot 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
SEB1 (Mutual Fund) Regulations 1996. The number of mutual fund
houses went on increasing, with many foreign mutual funds setting up
funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds
with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with
Rs.44. 541 crores of assets under management was way ahead of other
mutual funds.

Fourth Phase — since February 2003


In February 2003, following the repeal of the Unit Trust of India Act
1963 UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management
of Rs.29, 835 crores as at the end of January 2003, representing
broadly, the assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of
India and does not come under the purview of the Mutual Fund
Regulations. The second is the UTI Mutual Fund Ltd. sponsored by SBI,
PNB, BOB and LIC. It is registered with SEBI and functions under the
Mutual Fund Regulations. With the bifurcation of the erstwhile UTI
which had in March 2000 more than Rs.76, 000 crores of assets under

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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. As at the
end of September, 2004, there were 29 funds, which manage assets of
Rs. 153108 crores under 421 schemes.

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Classification Of Mutual Funds Schemes:
Any mutual fund has an objective of earning income for the investors
and/or getting increased value of their investments. To achieve these
objectives mutual funds adopt different strategies and accordingly offer
different schemes of investments. On this basis the simplest way to
categorize schemes would be to group these into two broad
classifications:

Operational Classification and Portfolio Classificaion


Operational classification highlights the two main types of schemes,
i.e., open-ended and close- ended which are offered by the mutual
funds.

Portfolio classification projects the combination of investment


instruments and investment avenues available to mutual funds to
manage their funds. Any portfolio scheme can he either open ended or
close ended.

Operational Classification:
(A) Open Ended Schemes: As the name implies the size of the scheme
(Fund) is open — i.e., not specified or pre-determined. Entry to the
fund is always open to the investor who can subscribe at any time. Such
fund stands ready to buy or sell its securities at any time. It implies that
the capitalization of the fund is constantly changing as investors sell or
buy their shares. Further, the shares or units are normally not traded
on the stock exchange hut arc repurchased by the fund at announced
rates. Open-ended schemes have comparatively better liquidity despite
the fact that these are not listed. The reason is that investors can any
time approach mutual fund for sale of such units. No intermediaries are
required. Moreover, the realizable amount is certain since repurchase
is at a price based on declared net asset value (NAV). No minute to

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minute fluctuations in rates haunt the investors. The portfolio mix of
such schemes has to be investments, which are actively traded in the
market. Otherwise, it will not be possible to calculate NAV. This is the
reason that generally open-ended schemes are equity based.
Moreover, desiring frequently traded securities, open-ended schemes
hardly have in their portfolio shares of comparatively new and smaller
companies since these are not generally traded. In such funds, option
to reinvest its dividend is also available. Since there is always a
possibility of withdrawals, the management of such funds becomes
more tedious as managers
have to work from crisis to crisis. Crisis may he on two fronts, one is,
that unexpected withdrawals require funds to maintain a high level of
cash available every time implying thereby idle cash. Fund managers
have to face questions like ‘what to sell’. He could very well have to sell
his most liquid assets. Second, by virtue of this situation such funds may
fail to grab favourable opportunities. Further, to match quick cash
payments, funds cannot have matching realization from their portfolio
due to intricacies of the stock market. Thus, success of the open- ended
schemes to a great extent depends on the efficiency of the capital
market and the selection and quality of the portfolio.
(B) Close Funded Schemes: Such schemes have a definite period after
which their shares/ units are redeemed. Unlike open-ended funds,
these funds have fixed capitalization, i.e., their corpus normally does
not change throughout its life period. Close ended fund units trade
among the investors in the secondary market since these are o he
quoted on the stock exchanges. Their price is determined on the basis
of demand and supply in the market. Their liquidity depends on the
efficiency and understanding of the engaged broker. Their price is free
to deviate from NAV, i.e., there is every possibility that the market price
may be above or below its NAV. If one takes into account the issue
expenses, conceptually close ended fund units cannot be traded at a
premium or over NAV because the price of’ a package of investments.
i.e., cannot exceed the sum of the prices of the investments
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constituting the package. Whatever premium exists that may exist only
on account of speculative activities. In India as per SEBI (MF)
Regulations every mutual fund is free to launch any or both types of
schemes.

Portfolio Classification of Funds:


Following are the portfolio classification of funds, which may be
offered. This classification may be on the basis of (A) Return, (B)
Investment Pattern. (C) Specialized sector of investment. (D) Leverage
and (E) Others.

(A) Return based classification:


To meet the diversified needs of the investors, the mutual fund
schemes are made to enjoy a
good return. Returns expected are in form of regular dividends or
capital appreciation or a
combination of these two.
1. Income Funds: For investors who are more curious for returns,
Income funds arc floated. Their objective is to maximize current
income. Such funds distribute periodically the income earned by them.
These funds can further be splitted up into categories: those that stress
constant income at relatively low risk and those that attempt to achieve
maximum income possible, even with the use of leverage. Obviously,
the higher the expected returns, the higher the potential risk of the
investment.
2. Growth Funds: Such funds aim to achieve increase in the value of the
underlying investments through capital appreciation. Such funds invest
in growth oriented securities which can appreciate through the
expansion production facilities in long run. An investor who selects such
funds should be able to assume a higher than normal degree of risk.
3. Conservative Funds: The fund with a philosophy of “all things to all”

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issue offer document announcing objectives as: (i) To provide a
reasonable rate of return, (ii) To protect the value of investment and.
(iii) To achieve capital appreciation consistent with the fulfillment of the
first two objectives. Such funds which offer a blend of immediate
average return and reasonable capital appreciation are known as
“middle of the road” funds. Such funds divide their portfolio in common
stocks and bonds in a way to achieve the desired objectives. Such funds
have been most popular and appeal to the investors who want both
growth and income.

(B) Investment Based Classification:


Mutual funds may also be classified on the basis of securities in which
they invest. Basically, it is renaming the subcategories of return based
classification.

1. Equity Fund: Such funds, as the name implies, invest most of their
investible shares in equity shares of companies and undertake the risk
associated with the investment in equity shares. Such funds are clearly
expected to outdo other funds in rising market, because these have
almost all their capital in equity. Equity funds again can be of different
categories varying from those that invest exclusively in high quality
‘blue chip companies to those that invest solely in the new,
unestablished companies. The strength of these funds is the expected
capital appreciation. Naturally, they have a higher degree of risk.

2. Bond Funds: such funds have their portfolio consisted of bonds,


debentures, etc. this type of fund is expected to be very secure with a
steady income and little or no chance of capital appreciation. Obviously
risk is low in such funds. In this category we may come across the funds
called ‘Liquid Funds’ which specialize in investing short-term money
market instruments. The emphasis is on liquidity and is associated with
lower risks and low returns.

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3. Balanced Fund: The funds, which have in their portfolio a reasonable
mix of equity and bonds, are known as balanced funds. Such funds will
put more emphasis on equity share investments when the outlook is
bright and will tend to switch to debentures when the future is
expected to be poor for shares.

(C) Sector Based Funds:


There are number of funds that invest in a specified sector of economy.
While such funds do
have the disadvantage of low diversification by putting all their all eggs
in one basket, the policy of specializing has the advantage of developing
in the fund managers an intensive knowledge of the specific sector in
which they are investing. Sector based funds arc aggressive growth
funds
which make investments on the basis of assessed bright future for a
particular sector. These funds are characterized by high viability, hence
more risky.

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Mutual Funds For Whom?
These funds can survive and thrive only if they can live up to the hopes
and trusts of their individual members. These hopes and trusts echo the
peculiarities which support the emergence and growth of such
insecurity of such investors who come to the rescue of such investors
who face following constraints while making direct investments:
(a) Limited resources in the hands of investors quite often take them
away from stock market transactions.

(b) Lack of funds forbids investors to have a balanced and diversified


portfolio.

(c) Lack of professional knowledge associated with investment business


unable investors to operate gainfully in the market. Small investors can
hardly afford to have ex-pensive investment consultations.

(d) To buy shares, investors have to engage share brokers who are the
members of stock exchange and have to pay their brokerage.

(e) They hardly have access to price sensitive information in time.

(f) It is difficult for them to know the development taking place in share
market and corporate sector.

(g) Firm allotments are not possible for small investors on when there is
a trend of over subscription to public issues.

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Why Mutual Funds?
Mutual Funds are becoming a very popular form of investment
characterized by many advantages that they share with other forms of
investments and what they possess uniquely themselves. The primary
objectives of an investment proposal would fit into one or combination
of the two broad categories i.e., Income and Capital gains. How mutual
fund is expected to be over and above an individual in achieving the
two said objectives, is what attracts investors to opt for mutual funds.

Mutual fund route offers several important advantages.

Diversification: A proven principle of sound investment is that of


diversification, which is the idea of not putting all your eggs in one
basket. By investing in many companies the mutual funds can protect
themselves from unexpected drop in values of some shares. The small
investors can achieve wide diversification on his own because of many
reasons, mainly funds at his disposal. Mutual funds on the other hand,
pool funds of lakhs of investors and thus can participate in a large
basket of shares of many different companies. Majority of people
consider diversification as the major strength of mutual funds.

Expertise Supervision: Making investments is not a full time assignment


of investors. So they hardly have a professional attitude towards their
investment. When investors buy mutual fund scheme, an essential
benefit one acquires is expert management of the money he puts in the
fund. The professional fund managers who supervise fund’s portfolio
take desirable decisions viz., what scrip’s are to be bought, what
investments are to be sold and more appropriate decision as to timings
of such buy and sell. They have extensive research facilities at their
disposal, can spend full time to investigate and can give the fund a
constant supervision. The performance of mutual fund schemes, of

Page | 30
course, depends on the quality of fund managers employed.

A. Liquidity of Investment: A distinct advantage of a mutual fund over


other investments is that there is always a market for its unit) shares.
Moreover, Securities and Exchange Board of India (SEBI) requires the
mutual funds in India have to ensure liquidity. Mutual funds units can
either be sold in the share market as SEBI has made it obligatory for
closed-ended schemes to list themselves on stock exchanges. For open-
ended schemes investors can always approach the fund for repurchase
at net asset value (NAV) of the scheme. Such repurchase price and NAV
is advertised in newspaper for the convenience of investors.
B. Reduced risks: Risk in investment is as to recovery of the principal
amount and as to return on it. Mutual fund investments on both fronts
provide a comfortable situation for investors. The expert supervision,
diversification and liquidity of units ensured in mutual funds reduces
the risks. Investors are no longer expected to come to grief by falling
prey to misleading and motivating headline’ leads and tips, if they
invest in mutual funds.

C. Safety of Investment: Besides depending on the expert supervision


of fund managers, the legislation in a country (like SEBI in India) also
provides for the safety of investments. Mutual funds have to broadly
follow the laid down provisions for their regulations. SEBI acts as a
watchdog and attempts whole heatedly to safeguard investor’s
interests.

D. Tax Shelter: Depending on the scheme of mutual funds, tax shelter is


also available. As per the Union Budget-2003, income earned through
dividends from mutual funds is 100% tax- free at the hands of the
investors
.
E. Minimize Operating Costs: Mutual funds having large invisible funds

Page | 31
at their disposal avail economies of scale. The brokerage fee or trading
commission may be reduced substantially. The reduced operating costs
obviously increase the income available for investors.
Investing in securities through mutual funds has many advantages like
— option to reinvest dividends, strong possibility of capital
appreciation, regular returns, etc. Mutual funds are also relevant in
national interest. The test of their economic efficiency as financial
intermediary lies in the extent to which they are able to mobilize
additional savings and channeling to more productive sectors of the
economy.

Page | 32
AN INDIVIDUAL PERCEPTION ON MUTUAL
FUNDS

Mutual Funds provide a platform for a common investor to participate


in the Indian capital market with professional fund management
irrespective of the amount invested. The Indian mutual fund industry is
growing rapidly and this is reflected in the increase in Assets under
management of various fund houses. Mutual fund investment is less
risky than directly investing in stocks and is therefore a safer option for
risk averse investors. Monthly Income Plan funds offer monthly returns
and invest majorly in debt oriented instruments with little exposure to
equity. However it has been observed that most of the investors are
not aware of the benefits of investment in mutual funds. This is
reflected from the study conducted in this research paper. In India, a
small investor generally prefers for bank deposits which do not provide
hedge against inflation and often have negative real returns. He has a
very limited knowledge of the sensitive index and again finds helpless
to understand the information, if available from some expert, framed in
technical and legal lexicon. He finds himself to be a deviant in
the investment market. In such situation mutual funds acts as a
supportive to these investors. Mutual funds are
looked upon by individual investors as financial intermediaries/
portfolio managers who process information, identify
investment opportunities, formulate investment strategies, invest
funds and monitor progress at a very low cost. Thus the success of mut
ual funds is essentially the result of the combined efforts
of competent fund managers and alert investors. It is thus, timed to
understand and analyze investor’s awareness and expectations, and
depicts some excessively valuable information to defend financial
decision making of mutual fund investor and asset management
companies. Financial markets are becoming more widespread with

Page | 33
inclusive financial products trying innovations in designing mutual funds
portfolio but these changes need fusion in association with investor’s
expectations. Thus, it has become crucial to study mutual funds from a
different angle, which is to focus on investor’s perception and
expectations and disclose the incognito parameters that are attributed
for their disapproval. This paper makes an attempt to identify various
factors affecting perception of investors regarding investment in
Mutual funds. The findings will help mutual fund companies to identify
the areas required for improvement in order to create greater
awareness among investors regarding investment in mutual funds.

Literature Review

Ippolito (1992) stated that investor is ready to invest in those fund or


schemes which have resulted good rewards and most investors’ is
attracted by those funds or schemes that are performing better over
the worst.
Goetzman (1997) viewed that investor’s psychology affects mutual fund
selection for investment in and to withdraw from fund.
De Bondt and Thaler (1985) submitted that mean reversion in prices of
stock is backed by Investor’s retrogression which is based upon
investor’s psychology to overvalue firm’s resent performance in
forming future expected results which is also known as endowment
effect.
Gupta (1994) surveyed household investor for the objective to find
investors’ preferences to invest in mutual funds and other available
financial assets. The findings of the study were more relevant, at that
time, to the policy makers and mutual funds to design the financial
products for the future.
Kulshreshta (1994) in his study suggested some guidelines to the
investors’ that can help them to select needed mutual fund schemes.

Page | 34
Shanmugham (2000) worked a survey of individual investors with the
object to study on what information source does investor depends. The
results explained that they are an economical, sociological and
psychological factor which controls investment decisions.
Madhusudhan V Jambodekar (1996) conducted his study to size-up the
direction of mutual funds in investors and to identify factors influence
mutual fund investment decision. The study tells that open-ended
scheme is most favored among other things that income schemes and
open-ended schemes and income schemes are preferred over closed-
ended and growth schemes.
News papers are used as information source, safety of principal amount
and investor services are priority points for investing in mutual funds.
Sujit Sikidar and Amrit Pal Singh (1996) conducted a survey to peep in to
the behavioral aspects of the investors of the North-Eastern region in
direction of equity and mutual fund investment. The survey resulted
that because of tax benefits mutual funds are preferred by the salaried
and self-employed individuals. UTI and SBI schemes were catch on in
that region of the country over any other fund and the other fund had
been proved archaic during the time of survey.
Syama Sunder (1998) conducted a survey with an objective to get an in-
depth view into the operations of private sector mutual fund with
special reference to Kothari Pioneer. The survey tells that knowledge
about mutual fund concept was unsatisfactory during that time in small
cities like Visakapatanam. It also suggested that agents can help to
catalyze mutual fund culture, open-ended options are much popular
than any other schemes, asset management company’s
brand is chief consideration to invest in mutual fund.
Anjan Chakarabarti and Harsh Rungta (2000) emphasized to the importance
of brand in ascertaining competence of asset management companies.
Shankar (1996) suggested that for penetrating mutual fund culture deep
in to society asset management companies must have to work and
steer the consumer product distribution model.

Page | 35
Raja Rajan (1997) underlined segmentation of investors and mutual fund
products to increase popularity of mutual funds.

Objectives of Study

1. To study the investment pattern of Indian Investor.

2. To find out the awareness level of investors regarding mutual


funds.

3. To find the type of scheme of mutual fund preferred by investor.

To find out the importance of factors like liquidity, higher return,


company reputation and other factors that influence investment
decision of mutual fund holder.

Methodology
Locale of the Study
The place where the study is being conducted is the “ICICI SECURITIES”
at Ludhiana City Branch. The securities branch deals with the customers
in various aspects such as it provides financial planning services.
Sampling Size: 230 customers

Sources of Data
1. Primary Data: The primary data is gathered from the following
methods:
(a) Through Interview method: Personal interviews, depth interviews
(b) Through Questionnaire: Structured questionnaires

Page | 36
2. Secondary Data: The secondary data is gathered from the
organization’s website, research reports, other public reports.

Tools Deployed in collecting data


1. Through Questionnaire: In this tool, a structured questionnaire is
prepared by the intern
which consists of a set of number of questions printed in a definite
order on a form. The intern asks the questions from the respondents
and the respondents give answers on their own. This is the low cost
tool deployed to collect the data.
2. Through Personal Interviews: In this tool, the intern has taken the
personal interviews usually depth interviews from the respondents to
analyze the preference of investment of customers towards various
investment alternatives and the perception of customers towards
mutual funds.

Statistical Framework: Tools used for data analysis


The data is analyzed using tables, mode, proportion / percentages to
carry out the results for the study being carried out in the project. The
statistical tool used is Microsoft Excel for calculating the findings and
interpretations.

Findings and Interpretation


In this section, the researcher has observed the findings related to the
data which was collected and analyzed.
1. Occupation
Table 1: Occupation of the Respondents

Particulars No. of Respondents


Govt. Employee 20
Private Firm Employee 129

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Business Person 35
Self Employed 46
Others 0

Figure 1: Occupation of the Respondents

Interpretation: A critical analysis reveals that out of the total


respondent, 56% are lying in the occupation of Private Sector Employee
followed by 20% business person.

2. Age Group
Table 2: Age Group of the Respondents

Particulars No. of Respondents


Below 30 Years 136
Between 31 – 40 Years 40
Between 41 – 50 Years 30
Above 50 Years 24

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Figure 2: Age group of Respondents
Interpretation: From the above graph, it is interpreted that most of the
investors i.e. 59% belong to the age group of less than 30 years which
lies in between 21-30 years followed by 17% belonging to the age group
of 31 to 40 years. Further, 13% of the respondents lie in the age group
of 41-50 years and 11% belongs to the age group of 51 and above.
According to the first objective, there is a relationship between the age
of the respondent and their level of awareness for mutual funds.

3. Gender
Table 3: Gender of the Respondents
Particulars No. of Respondents
Male 154
Female 76

Figure 3: Gender of the Respondents

Page | 39
Interpretation: Out of the 230 respondents, 154 respondents are male
and 76 are female which means that 67% are male and 33% are female.
This chart shows that male gender dominates the investment pattern
by 67%. This shows that male gender takes the majority of the
decisions related to investment pattern. The intern also get to know
that most of the male respondents operate and manage the demat
account on the name of their wife or daughter. And the intern also
analyzed that most of the female respondents are hesitant to share
their investment pattern. Moreover, most of the female respondents
are unaware of the meaning or concept of mutual funds.

4. Annual Income
Table 4: Annual Income Range of Respondents

Particulars No. of Respondents


Below 1.5 Lakhs 36

Between 1.5 – 3 Lakhs 90

Between 3 – 5 Lakhs 70

Above 5 Lakhs 34

Figure 4: Annual Income Range of Respondents


Page | 40
Interpretation: The chart shows that annual income of 39%
respondents lies in the range of 1.5 to 3 lakhs followed by very closely
i.e. 30% of respondents whose annual income lies in between 3 to 5
lakhs. Further, 15% of the respondent’s annual income is above five
lakhs. The intern noticed that respondents whose annual income is less
than 1.5 lakhs are very hesitant to invest in mutual funds because it has
risk involved in it. They have limited savings. The respondents whose
income lies in the range of 1.5 to 3 lakhs usually invest in investments
that offer low returns though safety of principal amount. The
respondents with in income range of 3 to 5 lakhs and above 5 lakhs are
risk takers and they prefer to invest in equity shares and mutual funds.

4. Awareness About Mutual Funds

Table 5: Awareness of respondents towards Mutual Funds

Particulars No. of Respondents


Yes 120
No 110

Figure 5: Awareness of respondents towards Mutual Funds

Page | 41
Interpretation: It is analyzed that 85% of investors are aware about
mutual funds as an investment option. This shows that awareness level
for mutual funds is quite high. It only means that respondents knew
that mutual funds are an investment tool but they do not how to invest
in it and what actually mutual funds means. So in other words, it can be
said that as an investment option, respondents know about mutual
funds but still they are not fully aware about it. It is analyzed by the
intern that respondents are quite enthusiastic to know about the
concept of mutual funds as they have shown keen interest for the
same.

6. Preference of Investment Alternative

Table 6: Preference of Respondents towards various Investment


Alternatives

Particulars No. of Respondents


Fixed Deposit 37
Savings Account in Banks 28
Real Estate/ Property 20
Shares 22
Mutual Funds 56
Gold 20
Insurance 20
Others 20

Page | 42
Figure 6: Preference of Respondents towards various Investment
Alternatives

Interpretation: This chart shows only 25% of the respondents prefer to


invest in equity. Whereas 75% of the respondents prefer to invest their
savings in other investment options such as savings accounts, fixed
deposits, real estate, shares, insurance etc. This is concluded that
preference of respondents towards other investment alternatives is
much more than in mutual funds.

7. Investment Purpose

Table 7: Purpose of Investment


Particulars No. of Respondents
Liquidity 32
Risk Diversification 48
Tax Benefits 26

Page | 43
High Returns 110
Others 14

Figure 7: Purpose of Investment


Interpretation: The critical analysis of the chart depicts that 48% of the
respondent’s prefers to invest in the investment vehicle that offers high
returns on their invested value. Whereas 21% of the respondents
invest, to diversify their risk. 14% of the respondents check the liquidity
factor in an investment. It means that they check liquidity of the
investment should be enough so that funds can be withdrawn in order
to meet the urgent needs or in case of emergency. 11% of the
respondents invest to avail the taxation benefits.6% of respondents
invest for other purpose such as to earn regular income or for better
safety of their principal amount.

8. Perception of Respondent for not Investing in MF

Table 8: Perception of Respondents for not investing in MF

Page | 44
Particulars No. of Respondents
Lack of knowledge 66
Misguiding by brokers 25
Lack of interest 17
High risk involved 44
High brokerage charges 12
Others 65

Figure 8: Perception of Respondents for not investing in MF

Interpretation: The chart shows that 39% of investors are not aware
about the equity as an investment option whereas 25% of the
respondents believe that there is involvement of risk factor in equity
due to which they are hesitant to invest in mutual funds. Whereas 20%
of investors don’t invest because of misguiding by brokers.

9. Factors Considered for Preference of Mutual Fund Distributor


Table 9: Factors considered for Preference of Broker
Particulars No. of Respondents
Transparency 3

Page | 45
Less brokerage charges 5
Aware with current state of affairs 12
and upcoming changes
Switching facility 9
Better services 6
All mentioned above 17
Others 31

Figure 9: Factor considered for Preference of Broker

Interpretation: The chart shows that majority of the respondents


consider all the factors such as switching facility, low brokerage
charges, transparency and so on to rate the satisfaction level with their
brokers. Only 11% of the respondents take into consideration some
other factors which includes brand name, past performance of the
company, reviews of the existing customers towards the brand name
etc.

10. Overall Satisfaction level of respondents towards Mutual Fund


Investment

Page | 46
Table 10: Satisfaction level of respondents towards Mutual Fund
Investment
Particulars No. of Respondents
Highly Satisfied 20
Satisfied 61
Neutral 11
Dissatisfied 5
Highly Dissatisfied 3

Figure 10: Satisfaction level of respondents towards Mutual Fund


Investment

Interpretation: The chart shows that maximum investors i.e. 61% are
satisfied by choosing equity as an investment option. It should be noted
that there is no link between satisfaction level of the services provided
by brokers and satisfaction level of choosing equity as an investment
option. Sometimes it may happen that investors is satisfied by equity
but not with the services provided by its brokers.

Page | 47
CONSUMER BEHAVIOUR ON MUTUAL FUNDS

The Indian capital market has been growing tremendously with the
reforms of the industrial policy, reforms of public sector and financial
sector and new economic policies of liberalization, deregulation and
restructuring. The Indian economy has opened up and many
developments have been taking place in the Indian capital market and
money market with the help of financial system and financial
institutions or intermediaries which foster savings and channels them
to their most efficient use. One such financial intermediary who has
played a significant role in the development and growth of capital
markets are Mutual Fund (MF).The launching of innovative schemes in
India has been rather slow due to prevailing investment psychology and
infrastructural inadequacies. Risk adverse investors are interested in
schemes with tolerable capital risk and return over bank deposit, which
has restricted the launching of more risky products in the Indian Capital
market. But this objective of the MF industry has changed over the
decades. For many years funds were more of a service than a product,
the service being professional money management. In the last 15 years
MFs have evolved to be a product. The term ‘product’ is used because
MF is not merely to park investor’s savings but schemes are ‘tailor
made’ to cater to investor’s needs, whatever their age, financial
position, risk tolerance and return expectations.
This issue of combining service and product will be an important one
for the next decade. Mutual funds have opened new vistas to millions
of small investors by virtually taking investment to their doorstep. In
India, a small investor generally goes for bank deposits, which do not
provide hedge against inflation and often have negative real returns. He

Page | 48
has limited access to price sensitive information and if available, may
not be able to comprehend publicly available information couched in
technical and legal jargons. He finds himself to be an odd man out in
the investment game. Mutual funds have come, as a much needed help
to these investors. This study attempts to evaluate manager investor
behaviour and understand their needs and expectations, to gear up the
performance to meet investor requirements.

Literature Review
MFs have attracted a lot of attention and kindled the interest of both
academic and practitioner communities. Compared to the developed
markets, very few studies on MFs are done in India. This literature
review reveals Investor behaviour studies which can be grouped under
two themes.

1. Studies relating to General Financial Behaviour of Investors

2. Fund Selection Behaviour Studies

1. General Financial Behaviour Studies


It is found that individuals were much more distressed by prospective
losses than they were happy by equivalent gains. Some economists
have concluded that investors typically consider the loss of Re. 1 twice
as painful as the pleasure received from a Re. gain. Individuals will
respond differently to equivalent situations depending on whether it is
presented in the context of losses or gains. Let us study the following
problem.

1. In addition to what you own, you have been given Rs. 1000. You are
now asked to choose between

Page | 49
A. A sure gain of Rs. 500.

B. A 50% chance to gain Rs. 1,000 and a 50% chance to gain nothing.

Another group of subjects were presented with another problem.

2. In addition to whatever you own, you have been given Rs. 2000.
You are now asked to choose between:

A. A sure loss of Rs. 500.

B. A 50% chance to lose Rs. 1,000 and 50% chance to lose nothing.

In the first group 84% chose A. In the second group 69% chose B. The
two problems are identical in terms of net cash to the subject; however
the phrasing of the question causes the problem to be interpreted
differently.

When these preferences are based on choices, there is more ego


involvement and attachment to the preferences, suggesting heightened
level of preference bias. This phenomenon is consistent with the
prediction from Cognitive Dissonance theory

Many investors do not have data analysis and interpretation skills. This
is because, data from the market supports the merits of index investing,
passive investors are more likely to base their investment choices on
information received from objective or scientific sources. It is further
studied that a serious national campaign to promote savings through
education and information could have a measurable impact on financial
behaviour.

2. Fund Selection Behaviour Studies

Page | 50
Investor fund selection Behaviour influences marketing decisions of
fund management. It is studied that income schemes and open-ended
schemes are preferred over growth schemes and close-ended schemes
during the prevalent market conditions. Investors look for Safety of
Principal, Liquidity and Capital Appreciation in order of importance.
Newspapers and Magazines are the first source of information through
which investors get to know about. MFs / Schemes and the investor
service is the major differentiating factor in the selection of MFs. It is
also seen that the salaried and self-employed formed the major
investors in MFs primarily due to tax concessions. UTI and SBI schemes
were popular. It is also seen that Agents play a vital role in spreading
the MF culture; open-end schemes were much preferred; age and
income are the two important determinants in the selection of fund /
scheme; brand image and return are their prime considerations. An
attempt was made by the NCAER in 1964 to understand the attitude
and motivation for the savings of individuals, for which a survey of
households was undertaken. It was seen that psychological and
sociological factors dominated economic factors in share investment
decisions. An article by Personal Fn (http://www.personalfn.com) for
Business India August 2, 2004 with the title, “The Golden Nest Egg”,
reported that, investor’s age could be used as a benchmark to
determine the nature of the portfolio.

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Objectives of the study
The study has the following objectives

 To assess the savings objectives among individual investors


 To identify the preferred savings avenue among individual
investors
 To understand the preferential feature in the savings instrument
among individual investors
 To assess Mutual fund conceptual awareness among present
investors

Methodology
Data & Data Sources
The study mainly deals with the financial behaviour of Individual
Investors towards Mutual funds. The required data was collected
through a pretested questionnaire administered on a combination of
simple random and judgment sample of 83 educated individual
investors. Judgment sample selection is due to the time and financial
constraints. Respondents were screened and inclusion was purely on
the basis of their knowledge about Financial Markets, MFs in particular.
The purpose of the survey was to understand the behavioral aspects of
individual investors, mainly their fund selection behaviour, various
factors influencing this behaviour and also the conceptual awareness
level among individual investors.

Page | 52
Findings of the Study

1. Savings Objective of Individual Investors

Savings Objective of the majority of Individual Investors is ‘to meet


contingencies’ and ‘for tax reduction’, thus throwing light on the nature
of risk averse investors. AMC can attract a pool of investors by
designing products for Risk-Averse investors.

2. Mutual Fund Investment Preference in Future.

The study reveals that, there is a fair opportunity for MF investments in


future as 73.5% of the respondents have voted towards ‘Yes’. However,
26.5% have voted ‘No’ as their preference in future MF investment.
However, the ‘No’ and ‘Not Sure’ category should be matter of concern
to the AMCs. Firstly, AMCs should take steps and see that funds are not
virtually at the mercy of institutional investors. MFs should not indulge
in unethical practices and launch schemes that benefit institutional
investors at the cost of retail investors. Also, the AMCs should try and
tap the NRI market, as they can diversify from Bank Deposits to MFs.
The main task at hand for the AMCs is to tackle investor sentiments
with greater transparency and credibility in the functioning

3. Mutual Fund Scheme Preference among Individual Investor

Investors have a plethora of options ranging from Growth schemes to


Fixed Income schemes. Now-a day’s investors are not offered just plain
vanilla schemes but an assorted basket to tune with their risk appetite.
MF scheme preference for majority of investors is ‘Growth Scheme’.
The preference for growth or any other scheme is also influenced by
stock market conditions prevailing at the time of investment decision.
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The prevailing market conditions have prompted investors to look for
growth schemes and income schemes have become unattractive due to
dropping interest rates. This further indicates the growing alertness of
investors.

4. Scheme Preference by Operation among Individual Investors

Analysis of scheme preference by nature of operation reveals the


popularity of ‘Open- Ended’ scheme. In India majority of schemes are
Open- Ended as investors can buy or sell units at NAV related prices.
The preference to Open- Ended scheme has also given due importance
to ‘Liquidity’. On the other hand, only 20.5% of the respondents have
voted for ‘Interval Schemes” which shows lack of awareness with
regard to this feature.

5. Preferential Feature in Mutual Funds among Individual Investors

Mr. M. Damodaran, Chairman of UTI, has summed the psyche of a


typical Indian Investor in three words; Yield, Security and Liquidity. The
study also shows the investors’ need for ‘Flexibility’ is highest among
other features, followed by Diversification Benefit, Safety, Capital
Appreciation, Tax Benefit, Liquidity, Good Return, Professional
Management.

6. Preferable Route to Mutual Fund Investing Among Individual


Investors

Investors may use some sources to gain awareness regarding investing


in Mutual Funds. The sources in the present study are confined to
Reference groups, Newspapers – General and Business, Financial
Magazines, Television, Brokers/ Agents, E-Mail and Stores Display.
Findings of the study reveal that investors attach high priority to
Page | 54
published information, thereby preferring Newspapers – General and
Business and Financial Magazines. This throws light on the possibility
that MF investors spend time analyzing and examining relevant
information before taking any crucial decision.

7. Top-of-Mind-Recall of Mutual Funds/Schemes among Individual


Investors

Top-Of-Mind Recall throws light on the strength of brand identity,


awareness, acceptability and preference. This calls for a high degree of
brand equity and loyalty, which is the direct result of the promotion
strategy of the AMCs and a good performance over a period of time.
MFs are no more just financial instruments, rather a product or a
service, which should be tailor-made to attract and retain investors.
AMCs should realize that it is not just the USPs (Unique Selling
Propositions) that count, but the ESPs (Extra Sensory Perceptions),
which will help to track, gauge and deliver satisfaction to the targeted
investor groups.

Page | 55
CONCLUSION

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


dramatic increase in the secondary market for financial assets in the
recent years in India has opened up an entirely new area of value
creation and management. An average Indian investor is a greenhorn
when it comes to financial markets, the causes may be many:

 The lack of opportunity


 Lack of conceptual understanding
 The influence of a fixed-income orientation in the Indian culture.

Salaried person's savings are most often deposited in mutual funds; the
theory behind this is that by pooling together a huge aggregation of
individual savings and investing them, using the professional judgment
of the fund manager, one spreads risk, takes advantage of volume
buying and scientific data analysis, expertise and so on. Therefore it is
seen as the ideal option for an individual who does not have the time,
knowledge or experience to make a succession of judgments involving
his hard-earned savings. MF industry in India has a large untapped
market in urban areas besides the virgin markets in semi-urban and
rural areas. This market potential can be tapped by scrutinizing investor
behaviour to identify their expectations and articulate investor's own
situation and risk preference and then apply to an investment strategy
that combines the usual four:

 Cash and Equivalents


 Government-backed bonds
 Debt

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 Equity

In addition, the availability of more savings instruments with varied


risk-return combination would make the investors more alert and
choosy. Running a successful MF requires complete understanding of
the peculiarities of the Indian Stock Market and also the psyche of the
small investor.

Under such a situation, the present exploratory study is an attempt to


understand the financial behaviour of MF investors in connection with
scheme preference and selection. Studies similar to this, if conducted
on a large scale at regular intervals by organizations like AMFI/SEBI, will
help capture the changing perceptions and responses of these groups,
and thus provide early warning signals to enable implementation of
timely corrective measures. It is hoped that the survey findings of the
study will have some useful managerial implications for the AMCs in
their product designing, marketing and management of the fund.
Results of the study may help in making cost effective strategic
decisions and hence would be of interest to both existing and new MFs;
Fund managers; and individual investors.

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