PROJECT

REPORT
ON
Investor’s Perception towards
mutual funds and
Growth Of mutual funds in India

SUBMITTED TO
SUBMITTED BY

Lec. RAJNI GAGANDEEP SINGH

M.B.A. 4TH (FINANCE)
628222060
CONTENTS
 Objectives:
 Scope of the Project
 Executive summary of the project
 About the mutual funds
 Research methodology
 Data Analysis And Interpretation
 Findings and results
 Recommendations
 Conclusion
 Limitations
 Annexure
 Bibliography
Objectives
 To study the Types of mutual funds/schemes
 To study the Categories of investors
 To see the perception of the people about MF.
 To study the Ground Rules of Mutual Fund Investing
 To Aware people about the MF

Scope of the Project

 What exactly are mutual funds?
 Net asset value (NAV)
 Mutual Fund Structure
 Options available to investors
 Tax treatment for the investors (unit holder)
 To study the Role of Mutual Fund in the Financial
Market
 The concept of large cap, midcap and small cap
funds
 Benefits of Mutual Funds to investor
EXECUTIVE SUMMARY OF THE PROJECT
The project deals with to Survey the
perceptions of investors about the MF. And to survey that which
Categories of investors (professional, business, retired,
Housewife, service, Student) are more interested to invest in
MF. And what part of their income they are investing in MF.
First part of the project covers the
introduction of MF. A mutual fund is a common pool of money
into which investors place contribution that is to be invested in
accordance with the stated objective. The ownership of the fund
is thus joint or “mutual”, the fund belongs to all investors. He
or her bears in the same proportion as the amount of the
contribution make a single investor’s ownership of the fund to
the total amount of fund.
Second part of this project cover, Net asset
value (NAV), Role of Mutual Fund in the Financial Market,
types of mutual funds/schemes, Mutual Fund Structure, Options
available to investors, Tax treatment for the investors (unit
holder), The Ground Rules of Mutual Fund Investing,
Categories of investors, Benefits of Mutual Funds, The concept
of large cap, midcap and small cap funds
Third and lasts part deals with the data analysis
and interpretation. For the collection of data a field study was
organized and about 50 people were contacted on the basis of
this data tabulation and graphs were prepared to finally draw
the interference. And end with ANNEXURE, BIBLIOGRAPHY
What exactly are Mutual Funds?
A mutual fund is a common pool of money into which investors place contribution that
is to be invested in accordance with the stated objective. The ownership of the fund is
thus joint or “mutual”, the fund belongs to all investors. He or her bears in the same
proportion as the amount of the contribution make a single investor’s ownership of the
fund to the total amount of fund.
A mutual fund uses the money collected from investors to buy those assets, which are
specifically permitted by its stated investment objective. It is those assets, which are
owned by the investors in the same proportion as their contribution bears to the total
contribution of all investors put together. When an investor subscribes to a mutual fund,
he or she buys a part of the assets or the pool of funds that are outstanding at that time. It
is of no difference from buying “shares” of a joint stock company, in which the purchase
makes the investors a part owner of the company and its assets.

Buying and Selling

You can buy some mutual fund by contacting the fund companies directly. Other funds
are sold through brokers, banks, financial planners, or insurance agents. If you buy
through a third party there is a good chance they’ll hit you with a sales charge.

That being said, more and more funds can be purchased through no-transaction fee
programs that offer funds of many companies. Sometimes referred to as a “fund
supermarket,” this service lets you consolidate your holdings and record keeping, and it
still allows you to buy funds without sales charges from many different companies.
Popular examples are Schwab’s One Source, Vanguard’s Fund Access, and Fidelity’s
Fund Network. Many large brokerages have similar offerings.
Selling a fund is as easy purchasing one. All mutual funds will redeem your shares on
any business day. In the United States companies must send the payment within seven
days.

The Value of Your Fund

Net asset value (NAV), which is a fund’s assets minus liabilities, is the value of a
mutual fund. NAV per share is the value of one share in the mutual fund and it is the
number that is quoted in newspapers. You can basically just think of NAV per share as
the price of a mutual fund. It fluctuates everyday as fund holdings and shares outstanding
change.

When you buy shares, you pay the current NAV per share plus any sales front-end load.
When you sell your shares, the fund will pay you NAV less any back-end load.

In India, mutual fund is considered as a trust and the investor subscribe to the “units”
issued by the fund, which is where the term Unit Trust comes from. However, whether
the investor gets fund shares or units is only a matter of legal distinction. In any case, aq
mutual fund shareholder or unit holder is a part owner of the fund’s assets, thus it is
necessary to establish the value of his part. In other words, each share or unit that an
investor holds needs to be assigned a value. Since the units held by an investor evidence
the ownership of the fund’s assets, the value of the total assets of the fund when dividend
by the total number of units issued by the mutual fund gives us the value of one unit. The
value of an investor’s part ownership is thus determined by the NAV of the number of
unit held.
How does a change in NAV benefit investors?

Suppose the IPO price of a scheme was Rs. 10 and today its NAV is Rs. 15.35.
The increment of Rs. 5.35 is the total return on the scheme, which has been generated due
to some factors, can be explained as below –

Trading Gains –These are the gains generated from buying and selling of securities.
Any security bought at a lower price and sold at a higher price leads to trading gains.

Mark on market –Mark on market is also called unbooked gains. Because these are
gains that could have been generated if securities would have been sold instead of being
retained in the portfolio.

Accrued Interest – It is the amount accrued as interest by keeping the securities in

the portfolio.
The ratio of these three components keeps varying. Increment of NAV consists primarily
of accrued interest. The proportion of these factors moves in the following manner.

Accrued Interest -75%

Mark on Market -20%

Trading Gains -5%

This is the proportion in which returns are generated. But fund manager’s capability lies
in generating trading gains because interest can be generated by anyone by keeping same
securities in his portfolio. It is only due to the expertise of fund managers in generating
trading gains that people invest through mutual fund.

NAV calculation for different options:

Growth – For growth option NAV will be calculated in the same manner as discussed
above.

Dividend and Dividend reinvested – For dividend option the dividend declared
per unit will be deducted from the NAV under growth scheme to arrive at the NAV for
dividend option. Similarly for dividend reinvestment option the NAV will remain the
same. The only difference is that Investors under dividend reinvestment option will have
more units that with dividend option for the same amount of money invested.

Role of Mutual Fund in the Financial Market

The brief review in the preceding section of financial system and structural changes in the
market suggests that Indian mutual funds have emerged as strong financial intermediaries
and are playing a very important role in bringing stability to the financial system and
efficiency to recourse allocation. Mutual funds have opened new vistas to investors and
imparted much –need liquidity to the system.

Mutual funds are the fastest growing institutions in the household saving sector. Growing
complications and risk in the stock market, rising tax rates and increasing inflation have
pushed household towards mutual funds. The active involvement of mutual funds in
promoting economic development can be seen not only in terms of their participation in
the saving market but also in their dominant presence in the money and capital market. A
developed financial market is critical to overall development and mutual funds play an
active role in promoting a healthy capital market. We have also noted that Indian
investors have moved towards more liquid, growth-oriented tradable instrument like
share / debentures, and units of mutual funds. This shift in asset holding pattern of
investors has been significantly influenced by the ‘equity’ and ‘unit’ culture.
Mutual funds in India have emerged as a critical institutional linkage among various
financial segments like saving, capital market and the corporate sector. They provide
much needed impetus to the money market and stock market, in addition to direct and
indirect support to the corporate sector. Above all, mutual funds have given a new
direction to the flow of personal saving and enabled small and medium investors in
mutual funds are thus playing a very crucial development role in allocating resource in
the emerging market economy.

History 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. The history of
mutual funds in India can be broadly divided into four 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 cores 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 Can bank 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
mutualfunds.

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 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.

The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

In nutshell, 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 is 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. The flow
chart below describes broadly the working of a mutual fund:-

Mutual Fund Structure

The structure of Mutual Fund consists of the following:-

Sponsor
Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.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.

Trust
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian
Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration
Act, 1908.

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 inter alia 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, the provisions of the Trust Deed and the Offer Documents of the respective
Schemes. At least 2/3rd directors of the Trustee are independent directors who are not
associated with the Sponsor in any manner.

Asset Management Company (AMC)

AMCs manage the investment portfolios of the schemes. An AMC’s income comes from
the management fees it charged to the schemes. The management fee is calculated as a
percentage of net assets managed. Some countries provide for performance based
management fees as well.
In order to earn the management fee, any AMC has employ people and bear all the
establishment costs that are related to its activity, such as for premises, furniture,
computers and other assets, software development, communication costs etc. these are to
be met out of the management fee earned.
 Expenses such as on trustee fee, marketing etc. can be
directly borne by the mutual fund scheme. However, in some cases, competition in the
marketplace could force an AMC to bear some of these costs, which would otherwise
have been born by investors in the schemes.

Distributors
Distributors earn a commission for bringing investors into the schemes of a MF. This
commission is an expense for the scheme, although there are occasions when an AMC
chooses to bear the cost, wholly or partly.

Registrar and Transfer Agent

The AMC if so authorized 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.

Important Terminology used

Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a
sales load.

Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a back-end
load? This is also called Bid Price.

Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended schemes
redeem their units on maturity? Such prices are NAV related.
Sales Load
Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load.
Schemes that do not charge a load are called ‘No Load’ schemes.

Repurchase or ‘Back-end’ Load

Is a charge collected by a scheme when it buys back the units from the unit holders?

You can make money from a mutual fund in three ways:

1. Income is earned from dividend on stocks and interest on bonds. A fund pays out
nearly all income it receives over the year to fund owners in the form of a
distribution.
2. If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.
3. If fund holding increase in price but are not sold by the fund manager, the fund’s
shares increase in price. You can then sell your mutual fund shares for a profit.

Funds will also usually give you a choice either to receive a check for distribution or to
reinvest the earnings and get more shares.

Mutual Fund: Costs

Costs are the biggest problem with mutual funds. These costs eat into your returns, and
they are the main reason why the majority of funds end up with sub-par performance.
What’s even more disturbing is the way the funds industry hides costs through a layer of
financial complexity and jargon. Some critics of the industry say that mutual fund
companies get away with the fees they charge only because the average investor does not
understand what he / she is paying for.

Fee can be broken down into two categories:

1. Ongoing yearly fee to keep you invested in the fund
2. Transaction fees paid when you buy or sell shares in a fund (loads).

The Expense Ratio

The ongoing expenses of a mutual fund are represented by the expenses ratio. This is
sometimes also referred to as the management expenses ratio (MER). The expense
ratio is composed of the following:

• The cost of hiring the fund manager(s) –Also known as the management fee,
this cost is between 0.5%and 1.0% of assets on average. While it sounds small,
this fee ensures that mutual fund managers remain in the country’s top echelon of
earners. Think about it for a second: 1% of 250 million (a small mutual fund) is
$2.5 million –fund managers are definitely not going hungry! It’s true that paying
managers is a necessary fee, but don’t think that a high fee assures superior
performance.

• Administrative costs – These include necessities such as postage, record

keeping, customer service, cappuccino machines, etc. some funds are excellent at
minimizing these costs while others (the ones with the cappuccino machines in
the office) are not.
 • The last part of the ongoing fee (in the United states anyway) is known as the
12B-1 fee – this expense goes toward paying brokerage commissions and toward
advertising and promoting the fund. That’s right, if you invest in a fund with a
12B-1 fee, you are paying for the fund to run commercial and sell itself!

TYPES OF MUTUAL FUNDS/ SCHEMES

Funds are generally distinguished from each other by their investment objectives and
types of securities they invest in. currently, mutual funds in India are allowed to invest
either in equity or debt or a combination of these two. While moves are on to float funds
that invest in gold or real estate etc, as of date, mutual funds are not permitted to
currently hold physical assets. Thus, a fund can invest in shares or debt instruments of a
gold mining company, but cannot buy gold itself. Here the funds are classified on the
basis of the investment objective where objective reflects the purpose for which the
investor is investing his money. By law each mutual fund must declare an investment
objective which tells an investor what the fund concentrates on and allows the investor to
integrate a particular fund with his or her own needs. The main objective of any investor
is to generate returns and the portfolio for any investor varies.

Investors can have one particular objective or can have a mix of various objectives. On
the basis of objective and asset allocation mutual funds can be categorized as follows.
 Diagram showing the Types of Schemes

1) Investment Objective:-
Schemes can be classified by way of their stated investment objective such as Growth
Fund, Balanced Fund, and Income Fund etc.

I. Equity Oriented Schemes

These schemes, also commonly called Growth Schemes, seek to invest a majority of their
funds in equities and a small portion in money market instruments. Such schemes have
the potential to deliver superior returns over the long term. However, because they invest
in equities, these schemes are exposed to fluctuations in value especially in the short
term.
Equity schemes are hence not suitable for investors seeking regular income or needing to
use their investments in the short-term. They are ideal for investors who have a long-term
investment horizon. The NAV prices of equity fund fluctuates with market value of the
underlying stock which are influenced by external factors such as social, political as well
as economic.HDFC Growth Fund, HDFC Long Term Advantage Fund (formerly HDFC
Tax Plan 2000) and HDFC Index Fund are examples of equity schemes.
General Purpose
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. HDFC Growth
Fund is a general-purpose equity scheme.

Sector Specific
These schemes restrict their investing to one or more pre-defined sectors, e.g. technology
sector. Since they depend upon the performance of select sectors only, these schemes are
inherently more risky than general-purpose schemes. They are suited for informed
investors who wish to take a view and risk on the concerned sector.

Special Schemes
Index schemes
The primary purpose of an Index is to serve as a measure of the performance of the
market as a whole, or a specific sector of the market. An Index also serves as a relevant
benchmark to evaluate the performance of mutual funds. Some investors are interested in
investing in the market in general rather than investing in any specific fund. Such
investors are happy to receive the returns posted by the markets. As it is not practical to
invest in each and every stock in the market in proportion to its size, these investors are
comfortable investing in a fund that they believe is a good representative of the entire
market. Index Funds are launched and managed for such investors. An example to such a
fund is the HDFC Index Fund.

Tax Saving schemes

Investors (individuals and Hindu Undivided Families (“HUFs”)) are being encouraged to
invest in equity markets through Equity Linked Savings Scheme (“ELSS”) by offering
them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed /
switched – out until completion of 3 years from the date of allotment of the respective
Units.

The Scheme is subject to Securities & Exchange Board of India (Mutual Funds)
Regulations, 1996 and the notifications issued by the Ministry of Finance (Department of
Economic Affairs), Government of India regarding ELSS.

Subject to such conditions and limitations, as prescribed under Section 88 of the Income-
tax Act, 1961, subscriptions to the Units not exceeding Rs.10, 000 would be eligible to a
deduction, from income tax, of an amount equal to 20% of the amount subscribed. HDFC
Long Term Advantage Fund (formerly HDFC Tax Plan 2000) is such a fund.
Real Estate Funds
Specialized real estate funds would invest in real estates directly, or may fund real estate
developers or lend to them directly or buy shares of housing finance companies or may
even buy their securitized assets

II. Debt Based Schemes

These schemes, also commonly called Income Schemes, invest in debt securities such as
corporate bonds, debentures and government securities. The prices of these schemes tend
to be more stable compared with equity schemes and most of the returns to the investors
are generated through dividends or steady capital appreciation. These schemes are ideal
for conservative investors or those not in a position to take higher equity risks, such as
retired individuals. However, as compared to the money market schemes they do have a
higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk.
Income Schemes
These schemes invest in money markets, bonds and debentures of corporate with
medium and long-term maturities. These schemes primarily target current income instead
of capital appreciation. They therefore distribute a substantial part of their distributable
surplus to the investor by way of dividend distribution. Such schemes usually declare
quarterly dividends and are suitable for conservative investors who have medium to long
term investment horizon and are looking for regular income through dividend or steady
capital appreciation. HDFC Income Fund, HDFC Short Term Plan and HDFC Fixed
Investment Plans are examples of bond schemes.

Liquid Income Schemes

Similar to the Income scheme but with a shorter maturity than Income schemes. An
example of this scheme is the HDFC Liquid Fund.

Money Market Schemes

These schemes invest in short term instruments such as commercial paper (“CP”),
certificates of deposit (“CD”), treasury bills (“T-Bill”) and overnight money (“Call”).
The schemes are the least volatile of all the types of schemes because of their investments
in money market instrument with short-term maturities. These schemes have become
popular with institutional investors and high net worth individuals having short-term
surplus funds.

Gilt Funds
This scheme primarily invests in Government Debt. Hence the investor usually does not
have to worry about credit risk since Government Debt is generally credit risk free.
HDFC Gilt Fund is an example of such a scheme.

III. Hybrid Schemes

These schemes are commonly known as balanced schemes. These schemes invest in both
equities as well as debt. By investing in a mix of this nature, balanced schemes seek to
attain the objective of income and moderate capital appreciation and are ideal for
investors with a conservative, long-term orientation. HDFC Balanced Fund and HDFC
Children’s Gift Fund are examples of hybrid schemes

2) Constitution:-
Schemes can be classified as Closed-ended or Open-ended depending upon whether they
give the investor the option to redeem at any time (open-ended) or whether the investor
has to wait till maturity of the scheme.

I. Open ended Schemes

The units offered by these schemes are available for sale and repurchase on any business
day at NAV based prices. Hence, the unit capital of the schemes keeps changing each
day. Such schemes thus offer very high liquidity to investors and are becoming
increasingly popular in India. Please note that an open-ended fund is NOT obliged to
keep selling/issuing new units at all times, and may stop issuing further subscription to
new investors. On the other hand, an open-ended fund rarely denies to its investor the
facility to redeem existing units.
II. Closed ended Schemes
The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed
number of units. These schemes are launched with an initial public offer (IPO) with a
stated maturity period after which the units are fully redeemed at NAV linked prices. In
the interim, investors can buy or sell units on the stock exchanges where they are listed.
Unlike open-ended schemes, the unit capital in closed-ended schemes usually remains
unchanged. After an initial closed period, the scheme may offer direct repurchase facility
to the investors. Closed-ended schemes are usually more illiquid as compared to open-
ended schemes and hence trade at a discount to the NAV. This discount tends towards the
NAV closer to the maturity date of the scheme.

III. Interval Schemes

These schemes combine the features of open-ended and closed-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.

OPTIONS AVAILABLE TO INVESTORS

Each plan of every mutual fund has three options-Growth, Dividend and dividend
reinvestment. Separate NAV are calculated for scheme.

Dividend Option
Under the dividend plan dividend are usually declared on quarterly or annual basis.
Mutual fund reserves the right to change the frequency of dividend declared.

Dividend reinvestment option

Instead of remittances of units through payouts, Units holder may choose to invest the
entire dividend in additional units of the scheme at NAV related prices of the next
working day after the record date. No sales or entry load is levied on dividend reinvest.
Growth Option
Under this plan returns accrue to the investor in the form of capital appreciation as
reflected in the NAV. The scheme will not declare the dividend under the Growth plan
and investors who opt for this plan will not receive any income from the scheme. Instead
of income earned on their units will remain invested within the scheme and will be
reflected in the NAV.

New Development In The Ways Of Mutual Funds Investments

I. Systematic Switching Plan

The unit holder may set up a Systematic Switching plan on a monthly, quarterly, semi-
annual or annual basis to exchange a fixed number of units or amount in one scheme to
another scheme within the Fund Family or one plan / option to another. The redemption
or investment will be at the applicable NAV for the respective scheme as specified in the
offer document.

II. Systematic Investment Plan

Systematic Investment Plan is available for planned and regular investments, under this
plan unit holders can benefit by investing specified rupee amounts periodically for a
continuous period. This concept is called Rupee Cost Averaging. This program allows
Unit holders to save a fixed amount of rupees every month / quarter by purchasing
additional units of the scheme(s). Rupee cost averaging does not guarantee a profit or
protect against a loss. Rupee cost averaging can smooth out the market’s ups and downs
and reduce the risk of investing in volatile markets.
For as little as Rs. 250 each month for 12 months or Rs. 500 every month for 6 months,
you can purchase mutual fund units and avoid larger minimum investment amounts of
over Rs.1,000. Fixed amounts can be invested in Mutual Funds each month using funds
drawn automatically from your saving account regularly.
Investing in Systematic Investment Plan (SIP) offer the benefit of “Rupee-cost
averaging”, i.e., by purchasing Mutual Fund units over a period of time, you
automatically buy more units when price are low and fewer units when prices are high,
resulting in lower “per unit acquiring cost” as a result of averaging.
Understanding SIP – How does cost averaging benefit you? (Taking an example of few
schemes of Prudential ICICI mutual fund)
Many investors think that they should invest only when an opportunity to invest – like an
IPO (Initial Public Offering) – is available. However, when doing this, one runs the risk
of mistiming the market. For example, many times investors are attracted by the price in
the market only to subsequently find out that they had invested at a peak. Sometimes
investors buy when they think the market has bottomed out only to find the prices falling
further. SIP through cost averaging helps you avoid the risk of mistiming by spreading
your risk.

III. Systematic Withdrawal Plan

Systematic Withdrawal Plan (SWP) lets you automatically a prearranged amount of your
mutual fund holding each month. SWPs are an ideal way to supplement your monthly
cash flow, meet minimum withdrawal requirements, or move assets between the funds.
SWPs is a no-change service. When you set up your SWP, cash proceeds from each
redemption (minimum balance maintained @ 25% of holding at any given point of time)
are given to you in the form of post-dated cheque (six monthly cheque at par, which
enables you to get the funds loaded).

TAX TREATMENT FOR THE INVESTORS (UNIT HOLDERS)

Dividend paid by mutual funds is fully tax-exempt at the hands of the investors, although,
debt funds have to pay a 12.81 percent dividend distribution tax. On redemption of any
units held for more than a year, your realization will attract long-term capital gains tax of
20 percent plus surcharge after indexing for inflation, or at a flat rate of 10 percent. If
redeemed before a year it will be termed as short term capital gain and taxed along with
your other income. However, you can save tax by investing in Equity-linked Savings
Scheme (ELSS) under Section 88 of the Income Tax Act 1961, according to which 20
percent of the amount invested in ELSS could be deducted from your tax liability subject
to a maximum investment of Rs 10,000 per year but now under section 80C the complete
1,00,000 can be invested in ELSS schemes and which can be deducted from your gross
salary thereby leaving your taxable salary thinner by Rs. 1,00,000.
The entire income of the mutual fund are exempt from income-tax in accordance with the
provisions of section 10(23D) of the Income –Tax Act, 1961 the mutual fund will receive
all income without any deduction of tax at source under the provisions of the section
196(iv) of the act. On income distribution by an open-ended equity oriented fund i.e. such
fund where the invisible funds are invested buy way of equity in domestic companies to
the extent of more than 50% of the total proceeds of such fund; there is no additional
income-tax payable under section 115R of the act.

Income Tax

All unit holders

Income received, otherwise than on transfer (subject to the exemption of long term
capital gains provided for in section 10(38) of the act, discussed elsewhere in this
statement), in respect of units of a mutual fund would be exempt from tax under section
10(35) of the act.

Tax deduction at source

No income tax is deductible at source on any income distribution by the mutual fund
under the provisions of section 194K and 196A of the act.

Capital Gains Tax

As per section 111A of the act, short term capital gains on sale of units of an equity-
oriented into on or after October 1, 2004, where such transaction of sale is chargeable to
STT under chapter VII of the finance (no.2) act, 2004 shall be subject to tax at a rate of
10 percent (plus applicable surcharge and education cess) further, in case of resident
individuals and Hindu undivided families, where taxable income as reduced to the extent
of the shortfall and only the balance short term capital gains will be subjected to the flat
rate of income tax (plus applicable surcharge and education cess.)
Exemption of capital gain from income tax
As per section 10(38) of the act, any long term capital gains arising from the sale of units
of an equity oriented fund entered into on or after October 1, 2004, where such
transaction of sale is chargeable to STT under chapter VII of the finance (no.2) act 2004,
shall be exempt from tax.

Securities Transaction Tax

As per chapter VII of the finance (no.2) act, 2004 pertaining to STT. The STT shall be
payable by the seller at the rate of 0.15% on the sale of a unit of an equity-oriented fund
to the mutual fund.

Other benefits
Investments in units of the mutual fund will rank as an eligible from of investment under
section 11(5) of the act read with rule 17C of the income tax rules, 1962, for religious and
charitable trusts.

Wealth Tax
Units of the mutual fund are treated as assets, as defined under section 2(ea) of the wealth
tax act 1957 and therefore would not be liable to wealth tax.

Gift Tax
The gift tax act, 1958 has ceased to apply gifts made on or after October 1, 1998. Gifts of
units of the mutual fund would therefore be exempt from gift tax.

The Ground Rules of Mutual Fund Investing

Moses gave to his followers 10 commandments that were to be followed till eternity. The
world of investments too has several ground rules meant for investors who are novices in
their own right and wish to enter the myriad world of investments. These come in handy
for there is every possibility of losing what one has if due care is not taken.
1. Assess yourself: Self-assessment of one’s needs; expectations and risk profile is
of prime importance failing which; one will make more mistakes inputting money
in right places than otherwise. One should identify the degree of risk bearing
capacity one has and also clearly state the expectations from the investments.
Irrational expectations will only bring pain.
2. Try to understand where the money is going: It is important to identify the
nature of investment and to know if one is compatible with the investment. One
can lose substantially if one picks the wrong kind of mutual fund. In order to
avoid any confusion it is better to go through the literature such as offer document
and fact sheets that mutual fund companies provide ob their funds.
3. Don’t rush in picking funds, think first: One first has to decide what he wants
the money for and it is this investment goal that should be the guiding light for all
investment done. It is thus important to know the risk associated with the fund
and align it with the quantum of risk one is willing to take. One should take a look
at the portfolio of the funds for the purpose. Excessive exposure to any specific
sector should be avoided, as it will only add to the risk of the entire portfolio.
Mutual funds invest with a certain ideology such as the “Value Principle” or
“Growth Philosophy”. Both have their share of critics but both philosophies work
for investors of different kinds. Identifying the proposed investment philosophy of
the fund will give an insight into the kind of risks that it shall be taking in future.
4. Invest. Don’t speculate: A common investor is limited in the degree of risk that
he is willing to take. It is thus of key importance that there is thought given to the
process of investment and to the time horizon of the intended investment. One
should abstain from speculating which in other words would mean getting out of
one fund and investing in another with the intention of making quick money. One
would do well to remember that nobody can perfectly time then market so staying
invested is the best option unless there are compelling reasons to exit.
5. Don’t put all the eggs in one basket: This old age adage is of utmost
importance. No matter what the risk profile of a person is, it is advisable to
diversify the risks associated. So putting one’s money in different asset classes is
 generally the best option as it averages the risks in each category. Thus, even
investors of equity be judicious and invest some portion of the investment in debt.
Diversification even in any particular asset class (such as equity, debt) is good.
Not all fund managers have the same acumen of fund management and with
identification of the best man being a tough task; it is good to place money in the
hands of several fund managers. This might reduce the maximum return possible,
but will also reduce the risks.
6. Be regular: Investing should be a habit and not an exercise understands at one’s
wishes, if one has to really benefit from them. As we said earlier, since it is
extremely difficult to know when to enter or exit the market, it is important to
beat the market by being systematic. The basic philosophy of Rupee cost
averaging would suggest that if one invests regularly through the ups and downs
of the market, he would stand a better chance of generating more returns than the
market for the entire duration. The SIPs (Systematic Investment Plans) offered by
all funds helps in being systematic. All that one needs to do is to give post-dated
cheque to the fund and thereafter one will not be harried later. The Automatic
Investment Plans offered by some funds goes a step further, as the amount can be
directly/electronically transferred from the account of the investor.
7. Do your homework: It is important for all investors to research the avenues
available to them irrespective of the investor category they belong to. This is
important because an informed investor is in a better decision to make right
decisions. Having identified the risks associated with the investment is important
and so one should try to know all aspects associated with it. Asking the
intermediaries is one of the ways to take care of the problem.
8. Find the right funds: Finding funds that do not charge many fees is of
importance, as the fee charge ultimately goes from the pocket of the investor. This
is even more important for debt funds as the returns from these funds are not
much. Funds that charge more will reduce the yield to the investor. Finding the
right funds that is important and one should also use these funds for tax
efficiency. Investors of equity should keep in mind that all dividends are currently
tax-free in India and so their tax liabilities can be reduced if the dividend payout
 option is used. Investors of debt will be charged a tax on dividend distribution and
so can easily avoid the payout options.
9. Keep track of your investment: Finding the right fund is important but even
more important is to keep track of the way they are performing in the market. If
the market is beginning to enter a bearish phase, then investors of equity too will
benefit by switching to debt funds as the losses can be minimized. One can
always switch back to equity if the equity market starts to show some buoyancy.
10. Know when to sell your mutual funds: Knowing when to exit a fund too is of
utmost importance. One should book profits immediately when enough has been
earned i.e. the initial expectation from the fund has been met with. Other factors
like non-performance, hike in fee charged and change in any basic attribute of the
fund etc. are some of the reasons for to exit.
Investments in mutual funds too are not risk free and so investments warrant some
caution and careful attention of the investor.
After learning the concept of mutual funds and various schemes of mutual funds
available for investment it is required to effectively manage the portfolio of an investor
which depends upon the objective of investor. The most important objective of any
investor is to generate returns requirement for return for every investor varies which
depends upon many factors and these factors determine the category to which an investor
belongs. Depending upon the category to which an investors belongs portfolio of any
customer is managed.
 CATEGORIES OF INVESTORS
Investors can be categorized on the basis of certain factors which can be described as
below:

1. On the basis of Risk and Return

∗ Low Risk Bearing Capacity

∗ Medium Risk Bearing Capacity
∗ High Risk Bearing Capacity

Risk and Return goes hand to hand. Higher return means higher risk. Low risk means
moderate return.

2. On the basis of Age of Investor:

∗ Young Age (20-35 years)
∗ Middle Age (35-50 years)
∗ Old Age (50 and above)

3. On the basis of Liquidity required by Investor:

∗ Less Liquidity
∗ Medium Liquidity
∗ More Liquidity

4. On the basis of tenure of investment:

∗ Short Term
∗ Medium Term
∗ Long Term
5. Investment can also be made to:
∗ Park the Idle Funds
∗ Make a full time investment
∗ Avail tax benefits
∗ Meet requirement for Contingencies

On the basis of the advisory paradigm (deciding factors) mentioned above, various
categories of investor can be made which is deciding factor as to where an investor with a
particular requirement must invest.

THE CONCEPT OF LARGE CAP, MID CAP AND

SMALL CAP FUNDS

LARGE CAP FUNDS

Large cap is an investing abbreviation for Large Capitalization. It is a reference to the
market value or “capitalization” of a stock listed on public exchange such as the Bombay
Stock Exchange. A stock or company is said to be large cap if its market value is between
10 billion and 20 billion dollars. The limits though are somewhat arbitrary and will vary
depending on who you ask.
Large cap stocks are generally considered safe stocks. The sheer size of these companies
tends to make the stocks price fairly stable. It is unusual for them to experience
significant growth or to see large declines in the value of their stock price. For this
reason, many investors tend to park their money in large caps during times of uncertainty
or unrest in the stock markets.
However, not all large cap companies can be considered safe. Even among the stocks
considered safe there are better choices than others. An intelligent and diligent investor
will still review the specific company’s financial statements and perhaps the industry
outlook before investing in a particular stock.
It is also possible to invest in large caps using mutual funds that specialize in large cap
companies. There are many large cap mutual funds to choose from. Most “blue chip”
companies are also large cap companies so a mutual fund that invests in blue chip
companies is also a large cap mutual fund.

MID CAP FUNDS

Market capitalization ranks stocks into a number of distinct groups. Mid cap stocks are in
the middle rank and represent companies whose total market capitalization is between 2
billion and 10 billion US dollars (USD). Market capitalization is the product of the stock
price and the number of stock shares issued, so if XYZ company has issued one billion
shares and the stock price is 3 USD, then its market capitalization is 3 billion USD and
XYZ company is a mid cap company. Its stock shares would be considered mid cap
stocks.
This is important when considering an investment in a particular company. Each rank has
certain stereotypical features that you can look for in the mid cap stock under
consideration. Mid cap stocks are more risky than large cap stocks and less risky than
small cap stocks.
Generally, risk of company failure decreases as the company increases in size. However,
a mid cap stock also has better potential for growth than a large cap company. A very
large company may have completely saturated its market, while a mid cap company may
have room to grow into a large cap company. So when considering an investment in a
mid cap stock, you are basically trying to decide if the mid cap stock in question has the
potential to grow into a large cap stock. If you are right and make the investment, you
will have a successful investment.
If you do not like the idea of researching individual companies, you can still invest in mid
cap stocks using mutual funds. There are many mutual funds that specialize in mid cap
stocks. Investors in mid cap funds expect to achieve greater returns over the long run than
those investing in large cap funds. However, the returns may be much more volatile over
the short term. This means that if you check your portfolio value every week or month,
the investment in mid cap stocks may be up a large amount one week and down a small
amount the next time you check, while the large cap stock will be up a small amount
every time.
Over time however, you will expect your mid cap stocks to have a larger return than the
large cap stock. Mid cap stocks are usually growth stocks, and while growth stocks are
expected by many to outperform a mature or large cap stock, this is not always the case.
Ultimately, the decision to invest in mid cap stock comes down to individual investment
style and preference.

SMALL CAP FUNDS

Small cap stocks are in the bottom rank and represent companies whose total market
capitalization is less than 50 million US dollars (USD). Small cap stocks are also
sometimes referred to as penny stocks.
This small cap ranking is important when considering an investment in a particular
company. Each rank has certain stereotypical features. Small cap stocks are very risky.
Small cap stocks are the stocks shares of companies that are just getting started.
The market for small cap stocks can be very small, and while you can purchase the stock,
you may find difficulty selling it. Small cap stocks are subject to very large swings in
price since the volume is very small. Small cap stocks are also subject to price
manipulation; since the market is small,, a single investor can influence the price of the
small cap stock to their own profit at the expense of the other investors.
Getting accurate information on small caps stocks can also be very difficult. Since the
market for small cap stocks is small, the media does not pay much attention to these
companies. This result in little information getting out about the small cap company, and
the information that does get published can be easily manipulated to the advantage of the
person releasing the information. Many of the checks and balances that are in place with
large cap stocks are simply not there for a small cap stock. It is doubtful that small cap
stock should be a part of your investment portfolio unless you are a very experienced
investor. While the possibility of a very large return is present – after all every company
started out as a small cap stock – the risk of a complete loss of your investment is also
very high.
 Benefits of Mutual Funds
There are numerous benefits of investing in mutual funds and one of the key reasons for
its phenomenal success in the developed markets like US and UK is the range of benefits
they offer, which are unmatched by most other investment avenues. We have explained
the key benefits in this section. The benefits have been broadly split into universal
benefits, applicable to all schemes and benefits applicable specifically to open-ended
schemes.

Universal Benefits
Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the
investment objective of the scheme. An investor can buy in to a portfolio of equities,
which would otherwise be extremely expensive. Each unit holder thus gets an exposure to
such portfolios with an investment as modest as Rs.500/-. This amount today would get
you less than quarter of an Infosys share! Thus it would be affordable for an investor to
build a portfolio of investments through a mutual fund rather than investing directly in
the stock market

Diversification
The nuclear weapon in your arsenal for your fight against Risk. It simply means that you
must spread your investment across different securities (stocks, bonds, money market
instruments, real estate, fixed deposits etc.) and different sectors (auto, textile,
information technology etc.). This kind of a diversification may add to the stability of
your returns, for example during one period of time equities might underperforms but
bonds and money market instruments might do well enough to offset the effect of a
slump in the equity markets. Similarly the information technology sector might be faring
poorly but the auto and textile sectors might do well and may protect your principal
investment as well as help you meet your return objectives.

Variety
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two
ways: first, it offers different types of schemes to investors with different needs and risk
appetites; secondly, it offers an opportunity to an investor to invest sums across a variety
of schemes, both debt and equity. For example, an investor can invest his money in a
Growth Fund (equity scheme) and Income Fund (debt scheme) depending on his risk
appetite and thus create a balanced portfolio easily or simply just buy a Balanced
Scheme.

Professional Management
Qualified investment professionals who seek to maximize returns and minimize risk
monitor investor's money. When you buy in to a mutual fund, you are handing your
money to an investment professional who has experience in making investment decisions.
It is the Fund Manager's job to (a) find the best securities for the fund, given the fund's
stated investment objectives; and (b) keep track of investments and changes in market
conditions and adjust the mix of the portfolio, as and when required.

Tax Benefits
Any income distributed after March 31, 2002 will be subject to tax in the assessment of
all Unit holders. However, as a measure of concession to Unit holders of open-ended
equity-oriented funds, income distributions for the year ending March 31, 2003, will be
taxed at a concessional rate of 10.5%.
In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the
Total Income will be admissible in respect of income from investments specified in
Section 80L, including income from Units of the Mutual Fund. Units of the schemes are
not subject to Wealth-Tax and Gift-Tax.

Regulations
Securities Exchange Board of India (“SEBI”), the mutual funds regulator has clearly
defined rules, which govern mutual funds. These rules relate to the formation,
administration and management of mutual funds and also prescribe disclosure and
accounting requirements. Such a high level of regulation seeks to protect the interest of
investors

Other benefits
Liquidity
In open-ended mutual funds, you can redeem all or part of your units any time you wish.
Some schemes do have a lock-in period where an investor cannot return the units until
the completion of such a lock-in period

Convenience
An investor can purchase or sell fund units directly from a fund, through a broker or a
financial planner. The investor may opt for a Systematic Investment Plan (“SIP”) or a
Systematic Withdrawal Advantage Plan (“SWAP”). In addition to this an investor
receives account statements and portfolios of the schemes

Flexibility
Mutual Funds offering multiple schemes allow investors to switch easily between various
schemes. This flexibility gives the investor a convenient way to change the mix of his
portfolio over time.

Transparency
Open-ended mutual funds disclose their Net Asset Value (“NAV”) daily and the entire
portfolio monthly. This level of transparency, where the investor himself sees the
underlying assets bought with his money, is unmatched by any other financial instrument.
Thus the investor is in the know of the quality of the portfolio and can invest further or
redeem depending on the kind of the portfolio that has been constructed by the
investment manager.

RESEARCH METHODOLOGY
This section deals with the research design used, sampling method used,
fieldwork carried out, analysis and interpretation done and limitation inherent in
project.

RESEARCH DESIGN:-
A good research design has the characteristics VIZ, problem definition, time
required for research project and estimate of expenses to be incurred the
function of research design is to ensure that the required data are collected and
they are collected accurately and economically. A research design is purely and
simply the framework or plan for a study that guide s the collection and analysis
of the data. There is never a single standard and correct method of carrying out a
piece of research therefore I do not wait to start my research until I find out the
proper approach because there are many ways to tackle a problem some are
well some are bad but probably several good ways. There is no single perfect
design.
In this project the two basic types of research designs are used: -
Exploratory
DATA COLLECTION
After identifying and defining the research problem determining specific
information required to solve the problem. It is necessary to find the type of
sources of data, which may yield the desired results that is why I have used both
PRIMARY AND SECONDARY data to collect information.
Primary Data: Primary data are generated when a particular problem and
hand is investigated by the researcher employing mail questionnaire, telephone
survey, personal interviews, observations.
METHOD USED IN COLLECTION OF DATA
Personal Interview:
In personal interview, the investigator questions the respondents in a face-to-face
meeting. Personal interviews may be conducted on a door-to-door basis or in
public places such as shopping centers. The usual approach for the interviewer
is to identify himself to a potential respondent and attempt to secure the
respondent's co-operation in answering a list of predetermined questions. These
answers may be tape-recorded or written down by the interviewer.
Convenience Sampling
As the name implies, a convenience sample is one chosen purely for expedience
(e.g., items are selected because they are easy or cheap to find and measure.
While few analysts would find credibility in conclusions from such extreme cases,
the inappropriateness of using convenience sampling to estimate universe values
is not widely recognized. The major problem with this (and other non-probability
method) is that one is unable to draw objective inference about a rigorously
defined universe. In practice, it is often found that the response given by
"convenient" items in a universe differ significantly from the responses given by
universe items that are less accessible. As a result, unless one is dealing with a
known highly homogeneous universe (virtually all items responding alike),
convenience sampling should not be used to estimate universe values.
Sample Size
The sample size taken in the project work is 50 in Ambala
Secondary Data: I collect my secondary data from the Internet & AMFI book.
 DATA ANALYSIS AND INTERPRETATION

1) Do you know about the term MF?

25%

yes
no

75%

In my survey out of 50 persons only 75% persons are aware about

the term mutual funds and Remaining saying they do not know about
the term MF.Still there are lot of people don’t know about MF.
2) Do you invest in MF?

80% 75%

70%

60%

50%

40% yes
No
30% 25%

20%

10%

0%
yes No

Only 25% persons are investing in MF. 75% persons are not investing in
MF. There is need to encourage people for investing in MF.
3) IN WHICH OF THE FOLLOWING INSTRUMENT DO YOU
INVEST?

25%
0.25

21%
20%
0.2

15%
0.15

10%
0.1 9%

0.05

0
Bank Mutual fund P.O deposits share don’t invest other(specify)
deposits

25% people think that MF is a better option to invest money, 20%

people think that bank is better option, 15% people give the
preference to P.O.deposits, 21% people like to invest in shares,
9% people don’t invest and 10% persons invest in other securities.
Only 25% people invest in MF still there is great opportunities of
growth.
IN WHICH SEGMENT OF MUTUAL FUND DO YOU INVEST?

69%
0.7
0.6
0.5
0.4
0.3 26%

0.2
0.1 5%
0 balance debt equity
fund fund fund

Most of the people like to invest in equity funds, 69% people said that
they invest in equity funds, 26% people invest in balance funds, and
rest like to invest in debt funds because of very low risk that people
are generally old age persons
IN WHAT TYPE OF MUTUAL FUND DO YOU INVEST?

43%

37% 20%

open ended
fund
close ended
fund
both of above

The 43% people invest in open-ended funds, 20% like to invest in

close-ended funds, and 37% people invest in both of them.

4) Why do you prefer?

 40%

35%

30%
Better return Low
25% Risk factor
Saving
20% 40% Tax saving
35%
15% Any other

10% 20%

5%
5%
S1
0%
Better Saving Tax Any
return saving other
Low
Risk
factor

The 20% people told that the purpose of investing is better return
and low risk, 35% persons invest for saving, and 40% persons
said that they are investing for tax saving, 5% persons gave other
reasons.

5) What is your PROFESSION?

 5%

30%

Business
Retired
Housewife
Service
50% Student

10%

5%

The 30% businessmen are investing in MF, 10% retired, 5% Housewife,

50% Service, 5% Student are investing in MF. To capture the market
company should try to concentrate on housewife, student and retired
persons.

6) Who influence your decision of selecting MF SCHEMES?

 Agent
52%
Friends
25%
Advertisement

5% Other
18%

It is found that mainly investment decisions are influence by

agents. 52% people said that their investment decisions are
influence by agent. Friends influence 18% decisions. 5% by
advertising and 25% people gave other reasons. Companies
should give the advertisements by more effective channels.
7) How much is your GROSS MONTHLY INCOME?

0.6

50%
0.5

0.4

0.3

22%
20%
0.2

0.1 8%

0%
0
Less than Rs5000- Rs10000- Rs.20000- Rs.30000&
Rs.5000 Rs10000 Rs.20000 Rs.30000 above

Gross monthly income of 20% people is between 5000-100000, 50% people earn 10000-20000, 22% people earn 20000-30000,
8% earn above 30000.

8) What percentage of your salary do you invest in MF?

 10% 6%

23%
Up to 5%
6 to 10%
10 to 20%
More than 20%

61%

In this survey 6% people said that they invest in MF up to 5% of their

income. 23% people invest up to 6%-10% of their income, 61% people
invest 10%-20% of their income and 10%people invest more then 20% of
their income.

9) AT WHICH RATE DO YOU WANT YOUR INVESTMENT TO

GROW?
 0.6

0.5

0.4

53%
0.3

35%
0.2

12%
0.1 S2

S1
0
Steadily At an average Fast
rate

12% people want steadily growth that are generally retired persons
and invest in debt fund, 35% people want average rate of growth they invest
in balance fund and 53% people are risk take they want fast growth and
generally invest in equity funds.
IMAGINE THAT STOCK MARKET DROPS IMMEDIATELY AFTER YOU
INVEST IN IT THEN WHAT WILL YOU DO?

0.6

0.5 57%

0.4

0.3
28%
0.2
15%
0.1

0 S1
Withdraw your Wait and watch Invest more in it
money

15% people say that they withdraw their money when market drops because they expect that
in future market will go down, 57% people prefer to stay with that fund because they expect
that in future market will go up, 28% people like to more invest because that time prices of the
units are low and through investing money they can acquire more unit.

FINDING AND RESULT

 The survey conducted on perception of investors towards MF.

 In my survey out of 50 persons only 75% persons are aware about

the term mutual funds and Remaining saying they do not know
about the term MF.

 Only 25% persons are investing in MF. 75% persons are not
investing in MF.

The 30% businessmen are investing in MF, 10% retired, 5% Housewife, 50%
Service, 5% Student are investing in MF. To capture the market
company should try to concentrate on housewife, student and retired
persons.

 Highest number of investors comes from the salaried class.

 The 20% people told that the purpose of investing is better return
and low risk, 35% persons invest for saving, and 40% persons
said that they are investing for tax saving, 5% persons gave other
reasons

 It is found that mainly investment decisions are influence by

agents. 52% people said that their investment decisions are
influence by agent. Friends influence 18% decisions. 5% by
advertising and 25% people gave other reasons

 Gross monthly income of 20% people is between 5000-100000,

50% people earn 10000-20000, 22% people earn 20000-30000, 8%
earn above 30000.

 In this survey 6% people said that they invest in MF up to 5% of

their income. 23% people invest up to 6%-10% of their income,
61% people invest 10%-20% of their income and 10% people
invest more then 20% of their income.

 25% people think that MF is a better option to invest money, 20%

people think that bank is better option, 15% people give the
preference to P.O.deposits, 21% people like to invest in shares,
9% people don’t invest and 10% persons invest in other
securities. Only 25% people invest in MF still there is great
opportunities of growth.

 The 43% people invest in open-ended funds, 20% like to invest in

close-ended funds, and 37% people invest in both of them.
 Most of the people like to invest in equity funds, 69% people said
that they invest in equity funds, 26% people invest in balance
funds, and rest like to invest in debt funds because of very low
risk that people are generally old age persons

 11% of the people invest less than 1000 on monthly basis, 51%
people invest Rs. 1000-5000, 36% people invest 5000-10000, and
only 2% people invest above 10000 on monthly basis.

 15% people say that they withdraw their money when market
drops because they expect that in future market will go down,
57% people prefer to stay with that fund because they expect that
in future market will go up, 28% people like to more invest
because that time prices of the units are low and through
investing money they can acquire more unit.

 12% people want steadily growth that are generally retired

persons and invest in debt fund, 35% people want average rate of
growth they invest in balance fund and 53% people are risk take
they want fast growth and generally invest in equity funds.

RECOMMENDATIONS
 To make more awareness among people advertisement should be
made on the television, newspaper with effective message and
slogans.

 The companies sale people and agent should be properly trained

and must give full knowledge about MF. So agents can be able to
change the perception of investors.

 The people do not want to take risk. The AMC should launch more
diversified funds so that the risk becomes minimum. This will lure
more and more people to invest in mutual funds.

 Some people have knowledge of MF. But they Afraid to invest. So

agent should try to encourage them for investing in MF.

 In my survey only 25% people are investing in MF. 75% people are
investing in other than MF and so companies have high growth
opportunities. There is need to aware the people about the
benefits of MF

 To provide some kind of curriculum at the school/college level to

create awareness regarding Mutual Fund.

 It is found that mainly investment decisions are influence by

agents. Agents should give the advice to investors on the base of
investor’s category.

Conclusion
From the above finding and result it is concluded that still lot of peoples
are not aware about the MF. The most people prefer to invest other
securities like P.O deposits Shares, Bank deposits etc. So to make more
aware about MF companies should use the better marketing and
promotional strategies. People are not aware with the benefits of MF. There
is need to aware the people about the benefit like Investor can buy in to a
portfolio of equities, which would otherwise be extremely expensive.
Investors must spread your investment across different securities (stocks,
bonds, money market instruments, real estate, fixed deposits etc.) and
different sectors (auto, textile, information technology etc.), they can also
get tax benefits. Everybody wants to invest money, which entitled of low
risk, high returns and easy redemption. In my opinion before investing in
mutual funds, one should be fully aware of each and everything.

LIMITATIONS OF THE SURVEY

1. As only single city is surveyed or covered. It does not represent the
overall view of Indian Market.
2. The response of some of people is not proper and positive.
3. The research projects generally take longer time period. Hence the
less time to complete the project is also a one major problem.
4. The research is carried out on human beings. Human being has a
tendency to believe artificially when they know that they are being
observed. So the respondents behaving artificially when they know
that their attitudes, opinions etc. are being studied. This aspect of
human behavior affects the results
5. The result I have concluded on the basis of sample size of 50
investors not the sufficient to the good market survey.

ANNEXURE
 QUESTIONNAIRE NAME: _______________
AGE : ______________
Cont. No:_____________

1) Do you know about the term MF?

 Yes

 No

2) Do you invest in MF?

 Yes

No

3) IN WHICH OF THE FOLLOWING INSTRUMENT DO YOU INVEST?

Bank deposits

Mutual fund

P.O deposits

Shares

Don’t invest

 other(specify) _____

4) IN WHICH SEGMENT OF MUTUAL FUND DO YOU INVEST?

Balance fund

Debt fund

Equity fund

5) WHAT TYPE OF MUTUAL FUND DO YOU INVEST?

Open ended fund

Closed ended fund

 both of above
6) Why you prefer?
  Better return Low Risk factor

 Saving

 Tax saving

 Any other

7) What is your PROFESSION?

Business

Retired

Housewife

Service

Student

8) Who influence your decision of selecting MF SCHEME?

 Agent

 Friends

 Advertisement

 Other

9) How much is your GROSS MONTHLY INCOME?

Less than Rs.5000

Rs5000-Rs10000

Rs10000-Rs.20000

Rs.20000-Rs.30000

 Rs.30000& above

10) What percentage of your salary do you invest in MF?

  Up to 5%

 6 to 10%

 10 to 20%

 More than 20%



11) At which rate do you want your investment to grow?

 Steadily
 At an average rate
 Fast
12) Imagine that stock market drops immediately after you invest
in it then what will you do?
 Withdraw your money
 Wait and watch
 Invest more in it
 BIBLIOGRAPHY

• www.investorsguide.com
• www.amfiindia.com
• www.mutualfundsindia.com
• www.valuersearchonline.com
• www.mutualfundindia.com
• Economic Times
AMFI WORKBOOK
Mutual Fund Testing Programme
For Distributors & Employees of Mutual Funds in India.