A Study of Attitude of Investors' Towards Mutual Fund as an Investment Tool

A PROJECT REPORT ON A STUDY OF INVESTORS’ ATTITUDE TOWARDS

MUTUAL FUNDS AS AN INVESTMENT OPTION For

NJ INDIA INVEST PVT. LTD

MASTER OF MANAGEMENT STUDIES (MMS) UNIVERSITY OF MUMBAI

SUBMITTED TO

SINHGAD INSTITUTE OF BUSINESS MANAGEMENT CHANDIVALI

UNDER THE GUIDANCE OF SUSHMA VERMA SUBMITTED BY

SURAJ NILEKAR 2012-14/ROLL NO: 125 FIANANCE

A study of Investors‟ attitude towards mutual fund as an investment option

CERTIFICATE

This is to certify certif y that ______________________ _________________________________ ______________________ ____________ _ has successfully completed the project work as a part of academic fulfillment of Masters of Management Studies (M.M.S.) Semester II examination.

_______________________ ___________________________________ ____________

Name & Signature of Project Guide

Date : ____________

DIRECTOR SIBM

SIBM, Mumbai

2


DECLARATION

I, Suraj S. Nilekar of Master of Management Studies (Semester II) of Sinhgad Institute of Business Management , hereby declare that I have successfully

completed this Project on “ A study of investors’ attitude towards mutual fund as an investment tool” tool ” in the academic year 2012-14 .

The information incorporated in this project is true and original to the best of my knowledge.

_____________________________ Signature

(SURAJ S. NILEKAR)

SIBM, Mumbai

3


ACKOWLEDGEMENT It is great exposure for us using our theoretical knowledge which we have learnt till 2 nd semester of Master of Management Studies (M.M.S.) in my project work which I have done at NJ India Pvt. Ltd. It is great pleasure to use knowledge in practical way in our tenure of training. I would like to first heartily thanks to MUMBAI UNIVERSITY for including project in our M.M.S. syllabus. It is helpful to learn real situation of industry and helpful for increasing in our practical knowledge. We present our sincere sentiments of appreciation and gratitude to our college Director Dr. Meera Vijay for the approval of our project. I am very thankful to Mr. Shailesh Mathukia, Branch Manager of NJ India Pvt. Ltd. As without his help and guidance this project is not possible, he shares his good knowledge and guide in my project work. I am also thankful to all s taff members of NJ India Pvt. Ltd. I would like to thank my project guide Prof. Sushma Verma for her invaluable guidance at every stage. Without her support I would not have been able to successfully complete and present the project. I am thankful to my parents and my friends as they always motivate me and help me directly or indirectly in my project work. I appreciate the non teaching staff of SIBM College for providing me all information related the project and my sincere thanks to MMS Department for providing us essential amenities, which proved beneficial for my project development.

SIBM, Mumbai

4


EXECUTIVE SUMMARY Mutual Funds have gained popularity as an investment vehicle over the past two years. Though technically, must have been in India since 1964 through Unit Trust of India , the industry has gained importance only recently after new private sector funds and funds backed by global investment houses set up shop in India. Mutual Funds have often been associated with equity markets. While that is industry, the debt or fixed income side has also gained prominence in the recent past. In fact, now mutual funds offer instruments schemes for all types of investors from the risk averse to t o high risk takers. The project lays a great stress on investor education. The primary objective is to explain in clear and simple language, the benefits and pitfalls of investing in mutual funds. There is a gap in the market about quality information on Mutual Funds. Most of the information is either inadequate or biased towards a particular scheme/fund or a particular category. This project attempts to look at the subject from the point of view of an ordinary investor who has little time or inclination to get into the technical details of Mutual Funds. 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‟ Pref erences erences in Mutual Fund means Are they prefer any particular Asset Management Company (AMC), Which type of Product the y prefer, Which Option (Growth or Dividend) they prefer or Which Investment Strategy they follow (Systematic Investment Plan or One time Plan). This Project a s a whole can be divided into two parts. The first part of the project explains the basics of a Mutual Fund including the history and evolution of the history. Then it highlights the types of Mutual Funds and the recent trends in the industry. The second portion deals with doubts and questions that arise in investors' mind about Mutual Funds. The data collected has been well organised and presented. Hope the research findings and conclusions will be helpful in understanding the perception and attitude of Indian Investors towards Mutual Fund which may reveal some interesting insights and directions for future research. SIBM, Mumbai

5


INDEX Sr. No. 1.

Topic

Page No

Introduction

9 - 16

1.1

The Concept of Mutual Fund

10

1.2

Definition of Mutual Fund

10

1.3

History of Mutual Fund

11

1.4

Originated Mutual Fund in India

11

1.5

Type of Mutual Fund in India

14

1.6 2.

Mutual Fund Investing

. Investing through banks

vs

Company Overview

16 17 - 19

2.1 2.2

Company Profile Product of the Company

17 17

2.3

Experience during SIP

19

3.

Review of Literature

3.1 3.2 4.

Review of the existing literature Theoretical framework / Background Theory Objectives, Objectives, Scope and Hypothesis of the Study

20 - 25

20 22 26 - 27

4.1 4.2

Research Aim Research Objective

26 26

4.3 4.4

Scope of the Research Hypothesis

26 27

5.

Research Methodology of the Study

28

5.1

Data Source

28

5.2

Duration of the Study

28

5.3

Sampling Procedure

28

5.4

Sample Size

28

5.5

Sample Design

28

6.

Data analysis, Results and Interpretation Interpretation

29 - 40

6.1

Profile of Sample

29

6.2 6.3

Data Analysis Interpretation of results

33 38

7.

Limitation of the Project

41

8.

Conclusion

42

9.

Recommendations Recommendations and Suggestions

43

10.

Appendix

44 – 44 – 46 46

11.

Bibliography

47

SIBM, Mumbai

6


LIST OF FIGURE Figure 1: Growth in AUM in different Phase Figure 2: Mutual Fund Operation Flow Chart Figure 3: Organisation of a Mutual Fund Figure 4: Classification as per Gender Figure 5: Classification as per Age Figure 6: Classification as per Qualification Figure 7: Classification as per Occupation Figure 8: Profile of Investors on the basis of Income Figure 9: Investors’ preference for investing money Figure 10: Factor consider while investing money Figure 11: No of Investors who invest in Mutual Fund Figure 12: Reason for not investing in MF Figure 13: Awareness level of Mutual Fund Investors Figure 14: Source of information for investors Figure 15: Key features which attract investors Figure 16: Preferable mode of investment in Mutual Fund Figure 17: Intermediaries in Mutual Fund Figure 18: Mode of receive returns re turns Figure 19: Most preferred AMCs as per Investors

SIBM, Mumbai

7


LIST OF TABLE Table 1: Growth in Mutual Fund Industry in India Table 2: Comparison between investment in bank and Mutual Funds Table 3: Ranking of AMCs as per Investor

SIBM, Mumbai

8


1. Introduction Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. Mutual fund is the pool of money, based on the earnings of individuals who shares a common objective of having financial secured for future uncertainty as well as some sort of financial benefits like the capital appreciation and dividend earning. The money collected from the investors is then relocated or invested in capital market instruments such as shares, debenture, and various foreign markets. Investors invest money and get the units as per the unit value which can be called as Net Assets Value (NAV).The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion 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. A Mutual Fund Fund pools the money of people with certain investment goals. The money invested in various securities depending on the objectives of the mutual fund scheme and the profits (or ( or loss) are shared sh ared among investors‟ in proportion p roportion to their investment. invest ment. Investments in securities are spread across a wide cross-section of industries and sectors. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors‟ in accordance with quantum of money invested by them. Investors‟ of mutual funds are known as unit holders. The profits or losses are shared by the investors‟ in proportion proportion to their investment. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. Mutual funds can be invested in many different kinds of securities. The most common are cash, stock, and bonds, and bonds, but b ut there are hundreds of sub-categories. Stock funds invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (e.g., high-yield hi gh-yield or junk bonds,

SIBM, Mumbai

9


investment-grade corporate bonds), type of issuers (e.g., (e.g., government agencies, corporations, or municipalities), or maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities (global funds), or primarily foreign securities (international funds). Most mutual funds' investment portfolios ar e continually adjusted under the supervision of a professional manager, who forecasts the future performance of investments appropriate appropriate for the fund fund and chooses those which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered through a parent management company, which may hire or fire fund managers. Mutual funds are liable to a special set of regulatory, accounting, and tax rules. Unlike most other types of business entities, they are not taxed on their income as long as they distribute substantially all of it to their shareholders. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions can be either ordinary income or capital gains, depending depending on how the fund earned those distributions. 1.1 The Concept of Mutual Fund:

Investors have a basic choice, they can invest directly in individual securities, or they can invest indirectly through a financial intermediary. Financial intermediaries gather savings from investors and invest these monies in portfolio of financial assets. A mutual fund is a type of financial intermediary that pools the funds of investors who seek the same general investment objectives and invests them in a number of different types of financial claims (e.g. equity shares, bonds, money market instruments). These pooled funds provide thousands of investors with proportional ownership of diversified portfolios managed by professional investment managers. The term „mutual‟ is used in the sense that all its returns, minus expenses, are shared by the fund‟s unit holders. 1.2 Definition of Mutual Fund:

An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's SIBM, Mumbai

10


portfolio is structured and maintained to match the investment objectives stated in its prospectus. A mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings. 1.3 History of Mutual Fund:

The history of mutual funds dates support to 19 th century when it was introduced in Europe, in particular, Great Britain. Robert Fleming set up in 1868 the first investment trust called Foreign and colonial investment trust which promised to manage the finances of the moneyed classes of Scotland by scattering the investment over a number of different stocks. This investment trust and other investment trusts which were afterward set up in Britain and the U.S., resembled today‟s close – ended ended mutual funds. The first mutual fund in the U.S., Massachusetts Mass achusetts investor‟s trust, was set up in March 1924. This was the open – ended – ended mutual fund. The stock market crash in 1929, the Great Depression, and the outbreak of the Second World War slackened the pace of growth of the mutual fund industry. industr y. Innovations in products and services increased the th e popularity of mutual funds in the 1950s and 1960s. The first international stock mutual fund was introduced in the US in 1940. In 1976, the first tax exempt municipal bond funds emerged and in 1979, the first money market mutual funds were created. The latest additions are the international bond fund in 1986 arm funds in 1990. This industry witnessed substantial growth in the eighties and nineties when there was a significant increase in the number of mutual funds, schemes, assets, and shareholders. In the US the mutual fund industry registered s ten – fold fold growth the eighties. Since 1996, mutual fund assets have exceeds bank deposits. The mutual fund industry and the banking industry virtually rival each other in size. 1.4 Originated Mutual Fund in India:

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

11


Years Mar-65 to Feb-87

Rs in Crores 25

Different Phase in MF Industry First Phase

Mar-87 to Feb-93 Mar-93 to Feb-03 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

4564 47000 121805 139616 149554 231862 326388 505152 417300 613979 592250

Second Phase Third Phase

Fourth Phase

Table 1: Growth in Mutual Fund Industry in India 1.4.1 First Phase: 1964 – 1964 – 87 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 s cheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management. 1.4.2 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 1.4.3 Third Phase: 1993-2003 (Entry of Private Sector Funds) SIBM, Mumbai

12


With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. 1.4.4 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, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. The graph indicates the growth of assets over the years. SIBM, Mumbai

13


Figure 1: Growth in AUM (Rs in Crores) in different Phase

Growth in Assets Under Management 700000 600000 s 500000 e r o400000 r C n300000 i s R200000

Rs in Crores

100000 0

Years

Source: Association of Mutual Funds in India (AMFI) 1.5 Type of Mutual Fund in India:

A common man is so much confused about the various kinds of Mutual Funds that he is afraid of investing in these funds as he cannot differentiate between various types of Mutual Funds with fancy names. Mutual Funds can be classified into various categories under the following heads: 1.5.1 According to type of Investments: While launching a new scheme, every ever y Mutual Fund

is supposed to declare in the prospectus the kind of instruments in which it will make investments of the funds collected under that scheme. Thus, the various kinds of Mutual Fund schemes as categorized according to the type t ype of investments are as follows: (a) Equity Funds (b) Debt Funds (also called Income Funds) (c) Diversified Funds (Also called Balanced Funds) (d) Gilt Funds

SIBM, Mumbai

14


(e) Money Market Funds (f) Sector Specific Funds (g) Index Funds 1.5.2 According to the time of closure of the scheme: While launching new schemes,

Mutual Funds also declare whether this will be an open ended scheme (i.e. there is no spe cific date when the scheme will be closed) or there is a closing date when finally the scheme will be wind up. Thus, according to the time of closure schemes are classified as follows: (a) Open Ended Schemes (b) Close Ended Schemes Open ended funds are allowed to issue and redeem units any time during the life of the scheme, but close ended funds cannot issue new units except in case of bonus or rights issue.

Therefore, unit capital of open open ended funds can fluctuate on daily basis (as new

investors may purchase purchase fresh units), but that is not the case for close ended schemes.

In

other words we can say that new investors can join the scheme by directly applying to the mutual fund at applicable net asset value related prices in case of open ended schemes but not in case of close ended schemes. In case of close ended schemes, new investors can buy the units only from secondary markets. f loat some tax 1.5.3 According to tax incentives i ncentives Schemes: Mutual Funds are also allowed to float saving schemes. Therefore, sometimes the schemes are classified according to this also: (a) Tax Savings Funds (b) Non Tax Savings Funds 1.5.4 According to the time of payout: Sometimes Mutual Fund schemes are classified

according to the periodicity of the pay outs (i.e. dividend etc.). The categories are as follows: (a) Dividend Paying Schemes (b) Reinvestment Schemes The mutual fund schemes come with various combinations of the above categories. Therefore, we can have an Equity Fund which is open ended and is dividend paying plan. SIBM, Mumbai

15


Before you invest, you must find out what kind of the scheme you are being asked to invest. You should choose a scheme as per your risk capacity and the regularity at which you wish to have the dividends from such schemes 1.6 Mutual Fund Investing

. Investing through banks:

vs

Mutual funds are only one kind of financial intermediary. Bank is the largest intermediary in the financial system. Thousands of depositors pool their savings in a bank. However, investments in banks entitle the depositors to different financial claims than the generated by the mutual funds. Factors

Bank

Mutual Fund

Returns Administrative Exp. Risk Investment Options Network Liquidity Quality of Assets Interest Calculation

Low High Low Less High Penetration At a cost Not transparent Minimum balance between 10th & 30th of Every month

Better Low Moderate More Low but Improving Better Transparent Everyday

Guarantee

None Maximum Rs. 1,00,000 on deposits

Table 2: Comparison between investment investment in bank and Mutual Funds

SIBM, Mumbai

16


2. Company Overview 2.1 Company Profile:

NJ Group is a leading player in the Indian financial services industry known for its' strong distribution capabilities. The journey of NJ began in 1994 with the establishment of NJ India Invest Pvt. Ltd., the flagship company, to cater to investor needs in the financial services industry. Today, the Wealth Advisory Network, also known as the NJ Funds Network, started in 2003 is among the largest networks of wealth advisors in India. A evolving, emerging & enterprising group with its' roots in the financial services sector and today expanding into newer horizons with great passion. The vision of the group is to be leaders in businesses driven by customer satisfaction, commitment to excellence and passion for continued value creation for all stakeholders. This vision has helped us grow and build the trust of our customers and associates which is at the cornerstone of everything we do. Trust is also at the heart of our success and the driver for passion for our success. Over the years, NJ Group has diversified into other businesses and today has the presence in businesses ranging from wealth advisory network, asset management, real estate, insurance broking, training t raining & development and technology. Our rich experience in financial services, combined with execution capabilities and strong process & system orientation, has enabled us to shape a rising growth trajectory in our businesses. NJ Group is based out of Surat in Gujarat (India) and has presence in over 100 locations in India and has over 1,000 employees. 2.2 Product of the Company:

The NJ Wealth Advisors Network is among India's largest and most successful network of advisors in the financial services industry. The NJ Wealth Advisory Platform is a comprehensive, 360° platform offering end-to-end solutions, required for a successful wealth advisory practice.

SIBM, Mumbai

17


Started in 2003, the network seeks to reach out to the common man and extend the opportunity to create wealth through sound investment principles and strategies. The NJ Wealth Advisors Network today has over 15,000* Advisors, called as NJ Partners, spread across India catering cat ering to over 12* lakh investors in vestors and having an a n AUA close to Rs.10,000* Crores. The platform offers Partners with a basket of wealth products in addition to comprehensive solutions in all important areas of business, backed by cutting edge IT services. The Wealth Advisory Platform has managed to successfully transform the lives of many wealth advisors by providing them with one answer to all advisory practice related concerns. NJ Wealth Advisors Network has its presence in over 100* locations in India. The key offerings of the NJ Wealth Advisory Platform are briefly mentioned here. Product basket 

Domestic mutual funds (all AMCs)



Fixed Deposits of companies



PMS products (Third party & NJ)



Government/ RBI/ Infrastructure bonds



Residential & commercial properties

Partner Services



Dedicated Relationship Manager



Marketing & Sales support



Research support



Training & Education support



Dedicated Customer Care / Query management support



Technological support, including online business / 'Partners Desk' with CRM, Financial Planning & Employee Management modules

SIBM, Mumbai

18


Customer Services:

Online family "Wealth / Client Desk" enabling single portfolio view of 'entire' wealth portfolio Trading & Demat Account with online transacting & call-&-trade s ervice in mutual funds 2.3 Experiences during SIP:

This SIP was my first industrial experience. During the SIP in NJ India Invest provided me with a great deal of exposure to the financial market. I found myself in a professional working environment after quite a long gap. I‟m sure the training which was given to me at NJ India Invest would help me tremendously in the future During the initial days of my SIP, I had many interactive sessions with various officials on their areas of expertise. I was lucky enough to have discussions with the Regional Head on various finance related topics. My interactions with these people gave me a rough idea of the entire financial products especially mutual fund. I got many doubts cleared and concepts corrected. I got a chance to interact with the sales people and tried to understand the way they sell Investment products. I also accompanied them to different locations to meet customers. The Investors‟ Survey was the most difficult part of the SIP which continued for about one and half months. As the sample size was large, successfully completing the survey seemed next to impossible. The big problem I faced was in approaching people. Some were good enough to answer my questions while some others were quite hesitant. This SIP taught me many things; I met different people and different types of people who were more or less nice.

SIBM, Mumbai

19


3. Review of Literature The published work relating to the topic is reviewed. The relevant literature is reviewed on the basis of Books, Periodicals, News Papers and Websites. The detailed review is given below: Dr. Shantanu Mehta (September 2012) in his research paper “Preference of Investors for Indian Mutual Funds and its Performance Evaluation”, published in Pacific Business Review International Vol. 5 concluded that, 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 such kind of information, which do not provide hedge against inflation and often have negative real returns. However Mutual funds have come, as a much needed help to these investors. Dr. Ravi Vyas (July 2012) in his article “Mutual Fund Investor’s Behaviour and Perception”, Perception”, published in International International Refereed Research Journal Vol. – III III concluded

that, Mutual fund companies should come forward with full support for the investors in terms of advisory services, ensure full disclosure of related information to investor, proper consultancy should be given by mutual fund companies to the investors in understanding terms mutual fund information should be published in investor friendly language and style, proper system to educate investors should be developed by mutual fund companies to analyse risk in investments made by them, etc. Dr. Binod Kumar Singh (March 2012) 2012) in his article “Investors attitude towards Mutual Funds”, published in the International Journal of Research in Management pointed out

that, most of the investors having lack of awareness about the various function of mutual funds. Moreover, as far as the demographic factors are concerned, gender, income and level of education have significantly influence the investors‟ attitude towards mutual funds. On the other hand the other two demographic factors like age and occupation have not been found influencing influencing the attitude of investors‟ towards mutual funds. Mr. Sarish (2012) in his research paper “A Study of Opportunities and Challenges for Mutual Fund in India: Vision 2020”, published in VSRD International Journal of Business & Management Research Vol. 2 draw a conclusion that, Mutual funds are among

the most preferred investment instruments. For middle income individuals, investing in SIBM, Mumbai

20


mutual funds yields higher interest and comes with good principal amount at the end of the maturity period of the mutual fund investment. Another important fact which he concluded is that mutual funds are safe, with close to zero risk, offering an optimized return on earnings and protecting the interest of investors. Mr. B. K. Singh and Mr. A. K. Jha (2009) in his study, “An Empirical study on awareness & acceptability of Mutual Fund”, published in Regional Student’s Conference, ICWAI pointed out that investors basically prefer mutual fund due to return

potential, liquidity and safety and they were not totally aware about about the systematic investment plan. The invertors‟ will also consider various factors before investing in mutual fund. fund. Ramamurthy and Reddy (2005) conducted a study, “Recent Trends in Mutual Fund Industry” published in SCMS Journal of Indian Management to analyze recent trends in

the mutual fund industry and draw a conclusion that the main benefits for small investors‟ due to efficient management, diversification of investment, easy administration, nice return potential, liquidity, transparency, flexibility, affordabilit y, wide range of choices and a proper regulation governed by SEBI. The study also analyzed about recent trends in mutual fund industry like various exit and entry policies of mutual fund companies, various schemes related to real estate, commodity, bullion and precious metals, entering of banking sector in mutual fund, buying and selling of mutual funds through online.

SIBM, Mumbai

21


3.2 Theoretical framework / Background Theory:

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 realised are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Figure 2: Mutual Fund Operation Flow Chart

SIBM, Mumbai

22


Organisation of Mutual Fund in India:

There are many entities involved and the diagram below illustrates the organisational set up of a mutual fund:

Figure 3: Organisation of a Mutual Fund Sponsors:

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

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

23


point, this Trust is known as the mutual fund. Asset Management Company:

Asset Management Company is the one which will manage the asset (money collected to invest on company shares) of its customers by appointing a manager under several schemes. Every scheme will have a specific objective, which is framed at the time of introducing the scheme. A manager is to be appointed under the scheme to keep up the objectives framed. He should take care that the investment on specific scheme should not affect the customer's asset. The schemes being introduced by the Asset Management Companies is known as Mutual Fund Scheme. As per the Mutual Fund definition, the Asset is the money received towards a collective investment plan. This will help the small investors to increase their asset with the help of Asset Management Companies. Anyhow an investor cannot blame AMC, for its under performance. We need to have a quick review on the performance of the fund in which we invest, at least once in 3 months. The AMC will help in providing the various investment plans. We should select the suitable plan from it which can meet our requirement. So risks are based on our decisions. Requirement of Asset Management Company:

Recent days are said to be the days of competition. Every day and every minute everyone is running to achieve something in their career. Achieving some goal is not that much easier nowadays, not only the hard work but also fastness in the work will help in achieving their goal to earn money. So, many of us do not have time to think about the future financial requirement and planning. Many of us are not having time to watch the market status and invest the money in it. That is the only source, through which we can grow our money drastic in a long run. However that needs some follow up of market, to change the investments periodically in order to fetch high returns. The above are all the reasons for which the Asset Management Companies are required. By paying the fund manager a little percentage we are making him to take care of our assets by investing in the shares which will meet the declared financial objectives

SIBM, Mumbai

24


Top 10 Asset Management Companies in India:

As it is very tough to find the best one AMC among the list, with the past performance and the returns of the schemes they have, many are suggesting the following the 10 AMC as top among the 44. It is not in order from the first to last, all may ma y have same importance. 

Axis AMC ltd.



Reliance Capital AMC Ltd.



SBI Funds Management Ltd.



HDFC Asset Management Co. Ltd.



ICICI Prudential AMC Ltd.



Franklin Templeton AMC (I) Pvt. Ltd.



Birla Sun Life AMC Ltd.



BNP Paribas AMC Ltd.



Tata Asset Management Ltd.



DSP Blackrock Investment Managers Pvt. Ltd.

SIBM, Mumbai

25


4. Objectives and Scope of the study 4.1 Research Aim:

The aim of this research is to empirically investigate the investors‟ attitude toward mutual fund 4.2 Research Objective: Objective 1: To study and analyze the impact of various demographic factors on investors‟

attitude towards mutual fund. Objective 2: To study about the factors responsible for the selection of mutual funds as an

investment option. Objective 3: To study the people in which age and income group prefer mutual funds over

other investment options 4.3 Scope of the Research:

Over the past few decades, much research has already been done over legal requirements of a mutual fund, SEBI Norms and role of AMFI. The main reason for choosing this topic is based on the fact that so far no study has been conducted conducted in order to understand the attitude of Investors‟ towards mutual fund as an investment tool. Academically, this research project will be helpful in understanding the perception and attitude of Indian Investors towards mutual fund which may reveal some interesting insights and directions for future research. It is observed that the level of income also influences the investment decisions. As far as the demographic factors are concerned, gender, income and level of education have significantly influence the investors‟ attitude investors‟ attitude towards mutual funds. Later after reading and studying various literatures, I came to know about various problems regarding mutual fund industry and its complex procedure. Additionally, we believe that conducting this research project will enhance the valuable personal knowledge about the subject and experience for future career applications.

SIBM, Mumbai

26


4.4 Hypotheses

The main purpose of this study is to find out what is the attitude of investors towards mutual fund as an investment option. To be able to fulfill the purpose of this research we find it appropriate to test the perception of investors towards mutual fund. This led into generating the following hypotheses to test accordingly: 

Hypothesis 1:

The demographic factors like gender, income and level of education have significantly influence the investors‟ attitude towards mutual funds.



Hypothesis 2:

The individual investors having lack of knowledge about mutual fund and hence they are not considering mutual fund as an investment option.

SIBM, Mumbai

27


5 Research Methodology of Study 5.1 Data Source:

This report is based on primary as well as secondary data. The study aims at finding out the attitude of the investors towards Mutual fund in Mumbai and Suburb. This study was based mainly on primary sources. The primary data was collected from the investors of mutual funds with help of the questionnaire which are supplied among the investors of Mumbai City. The secondary data were collected from the books, records and journals. The essential data were collected with the help of questionnaire.

5.2 Duration of Study:

The study was carried out for a period of one month, from 5 th June 2013 to 4 th July, 2013.

5.3 Sampling procedure:

By adopting convenience sampling, approximately 100 respondents were selected for this study. The essential data were collected with the help of questionnaire. It was collected through filling up the questionnaire prepared. The data has been analyzed by using Statistical tool.

5.4 Sample size:

The sample size of our project is limited to 100 people only. Out of which only 72 people had invested in various mutual fund schemes. Other 28 people had not invested in any of the mutual fund schemes

5.5 Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs etc.

SIBM, Mumbai

28


6 Data Analysis, Results and Interpretation This chapter provides results obtained from the survey, which have been examined and evaluated through data analysis techniques. Findings are subjected to hypotheses testing. This chapter evaluates investors‟ attitude towards mutual fund: 6.1 Profile of Sample:

Here we have mentioned profile of sample like age, gender, Income etc. The sample size of our project is limited to 100 people only.

Gender 7%

Male Female 93%

Figure 4: Classification as per Gender Data Interpretation: Interpretation:

Total number of respondents is 100 out of which 93% are male and 7% are female respondents. Hence we can say that the majority of our respondents are male and due to this reason NO further analysis of the impact of gender as a dependant (demographic) factor on other independent factors is

SIBM, Mumbai

29


Classification as per Age 60 50 40 30

No. of Investors

20 10 0 Less than 31 to 40 30

41 to 50

More than 50

Figure 5: Classification as per Age Data Interpretation: Interpretation:

This shows that majority of the respondents are young and they have just started their career. It might be possible that these respondents do not have complete knowledge of mutual fund and they might be investing in various avenues according to the advices given by their brokers and agents.

Qualification Distribution

19%

6%

SSC/HSC 46% 29%

Graduate Post Graduate Professional

Figure 6: Classification as per Qualification

SIBM, Mumbai

30


Data Interpretation: Interpretation:

A minor portion of 6% of the respondents are high school pass out while maximum of them i.e. 46% are graduates while 29% and 19% of the respondents hold Postgraduate and Professional qualification respectively.

Occupation Distribution 4%

12% Professional

51%

33%

Business Salaried Retired

Figure 7: Classification as per Occupation Data Interpretation: Interpretation:

51% of the respondents are salaried employees which forms a majority. 33% are business persons 12% are practicing professionals (like Chartered Accountants, Architects, Lawyers etc.) while a minor portion of 4% of them are retired employees.

SIBM, Mumbai

31


Distribution on the basis of Income 1% 6%

3 to 5 lakhs

34% 59%

5 to 15 lakhs 15 to 25 lakhs Above 25 lakhs

Figure 8: Profile of Investors on the basis of Income Data Interpretation: Interpretation:

Majority of the respondents i.e. 59% lie in the slab of annual income between Rs. 3-5 lakhs. 34% of the respondents have an income ranging from Rs. 5-15 lakhs, while a minor portion of 6% and 1% of the respondents have an annual income of Rs. 15-25 lakhs and above Rs. 25 lakhs respectively.

SIBM, Mumbai

32


6.2 Data Analysis, Interpretation and Results

Preferred Preferred Investment Avenue Avenue by Investors t n e d n o p s e R f o o N

50 45 40 35 30 25 20 15 10 5 0

no. of respondent

Saving Fixed Insuran Mutual s A/c Deposit ce Fund 50

40

31

48

Post Office 24

Shares/ Debent ures 41

Gold and Silver 45

Real Estate 26

Figure 9: Investors’ Investors ’ preference for investing money Data Interpretation: Interpretation:

This chart mainly talks about the respondents‟ preference to Investment Avenue. As per our survey it is seen that investors give second preference to mutual fund investment after savings A/c. It shows that mutual fund has gained popularity among the investors and they also prefer it as investment tool.

Factor Preferred Most

12%

22% Liquidity

25%

Low Risk 41%

High Returns Company Reputation

Figure 10: Factor consider while investing money

SIBM, Mumbai

33



Figure 10 mainly talks about the factor considered by investors while investing their money in different financial product. It is found that most of the investors are look at the safety of their money here as per our survey 41% people prefer low risk while investing their money. Around 25 % people are ready to take risk and attract to high returns followed by liquidity and company reputation which is 22% and 12% respectively. Question 1: Have you ever invested money in mutual fund?

Have you ever invested money in Mutual Fund?

28%

Yes 72%

No

Figure 11: No of Investors who invest in Mutual Fund Data Interpretation: Interpretation:

This chart mainly talks about the respondents‟ interest in investing in Mutual Fund. Out of 100 people surveyed it is seen that 72% of the people are investing or invested their money in MF whereas just 28% of the people are not investing in MF. This shows that mutual fund is considered as a good option for investment by most of the respondents.

SIBM, Mumbai

34


Question 2: If you do not invest in mutual fund then why?

Reason for not investing in Mutual Fund 11% 11%

Not aware about MF 53%

25%

Higher Risk Difficult to understand Not any specific reason

Figure 12: Reason for not investing in MF Data Interpretation: Interpretation:

Figure 12 is clearly shows that 53% of people who don‟t invest in mutual fund are due to lack of awareness and knowledge. And second most important reason is risk factor it is seen that 25% people think that mutual fund is a risky investment. Also 11% people think that it is difficult to understand and same no. of people also don‟t give specific reason for not investing in mutual fund. Question 3: Where do you find yourself as a mutual fund Investor?

Level of awareness in Mutual Fund Investors Totally ignorant 17%

14% Partial Knowledge of MF 32%

37%

Aware only about any specific scheme in which you invested Fully Aware

Figure 13: Awareness level of Mutual Fund Investors SIBM, Mumbai

35



This chart mainly talks about level of awareness among the mutual fund investors. It is seen that only 17% people are fully aware about mutual fund, where as 14% people are fully ignorant and it seems that they invest their money in mutual fund as per their advice of their financial advisor. Around 37% people are aware only about specific scheme in which they have invested their money and 32% are having partial knowledge about mutual fund. Question 4: How do you come to know about various mutual funds scheme?

Source of Information

10% 14% Advertisement

51%

Peer Groups 25%

Banks Financial Advisors

Figure 14: Source of information i nformation for investors Data Interpretation: Interpretation:

Figure 14 mainly talks about the source of information for mutual fund investors. It is clearly seen that the financial advisors stands first as the main source of information that is 51% of sample size followed by banks (that is 25% of sample) peer groups (that is 14% of sample) and advertisement (that is 10% of sample). The point to be noted is that most of the people prefer advice of their financial advisor before investing in mutual fund.

SIBM, Mumbai

36


Question 5: Which feature of mutual fund allure you most?

Features which attract Investors

32%

14% Diversification Better returns & Safety 37%

17%

Regular income Tax Benefits

Figure 15: Key features which attract investors Data Interpretation: Interpretation:

Figure 15 mainly talks about the key features which attract investors towards mutual fund. We can see that 37% of the respondents have attracted because mutual fund provide better returns and safety followed by tax benefits (that is 32% of sample), regular income (that is 17% of sample), diversification (that is 14% of sample).

Question 6: When you invest in mutual fund which mode of investment will you prefer?

Mode of Investment

31% One time investment 69%

Systematic Investment Plan (SIP)

Figure 16: Preferable mode of investment in Mutual Fund

SIBM, Mumbai

37



Figure 16 shows the respondents‟ mode of investment in mutual fund and it is seen that 69% of people prefer systematic investment plan and 31% people prefer one time investment in mutual fund. Question 7: Where do you go to invest your money in mutual funds?

Intermediaries in MF 3% 15% 38%

Direct in AMCs Financial Advisor 44%

Distributor/Broker Other Source

Figure 17: Intermediaries in Mutual Fund Data Interpretation: Interpretation:

Figure 17 talks about who are the most effective intermediaries in mutual fund. It is clearly seen that the financial advisors stands first as the main intermediaries that is 44% of sample size followed by distributor/broker (that is 38% of sample) direct AMCs (that is 15% of sample) and other source (that is 3% of sample).

SIBM, Mumbai

38


Question 8: How would you like li ke to receive returns every year?

Preferred mode to receive returns

29% Dividend Payout 56%

Dividend re-investment

15%

Growth in NAV

Figure 18: Mode of receive returns Data Interpretation: Interpretation:

Figure 18 mainly talks about the preferred mode to receive returns. It is found that most of the investors are preferred returns in terms of growth in NAV. Their number stands to be at 56% followed by 29% people would like to receive returns in form dividend payout and 15% people would like to re invest their returns in mutual fund fund or other investment avenue. Question 9: Which AMC would you like to prefer to invest your money?

Name of AMC

No. Of Respondents

Rank

Reliance HDFC AXIS Birla Sun Life SBI MF ICICI Prudential Kotak Mahindra Other

37 32 28 27 22 20 19 10

1 2 3 4 5 6 7 8

Table 3: Ranking of AMCs as per Investor

SIBM, Mumbai

39


Most preferred preferred Assets Management Company 40 t 35 n e d30 n o 25 p s 20 e R15 f o o 10 N 5 0

No. of respondent

Name of AMC

Figure 19: Most preferred AMCs as per Investors Data Interpretation: Interpretation:

Table 3 shows reliance is most preferred AMCs among mutual fund investors followed by HDFC, AXIS, Birla Sun Life, SBI MF, M F, ICICI Prudential and Kotak Mahindra.

SIBM, Mumbai

40


7 Limitations of the Project 

Some of the persons were not so responsive. Respondents may not be prepared to contribute to the research due to lack of time and resources required.



Possibility of error in data collection because many of investors may have not given actual answers of questionnaire.



Sample size is limited to 100 investors.



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



The research is confined only to the city Mumbai.

SIBM, Mumbai

41


8 Conclusion Even though the first mutual fund was introduced in year 1963, the awareness about mutual fund is comparatively low among the Indian investors. Most of the Indians are unaware of a financial option called mutual funds. Till now, the major part of saving goes into bank deposits, postal deposits and insurance. In the competitive business environment good performance of scheme of a particular mutual fund company plays a vital role in the minds of the existing investors will deciding to invest than the brand name of the AMC. Further this study shows that most of respondents are still confused about the mutual funds and have not formed any attitude towards the mutual fund for investment purpose. It has been observed that most of the respondents having lack of awareness about the various function of mutual funds. Moreover, as far as the demographic factors are concerned, gender, income and level of education have significantly significa ntly influence the investors‟ attitude towards mutual funds. As far as the benefits provided by mutual funds are concerned, return potential and liquidity have been perceived to be most attractive by the investors followed by flexibility, transparency and affordability. Apart from the above, in India there is a lot of scope for the growth of mutual fund.

SIBM, Mumbai

42


9 Recommendations and Suggestions 

There is need to build awareness of the new funds among the investors with constantly being in contact with them.



Proper training should be given to the advisor so that they will solve the question of the customer mind.



Some of investors have asked for periodical market report about stock market so that they can get the knowledge properly.



AMC‟ AMC‟s should go for increasing more awareness about different facilities of investment such as SIP S IP & MIP among investors.



The AMC should advertise their tax saving plan more so that they can gain more customers.



The promotional activities play a vital role. So it should be given importance importance for creating more awareness among the people.

SIBM, Mumbai

43


10 Appendix Questionnaire 



The Questionnaire given below is designed to conduct Primary research for measuring Investors‟ attitude towards Mutual Fund in the city of Mumbai & Suburbs. The Personal information will not be used/disclosed anywhere, It is solely used for academic purpose only. Section: I A) Name: _______________________________________________________

B) Age : _____________________ _____________ ________

C) Gender: ______________________ _____________ _________

D) Qualification

E) Occupation

F) Yearly Income

a. SSC/HSC

a. Professional

a. 3 - 5 lakhs

b. Graduate

b. Business

b. 5 - 15 lakhs

c. Post Graduate

c. Salaried

c. 15 - 25 lakhs

e. Professional

d. Retired

d. Above 25 lakhs

Section: II 1. What kind of investment do you prefer most?

(Kindly tick ( ) which are applicable) a. Saving Account

e. Post Office - NSC

b. Fixed Deposit

f. Shares/Debentures

c. Insurance

g. Gold and Silver

d. Mutual fund

h. Real Estate

Note: Kindly tick () on any one option for the following questions 2. While inventing your money which factor you would consider most?

a. Liquidity

c. High Returns

b. Low Risk

d. Company Reputation Reputation

SIBM, Mumbai

44


3. Have you ever invested money in mutual fund?

a. Yes b. No If No, 4. If you do not invest in mutual fund then why?

a. Not aware of MF b. Higher Risk c. Difficult to Understand d. Not any specific Reason If Yes, Please Answer the below questions . Section: III A. Where do you find yourself as a mutual fund Investor? Investor?

a. Totally Ignorant b. Partial Knowledge of Mutual Fund Fund c. Aware only of any specific scheme in which you invested d. Fully Aware B. How do you come to know about various mutual funds scheme?

a. Advertisement b. Peer Groups c. Banks d. Financial Advisors C. Which feature of mutual fund allure you most?

a. Diversification b. Better Returns & Safety c. Regular Income d. Tax Benefits SIBM, Mumbai

45


D. When you invest in mutual fund which mode of investment will you prefer?

a. One time investment b. Systematic Investment Plan E. Where do you go to invest your money in mutual funds?

a. Direct in AMCs b. Financial Advisor c. Distributor/Broker d. Other Source F. How would you like to receive returns every year?

a. Dividend Payout b. Dividend re-investment c. Growth in NAV G. Which AMC would you like to prefer to invest your money?

a. HDFC

e. ICICI Prudential

b. Reliance

f. Birla Sun Life

c. SBI MF

g. Kotak Mahindra

d. AXIS

h. Other

SIBM, Mumbai

46


11 Bibliography References: 

Ramamurthy and Reddy (2005), “Recent Trends in Mutual Fund Industry” published in SCMS Journal of Indian Management



Mr. B. K. Singh and Mr. A. K. Jha (2009), “An Empirical study on awareness & acceptability of Mutual Fund”, published in Regional Student‟s Conference, ICWAI



Mr. Sarish (2012) “A Study of Opportunities and Challenges for Mutual Fund in India: Vision 2020”, published in VSRD International Journal of Business & Management Research Vol. 2



Dr. Binod Kumar Singh (March 2012), “Investors attitude towards Mutual Funds”, published in the International Journal of Research in Management



Dr. Ravi Vyas (July 2012), “Mutual Fund Investor‟s Behaviour and Perception”, published in International Refereed Research Journal Vol. – Vol. – I I



Dr. Shantanu Mehta (September 2012), “Preference of Investors for Indian Mutual Funds and its Performance Evaluation”, Evaluation ”, published in Pacific Business Review International Vol. 5

Website: 

www.amfiindia.com



www.moneycontrol.com



www.njgroup.in



www.investopedia.com



www.investor.sebi.gov.in



www.bseindia.com



www.nseindia.com

SIBM, Mumbai

47

A Study of Attitude of Investors' Towards Mutual Fund as an Investment Tool

Recommend Documents