A study on investor attitude towards mutual funds with reference to reliance mutual funds

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A STUDY ON INVESTOR ATTITUDE TOWARDS MUTUAL FUNDS WITH REFERENCE TO RELIANCE MUTUAL FUNDS.

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A study on investor attitude towards mutual funds with reference to reliance mutual funds

  1. 1. 1 CHAPTER 1 INTRODUCTION The term investment is used to describe the process of investing money in shares, debentures, fixed deposits, gold, real assets, life policies, mutual funds, and money market instruments. These outlets where the money is invested are known as investment assets. By investing, an investor commits the present funds to one or more assets to be held for some time in expectation of some future return in terms of interest or capital gain. Individual investor considers a number of factors before deciding to invest their funds in various securities involving varying degrees of risk and return. In the present economic scenario, the option available to them is different and the factor motivating the investors to invest is governed by their socio- economic profile including expected return and risk tolerance. In short, the investment decision making process is a multi-faceted subject to change over a period of time. An attempt has been made in this study to identify the perceptual factors which influence the investors to invest in mutual funds. There are a number of investment opportunities available to an investor. Each of these investments has its own risk and return features. The proverb “never put all the eggs in the same basket” guides the investor to diversify the risk. Diversification refers to the process whereby an investor invests his funds in more than one investment opportunity. An investor must learn to analyze and measure the risk and return of the portfolio. All investors may not be in a position to undertake fundamental and technical analysis before they decide about their investment options. Neither do they have the resources nor the expertise to do so. Instead of investing directly, the investors particularly, small investors may go for indirect investment through the mutual funds. Instead of becoming the share holder or bondholder of a company, these investors would become the unit holders of mutual funds. In almost all the capital markets throughout the world, mutual funds have gained a significant position. The mutual fund industry plays a significant role in the development of the economy as well. Its buoyant growth leads to lower intermediation costs, more efficient financial markets, and increased vibrancy of the capital markets and higher local ownership of financial assets. If retail investment is directed through the mutual fund route, it will lead to greater wealth creation in the long run. Thus, the industry can be one of the causative factors for a healthy economy.
  2. 2. 2 Mutual fund is a retail product designed to target small investors, salaried people and others who are intimidated by the mysteries of stock market but, nevertheless, like to reap the benefits of stock market investment. SEBI has played a vital role in regularizing the mutual fund business. From time to time it has tried to plug the loopholes prevailing in the system and safeguard the interest of investors who has been backbone of this unprecedented growth. As of now big challenge of mutual fund industry is to mount on investor awareness and to spread further to the semi urban and rural areas. Since the need of this study has been aroused in order to see the preference awareness and the investor’s attitude regarding the mutual funds. Investment is a commitment of funds made in the expectation of some positive return. If the investment is properly undertaken, the return will be commensurate with the risk the investor assumes. Investment goals vary from person to person business to business. While some want security, others give more weightage to returns alone. With objectives defying any range, it is obvious that the products required will vary as well. Investments generally involve real assets. Real assets are tangible, material thing such as buildings, automobiles, and gold etc. financial assets are pieces of paper representing an indirect claim to real assets held by someone else. MUTUAL FUNDS: A mutual fund is an investment vehicle that pools in the monies of several investors, and collectively invests this amount in either the equity market or the debt market, or both, depending upon the fund’s objective. This means you can access either the equity or the debt market, or both, without investing directly in equity or debt. INVESTING IN MUTUAL FUNDS: Diversification is a major advantage of investment through Mutual Funds, as investors get the benefit of various instruments through a single avenue.  Professionally qualified people manage the funds.  Mutual Funds offer flexibility in options and choice of schemes to match individual needs.  Transparency of operations as well as investment pattern and philosophy by disclosures of portfolio also add to the advantages of investing in Mutual Funds.  The Mutual Fund industry is very well regulated by SEBI
  3. 3. 3 Mutual Funds offer tax benefits. Dividend income received from investing in Mutual Funds is tax free in the hands of the investor. Investments in the growth option will be subject to long term or short-term capital gains tax as applicable. ADVANTAGE OF MUTUAL FUNDS 1. Professional Fund Management 2. Services 3. Diversification 4. Affordability 5. Cost effectiveness 6. Liquidity 7. Tax breaks 8. Transparency. There are wide varieties of mutual fund schemes and are classified on the basis of its structure and its investment objective. BASED ON STRUCTURE OPEN ENDED FUNDS An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net asset value (“NAV”) related prices. The key feature of this scheme is liquidity. CLOSED-ENDED FUNDS The fund is open for subscription only during a specific period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. The objective of the fund is to declare regular dividend.
  4. 4. 4 BASED ON INVESTMENT OBJECTIVE GROWTH FUNDS The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of the stock exchanges where they are listed. The fund may declare dividend but the main objective is only capital appreciation. INCOME FUNDS These are also known as debt funds since they invest in debt instruments issued by the government, private companies banks and financial institutions. These funds target low risk and stable income to the investors. While returns in these funds may be regular, their scale may fluctuate depending on the prevailing interest rates and the credit quality of the debt securities. BALANCED FUNDS These funds, as the name suggests, are a mix of both equity and debt funds. They invest in both equities and fixed income securities in line with pre-defined investment objectives. The aim at providing a balanced mix of capital appreciation through investments in equities coupled with investments in stable instruments like bonds etc. LIQUID FUNDS Also know as Money market funds as they invest in securities of short term nature, typically securities of less than one-year maturity like Treasury Bills issued by the government, Certificate of Deposits issued by banks and Commercial Paper issued by companies as well as in the inter- bank call money market. These funds are considered to be at the lowest rung in the hierarchy of risks.
  5. 5. 5 1.1 COMPANY PROFILE Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of India’s leading Mutual Funds, with Average Assets Under Management (AAUM) of Rs. 78,112 Crores and an investor count of over 64.65 and 70.99 Lakh folios. (AAUM and investor count as of Jan - Mar '12 ) Source : http://www.amfiindia.com/ Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing mutual funds in India. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 179 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. Reliance Capital Asset Management Limited (‘RCAM’) is the asset manager of Reliance Mutual Fund. RCAM a subsidiary of Reliance Capital Limited, which holds 92.93% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders. Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life and general insurance, private equity and proprietary investments, stock broking and other financial services. Sponsor : Reliance Capital Limited Trustee : Reliance Capital Trustee Co. Limited Investment Manager / AMC : Reliance Capital Asset Management Limited Statutory Details : The Sponsor, the Trustee and the Investment Manager are incorporate under the Companies Act 1956. Vision Statement To be a globally respected wealth creator with an emphasis on customer care and a culture of good corporate governance. Mission Statement To create and nurture a world-class, high performance environment aimed at delighting our customers
  6. 6. 6 Our Corporate Governance Policy: Reliance Capital Asset Management Limited has a vision of being a leading player in the mutual fund business and has achieved significant success and visibility in the market. However, an imperative part of growth and visibility is adherence to good conduct in the marketplace. At Reliance Capital Asset Management Limited, the implementation and observance of ethical processes and policies has helped us in standing up to the scrutiny of our domestic and international investors. Management: The management at Reliance Capital Asset Management Limited is committed to good corporate governance, which includes transparency and timely dissemination of information to its investors and unit holders. The Board of Directors of RCAM is a professional body constituting inter-alia of, well-experienced and knowledgeable independent members. Employees: Reliance Capital Asset Management Limited has at present, a code of conduct for all its officers. It has a clearly defined prohibition on insider trading policy and regulations. The management believes in the principles of propriety and utmost care is taken while handling public money, making proper and adequate disclosures. All personnel at RCAM are made aware of their rights, obligations and duties as part of the Dealing Policy laid down in terms of SEBI guidelines. They are taken through a well-designed HR program, conducted to impart work ethics, the Code of Conduct, information security, Internet and e-mail usage and a host of other issues. One of the core objectives of RCAM is to identify issues considered sensitive by global corporate standards, and implement policies/guidelines in conformity with the best practices as an ongoing process. RCAM gives top priority to compliance in true letter and spirit, fully understanding its fiduciary responsibilities. Sponsors Reliance Capital Limited: Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited, a subsidiary of Reliance Capital Limited, which holds 86.80% of the paid-up capital of
  7. 7. 7 Reliance Capital Asset Management Limited, the balance paid up capital being held by minority shareholders. Reliance Mutual Fund (RMF) has been sponsored by Reliance Capital Ltd (RCL). The promoter of RCL is AAA Enterprises Private Limited. Reliance Capital Limited is a Non Banking Finance Company and is one of the India’s leading and fastest growing financial services companies, and ranks among the top three private sector financial services and banking companies in India, in terms of networth. Reliance Capital Limited has interests in asset management and mutual funds, life and non-life insurance, private equity and proprietary investments, stock broking and other activities in the financial services sector. The net worth of RCL is as follows: Particulars (Rs.in crores) 2009-10 2008-09 2007-08 Net Worth 6885.70 6687.30 5927.50 Total Income 2366.62 2974.85 2079.79 Profit After Tax 339.42 968.02 1025.45 Reliance Capital Limited has contributed Rupees One Lac as the initial contribution to the corpus for the setting up of the Reliance Mutual Fund. Reliance Capital Limited is responsible for discharging its functions and responsibilities towards the Fund in accordance with the Securities and Exchange Board of India (SEBI) Regulations. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond the contribution of an amount of Rupees one Lac made by them towards the initial corpus for setting up the Fund and such other accretions and additions to the corpus. AMC: About Reliance Capital Asset Management Limited. Reliance Capital Asset Management Limited (RCAM) is an unlisted Public Limited Company incorporated under the Companies Act, 1956 on February 24, 1995. RCAM has been appointed as the Asset Management company of Reliance Mutual Fund by the Trustees of Reliance Mutual Fund vide Investment Management Agreement (IMA) dated May 12, 1995 and executed between Reliance Capital Trustee Co. Limited and Reliance Capital Asset Management Limited and amended on August 12, 1997 and amended on August 12, 1997,
  8. 8. 8 January 20, 2004 and February 17, 2011 in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is acting as the Investment Manager of the Mutual Fund. The net worth of the Asset Management Company based unautdited financials statements as on September 30, 2011 is Rs. 1,228.89 Crore. RCAM is also registered as a Portfolio Manager vide SEBI Registration Number PM/INP000000423 and renewed with effect from August1, 2009. The AMC is also rendering advisory services in respect of ‘Emergent India Investment Limited’, an offshore fund for investment in India. RCAM has ensured that key personnel of the AMC, the systems, back office, bank and securities accounts are segregated activity wise and there exists systems to prohibit access to inside information of various activities. As per SEBI Regulations, it will further ensure that AMC meets the capital adequacy requirements, if any, separately for each such activity. However, there is no conflict of interest between various business activities carried on by RCAM. The mutual fund: About RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund was changed to Reliance Mutual Fund effective 11th March 2004 vide SEBI's letter no. IMD/PSP/4958/2004 date 11th March 2004. Reliance Mutual Fund was formed to launch various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities. The main objectives of the Reliance Mutual Fund are:  To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise various collective Schemes of savings and investments for people in India and abroad and also ensure liquidity of investments for the Unit holders.  To deploy Funds thus rose so as to help the Unit holders earn reasonable returns on their savings.  To take such steps as may be necessary from time to time to realise the effects without any limitation.
  9. 9. 9 Awards and achievements: CNBC TV18 - CRISIL Mutual Fund of the Year Award for 2009: Reliance Mutual Fund has won the ‘CNBC TV18 - CRISIL Mutual Fund of the Year’ Award in the Category – Mutual Fund House of the Year (Awarded by CRISIL Fund Services, CRISIL Limited). In total 37 fund houses were considered as the award universe. Fund Houses winning at least one award for their schemes in the category level awards for 2009 were eligible to be in contention for the award. The award is based on consistency of fund house’s performance across various scheme categories in the four quarterly CRISIL Composite Performance Rankings (CPRs) released during the calendar year 2009. The individual CRISIL CPR ranks for their schemes were aggregated on a weighted average basis to arrive at the final ranks for fund houses. The mutual fund house with the highest final score is the “Mutual Fund House of the Year”. The award has been granted for the year 2009 and will be in vogue till the announcement of the award for the next year in the same category. A detailed methodology of the CRISIL CPR is available at www.crisilfundservices.com. Past performance is no guarantee of future results. Rankings and Award Source: CRISIL Fund Services, CRISIL Limited.
  10. 10. 10 1.2 OBJECTIVES OF THE STUDY:  To study the investors attitude towards the mutual funds.  To find out the factors which influencing the investors to prefer the investment in mutual funds.  To suggest the suitable measures for extending the scope for investment in mutual funds based on findings of the study. 1.3 SCOPE OF THE STUDY:  The present study is an attempt to study the investor’s attitude towards mutual fund of Chennai city. it involves understanding the basic concept of mutual fund, various concepts of mutual fund, various schemes of mutual fund, investment alternatives.  Factor influencing to investment in mutual funds, investors expectations regarding the mutual fund and investors attitudes of different mutual funds.  The analysis would help how much importance investors giving to the mutual funds comparing to the other investments. 1.4 NEED OF THE STUDY:  This study gives information about mutual fund industry and as well as awareness level among the people for mutual funds.  And this study deals with the investors attitude and how the mutual funds are performing in the current market situation.  This study facilitates the general people who can understand the importance and explore the new option for investment in the mutual funds
  11. 11. 11 1.5 LIMITATIONS OF THE STUDY For the research work, data was collected and interpreted with utmost reliability and consistency but due to prejudices of a few respondents, certain limitations of the study are as follows:  The study depicts the present scenario in the selected city of Chennai and hence the result may not be applicable to another period of time.  The study is limited to 150 respondents of the selected city of Chennai.  Answer to the questionnaire depends upon the beliefs and prejudices of investors.  It is assumed that respondents are true and honest in expressing their views and have filled the questionnaire honestly and without any bias.  The present study is restricted to information collected about the Mutual Fund Investors with the help of questionnaire.
  12. 12. 12 CHAPTER 2 REVIEW OF LITERATURE Investors are generally more careful while making investment decision and presence of rationality in every investor demands higher return at minimum risk but when markets are efficient it is not possible to gain abnormal returns. Risk is generally, associated with various applications differently but in common it means negative connotation such as harm or loss or some undesirable action. 2.1 Factors influencing the retail investors to prefer investment in mutual funds in Puducherry: An Emprical study *D.Kandavel *Asst. Professor of Commerce, DDE, Annamalai University, Annamalai Nagar, Tamil Nadu, India. Mutual funds have emerged as an important segment of financial markets and so far have delivered value to the investors. It has grown by leaps and bounds in last couple of years. But no industry can flourish without a proper regulatory mechanism in the place. These initiatives would help towards making the Indian mutual fund industry more vibrant and competitive. Since, the need of study has been aroused in order to see the factors influencing the retail investors to prefer investment regarding the mutual funds in Puducherry. The study is based on the formulation of the following null hypotheses: There is no significant relationship among the acceptance level of the retail investors belonging to different demographic profile towards factors influencing to invest in mutual funds. In order to study the factors influencing the retail investors to prefer investment in mutual funds in Puducherry, chi square test, analysis of one-way variance, student t-test, analysis of co- efficient of variation, multiple regression analysis, and percentage analysis have been employed. Chi square test was employed to measure the association between the demographic profile of the respondents and their satisfaction with investment in mutual funds and type of fund preferred. The present study looks at the small investors purchase behavior does not have a high level of coherence due to the influence of different purchase factors. If the study provokes the authority concerned to take some positive measures for expanding the scope of mutual funds investment.
  13. 13. 13 2.2 Investors perception towards investment in mutual funds Kaplan and Garrick (1981), Rajeshwari TR and Rama moorthy VE (2002) The investment decision making process is a multi-faceted subject to change over a period of time. Mutual Funds have become an important portal for the small investors. The objectives of the study are to know investor’s motivational factors, investment preference and problems faced by investors in Mutual Funds. The study reveals that 1) The motivational factors to invest in mutual funds are Portfolio diversification, Risk minimization and greater tax benefits; 2) Lack of knowledge is the primary reason for not investing in mutual fund. Risk expressed by Kaplan and Garrick (1981) demonstrates that risk involves a factor of uncertainty and potential loss that might be incurred. Rajeshwari TR and Rama moorthy VE (2002) studied the financial behavior and factors influencing fund/scheme selection of retail investors by conducting factor analysis using principal component analysis, to identify the investors underlying fund scheme selection criteria, so as to group them into specific market segment for designing of the appropriate marketing strategy. Although majority of investors who invest in mutual fund themselves are not clear with the objective and constraints of their investment but in addition to this most important critical gap that exist in this process is lack of awareness about presence of risk elements in mutual fund investment. The new marketing philosophy and strategies place special emphasis on recognition of customer needs in an effort to provide high level of quality services (Harrison, 2000). 2.3 Learn how to invest in Mutual Funds Mustafa Soleimanzadeh Mustafa Soleimanzadeh in his article, “Learn how to invest in Mutual Funds” had discussed about the risk and return in mutual funds. He stated that the risk and return depend each other, the greater the risk, the higher the potential return; the lower the risk, the lower the expected return. Mutual funds try to reduce their risk by investing in a diversified group of individual stocks, bonds, or other securities. He concluded that the investment in stocks can get more return than mutual funds but investment in mutual funds the risk is lower. Mutual funds are great for funding retirement plans and investors that don't have the time or energy to consider individual stocks.(2006) Kum Martin in his article, “Basics about Mutual Funds” had discussed about different types of mutual funds. He stated that the equity funds involve just common stock investments. They are extremely risky but can end up earning a lot of money. Fixed income funds are government and corporate securities. Fixed income funds offer fixed returns and the risk associated with these funds is very low. Balanced mutual funds are a combination of bonds
  14. 14. 14 and stocks. He concluded that the low risk in investment will not earn a lot of returns. (2007) Mutual fund managers have to use various investment styles depending upon investor’s requirement. Most of the empirical evidences have shown that mutual fund investor’s purchase decision is influenced by past performance (Patel, et al. 1992). Research study by (Jones et al, 2007) has proved that a negative correlation exists between advertisement and fund quality. A common investor may expect that mutual fund should option strategies that have been documented to produce superior returns in the past instead they follow to select portfolios that don’t deviate markedly from market benchmarks. 2.4 Investors’ Preference towards Mutual Funds in Coimbatore City A. Vennila, Author, Assistant Professor, Sri Krishna College of Technology, Coimbatore. R. Nandhagopal, Co-Author, Director, PSG Institute of Management, Coimbatore There are a lot of investment avenues available today in the financial market for an investor with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and Bonds where there is low risk but low return. The recent trends in the Stock Market have shown that an average retail investor always lost with periodic bearish tends. If the invests in Index Funds, they foregoes management risk, because these funds do not employ managers. In the present study an attempt has been made to study the attitude of the investors towards investment in mutual funds in Coimbatore City. The study aims at finding out the attitude of the investors towards investment in mutual funds in Coimbatore city. The primary data was collected from the investors of mutual funds with help of the questionnaire. The secondary data were collected from the books, records and journals. By adopting convenience sampling, 250 respondents were selected for this study. 2.5 .An Analysis of Investors' Attitude towards Tax Saving Mutual Funds in India N. S. Santhi, Assistant Professor, Department of Business Administration, KSR College of Engineering, Tiruchengode. K. Balanaga Gurunathan, Professor, Department of Management Studies, KSR College of Technology, Tiruchengode. Investment is saving money and engaging them with the expectation of earning profit in future. Mutual fund is supposed to be a better avenue for the individual investor. Tax saving mutual funds is also known as Equity Linked Saving tax saving mutual funds which provides all the benefits along with tax exemption on their investment. This study makes an attempt to analyze the investor’s attitude towards their investment on Tax saving mutual funds. The study
  15. 15. 15 finds that the participation of investors in Tax saving mutual funds is comparatively less than other safer investment areas like Insurance, Postal Deposit Schemes and Fixed Deposits. The dynamic relationship between investors’ biographical information and their behavior has been examined by using relevant statistical techniques. The investors’ Knowledge and satisfaction on Tax saving mutual funds and awareness on regulating bodies also has been analyzed. The study finds that majority of the investor doesn’t have the knowledge on schemes and awareness on controlling authorities and they are satisfied with the overall benefits on Tax saving mutual funds. For the purpose of research, Primary data have been collected from the Tax saving Mutual fund Investors’ in Tamil Nadu, India through well structured questionnaire schedule. 2.6 Investors attitude towards Mututal Funds Project Report The research was done on the topic “Investors Attitude towards UTI Mutual Funds”. The study aims at analysing the attitude of the investors towards UTI Mutual Funds. The data was collected with the help of a questionnaire. The sample size considered for the study was 100 wherein all the samples were investors of UTI Mutual Funds in Coonoor. The tools used for the analysis include Percentage Analysis and Mean Score Values. The analysis was divided into 2 phases which are Personal Factors and Investment Factors. The study revealed that the investors have a positive attitude towards their investments in UTI Mutual Funds. The investors mainly look into the returns earned from the investment. It was found that the awareness towards the risk related to the investment was relatively low. Based on the analysis Suggestions for improvement are provided. 2.7 Perceptions of investors, brokers and fund managers on the indian mutual fund industry Financial system comprises of financial institutions, services, market and instruments. Financial institutions mobilize resources, purchase and sell instruments and render various services in accordance with the practices and procedures of law. Investing in financial securities is a complex one involving knowledge of various investment tools, terms, concepts, strategies and process. The success of a financial investment activity depends on the knowledge and ability of investors to invest the right amount, in the right type, at the right time. Investor has to use his intellect, which is an art to acquire by learning and experience.
  16. 16. 16 Knowledge of financial investment principles and the art of investment management are the basic requirements for a successful investment. The financial securities include ownership securities (like shares, mutual fund units) and creditorship securities (like debentures, bonds). Ownership securities are more risky than creditorship securities. Investment decisions relating to ownership securities involve planning of investment strategies according to the extent of diversification desired by individuals. Investors can reduce risk and maximize returns by way of mutual fund investments, enjoying the expertise of professional fund management. In India, Mutual fund industry is an organised financial system, accessible to individual investors having varied needs and options. In order to identify the preferences of brokers and investors for mutual funds, a careful collection of primary data through questionnaire was made. Schedules were used to collect data from fund managers on mutual funds. 2.8 Investors Preference for Investment in Mutual Funds: An Empirical Evidence Since interest rates on investments like PPF, NSC, bank deposits, etc., are falling, the question to be answered is: What investment alternative should a small investor adopt? Direct investment in capital market is an expensive proposal, and keeping money in saving schemes is not advisable. One of the alternatives is to invest in capital markets through mutual funds. This helps the investor avoid the risks involved in direct investment. Considering the state of mind of the general investor, this article figures out: (i) the preference attached to different investment avenues by the investors; (ii) the preference of Mutual Funds schemes over others for investment; (iii) the source from which the investor gets information about Mutual Funds; and (iv) the experience with regard to returns from mutual funds. The results show that the investors consider gold to be the most preferred form of investment, followed by NSC and Post Office schemes. Hence, the basic psyche of an Indian investor, who still prefers to keep his savings in the form of yellow metal, is indicated. Investors belonging to the salaried category, and in the age group of 20-35, years showed inclination towards close-ended growth (equity-oriented) schemes over the other scheme types. A majority of the investors based their investment decision on the advice of brokers, professionals and financial advisors. The findings also reveals the varied experiences of respondents regarding the returns received from investments made in mutual funds. The masses in India generally prefer to save in those instruments that are safe. The safety of the money invested is not compromised, and at times, they do not mind accepting lesser returns on their investment. An average small investor generally advocates the
  17. 17. 17 phenomenon of risk aversity. But, return on investment in capital markets comes with the associated risk. 2.9 An Empirical Study of Retail Investor’s Attitude Towards Investment in Mutual Funds Ashok Khurana, Guru Nanak Khalsa College, Yamunanagar Vikas Chaudhary In the financial industry, Mutual Funds have become a hot favourite of millions of people all over the world. A mutual fund is a special type of institution, a trust or an investment company which acts as an investment intermediary and invests the savings of large number of people to the corporate securities in such a way that investors get steady returns, capital appreciation and a low risk. It is essentially a mechanism of pooling together the savings of a large number of investor for collecting investment with an avowed objective of attractive yields and appreciation in their values. The concept of 'Mutual Fund' is a new feature in Indian capital market but not to international capital markets. A mutual fund in the most suitable investment for the retail investors as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. At the retail level, investors are unique and are a highly heterogeneous group. A large number of investment options are available to investors. Currently there are large numbers of schemes available and asset management companies (AMCs) compete against one another by launching new products or repositioning old ones. Unless mutual fund schemes are tailored to the changing needs, and the AMCs understand the fund selection behaviour of the investors, survival of funds will be difficult in future. With this significance an attempt is made to study the attitude of mutual fund investors. 2.10 A study on investors’ attitude towards mutual funds as an investment option Dr. Binod Kumar Singh, Faculty Member,Amity Global Business School,Patna. In this paper, structure of mutual fund, operations of mutual fund, comparison between investment in mutual fund and bank and calculation of NAV etc. have been considered. In this paper, the impacts of various demographic factors on investors’ attitude towards mutual fund have been studied. For measuring various phenomena and analyzing the collected data effectively and efficiently for drawing sound conclusions, Chi-square () test has been used and for analyzing the various factors responsible for investment in mutual funds, ranking was done on the basis of weighted scores and scoring was also done on the basis of scale. Key words: Hypothesis, Chi-square () test, Rank, Weighted score and Scaling.
  18. 18. 18 CHAPTER –3 RESEARCH METHODOLOGY Research Methodology is a way to systematically solve a problem. It may be understood as a science of study where research is done scientifically. It includes various steps that are generally adopted by a researcher in studying his research problem. 3.1 Type of research: The type of research carried out was Descriptive. Descriptive research, also known as statistical research, describes data and characteristics about the population or phenomenon being studied. Descriptive research answers the questions who, what, where, when, "why" and how. 3.2 Data collection methods: 3.2.1 Primary data: Questionnaire was used as a tool for primary data collection. 3.2.1 Secondary data: Secondary data were collected from books, journals, websites and magazines. 3.3 Sampling design: Collection of data from a sample of units that have been selected from the target universe with the intention that they may be representative of that universe. This is referred to as purposive sampling or judgemental sampling.  Sample size taken for this study is 150.  Convenience sampling technique was used. Accidental sampling (sometimes known as grab, convenience or opportunity sampling) is a type of non-probability sampling which involves the sample being drawn from that part of the population which is close to hand. That is, a population is selected because it is readily available and convenient. It may be through meeting the person or including a person in the sample when one meets them or chosen by finding them through technological means such as the internet or through phone.
  19. 19. 19 3.4 Statistical tool for analysis: 3.4.1 Percentage analysis: Percentage method refers to a specified kind which is used in making comparison between two or more series of data. Percentages are based on descriptive relationship. It compares the relative items. Since the percentage reduces everything to a common base and thereby allow meaning comparison. Percentage = Number of respondents x 100 Total no of respondents 3.4.2 Cross tabulation: Cross tabulation tables (contingency tables) display the relationship between two or more categorical (nominal or ordinal) variables. The Cross tabs procedure forms two-way and multiway tables and provides a variety of tests and measures of association for two-way tables. The structure of the table and whether categories are ordered determine what test or measure to use. 3.4.3 Chi-square: The Chi square test procedure tabulates a variable into categories and computes a chi square statistic. This goodness-of-fit test compares the observed and expected frequencies in each category to test that all categories contain the same proportion of values or test that each category contains a user-specified proportion of values. Statistical method to test whether two (or more) variables are: (1) independent or (2) homogeneous. The chi-square test for independence examines whether knowing the value of one variable helps to estimate the value of another variable. The chi-square test for homogeneity examines whether two populations have the same proportion of observations with a common characteristic.
  20. 20. 20 CHAPTER 4 DATA ANALYSIS AND INTERPRETATION 4.1 Univariate – Percentage Analysis Table showing classification of respondents based on Gender Frequency Percent Valid Percent Cumulative Percent Valid MALE 93 62.0 62.0 62.0 FEMALE 57 38.0 38.0 100.0 Total 150 100.0 100.0 Table 4.1 Chart showing classification of respondents based on Gender Chart 4.1 INTERPRETATION: Out of 150 respondents 62% were male and 38% were female.
  21. 21. 21 Table showing classification of respondents based on Occupation Frequency Percent Valid Percent Cumulative Percent Valid STUDENT 12 8.0 8.0 8.0 GOVT.EMP 64 42.7 42.7 50.7 PRI.EMP 59 39.3 39.3 90.0 BUSINESS 11 7.3 7.3 97.3 RETIRED 4 2.7 2.7 100.0 Total 150 100.0 100.0 Table 4.2 Chart showing classification of respondents based on Occupation Chart 4.2 INTERPRETATION:  8% are the students  42.7%are the government employees  39.3% are the private employees  7.3%are the business  2.7% are the retired peoples.
  22. 22. 22 Table showing classification of respondents based on Age Frequency Percent Valid Percent Cumulative Percent Valid < 20 5 3.3 3.3 3.3 21 TO 40 98 65.3 65.3 68.7 41 TO 60 46 30.7 30.7 99.3 > 60 1 .7 .7 100.0 Total 150 100.0 100.0 Table 4.3 Chart showing classification of respondents based on Age Chart 4.3 INTERPRETATION:  3.3% of the respondents are at the age less than 20.  65.3% are at the age 21 to 40  30.7% are at the age 41 to 60  0.7% are at the age above 60.
  23. 23. 23 Table showing classification of respondents based on Annual income Frequency Percent Valid Percent Cumulative Percent Valid < 1LAC 9 6.0 6.0 6.0 1 TO 3LAC 92 61.3 61.3 67.3 3 TO 5LAC 31 20.7 20.7 88.0 >5LAC 18 12.0 12.0 100.0 Total 150 100.0 100.0 Table 4.4 Chart showing classification of respondents based on Annual income Chart 4.4 INTERPRETATION:  6% of the respondents earn less than 1lakh annually.  61.3% earn 1 to 3lakh.  20.7% earn 3 to 5lakh  12% earn above 5lakh
  24. 24. 24 Table showing classification of respondents based on Amount invested Frequency Percent Valid Percent Cumulative Percent Valid <10000 66 44.0 44.0 44.0 >10000 84 56.0 56.0 100.0 Total 150 100.0 100.0 Table 4.5 Chart showing classification of respondents based on Amount invested Chart 4.5 INTERPRETATION:  44% of the respondents are invested less than 10000.  56% of the respondents are invested above 10000
  25. 25. 25 Table showing classification of respondents based on reason for investment in mutual funds Frequency Percent Valid Percent Cumulative Percent Valid CHILD EDU 32 21.3 21.3 21.3 RETIREMENT 16 10.7 10.7 32.0 HOUSE 48 32.0 32.0 64.0 VACATION ABROAD 26 17.3 17.3 81.3 OTHER 28 18.7 18.7 100.0 Total 150 100.0 100.0 Table 4.6 Chart showing classification respondents based on reason for investment in mutual funds Chart 4.6 INTERPRETATION:  21.3% of the respondents are invested for their child education.  10.7% are invested for retirement  32% are invested for house  17.3% are invested for vacation abroad.  18.7% are invested for other purposes.
  26. 26. 26 Table showing classification of respondents based on how long they are investors of mutual funds Frequency Percent Valid Percent Cumulative Percent Valid < 1YR 7 4.7 4.7 4.7 1 TO 3YR 103 68.7 68.7 73.3 >5yr 40 26.7 26.7 100.0 Total 150 100.0 100.0 Table4.7 Chart showing classification of respondents based on how long they are investors of mutual funds Chart 4.7 INTERPRETATION:  4.7% of the respondents are investing in less than one year  68.7% are invested one to 3 year.  26.7% are invested above 5 year.
  27. 27. 27 Table showing classification of respondents based on reason for choosing mutual funds Frequency Percent Valid Percent Cumulative Percent Valid SAVINGS 73 48.7 48.7 48.7 returns 44 29.3 29.3 78.0 diversification 20 13.3 13.3 91.3 risk tolerance 13 8.7 8.7 100.0 Total 150 100.0 100.0 Table 4.8 Chart showing classification of respondents based on reason for choosing mutual funds Chart 4.8 INTERPRETATION:  48.7% are chosen mutual funds for savings.  29.3% are chosen mutual funds for returns.  13.3% are chosen mutual funds for diversification.  8.7% are chosen mutual funds for risk tolerance.
  28. 28. 28 Table showing classification of respondents based on number of plans they have invested in mutual funds. Frequency Percent Valid Percent Cumulative Percent Valid 1 65 43.3 43.3 43.3 2 54 36.0 36.0 79.3 3 24 16.0 16.0 95.3 >3 7 4.7 4.7 100.0 Total 150 100.0 100.0 Table 4.9 Chart showing classification of respondents based on number of plans they have invested in mutual funds. Chart 4.9 INTERPRETATION:  43.3% of the respondents invested in one scheme.  36% of the respondents invested in 2 schemes.  16%of the respondents invested in 3 schemes.  4.7% of the respondents invested in more than 3 schemes.
  29. 29. 29 Table showing classification of respondents based on the reason for selecting a particular mutual fund company. Frequency Percent Valid Percent Cumulative Percent Valid REPUTATION 27 18.0 18.0 18.0 GOOD RETURNS 88 58.7 58.7 76.7 EXPERT ADVICE 33 22.0 22.0 98.7 OTHER 2 1.3 1.3 100.0 Total 150 100.0 100.0 Table 4.10 Chart showing classification of respondents based on the reason for selecting a particular mutual fund company. Chart 4.10 INTERPRETATION:  18% are chosen the mutual fund company for the company reputation.  58.7% chosen for the good returns.  22% chosen for the expert advice.  1.3% chosen for the other reasons.
  30. 30. 30 Table showing classification of respondents based on the option they prefer for investment in mutual fund Frequency Percent Valid Percent Cumulative Percent Valid DIV 55 36.7 36.7 36.7 GROWTH 90 60.0 60.0 96.7 NOT SURE 5 3.3 3.3 100.0 Total 150 100.0 100.0 Table 4.11 Chart showing classification of respondents based on the option they prefer for investment in mutual fund Chart 4.11 INTERPRETATION:  36.7% of the respondents prefer the dividends for their investments.  60.7% of the respondents prefer the growth for their investments.  3.3% of the respondents are not sure their investments.
  31. 31. 31 Table showing classification of respondents based on how frequent they monitor performance of investment Frequency Percent Valid Percent Cumulative Percent Vali d M 109 72.7 72.7 72.7 Q 18 12.0 12.0 84.7 HY 16 10.7 10.7 95.3 Y 6 4.0 4.0 99.3 N 1 .7 .7 100.0 Total 150 100.0 100.0 Table 4.12 Chart showing classification of respondents based on how frequent they monitor performance of investment Chart 4.12 INTERPRETATION:  72.7% of the respondents are monitoring their performance of the investments monthly.  12% of the respondents are monitoring quarterly.  10.7%of the respondents are monitoring half yearly.  4% of the respondents are monitoring yearly.  And 0.7% of the respondents are never monitoring their performance.
  32. 32. 32 Table showing classification of respondents based on how frequent they monitor risk factors. Frequency Percent Valid Percent Cumulative Percent Valid M 77 51.3 51.3 51.3 Q 37 24.7 24.7 76.0 HY 21 14.0 14.0 90.0 Y 7 4.7 4.7 94.7 N 8 5.3 5.3 100.0 Total 150 100.0 100.0 Table 4.13 Chart showing classification of respondents based on how frequent they monitor risk factors. Chart 4.13 INTERPRETATION:  51.3% of the respondents are monitoring their risk factors monthly.  24.7% of the respondents are monitoring quarterly.  14% of the respondents are monitoring half yearly.  4.7% of the respondents are monitoring yearly.  5.3% of the respondents are never monitor their risk factor.
  33. 33. 33 Table showing classification of respondents based on how frequent they monitor portfolio of securities Frequency Percent Valid Percent Cumulative Percent Valid M 89 59.3 59.3 59.3 Q 26 17.3 17.3 76.7 HY 18 12.0 12.0 88.7 Y 14 9.3 9.3 98.0 N 3 2.0 2.0 100.0 Total 150 100.0 100.0 Table 4.14 Chart showing classification of respondents based on how frequent they monitor portfolio of securities Chart 4.14 INTERPRETATION:  59.3% of the respondents are monitoring their portfolio of securities monthly.  17.3% of the respondents are monitoring their quarterly.  12% of the respondents are monitoring half yearly.  9.3% of the respondents are monitoring yearly.  2% of the respondents are never monitor their portfolio securities.
  34. 34. 34 Table showing classification of respondents based on how frequent they monitor portfolio of fund manager Frequency Percent Valid Percent Cumulative Percent Valid M 68 45.3 45.3 45.3 Q 31 20.7 20.7 66.0 HY 25 16.7 16.7 82.7 Y 16 10.7 10.7 93.3 N 10 6.7 6.7 100.0 Total 150 100.0 100.0 Table 4.15 Chart showing classification of respondents based on how frequent they monitor portfolio of fund manager Chart 4.15 INTERPRETATION:  45.3% of the respondents are monitoring their portfolio of fund manager monthly.  20.7% of the respondents are monitoring quarterly.  16.7% of the respondents are monitoring half yearly.  10.7% of the respondents are monitoring yearly.  6.7% of the respondents are never monitoring their portfolio of fund manager.
  35. 35. 35 4.2 BIVARIATE - CHI SQUARE: Null hypothesis H0: There is no significance relationship between gender & preference for investment option. Alternative hypothesis H1: There is significance relationship between gender & preference for investment option. Table showing crosstab between gender and preference for investment option OPT.INV TotalDIV GROWTH NOT SURE GENDER MALE 27 62 4 93 FEMALE 28 28 1 57 Total 55 90 5 150 Table 4.16 Table showing relationship between gender and preference for investment option Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 6.391a 2 .041 Likelihood Ratio 6.390 2 .041 Linear-by-Linear Association 6.227 1 .013 N of Valid Cases 150 Table 4.17. INTERPRETATION:  27 males out of 93 and 28 females out of 57 prefer the mutual fund investments for dividends. Therefore women mostly prefer the dividends.  62 males out of 93 and 28 females out of 57 prefer the mutual fund investments for growth. Therefore women mostly prefer the growth also. So women’s only equally prefer the dividends and growth for their investments.  4 males out of 93 and 1 female out of 57 are not prefer anything for their investments.  From the chi square test table we infer that reject the h0.and accept the h1 so there is significance relationship between gender& respondents preference for investment option.
  36. 36. 36 Null hypothesis H0: There is no significance relationship between gender & respondents purpose for investments. Alternative hypothesis H1: There is significance relationship between gender & respondents purpose for investments. Table showing crosstab of gender and purpose for investment INV.FOR Total CHILD EDU RETIREMEN T HOUSE VACATION ABROAD OTHER GENDER MALE 26 13 23 19 12 93 FEMALE 6 3 25 7 16 57 Total 32 16 48 26 28 150 Table 4.18 Table showing relationship between gender and purpose for investment Value df Asymp. Sig. (2-sided) Pearson Chi-Square 17.300a 4 .002 Likelihood Ratio 17.901 4 .001 Linear-by-Linear Association 8.076 1 .004 N of Valid Cases 150 a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 6.08. Table 4.19
  37. 37. 37 INTERPRETATION:  26 males out of 93 and 6 females out of 57 are purpose to invest for their child education. Therefore males mostly purose the investments for their child education.  13 males out of 93 and 3 females out of 57 are purpose to invest for their retirement.  23 males out of 93 and 25 females out of 57 are purpose to invest for their house. Therefore females mostly purpose the investments for house.  19 males out of 93 and 7 females out of 57 are purpose to invest for vacation abroad.  12 males out of 93 and 16 females out of 57 are purpose to invest for other reasons and other purposes.  From the chi square test table we infer that reject h0.and accept h1.so there is significance relationship between gender and respondents purpose for investments.
  38. 38. 38 Null hypothesis H0: There is no significance relationship between age & respondents purpose for investments. Alternative hypothesis H1: There is significance relationship age & respondents purpose for investments. Table showing crosstab of age and purpose for investment INV.FOR TotalCHILD EDU RETIREMENT HOUSE VACATION ABROAD OTHER AGE < 20 2 0 2 1 0 5 21 TO 40 17 11 32 17 21 98 41 TO 60 13 5 13 8 7 46 > 60 0 0 1 0 0 1 Total 32 16 48 26 28 150 Table 4.20 Table showing relationship between age and purpose for investment Value df Asymp. Sig. (2-sided) Pearson Chi-Square 7.232a 12 .842 Likelihood Ratio 8.638 12 .734 Linear-by-Linear Association .535 1 .464 N of Valid Cases 150 a. 11 cells (55.0%) have expected count less than 5. The minimum expected count is .11. Table 4.21 INTERPRETATION:  Less than 20 age 2 respondents out of 5 and 21 to 40 age 17 respondents out of 98 and 41 to 60 age 13 respondents out of 46 are invest for the child education. And there are no respondents for this option above 60 ages.  21 to 40 age 11 respondents out of 98 and 41 to 60 age 5 respondents out of 46 are invest for retirement. And there are no respondents for this option less than 20 ages and above 60 ages.
  39. 39. 39  Less than 20 age 2 respondents out of 5 and 21 to 40 age 32 respondents out of 98 and 41 to 60 age 13 respondents out of 46 and above 60 age 1 respondents are invest for house.  Less than 20 age 1 respondents out of 5 and 21 to 40 age 17 respondents out of 98 and 41 to 60 age 8 respondents out of 46 are invest for the vacation abroad. And there are no respondents for this option above 60 ages.  From this chi square test table we infer that accept h0 and reject h1. And there is no significance relationship between age and respondents purpose for investments.
  40. 40. 40 Null hypothesis H0: There is no significance relationship between age & respondents preferring for mutual funds. Alternative hypothesis H1: There is significance relationship between age & respondents preferring for mutual funds. Table showing crosstab of age and reason for preferring mutual fund REA.MF TotalSAVINGS returns diversification risk tolerance AGE < 20 1 1 2 1 5 21 TO 40 46 32 14 6 98 41 TO 60 26 11 4 5 46 > 60 0 0 0 1 1 Total 73 44 20 13 150 Table 4.22 Table showing relationship between age and reason for preferring mutual fund Value df Asymp. Sig. (2- sided) Pearson Chi-Square 18.209a 9 .033 Likelihood Ratio 11.843 9 .222 Linear-by-Linear Association .265 1 .607 N of Valid Cases 150 a. 9 cells (56.3%) have expected count less than 5. The minimum expected count is .09. Table 4.23
  41. 41. 41 INTERPRETATION:  Less than 20 age 1 respondent out of 5 and 21 to 40 age 46 respondents out of 98 and 41 to 60 age 26 respondents out of 46 are prefer the mutual fund for savings. And there are no respondent from above 60 ages.  Less than 20 age 1 respondent out of 5 and 21 to 40 age 32 respondents out of 98 and 41 to 60 age 11 respondents out of 46 are prefer the mutual funds for returns. And there are no respondent from above 60 ages.  Less than 20 age 2 respondents out of 5 and 21 to 40 age 14 respondents out of 98 and 41 to 60 age 4 respondents out of 46 are prefer the mutual funds for diversifications. And there are no respondent from above 60 ages.  Less than 20 age 1 respondent out of 5 and 21 to 40 age 6 respondents out of 98 and 41 to 60 age 5 respondents out of 46 and above 60 age 1 respondent out of 1 respondent are prefer the mutual fund for risk tolerance.  From the chi square test table we infer that reject h0.accepth1. so there is significance relationship between age and respondent preference for mutual funds.
  42. 42. 42 Table showing rank of reason for investing in mutual fund FACTORS SUM OF SCORE RANK Savings 302 2 Tax benefits 276 1 Portfolio management 305 3 Balanced risk 341 4 Potential returns 363 5 TOTAL 1587 Table 4.24 INTERPRETATION: In case of the factors responsible for investing in mutual funds is concerned tax benefits has got first rank, savings has got second rank, portfolio management , balanced risk and potential returns have been ranked third, fourth and fifth respectively.
  43. 43. 43 CHAPTER 5 5.1 FINDINGS:  The Study was aimed at identifying the level of attitude towards the mutual funds.  There is significance relationship is found between the gender and respondents preferences for investment options, and women’s are equally prefer the dividends and growth for the investments.  There is significance relationship is found between the gender and respondents purpose for investments. Males are mostly purposeto invest for their child education. and females are mostly purpose to invest for house and other purposes.  There is no relationship found between age and respondent preferring for investments.  There is significance relationship found between age and respondents preference for mutual funds. Respondents are mostly prefer the mutual funds for savings and returns. And next they prefer the mutual funds for diversifications and risk tolerance.  Ranking the factors for investing in mutual funds is concerned the tax benefit has got first rank and savings has got second rank and portfolio management and balanced risk and potential risk has got third, fourth, fifth ranks.
  44. 44. 44 5.2 SUGGESTIONS:  The average attitude score reveals that the respondents are giving more importance to the dividends and growth. Therefore the mutual funds should improve the scope of dividends and growth of the mutual funds.  Mutual fund companies should segment their target customers and position their products. The target segment can be broadly divided into institutional segment and retail investor segment. The institutional segment consisted of treasury departments of corporate, trusts, etc and suitable products such as institutional income schemes and money market schemes can be targeted at them. As far as retail investors are concerned, they can be in turn divided into various segments such as young families with small or no children, middle-aged people saving for retirement and retired people looking for steady income. Suitable products such as growth and balanced schemes for young families and income schemes with certain and steady returns for retired people can be marketed. By proper segmentation and by targeting the right product to the right customer, mutual fund companies can hope to win the confidence of their customers and own them for a lifetime. In this way the market scope for mutual funds can be expanded.  Investors usually review a range of information before purchasing mutual fund shares. In general, they frequently review or ask questions about a fund’s fees and expenses and its historical performance. They most often turn to professional financial advisers for information prior to purchasing fund shares. Some investors also visit Mutual Fund Company; confer with friends, family, or business associates for information before buying fund shares, while others use the Internet regularly. The Internet, with its interactive capabilities, is an effective vehicle for communicating mutual fund information to retail investors
  45. 45. 45 5.3 CONCLUSION: The present study looks at the attitude level of the retail investors towards investment in mutual funds. The small investors purchase behavior does not have a high level. The buying intent of a mutual fund product by a small investor can be due to multiple reasons depending upon customers risk return trade off. Presently, more and more funds are entering the industry and their survival depends on strategic marketing choices of mutual fund companies, to survive and thrive in this highly promising industry, in the face of such cut throat competition. Therefore, the mutual fund industry today needs to develop products to fulfils customer needs and help customers understand how its products to their needs. Thus the study provokes the authority to take some positive measures for expanding the scope of mutual funds investment.
  46. 46. 46 REFERENCES:  Aman Srivastava (2007). An Analysis of Behaviour of Investors in India, ICFAI Journal of Behavioural Finance.  Bala Ramasamy, Matthew C.H. Yeung (2003).  Singh Jaspal and Chander Subhash (2004). An Empirical Analysis of Perceptions of Investors towards Mutual Fund. WEBSITES: http://www.appuonline.com/mf/knowledge/industry.html http://www.appuonline.com/mf/knowledge/industry.html http://www.investopedia.com/articles/mutualfund/05/MFhistory.asp http://www.mutualfundsresource.com/history/ www.reliancemutual.com

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