A STUDY ON AWARENESS OF MUTUAL FUNDS AND

PERCEPTION OF INVESTORS

A Project Submitted to

University of Mumbai for partial completion of the degree of

Master in Commerce

Under the Faculty of Commerce

By

YASHASWINI SURESH BANGERA

Under the Guidance of

CA. KUNAL C.

KERALEEYA SAMAJAM(REGD) DOMBIVLI’S

MODEL COLLEGE

JANUARY 2023
A STUDY ON AWARENESS OF MUTUAL FUNDS AND

PERCEPTION OF INVESTORS

A Project Submitted to

University of Mumbai for partial completion of the degree of

Master in Commerce

Under the Faculty of Commerce

By

YASHASWINI SURESH BANGERA

Under the Guidance of

CA. KUNAL C.

KERALEEYA SAMAJAM(REGD) DOMBIVLI’S

MODEL COLLEGE

JANUARY 2023
 Index

Chapter No. Title of the Chapter Page No.

1 INTRODUCTION 1- 36
1.1 What is mutual fund 1
1.2 Structure of mutual fund 1
1.3 Parties involved in mutual funds 2
1.4 History of mutual funds 5
1.5 Types of mutual funds 9
1.6 Mutual fund schemes 10
1.7 Benefits of mutual funds 21
1.8 Risks involved in mutual funds 22
1.9 Terminologies/ important concepts of mutual funds 24
1.10 Evaluating performance of mutual funds 31
1.11 Present scenario of mutual funds in India 31
2 RESEARCH METHODOLOGY 36-37
2.1 Introduction to chapter 36
2.2 Objectives 36
2.3 Sample size 36
2.4 Sampling technique 36
2.5 Data collection 36
2.6 Scope 37
2.7 Tools used for analysis 37
2.8 Limitations 37
3 LITERATURE REVIEW 38-48
4 DATA ANALYSIS & INTERPRETATION 49-76
4.1 Data analysis and interpretation 49
4.2 Findings 75
5 CONCLUSIONS AND SUGGESTIONS 77-79
5.1 Conclusion 77
5.2 Suggestions 78
 INDEX FOR TABLES
Table Page
Title
No. No.
1.1 Classification of respondents on the basis of their Gender 49

1.2 Classification of Respondents on the basis of their Age 50

Classification of Respondents on the basis of their Employment 51

1.3
Status
Classification of Respondents on the basis of their Annual 53
1.4
Income
Classification of respondents as per their ratings to investment 57
2.1
Parameters
Classification of respondents as per their knowledge of various 58
2.2
investment avenues.
Classification of Respondents according to their awareness of 59
2.3
Mutual Funds
Classification of Respondents according to the use of various 60
2.4
Mediums
Classification of Respondents according to their investment in 61
2.5
Mutual Funds.
Classification of Respondents as per to the percentage of 62
2.6
investment in Mutual Funds.
Classification of Respondents as per their investment in 63
2.7
schemes of Mutual Funds
Classification of Respondents on the basis of type of scheme 64
2.8
invested in
Classification of Respondents on the basis of medium of 65
2.9
Investment
Classification of Respondents on the basis of their investment 66
2.10
Objectives
Classification of respondents as per their ratings to features of 71
2.11
Mutual Funds
Classification of Respondents on the basis of fulfilment of them 72
2.12
investment objective
Classification of Respondents according to their willingness to 73
3.1
invest in Mutual Funds
Classification of Respondents according to use of medium for 74
3.2
increasing awareness
 KERALEEYA SAMAJAM (REGD.) DOMBIVLI’s
MODEL COLLEGE
(Affiliated to University of Mumbai)
RE-ACCREDITED GRADE “A” BY NAAC

CERTIFICATE
This is to certify that Ms. YASHASWINI SURESH BANGERA has worked
and duly completed her Project Work for the degree of Master in Commerce
under the Faculty of Commerce in the subject of Banking and Finance and
her project is entitled, A STUDY ON AWARNESS OF MUTUAL FUNDS
AND PERCEPTION OF CUSTOMER under my supervision. I further
certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or
Diploma of any University.
It is her own work and facts reported by her personal findings and
investigation.

Seal of the CA. KUNAL.C

College

Date of admission:22 JANUARY 2023

 Declaration by Learner
I the undersigned Miss YASHASWINI SURESH BANGERA here by,
declare that the work embodied in this project work titled A Study on
Awareness of Mutual Funds and Perception of Customer, forms my own
contribution to the research work carried out under the guidance of CA.
KUNAL.C is a result of my own research work and has not been previously
submitted to any other University for any other Degree/Diploma to this or
any other University.

Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

YASHASWINI SURESH BANGERA

Certified by
CA. KUNAL.C
 Acknowledgement

To list who all have helped me is difficult because they are so numerous and
the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my CA. DR. R. P. Bambardekar for providing the

necessary facilities required for completion of this project.

I take this opportunity to thank our Nikhil R. Nair for her moral support and
guidance.

I would also like to express my sincere gratitude towards my project guide

CA. KUNAL.C whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my Parents
and Peers who supported me throughout my project.
A STUDY ON AWARENESS OF MUTUAL FUNDS
AND PERCEPTION OF INVESTORS

CHAPTER 1: INTRODUCTION

1.1 WHAT IS A MUTUAL FUND?

A mutual fund is a type of financial vehicle made up of a pool of
money collected from many investors who share a common financial
goal. Accordingly, the money is invested in securities like stocks,
bonds, money market instruments, and other assets depending upon
the objectives of the mutual fund scheme. They are operated by
professionals, who allocate the fund's assets and attempt to produce
capital gains or income for the fund's investors. Mutual fund issues
units to the investors as per their money invested by them. Investors
of mutual funds are known as unit holders. The profits or losses are
shared by the investors in proportion to their investment after
deducting some expenses. Each shareholder, therefore, participates
proportionally in the gains or losses of the fund.

1.2 STRUCTURE OF MUTUAL FUND

A mutual fund is set up in the form of a trust, which has a

sponsor, trustees, Asset Management Company (AMC) and a
custodian. The trust is established by a sponsor or more than one
sponsor who is like a promoter of a company. The trustees of mutual
fund hold its property for the benefit of the unit holders. The AMC
approved by SEBI, manages the funds by making investment in
various types of securities. The custodian, who is registered with
SEBI, holds the securities of various schemes of the fund in its
custody. The trustees are vested with the general power of
superintendence and direction over the AMC. They monitor the
performance and compliance of SEBI regulations by the mutual
fund.

1
Example of Mutual Fund Structure:

Description Entity
Mutual Fund Trust IDBI Mutual Fund
Sponsor IDBI Bank Ltd.
Trustee IDBI MF Trustee Company Ltd.
Asset Management Company IDBI Asset Management Ltd.
Registrar Karvy Computershare Pvt. Ltd.
Custodian Stockholding Corporation Of India Ltd.

1.3 PARTIES INVOLVED IN MUTUAL FUND

1. Sponsor

Sponsor is an influential investor who creates demand for a security because

of the positive outlook on it. The sponsor brings in capital and creates a
mutual fund trust and sets up the AMC. The sponsor makes an application for
the registration of the mutual fund and contributes at least 40% of the net
worth of AMC.

2. Asset Management Company (AMC)

An asset management company AMC is a company that invests its

client’s pooled funds into securities that match declared financial objectives.

2
The asset management companies provide the investors with more
diversification and investing options. These companies earn income by
charging service fees or commissions to their clients.

3. Trustee

Trustee is a person or a firm that holds and administers property or

assets for the benefit of a third party. A trustee may be appointed for a wide
variety of purposes such as in case of bankruptcy, for a charity, for certain
types of retirement plans for pensions, etc.

4. Unit holders

The securities issued by the mutual fund are called as units and the
investors who own these units are called the unit holders. Thus, the unit
reflects the share of the investor in the Net assets of the fund.

5. Mutual Fund

Mutual fund is established under the Indian Trust Act to raise money
through the sale of units to the public for investing in the capital markets. The
funds are thus collected as per the directions of asset management company
for investment. The mutual fund has to be registered with SEBI

6. Custodian

A custodian is a person who carries on the business of providing

custodial services to the client. The custodian keeps the custody of the
securities of the client. Custodian also provides incidental services such as
maintaining the accounts of securities of the client, collecting the benefits or
rights accruing to the client in respect of securities. Every custodian should
have adequate facilities sufficient capital and financial strength to manage the
custodial services. SEBI (Custodian of Securities) Regulations, 1996
prescribe the roles and responsibilities of the custodian. According to SEBI
the roles and responsibilities of the custodian are to administer and protect
the assets of the client, open a separate custody account and deposit account

3
in the name of each client, record assets and conduct registration of
securities.

7. Transfer Agent

Transfer agent is a person who has been granted a certificate of

registration to conduct the business of transfer agent under SEBI Regulation
Act 1993.Transfer agent services include issue and redemption of mutual
fund units, preparation of transfer documents and maintenance of updated
investment records. They also record transfer of units between investors by
depository does not function. They also facilitate investors to get customized
reports.

8. Depository

A depository facilitates the smooth flow of trading and ensure

investors about their investment in securities.

9. Regulator: SEBI

The Securities Exchange Board of India (SEBI) regulates Mutual

Funds, Custodians and Registrars & transfer agents. The applicable
guidelines for mutual funds are set out in SEBI (Mutual Funds) Regulations,
1996 and are updated regularly. SEBI has set out some mandatory
requirements in the guidelines which has to be strictly follwed in order to
ensure the security and transparency of mutual funds, for example :

 Mandatory registration of the sponsor.

 A sound track record of body corporate so as to be eligible to
become a sponsor.
 SEBI’s approval regarding the trust deed and trustees’s
appointment.

10. Industry Body: AMFI (Association of Mutual Funds in India)

AMFI recommends and promotes best practices and code of conduct.

It also disseminates information and carries out study/ research on mutual

4
fund industry. It provides for ethical and professional standards to be
followed in order to improve the mutual funds market in India.

1.4 HISTORY OF MUTUAL FUNDS IN INDIA

A mutual fund is a trust or a pool of investments by investors who share a common

financial goal. This pool is invested in several financial instruments such as shares, debt
instruments, bonds etc. by the company managing that trust. This company is called
an Asset Management Company. Returns so generated are later distributed among the
members of the pool in the ratio of their investments. The AMC invests its money in a
manner that while the returns are maximized, the risks are kept to a minimum level. In
India, it is mandatory for every Asset Management Firm to be registered with the
Securities and Exchange Board of India (SEBI), a body that regulates all securities
instruments.
The first company that dealt in mutual funds was the Unit Trust of India. It was set up
in 1963 as a joint venture of the Reserve Bank of India and the Government of India.
The objective of the UTI was to guide small and uninformed investors who wanted to
buy shares and other financial products in larger firms. The UTI was a monopoly in
those days. One of its mutual fund products that ran for several years was the Unit
Scheme 1964.The mutual fund industry in India has undergone at least 4 phases. Let us
now look at each phase in brief:

Mutual Funds History: Phase Of Inception (1964-87)

The first phase was marked by the setting up of the UTI. Though it was a collaboration
between the RBI and the Indian Government, the latter was soon delinked from the day-
to-day operations of the Unit Trust of India. In this phase, the company was the sole
operator in the Indian mutual fund industry. In 1971, the UTI launched the Unit Linked
Insurance Plan or the ULIP. From that year until 1986, UTI introduced several plans
and played a very big role in introducing the concept of mutual funds in India. When
UTI was set up several years ago, the idea was to not just introduce the concept of
mutual funds in India; an associated idea was to set up a corpus for nation-building as
well. Therefore, to encourage the small Indian investor, the government built in several
income-tax rebates in the UTI schemes. Not surprisingly, the investible corpus of UTI
swelled from 600 crores in 1984 to 6,700 crores in 1988. Clearly, the time had come
for the Indian mutual industry to move into the next phase.

5
Mutual Funds History: Entry Of Public Sector (1987-1993)
By the end of 1988, the mutual fund industry had acquired its own identity. From 1987,
many public sector banks had begun lobbying the government for starting their own
mutual fund arms. In November 1987, the first non-UTI Asset Management Fund was
set up by the State Bank of India. This AMC was quickly followed by the creation of
other AMCs by banks like Canara Bank, Indian Bank, Life Insurance Corporation,
General Insurance Corporation, and Punjab National Bank. This opening up of the
mutual fund industry delivered the desired results. In 1993, the cumulative corpus of
all the AMCs went up to a whopping Rs. 44,000 crores. Observers of this industry say
that in the second phase, not only the base of the industry increased but also it
encouraged investors to spend a higher percentage of their savings in mutual funds. It
was evident that the mutual fund industry in India was poised for higher growth.

Mutual Fund History: Entry Private Sector Phase (1993-1996)

In the period 1991-1996, the Government of India had realized the importance of the
liberalization of the Indian economy. Financial sector reforms were the need of the
hour. India needed private sector participation for the rebuilding of the economy.
Keeping this in mind, the government opened up the mutual fund industry for the
private players as well. The foreign players welcomed this move and entered the Indian
market in significant numbers. In this period, 11 private players –in collaboration with
foreign entities- launched their Asset Management Funds. Some of the top AMCs in
the private sector were:

• ICICI Prudential AMC- This Company is a joint venture between ICICI Bank of India
and Prudential Plc of UK. It manages a corpus of INR 2, 93,000 crores and has an
inventory of more than 1400 schemes.

• HDFC Mutual Fund- Launched in the 1990s, the HDFC Mutual Fund manages more
than 900 different kinds of funds.

• Kotak Mahindra Mutual Fund- This AMC has an asset base of more than Rs. 1,19,000
crores. It is a joint venture of Kotak Financial Services and the Mahindra Group.

6
SEBI Interventions And Growth, And AMFI
As the mutual fund industry grew further in the 1990s, the AMCs and the government
felt that it was time for regulation and some control. Investors had to be protected as
well as a level playing ground had also to be laid down. A few years ago, the Indian
industry had suffered a lot because of bank scams and there was a real threat that
investors might lose their monies yet again.Consequently, the government introduced
the SEBI Regulation Act in 1996 which laid down a set of fair and transparent rules for
all the stakeholders. In 1999, the Indian government declared that all mutual fund
dividends would be exempt from income tax. The idea behind this decision was to spur
further growth in the mutual fund industry.Meanwhile, the mutual fund industry also
realized the importance of self-regulation. As a result, it set up an industry body- the
Association of Mutual Funds of India (AMFI). One of the goals of this body is investor
education.

Mutual Funds History: Phase Of Consolidation (February 2003 – April 2014)

In February 2003, the Unit Trust of India was split into two separate entities, following
the repeal of the original UTI Act of 1963. The two separated entities were the UTI
Mutual Fund (which is under the SEBI regulations for MFs) and the Specified
Undertaking of the Unit Trust of India (SUUTI). Following this bifurcation of the
former UTI and occurrence numerous mergers among different private sector entities,
the mutual fund industry took a step towards the phase of consolidation. After the global
economic recession of 2009, the financial markets across the globe were at an all-time
low and Indian market was no exception to it. Majority of investors who had put in their
money during the peak time of the market had suffered great losses. This severely shook
the faith of investors in the MF products. The Indian Mutual Fund industry struggled to
recover from these hardships and remodel itself over the next two years. The situation
toughened up more with SEBI abolishing the entry load and the lasting repercussions
of the global economic crisis. This scenario is evident from the sluggish rise in the
overall AUM of the Indian MF industry.

Mutual Funds History: Phase Of Steady Development And Growth (Since May 2014):
Recognizing the lack of penetration of mutual funds in India, especially in the tier II
and tier III cities, SEBI launched numerous progressive measures in September 2012.
The idea behind these measures was to bring more transparency and security for the

7
interest of the stakeholders. This was SEBI’s idea to ‘re-energize’ the Indian MF
Industry and boost the overall penetration of mutual funds in India. The measures bore
fruit in the due course by countering the negative trend that was set because of the
global financial crisis. The situation improved considerably after the new government
took charge at the center. Since May ’14, the Indian MF industry has experienced a
consistent inflow and rise in the overall AUM as well as the total number of investor
accounts (portfolio).
1.5 TYPES OF MUTUAL FUNDS

1. According to Schemes

a) Open Ended

 Can be purchased on any transaction day

 Can be redeemed on any transaction day (Except when units are

locked-in in the case of ELSS funds)

 High liquidity

b) Close Ended

 Can be purchased only during NFO

 Can be redeemed only at maturity

 Low on liquidity

2. According to Plans

a) Regular Plans

 Sold through a distributor

 Higher Expense Ratio (Due to commissions paid to distributor)

 Potentially lower returns to the investor (Due to higher expenses)

b) Direct Plans
 Sold directly by the AMC
 Lower Expense Ratio (No commission paid to distributor)
 Potentially higher returns (Due to lower expenses)

8
1.6 MUTUAL FUND SCHEMES

EQUITY MUTUAL FUNDS

Equity mutual funds try generating high returns by investing in the stocks of
companies across all market capitalisations. They are the riskiest class of
mutual funds, and hence, they have the potential to provide higher returns
than debt and hybrid funds. The performance of the company plays a
significant role in deciding the investors’ returns. Equity mutual funds invest
at least 60% of their assets in equity shares of numerous companies in
suitable proportions. The asset allocation will be in line with the investment
objective. The asset allocation can be made purely in stocks of large-cap, mid-
cap, or small-cap companies, depending on the market conditions. The investing
style may be value-oriented or growth-oriented. After allocating a significant portion
towards the equity segment, the remaining amount may go into debt and money
market instruments. This is to take care of sudden redemption requests as well as
bring down the risk level to some extent. The fund manager makes buying or
selling decisions to take advantage of the changing market movements and reap
maximum returns.

TYPES OF EQUITY MUTUAL FUNDS

1. Large Cap Funds

As the name suggests, the large cap funds invest their assets in large sized
companies. At least 80% of assets are invested in these companies. In
comparison with mid-cap and small cap schemes, it possess low risk and
provides modest returns.

2. Large and Mid-Cap Funds

The large and mid-cap schemes invest around 35% in large sized companies
and 35% in mid-cap stocks. The risk involved in these schemes is slightly
higher but provide better returns as compared to large cap funds.

9
 3. Mid Cap Funds

The mid-cap funds invest a minimum of 65% the assets in the mid-cap
stocks. A much higher amount is bet on the mid-cap stocks, and therefore the
risk involved is quite high in this scheme. Since the risk involved is high, it
has a capacity of producing high returns.

4. Small Cap Funds

These funds invest in small cap companies that have potential to become
large cap companies. The scheme invest at least 65% in such small cap
companies. Such scheme is extremely risky since the company may or may
not become a large cap company but at the same time it can provide
phenomenal return.

5. Multi Cap Funds

The multi cap funds invest in stocks across market capitalization. These are
diversified funds also known as market capitalization agnostic. The portfolio
of such funds comprises of large cap, mid cap, small cap where at least 65%
is invested in equities. These are less risky and suited to not so aggressive
investors.

6. Dividend Yield Funds

These funds focus their investment in companies that shall provide a fixed
periodic return in the form of dividends. Therefore, companies that have
sound track record of dividend distribution form the part of portfolio. A
minimum of 65% of assets is invested in such companies.

7. Value Funds and Contra Funds

Mutual funds can offer one of the two categories. Value funds are funds
following a value investment strategy. In this strategy the fund manager will
invest in stocks which he believes are undervalued. Contra funds follow a
contrarian investment strategy. In this strategy the fund manager goes against

10
the prevailing market trends i.e. when all are selling a certain stock he will
buy and vice-versa.

8. Sectoral/Thematic Funds

The sectoral/ thematic fund invest a minimum of 80% in particular sector or

theme. For retail investors this type of scheme is not recommended as their
fortunes entirely depend on the performance of specific sector or theme.

9. ELSS (Equity Linked Savings Scheme)

This is a tax saving scheme. The ELSS invest at least 80% in equities stated
by the Finance Ministry in its Equity Linked Saving Scheme. The scheme has
a lock-in period of 3 years and provides tax benefit under section 80C of
Income Tax Act.

10. Focused Funds

These schemes are mandated to invest in a maximum of 30 stocks. The

schemes have to mention which market cap it intends to invest.

DEBT FUNDS

Debt funds are mutual funds wherein the underlying assets are fixed-income
securities. Fixed income securities could range from bonds, treasury bills,
Government Securities to different money market instruments. Investing in a
debt instrument is similar to lending an advance to the issuing entity. Debt
mutual funds aim to provide interest income periodically along with scope
for capital appreciation. Such funds invest in fixed-income generating
securities and are preferred by individuals, who do not wish to invest in
volatile equity markets. The issuer pays a fixed coupon which is known in
advance along with tenor which helps a fund manager of the scheme as well
as investor to have a fairly decent idea about the likely returns on the money
he is planning to invest. The credit rating of the issuer helps to determine
whether the firm would be able to service interest obligations regularly. A
higher credit rating means the issuer will be consistent in disbursing interest

11
payments periodically, as well as pay back the principal amount on maturity.
By investing in high credit quality instruments, debt funds endeavour to
provide safety of principal. The fund manager also determines the maturity
period of instruments held in each portfolio depending on the outlook of the
interest rates in the economy. If the interest rates are predicted to fall, the
fund manager invests in long-term securities. Instead, if the interest rates are
predicted to rise, investments are made in short-term securities.

TYPES OF DEBT MUTUAL FUND SCHEMES

1. Overnight Funds

Overnight funds invest in securities with an investment horizon

of one day. Given the short duration, interest fluctuations are minimal.
These funds are often considered safe investments.

2. Liquid Funds

Liquid funds invest in short term money market securities

which maturities of less than 91 days. If the investor wishes to park
his/her funds for a short period bearing little risk then, liquid funds are
a good investment option. They typically offer higher returns than
regular savings deposits as well.

3. Ultra Short-Duration Funds

These debt funds invest in debt and money market instruments

which mature between 3 to 6 months. They offer higher returns than a
fixed deposit. Such funds carry a relatively lower interest rate risk.

4. Money Market Funds

These schemes will invest in money market instruments such

as treasury bills with a maturity of up to one year.

12
5. Short Duration Funds

Short Duration Funds invest in debt and money market

instruments that mature between 1-3years. They are relatively low on
risk. Ideal for conservative investors as they typically not subject to high-
interest rate fluctuations.

6. Medium Duration Funds

These schemes will make investments in debt and money

market instruments which mature between three to four years.

7. Medium-Long Duration Funds

These schemes will invest in debt and money market

instruments with Macaulay duration of four to seven years.

8. Long Duration Funds

Long Duration Funds are debt mutual funds that are managed
actively to generate steady returns over different market scenarios.
They mostly invest in long term securities comprising G Secs, Bonds
and Debentures. The duration of the fund is longer than seven years.

9. Dynamic Bond Funds

These funds invest in debt instruments across different issuers

and have dynamic maturity periods. They are suited for investors with
a moderate appetite for risk and are looking at an investment horizon
of between 3-5 years.

10. Corporate Bond Fund

Funds that invest at least 80% of their corpus in highest-rated

corporate bonds are categorised as Corporate Bond Fund. They offer
scope to earn higher returns than those provided by short term debt

13
 funds. Though you need to watch out for credit risk associated with
downgraded ratings.

11. Credit Risk Fund

Credit Opportunities fund is a relatively new category that

typically invests 65% of its assets into debt instruments rated below
highest credit quality. These funds take a call regarding proportion to
invest in high interest yielding low-rated bonds, unlike other debt
funds that are focused on determining the tenure, or, the average
maturity. Hence, they may be riskier than other debt funds.

12. Bank and PSU Funds

These schemes will invest a minimum 80 per cent of their total

assets in debt instruments of banks, public sector undertakings and
public financial institutions.

13. Gilt Funds

Funds that invest at least 80% of their corpus in government

securities (G Secs) across maturities are called Gilt Funds. The portion
invested in Government securities virtually carries no credit risk.

14. Gilt Funds with ten years constant duration

These schemes will invest in government securities with a

maturity of 10 years. They will invest a minimum 80 per cent in
government securities.

15. Fixed Maturity Plans (FMPs)

Fixed Maturity Plans can only be invested in the initial offer

period. They are close-ended debt funds. They are locked in for a fixed
tenure, which could vary from months to years. FMPs tend to offer
superior and tax-efficient returns if held for more than three years.
However, there is guarantee of consistent returns.

14
 16. Floater Funds

These schemes will predominantly invest in floating rate

instruments. They should invest a minimum 65 per cent of their total
assets in floating rate instruments.

HYBRID FUNDS

Hybrid funds are also known as Balanced Funds or asset allocation funds.
Hybrid Funds are mutual funds that provide a combination of more than one
underlying investment asset class, such as stocks, bonds or cash. The
"hybrid" descriptor comes from the idea that one mutual fund consists of a
mix of different elements typically existing in two or more funds. Most often,
they are a combination of stocks and bonds and the fund will have a stated
objective, such as aggressive, moderate or conservative. For many investors,
it can make sense to buy mutual funds that focus on multiple objectives, asset
classes, or security types rather than just one investment type. At the core of
the smartest investment philosophy is diversification. Often the best mutual
funds are those that have a diverse blend of holdings and hybrid funds are an
excellent example of this category of investment.

TYPES OF HYBRID MUTUAL FUND SCHEMES

1. Conservative Hybrid Funds

These schemes will invest 75 to 90 per cent of their total assets in debt
instruments. They can also invest around 10 to 25 per cent in equity-related
instruments. These schemes are called conservative because they invest
predominantly in debt instruments.

2. Balanced Hybrid Funds and Aggressive Hybrid Funds

Balanced hybrid funds will invest around 40 to 60 per cent of their total
assets in either equity or debt instruments. These schemes cannot invest in
arbitrage.
Aggressive hybrid funds will invest around 65 to 85 per cent of their total

15
assets in equity-related instruments. They can also invest around 20 to 35 per
cent of their assets in debt instruments.Mutual fund houses can offer only one
of these two categories, either a balanced hybrid or an aggressive hybrid
fund.

3. Dynamic Asset Allocation and Balanced Advantage Funds

These schemes would dynamically manage their investments in equity

and debt instruments.

4. Multi Asset Allocation Fund

These schemes can invest in three asset classes. That is, they can invest in
an extra asset class apart from equity and debt. They should invest a
minimum of 10 per cent in each of the asset classes. Foreign securities will
not be treated as a separate asset class.

5. Arbitrage Funds

These schemes will follow arbitrage strategy and will invest a minimum 65
per cent of total assets in equities or equity-related instruments.

6. Equity Savings

These schemes will invest in equity, debt and arbitrage. They will have to
invest at least 65 per cent of the total assets in stocks and a minimum 10 per
cent in debt. They would declare the minimum hedged and unhedged
investments in the scheme information document.

SOLUTION ORIENTED MUTUAL FUNDS

Solution Oriented Fund is a recently introduced category of mutual funds by

SEBI. It has created an easy path for the financial planning of complex long
term objectives which may or may not need alteration in the strategy with
respect to time. The schemes under this category have been operating long
before the formation of the category. These funds were previously
categorised under equity or balanced schemes. However, the separate

16
category allows fund managers to follow unique strategies and deliver
eccentric outputs. The fund manager of a solution-oriented fund is free to
furbish the portfolio with equity or debt tools and can also change the
strategy for investors of different age groups. Some of the solution oriented
mutual funds also provide tax deductions. Majority of the schemes under this
category have lock-in period as the investment objective is of long term.

TYPES OF SOLUTION ORIENTED MUTUAL FUND

1. Retirement Funds

Financial independence in the post-retirement era is one of the most

looked out objectives for millions of investors. To cater the retirement
planning goals, various AMCs in India have mechanised plans for this
specific purpose in a convenient, reliable and innovative manner. Every
retirement fund follows a different strategy to enhance the financial strength
of retirees. Retirement mutual funds aim to provide financial assistance to the
retirees by gathering the capital during the earning age of the investor. These
funds follow an aggressive style of investment by selecting high-risk stocks
in the portfolio when the investor is in the young and earning stage. As
retirement is mostly more than 15 years away from such investors, high-risk
stocks add significant value to the investment allowing more capital to be
built for retirement planning. As the investor approaches the retirement age,
the corpus is generally shifted to a moderate or conservative plan of the same
scheme which has a less risky portfolio. When the age of retirement is
reached, the investor would’ve gained enough funds through the aggressive
plan and hence a defensive portfolio can conserve the gathered amount and
add regular incomes through debt securities. In simple words, the risk in the
portfolio of retirement planning fund keeps reducing as the garnered amount
through high-risk tools increases. These funds allow redemption either as a
lumpsum or through periodic withdrawals which act as a pension to maintain
the financial stability of the investor in the post-retirement era. These funds
have a lock-in period of 5 years and charge exit load if redemption is made
before retiring or reaching 60 years of age.

17
2. Children’s Funds

The children’s fund aims for the financial assistance of the

young ones until their education is completed. Education in India is
getting expensive day by day and for a common man, it can be a
tough task to pay gigantic fees for the education of children. This
can embark sudden financial imbalances on parents while some
children with potential to learn are barred from studying further and
achieving their dreams due to the financial situation. Proper planning
and necessary steps taken at the right time can help in avoiding these
kind of inconveniences. Mutual fund AMCs in India have structured
mutual funds which specifically aim for the financial planning of
children’s education and other financial needs of the young ones.
These funds follow a unique strategy to gather the corpus at a slow
and steady pace when the child is young and the expenses are low.
Later on, when the child comes at the age of attaining expensive
education or any other financial assistance, the invested capital can
be used. These funds may or may not use different plans with
different portfolio structure to achieve their objective. The
investment must be started before or right after the birth of the child
to plan better tomorrow of young ones. Most of the children’s
mutual fund has 2 different plans out of which one is equity oriented
and the other is debt oriented. If the child is young or is about to be
born, the equity-oriented plan can be chosen which can deliver
higher returns in the long term. The debt oriented plans are for those
children who are about to complete their primary schooling. The
investment between both the plans can be switched depending on the
age of the child.

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OTHER MUTUAL FUNDS

1. Index funds

Many investors are aware of the benefits of diversifying their portfolio

across assets. Index funds often catch their eyes in this search as they refer to
funds that invest in a broader market index – like the Sensex or the Nifty. All
the stocks in these indices will find some representation in their investment
portfolio. This theoretically ensures a performance identical to that of the
index, which is being tracked. Low expense ratio is it’s distinctive feature.
Index funds are not actively managed funds, thus incurs low expenses. They
do not aim at outperforming the market, but instead to maintain uniformity.
They help an investor manage or balance his risks in his investment portfolio.
When an index fund tracks a benchmark like the Nifty, its portfolio will have
the 50 stocks that comprise Nifty, in the same proportions. An index is a
group of securities defining a market segment. These securities can be bond
market instruments or equity-oriented instruments like stocks. Some of the
most popular indices in India are BSE Sensex and NSE Nifty. Since index
funds track a particular index, they fall under passive fund management. The
fund manager decides which stocks have to be bought and sold according to
the composition of the underlying benchmark. Unlike actively-managed
funds, there isn’t a standalone team of research analysts to identify
opportunities and select stocks. While an actively-managed fund strives to
beat its benchmark, an index fund’s role is to match its performance to that of
its index. Index funds typically deliver returns more or less equal to the
benchmark. However, there can be a small difference between fund
performance and the index. This is referred to as the tracking error. The fund
manager must work towards bringing down the tracking error as much as
possible. In the case of a weighted index, fund managers frequently stabilise
the percentage of the securities to ensure making a presence in the
benchmark.

19
 2. Fund of Funds

A Fund of fund is a mutual fund scheme that invests in other mutual fund
schemes. In this, the fund manager holds a portfolio of other mutual funds
instead of directly investing in equities or bonds. The fund may choose to
invest in a scheme of the same fund house or some other fund house. The
portfolio is designed to suit investors across risk profiles and financial goals.
The investors get an opportunity to benefit from the diversification as a result
of investing in numerous fund categories. Fund of funds can be domestic as
well as overseas. In case of foreign fund of funds, the fund manager invests
in units of overseas mutual fund schemes. He/she ensures that the target
fund’s investment philosophy and risk profile matches with that of the fund’s
mandate. The main objective is to create wealth over the long run. Fund of
funds is a good bet for small investors who do not wish to take too much risk.
The diversification of funds helps with reducing the risks to a certain extent.
This is also a great medium of investment for an investor with small amounts
of funds available for investment each month. In addition to this, investors
who have an investment horizon of five years or more may think of investing
in this fund. You will get the benefit of professional fund management.

3. International Funds

International mutual funds are those funds that invest in foreign

companies. These funds are also referred to as overseas or foreign funds.
Investing in these can be of higher risk exposure, but also chances of higher
returns. People usually prefer it as an alternative and (or) long-term
investment. With people getting increasingly aware of investment options
around the world, the need for portfolio diversification is more significant
than ever. A diverse plan not only spread the risks but also tap earning
potential of different markets. The fund houses are coming up with
innovative schemes across market types, sectors, and risk classes, with more
experimental investors entering the playground.

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 4. Exchange Traded Funds (ETF)

Exchange Traded Funds are mutual Funds which are listed and traded on
stock exchanges like shares.

1.7 BENEFITS OF MUTUAL FUNDS

1. Professional management:
Investors avail the services of experienced and skilled pofessionals who are
backed by dedicated investmnt team which analyses the performance and
prospects of companies and selects suitable investments to achieve the
objectives of the scheme.

2. Diversification

Mutual Fund invest in a number of companies across a broad cross-section of

industries and sectors. The diversification reduces the risk because seldom do
all of the stocks decline at the same time and in the same poportion. Investors
achiee this diversification with far less money than one can do on his own.

3. Convenient Administration

Investing in mutual fund reduces paperwork and helps investors to avoid

many problems such as bad deliveries, delayed payments and unnecessary
follow up with brokers and companies. Mutual funds save investors time and
make investing easy and convenient.

4. Return Potential

Over a medium to long term, mutual funds have the potential to provide a
higher retuen as they invest in a diversified basket of selected securities.

5. Low Costs

Mutual funds are relatively less expensive way to invest as compared to

directly investing in capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lowercosts for investors.

6. Liquidity

In open ended schemes, investors can get their money back promptly at net
asset value related prices from the mutual fund itself. With close ended

21
schemes, investors can sell their units on a stock exchange at the prevailing
market price or avail of the facility of direct repurchase at net asset value
(NAV) related prices which some close ended and interval schemes offer
periodically or offer it for redemption to the fund on the date of maturity.

7. Transperancy and ease of comparison

Investors get regular information on the value of their investment in addition

to disclosure on specific investments made by a scheme, the proportion
invested in each class of assets and the fund manager’s investment strategy
and outlook.All mutual funds are required to report the same information to
investors, which makes them easier to compare to each other.

8. Participation

Mutual funds provide investors the ability to participate in investments that

may be available only to larger investors. For example, individual investors
often find it difficult to invest directly in foreign markets.

9. Safety on account of regulations

The fund houses are strictly under the purview of statutory government
bodies like SEBI and AMFI. One can easily verify the credentials of the fund
house and the asset manager from SEBI. They also have an impartial
grievance redressal platform that works in the interest of investors. This
ensures protection of interest of investors.

10. Flexibility

Mutual funds enable the investors to make changes in their portfolio

according to the changing market conditions. This inturn provides an
opportunity to benefit in the changing market conditions.

1.8 RISKS INVOLVED IN MUTUAL FUNDS

1. Excessive diversification

Too much diversification of portfolio leads to losing focus on the

securities of the key segments.

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2. Too much concentration on blue-chip securities.

The Mutual funds mostly prefer to invest a larger amount of money in the
blue chip securities as it is expected to provide good returns. However,
overdependence on these may sometimes result in losses.

3. Costs to manage the mutual fund

The salary of the market analysts and fund manager comes from the
investors. Total fund management charge is one of the first parameters to
consider when choosing a mutual fund. Higher management fees do not
guarantee better fund performance.

4. Lock-in periods

Many mutual funds have long-term lock-in periods, ranging from five to eight
years. Exiting such funds before maturity can be an expensive affair. A specific
portion of the fund is always kept in cash to pay out an investor who wants to exit
the fund. This portion cannot earn interest for investors.

5. Dilution

While diversification averages your risks of loss, it can also dilute your profits.
Hence, you should not invest in more than seven to nine mutual funds at a time.

6. Necessity to effect high turnover through liquidation of portfolio resulting in

large payments of brokerage and commission.
7. Poor planning of investment returns.
8. Unresearched forecast on income, profits and government policies.
9. Fund managers being unaccountable for poor results.
10. Failure to identify clearly the risk of the scheme as distinct from risk of the
market.
11. Under performance of the fund in comparison to peers.

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1.9 TERMINOLOGIES/ IMPORTANT CONCEPTS OF MUTUAL FUNDS

A. Offer Document

– AMC raises money in new schemes through New Fund Offer (NFO)

– Offer document contains key details about the NFO

– Open and close dates, scheme objective, nature of the scheme, etc.

– Filed with SEBI

It consists of two parts viz:

1. Scheme Information Document (SID) - A document that contains the details of

the scheme. SID has to be updated every year

Key Contents:

 Scheme name on the cover page, along with scheme structure (open / closed-
ended) and expected scheme nature (equity / debt / balanced / liquid / ETF)

 Highlights of the scheme

 Risk factors o Standard o Scheme specific

 Due diligence certificate issued by the AMC

 Fees and expenses

 Rights of unit holders

 Penalties, litigations, etc.

2. Statement of Additional Information (SAI) - A document that contains statutory

information about the fund house offering the scheme. SAI has to be updated
the end of every quarter.

Key Contents:

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 Information about sponsor, mutual fund, trustees, custodian and registrar &
transfer agents

 Condensed financial information for schemes launched in the last three financial
years

 Information on how to apply

 Rights of unit holders

 Details of the fund managers

 Tax, legal and other general information

B. Key Information Memorandum (KIM) - Essentially it includes a summary of

SID & SAI. As per SEBI regulations, every application form should be
accompanied by the KIM. The KIM has to be updated at least once a year

Key Contents:

 Name of the AMC, Mutual Fund Trust, Trustee, Fund Manager(s) and Scheme
details

 Open and close dates of the issue

 Issue price of the scheme

 Plans and options available in the scheme

 Risk profile of the scheme

 Benchmark

 Dividend policy

 Performance of the scheme and benchmark over last 1, 3, 5 years and since
inception

 Loads and expenses

25
  Contact information and registrars

C. Fact Sheets - They are sually provided on a monthly basis by AMCs.

Key Contents:

 NAV and AUM

 Expense ratio, exit loads, average maturity, YTM, modified duration

 Benchmark & Fund manager details

 Past performance

 Scheme’s allocation & portfolios

 Style box

 Other scheme attributes like risk category, minimum investment amount,

scheme objective, etc.

D. New Fund Offer (NFO)

A new fund offer (NFO) refers to the initial sale of fund shares issued by an
investment company to investors. It is similar to an IPO in the stock market,
in which the public can purchase shares before getting listed on the exchange.
NFOs are intended to raise capital for the fund and attract investors. In a new
fund offer, the opportunity to subscribe to the scheme is available only for a
limited period. The investors may purchase units of the mutual fund scheme
during the pre-defined period and subscribe to the NFO at an offer price. This
is usually fixed at Rs. 10. Once the tenure expires, the investors would be
able to purchase the fund units at the specified price. NFO subscribers, in
general, have been able to generate noticeably better gains post-listing. With
the help of an NFO, the fund house raises money from the public to purchase
securities such as equity shares, bonds, and so on, in the market. NFO is
cheaper than the existing funds as it is new to the market. They are
comparable with the Initial Public Offering (IPOs). However, they are not
marketed as aggressively as IPOs and target certain select groups of

26
investors. As a result, new fund issues may be less noticeable to individual
investors than IPOs. Some factors that must be considered before investing in
a NFO are Fund House Reputation, Fund Objectives, Theme of New Fund
Offer, Returns, Risk factor, Cost of investment, Minimum Subscription
Amount and Investment Horizon.

E. Net Asset Value

NAV is simply the price per share of the fund. It is the current market value
of a fund's holdings. Just like shares have a share price; mutual funds have a
net asset value. For most funds, the NAV is determined daily, after the close
of trading on some specified financial exchange, but some funds update their
NAV multiple times during the trading day. Open-end funds sell and redeem
their shares at the NAV, and so process orders only after the NAV are
determined. Closed-end funds (the shares of which are traded by investors’)
may trade at a higher or lower price than their NAV; this is known as a
premium or discount, respectively. Generally, mutual fund units begin with a unit-
cost of ₹10 and it rises as the fund’s assets under the AMC grows. If a mutual
fund has a NAV of ₹500, then that is how much you will have to pay for one
unit of that mutual fund. Conversely, if you invest ₹5,000 in a mutual fund with a
net asset value of ₹500, then they will allow you 10 units of that fund. The cost
of an equity fund is the total cost of all the shares it has. These price fluctuations
are subject to the changes as per the share market and this is why mutual fund
portfolio comes with a daily value. All mutual companies estimate their portfolio
worth once the stock market closes at 3:30 p.m., each day. The market opens
again the next day with the previous day’s closing share prices. The fund
house deducts all the outstanding liabilities and expenses accordingly to calculate
net asset value (NAV) of the day using the given formula.

Net Asset Value = Net Asset of the Scheme / Number of units outstanding

Where, Net Asset of the Scheme = Market value of investments +

Receivables+ other accrued income+ other assets – Accrued Expenses- Other
Payables- Other Liabilities

27
Assets of a mutual fund scheme are divided into securities and liquid cash.
Securities include both the equity, debentures, bonds and commercial papers.
Interest accrued and dividends are also part of the assets. The cash balance in
the bank account is added and the money payable to others are subtracted to
determine the net asset value of the fund. The fund manager also deducts the
daily expenses to manage a fund. We get the cost per unit on a daily basis
when we divide total asset value by the number of mutual fund units issued
so far. The NAV should not have any bearing on fund selection. It basically
shows how the underlying assets have performed. It is more useful in
understanding how the fund performs on an everyday basis.

F. Asset Under Management (AUM)

Assets under management are the overall market value of assets/capital that a
mutual fund holds. The fund manager manages these assets and makes all investment-
related decisions on behalf of the investors. AUM is an indicator of the size
and success of a given fund house. One can easily compare a fund’s assets
under management in various timelines and performance with other similar
schemes. The AUM-value also includes the returns that a mutual fund
earns. The asset manager can invest this in securities, distribute to investors
as dividends, or hold as per the investment mandate. The overall investment in
a fund will rise when it gives consistently positive returns. A positive
performance can attract new assets and more investors, leading to an increased
AUM. Similarly, if there is a dip in the market value or the investment
performance, it can decrease the assets. Same goes for unexpected closure of the
fund or every time an investor redeems his/her share. Market fluctuations
impact the assets under management considerably. The fund’s assets will rise
when it earns returns and fall when it incurs losses. This also determines the
mutual fund fee. Lesser value generally means lower costs. For instance,
say, 100 investors have cumulatively invested Rs.10,000 in a mutual fund that
has earned 10% returns. Then the fund’s AUM would be Rs.11,000. Fund
houses employ different methods to calculate the assets that they manage. In
a nutshell, AUM is an excellent way to assess a fund’s popularity and
performance. However it shouldn’t affect the decision to invest or not.

28
G. Expense Ratio

The expense ratio refers to the fees charged by the scheme to manage
investors’ money. The expense ratio includes numerous charges for
smoothly running the mutual fund scheme. There are three major types of
expenses as a part of the Expense Ratio.

a. Management Fees

Mutual funds require the formulation of investment strategies before

actually investing money in the underlying assets. Fund managers need to
possess a high level of educational, relevant fund management
experience, and professional credentials.

The management fee or investment advisory fee is compensation for these

managers’ expertise. On average, this annual fee is about 0.50% to 1% of
the funds’ assets.

b. Administrative Costs

The administrative costs are the expenses of running the fund. This would
include keeping records, customer support, and service, information
emails, and communications. They can vary greatly and are expressed as a
percentage of fund assets.

c. Distribution Fees

Many mutual funds collect the distribution fee for advertising and
promotional purposes. Usually, they charge their shareholders to market
and promote the fund to the investors. These three fees combined are
equal to the percentage of assets deducted from the fund. Expense ratios
indicates how much the fund charges in terms of percentage annually to
manage your investment portfolio.

For example: If you invest Rs.20,000 in a fund which has an expense ratio of 2%,
then it means that you need to pay Rs.400 to the fund house to manage your money.
In simple words, if a fund earns returns equal to 15% and has Total Expense ratio
(TER) of 2%, then you will make a return equal to 13%.

29
A lower rate means more profitability and a higher rate means lesser profitability.
It becomes critical for schemes with comparatively more moderate yields. Apart
from that, one may use expense ratio to differentiate between actively managed and
passively managed funds. In case of actively managed equity funds, the returns
generated by the fund manager is a compelling justification for the fee they
charge. Also, mutual fund’s NAVs are reported after netting off the fees and
expenses and hence, it is necessary to know how much the fund is deducting or
charging as expenses. All expenses of an AMC must be managed within limits
specified under Regulation 52 of SEBI Mutual Fund Regulations. Mutual fund
expense ratios range from 0.1% to 3.5% for tax saving funds in India. Though the
expense ratio is important, it is not the only criteria while selecting a mutual fund
scheme.

H. Holding Period Return(HPR)

Holding period return is the total return received from holding an asset or portfolio
of assets over a period of time, generally expressed as a percentage. Holding period
return is calculated on the basis of total returns from the asset or portfolio – i.e.
income plus changes in value. It is particularly useful for comparing returns
between investments held for different periods of time.

Calculation of HPR

HPR = (Income + (end of period value- original value) x 100

Original Value

I. Know Your Customer (KYC)

Complying with the Know Your Customer or KYC norms is mandatory for every
mutual fund's investor. It is important for an investor to submit their identity details
to the mutual fund houses. AMC's are required to formulate rules and implement a
customer identification program in accordance with the Prevention of Money
laundering Act, 2002. These rules and regulation gets updated and is issued by SEBI
from time to time. The KYC process is free for the investors. Firstly, one needs to
get a KYC form which can be downloaded from the various website. It can also be
taken from a broker or an agent with whom the investor is dealing with. After filling
up the form, self-attested copies of the following documents along originals need to

30
 be submitted for In-person verification namely: Proof of identity, Proof of Address,
PAN Card, Photograph, Aadhaar Card if required. It can submitted the duly filled
form at the following juncture:
a. AMC (Asset Management Company) with which you are making an
investment
b. RTA (Registered Transfer Agent) such as CAMS, Karvy, or
Sundaram BNP Paribas Fund Services and Franklin Templeton.

It is important to note that each investor has to undergo a uniform KYC

process only once in the securities market.

1.10 EVALUATING PERFORMANCE OF MUTUAL FUNDS

While looking at a mutual fund scheme’s performance, one must not be led by the
scheme’s return in isolation. A scheme may have generated 10% annualised return
in the last couple of years. But then, even the market indices would have gone up
in similar way during the same period. Under-performance in a falling market, i.e.
when the NAV of the scheme falls more than its benchmark (or the market), is the
time when one must review his/her investment. One must compare the scheme’s
return as against its benchmark return. It is better to be rid of investment in a scheme
that consistently under-performs as compared to its benchmark over a period of
time, from one’s portfolio. It is important to identify under-performers over the
longer time horizon (as also out-performers). In addition, one may also consider
evaluating the ‘category average returns’ as well. Even if a scheme has
outperformed its benchmark by a decent margin, there could be better performers
in the peer group. The category average returns will reveal how good (or bad) is
one’s investment is against its peers which help in deciding whether it is time shift
the investment to better performers. One may be holding a too little or too much-
diversified portfolio. Even the expense ratio of some of the schemes that one could
be holding may be high compared to others within the same category.

1.11 PRESENT SCENARIO OF MUTUAL FUNDS IN INDIA

The year 2019 was as a rollercoaster ride for equities as various factors and
policy actions ensured uncertainty in the market. Political tensions ahead of the General
elections, tensions over terrorist attacks in Kashmir, NBFCs triggered liquidity crises,

31
concerns over weak earnings growth weighed on the markets in the first half of the
calendar year. Continuous heating up and cooling-off of the U.S-China trade was
constant factor that impacted the markets. Other global factors viz Brexit negotiations,
political disruptions in Hong-Kong, looming tensions in the middle-east also impacted
the market sentiment during the year. The markets moved sideways in the first two
months due to partial US government shutdown, concerns over the US-China trade talks
and India-Pakistan tensions. Sharply rally was seen in March 2019 due to moderation
in international crude oil prices, expectations of repo rate cut, a dovish US Fed policy
stance, waning trade tensions and increasing optimism about general election outcome.
The risk-taking ability came back as the elections concluded with BJP government
forming majority, FII inflows grew strong helping the markets to gain new highs in
June 2019. Second half of 2019 started off with announcements which dented the
market sentiments. Increased in tax on super rich/FPIs in the Union Budget, poor to
mixed corporate earnings, coupled with government’s hard steps on some sectors,
overhang on economic growth weighed heavy on investor sentiments. Mounting
troubles for NBFCs, concerns over corporate defaults and uncertainty surrounding the
US-China trade war have further contributed to the negative sentiments. However,
markets bounced back after government slashed corporate tax rates in a move to arrest
the slowing economic growth and incentivize capex by the private sector. Very low tax
rate for new manufacturing companies, clarity on the roll back of the increased
surcharge on capital gains on equity & derivatives in the hands of individuals and FPIs
lifted the market sentiments. Domestic frontline equity indices scaled life-time highs is
late 2019, outperforming Mid & small cap segments for more than a year. The
disconnect between financial markets and the real economy is becoming more
pronounced especially in the latter half of the year. The GDP clearly witnessed a
slowdown in growth while the Nifty is at the all-time highs. Within equities,
polarisation was clearly visible with select large caps ruling the roost with the broader
market witnessing a dry spell. This skew was due to investors’ focus on quality
companies with high governance standards and stable growth. Quality stocks
commanded premium thus trading at very high P/E’s. The Nifty 50 Index and the BSE
Sensex have rallied to 12% and 14.3% in 2019 respectively. In contrast, the Nifty
Midcap and Small-cap indices have suffered a loss of 4.3% and 9.5%, respectively.
Mirroring the benchmark, the large-cap schemes (especially focussed funds) gave good
returns while the mid- and small-cap schemes struggled. Investors of debt mutual funds

32
were left worried after the shock defaults by IL&FS Group subsidiaries. Long term
duration funds posted decent return due to easing cycle in interest rates. Many debt
funds saw sharp fall in NAV due mark down of investments made in defaulting
companies.

Quality focused rally helped focussed funds to beat large cap funds due to
concentrated exposure in top Nifty stocks. Performance of Large cap funds & multi-
cap funds were on the same lines as most of the multi-cap funds had more than 60% in
large cap stocks. Small cap & Midcap funds underperformed mirroring the benchmark
returns in CY2019.

33
 Long duration funds, gilt funds performed the best due to increasing interest
rate cycle in 2019. There were large divergence in the returns of debt funds within
categories also. Funds which favoured investment in top rated papers yielded decent
returns. Short duration and low duration funds with no major default events gave ~8-
9% returns. Credit funds took the biggest hit during the year.

Various set of regulatory and environment changes were made in Mutual funds in 2019.
The biggest change was a drastic reduction in the expenses that AMCs can charge from
investors and the nature of the commissions they pay to intermediaries (came into effect
from April 2019, though announced in September 2018). Defaults in IL&FS and few
of its subsidiaries ITNL, IL&FS Financial Services, IL&FS Energy Dev, IL&FS Tamil
Nadu Power, Jorabat Shillong Expressway, Jharkhand Road Projects; Reliance Home
Finance, Reliance Broadcast News ltd, Essel Infra, Sintex-BAPL, Simplex Infra, Altico
Capital, Dewan Housing Finance Corp impacted NAVs of debt funds and thus
investors’ confidence. In response to the credit defaults by these entities and weakness
in debt funds, SEBI reviewed risk management framework of debt funds, especially
liquid funds, and set prudential norms governing investments in debt and money
market. Major regulation changes which were effected in 2019:
1. Reduction in the expense ratio that is charged to investors across all MF
schemes.
2. All commission and expenses, etc. to be paid from the scheme only and not
from the AMC/Associate/Sponsor/Trustee, or any other route.
3. Adoption of full trail model of commission in all schemes without payment of
any upfront commission. Up fronting of trail commission in case of SIPs subject
to fulfilment of certain conditions.
4. Permitting segregation of Mutual Fund portfolio on the back of recent credit
events.
5. Liquid funds to hold at least 20% of its net assets in liquid assets with effect
from April 1, 2020. ‘Liquid assets’ shall include Cash, Government Securities,
T-bills and Repo on Government Securities. Levy of graded exit load on
investors who exit from Liquid Funds within 7 days of their investment.
6. Valuation of all money market and debt securities at its fair value and removing
the practice of amortization based valuation (with effect from Apr 1, 2020).

34
 7. Change in the cut-off timings for applicability of Net Asset Value (NAV) in
respect of purchase of units in liquid and overnight funds from 2:00pm to 1:30
p.m.
8. Various new Investment Restrictions on Debt Funds have been announced to
make debt funds much safer. Change in Sectoral exposure limit, group level
exposure limits, investment in unlisted securities.

Multi-cap & Large Cap funds garnered most of the inflows during 2019 aggregating to
Rs. 19,480cr from April 2019. Midcap funds saw robust inflows during the few months
betting on the outperformance of Midcap over Large cap. Few NFOs in Midcap funds
also managed to chip in additional inflows adding to Rs. 8,238cr. Focussed funds also
managed to attract high inflows from investors at large. Dividend Yield funds, contra
and value funds saw net inflows due to their poor performance track record. Sectoral
Funds saw subdued inflows during period Apr-Nov 2019.

35
A STUDY ON AWARENESS OF MUTUAL FUNDS
AND PERCEPTION OF INVESTORS

CHAPTER 2: RESEARCH METHODOLOGY

2.1 INTRODUCTION TO CHAPTER

This chapter contains brief information about the objectives, sample size, technique
used for sampling, various sources of data collection, area of study. It also
summarizes the tools used for the analysis of data and limitations of the study.

2.2 OBJECTIVES

 To gain knowledge of the awareness level among people regarding mutual

funds.
 To understand the perception and preferences of investors with regards to
mutual funds.
 To study the factors that influence decision making of investors before investing
in mutual funds.

2.3 SAMPLE SIZE

The study involves a survey of 80 respondents. They were surveyed by using a

structured questionnaire which was dispensed through the use of Google forms.

2.4 SAMPLING TECHNIQUE

The respondents were selected by using convenience sampling method. It is a type

of non-probability sampling method that relies on data collection from population
members who are conveniently available to participate in study.

2.5 DATA COLLECTION

1. Primary data

Primary data refers to the data that is collected by a researcher from first-hand sources,
using methods like surveys, interviews, or experiments. In this study, the primary data
was collected by using a structured questionnaire. It included 16 questions. The
questionnaire was circulated among more than 100 people however, only 80
respondents answered the same

36
 2. Secondary data

Secondary data refers to the data which is gathered from studies, surveys, or
experiments that have been run by other people or for other research. Here, the
secondary data was collected through the internet, articles from newspaper, published
sources including research papers, etc.

2.6 SCOPE

The research was conducted with an aim to know about the awareness level of people
regarding mutual fund as an investment avenue. An attempt was also made to study the
perception of people. Their preferences with respect to various investment avenues
mainly mutual funds and schemes of mutual funds was analysed. The study also focuses
on understanding the factors that influence investment decisions of respondents.

2.7 TOOLS USED FOR ANALYSIS

In this study, percentage method is used for data analysis. It is one of the basic statistical
tools which is widely used in analysis and interpretation of primary data. It deals with
the number of respondents’ response to a particular question which is in percentage and
is derived from the total population selected for the study. It is one of the simple forms
of analysis which is very easy for anyone to understand the outcome of the research.

2.8 LIMITATIONS

The findings of this study have to be seen in light of some limitations. They are:

 Majority of the respondents are students with a nil annual income.

 The sample size could have been larger to get more accurate results.
 Advanced statistical tools have not been used to analyze the data.

37
A STUDY ON AWARENESS OF MUTUAL FUNDS
AND PERCEPTION OF INVESTORS

CHAPTER 3: LITERATURE REVIEW

1. Peggy D. Dwyer, James H. Gilkeson and John A. (2001) conducted

a research entitled ‘Gender differences in revealed risk taking:
evidence from mutual fund investors.’ Data was collected from about
2000 respondents who were investors of Mutual funds. On the basis of
the findings, it was suggested that women take less risk than men in
their mutual fund investments. Also, it was revealed that wealthier,
more educated investors tend to take on more risk than their less
educated, less wealthy counterparts.

2. Dr. Binod Kumar Singh and Ashutosh Jha (2009) conducted a

research entitled ‘An empirical study on awareness and acceptability
of mutual fund’ to study the awareness and acceptability among the
consumers regarding mutual funds and also to analyse the factors that
influence their decisions. Primary data was collected through survey
method. 150 respondents were surveyed by using a questionnaire. The
findings revealed that consumers usually prefer mutual funds due to
wealth creation, tax benefit, security and liquidity. They are not fully
aware about the systematic investment plan.

3. Dr. K. Lakshman Rao (2011) through their research entitled

‘Analysis of investors’ perceptions towards mutual fund schemes’
made an attempt to evaluate the investor’s awareness and adoption
towards mutual fund schemes. 350 respondents were studied by using
a structured questionnaire. The data was then analysed using statistical
tools like percentage method, cross tabulation and chi-square test.
Through the findings, researcher concluded that majority of the
investors of mutual funds were found to be in the age group of 31-50
years. People belonging to the age group of more than 60 years and
less than 20 years were found to be less aware of various investment
schemes and hence their investments were comparatively lesser. It was

38
4. also found that urban people are more aware than rural people. The
researchers suggested that steps must be taken to increase awareness
of mutual funds among people. The regulatory bodies, AMFI and
AMCs must organise seminars in collaboration with universities,
institutes and stock exchanges. More researches on such areas must be
encouraged to cover various other aspects regarding investors and
mutual funds. The researcher finally concluded by adding that
collective efforts will add on to the wealth of the nation

5. Simran Saini, Dr. Bimal Anjum, Ramandeep Saini (2011)

conducted a research entitled ‘Investors’ awareness and perception
about mutual funds.’ The researchers performed the analysis of mutual
fund investment in relation to the investor behaviour that attract them
to invest in mutual funds. The study takes into consideration various
issues like: type of mutual fund scheme, main objective behind
investing in mutual funds scheme, level of satisfaction, role of
financial advisors and brokers, source of information, deficiencies in
the services provided by mutual fund managers, challenges before the
mutual fund industry, etc. The findings of the study showed that most
of the investors have a positive attitude about investing in mutual
funds. The mutual fund companies should attract more potential
investors and convert them to real investors. This can be done by
increasing transparency in functioning and ultimately confidence of
investors. These factors shall play a vital role to increase the growth
and development of mutual fund industry.

6. Binod Kumar Singh (2012) conducted a study entitled ‘A Study on

Investors’ Attitude towards Mutual Funds as an Investment Option.’ It
included details about structure of mutual fund, operations of mutual
fund, comparison between investment in mutual fund and bank and
calculation of NAV etc. It also considered the impact of various
demographic factors on investors’ attitude towards mutual funds. In
addition to this, attempt was also made for measuring and analysing

39
 the factors responsible for investment in mutual funds. Accordingly, it
was found that most respondents are confused about investing in
mutual funds. This might be due to lack of awareness regarding its
functions. Most demographic factors significantly influence investors
except for age and occupation. Return potential and liquidity have
been found to be the most attractive features of Mutual funds. Finally,
it was concluded by the researcher that India has a lot of scope for the
growth of mutual fund companies if they focus on satisfying the needs
of consumers, provide better services and improve disclosure norms.

7. R. Vasudevan and Dr. Peermohaideen (2012) studied the investor

perception and expectations associated with the specific mutual fund
scheme in their research paper entitled ‘Investors’ perceptions of
mutual fund risks an empirical study’. Data had been collected from
various sources and analysed with the help of statistical tools and
techniques such as percentages and chi-square tests. The research
focused on three main parameters namely investor’s age, marital status
and annual income and their opinion regarding risks associated with
mutual funds. The research shows that investors were of the opinion
that underperformance is a risk. It was found that most of the
unmarried investors were of the view that risk in mutual fund is low.
However, most of the married investors found it to be medium.
Investors with an income of above 6 lakhs consider mutual funds less
risky while those whose annual income is less than 1 lakh considered
it to be medium. Age also influenced their perception of risk. Majority
of the investors were satisfied with the returns.

8. Nishi Sharma (2012) made an attempt to analyse Indian investor’s

perception towards mutual funds. The research was mainly conducted
to understand the desirable characteristics of mutual fund schemes. It
also aims to know the various factors that might affect the selection of
mutual funds schemes either directly or indirectly. The findings
revealed that the factors influencing investors of mutual funds could

40
 be grouped into three categories viz: scheme/fund related attributes,
monetary benefits and sponsor related attributes. Therefore in order to
attract investments from Indian investors the mutual companies are
expected to provide full disclosure and regular updates of the relevant
information. They must also provide assurance, safety and monetary
benefits.

9. Ravi Vyas (2012) A research entitled ‘Mutual fund investor’s

behaviour and perception in Indore city’ was conducted. The main aim
was to find the form of investment avenues preferred by the investors
and to also know about other influencing factors like holding period,
availability of information etc. For this purpose primary as well as
secondary data was collected which was presented in the form of
graph chart etc. Various statistical tools like chi-square test,
correlation, etc were used. The following conclusions were drawn with
the help of the research namely: mutual fund information should be
published in an investor friendly language and style, proper system to
educate investor should be developed by mutual fund companies to
analyse the risk in investment made by them. On the other hand it is
required from the government and regulatory bodies point of view that
more laws should be made in order to secure the funds of the investors
and prevent them from being exploited, more tax rebate should be
given on mutual fund investments, proper and effective grievance
system, protection of rights of investors, investor education and more
control an asset management company should be established.

10. V. Rathnamani (2013) stated in his research entitled ‘Investor’s

Preferences towards Mutual Fund Industry in Trichy’ that many
investors prefer to invest in mutual funds in order to gain high at lower
level of risk also for safety and liquidity. The study was conducted
with an aim to study the growth of mutual fund industry, analyse
awareness of investors and to understand the factors that influence
investment decisions, features that attract investors. Primary data was
collected from 100 respondents through a questionnaire covering

41
 different groups of peoples in Trichy city area and secondary data was
collected from various books, magazine, journals, newspapers and
websites. It was found that majority of investors are willing to invest
only 10% of their annual income. The study also revealed that around
39% investors belonged to the age group of 31 to 40 years. The
investors were seen to be willing to take moderate and low level risks.
The researcher is of the opinion that the mutual fund companies must
ensure safety of investors’ funds and try to increase awareness among
them.

11. Shalini Goyal and Dauly Bansal (2013) conducted a research with
the objective to study the entire journey of mutual fund industry in
India. The title of the research was ‘A study on mutual funds in India’.
They have taken into consideration various literature reviews and
other theoretical aspects in order to achieve their objective.
Accordingly the conclusions were drawn. The researchers were of the
opinion that with the structural liberalisation policies Indian economy
is likely to return to high growth path in the few years. Due to this
mutual fund organisations would be required to upgrade their skills
and technology. However they also mentioned that the success of
mutual fund would depend upon implementation of some of the
suggestions viz: spreading awareness about the investors about two
crucial skills for successful investing namely a sense of timing and
investment discipline which are required to be adopted at the same
time.

12. Gaurav Agrawal and Dr. Mini Jain (2013) in their research
‘Investor’s preference towards mutual fund in comparison to other
investment avenues’ tried to find out the most preferred investment
avenue among investors in Mathura. They studied a sample of 300
investors through the use of a structured questionnaire. The
researchers found that majority of the investors were aware of Banks,
LIC, mutual funds followed by real estate and such other avenues.

42
 Majority of the investors gave importance to returns followed by tax
planning and safety. It was concluded on the basis of the findings that
investors prefer Banks and LIC for investment due to safety and
returns. They prefer post office schemes and mutual funds for tax
planning. It was also noted that if investors were provided with more
funds, they would invest in real estate due to its rapid growth.

13. Prof. Gauri Prabhu and Dr N.M. Vechalekar (2013) in their

research entitled ‘Perception of Indian Investor towards investment in
mutual funds with special reference to MIP Funds’ made an attempt to
study the investment pattern of Indian investors. Their main aim was
to find the awareness of mutual funds among investors, type of
schemes preferred, influencing factors, etc. They also tried to find the
awareness regarding MIP fund (Monthly income plan funds). The
researchers studied a sample of 150 individual mutual fund investors
belonging to Pune city. A structured questionnaire was used for this
purpose. The findings of the study revealed that, most of the investors
are aware about mutual fund schemes. The investors generally belong
to age group of 19-55 years. Their income ranges between Rs. 30,000
– Rs. 70,000 and above. The main factors that influence investments
include diversification and tax benefits. Similarly, most of the
investors were seen to be aware of MIPs due to consistent returns
provided by the funds.

14. Subramanya P R, Manasa G R (2015) in their research ‘Investment

behaviour of women investors’’ studied the factors of investor’s
perception towards mutual funds like age, gender, education, income
and savings which constitutes the social economic factors. Data was
collected from both primary and secondary sources. The researchers
concluded that the women gave more importance to the principal
amount irrespective of the investment avenue. Majority of the
investors expected high level of safety for their investment. Also, they
found that only salaried people think about investments. On the basis

43
 of their findings, the researchers suggested that more awareness
programmes must be conducted for women investors.

15. Mukesh H.V. (2015) conducted a research entitled ‘Investors

Perception towards Mutual Funds: An Indian Perspective.’ The study
focused on investor perception on mutual fund for return, tax benefit
and capital appreciation. Primary data was collected by means of a
structured questionnaire. A sample of 300 respondents was studied.
The findings of the research stated that it is necessary to create
awareness among the investors through conducting seminars,
workshops on financial market and publish data like newspaper,
magazines and journals. This is because it was found that the investors
lack awareness about mutual funds and their various schemes like SIP
(Systematic investment plan).

16. Arthy B and Aswathy A Nair (2015) conducted a research entitled

‘A study on factors affecting investment on mutual funds and its
preference of retail investors’. They have analysed the factors which
influence the investment decisions of retail investors in mutual funds.
They have also made an attempt to get a detailed knowledge about
investor’s perception and preferences towards mutual fund. They have
made use of the personal interview method also a questionnaire was
filled by the respondents. Accordingly their study concluded that
mutual funds have emerged as one of the important classes of financial
intermediaries that fulfil the needs of retail investors. Some of the
most important factors that affect the investment decision of the retail
investors are tax benefits, high return price and capital appreciation. It
was also observed that most of the investors preferred equity based
schemes. One of the barrier while investing in mutual funds was found
to be the bitter past experiences of the retail investors.

17. Ramanujan and Bhubaneswari (2015) conducted a study with a

view to analyse the growth and performance of the mutual fund

44
 industry during the past decades. The study is descriptive in nature it is
based on secondary data includes books journals periodical publication
of various mutual fund organisation website of mc website of
government publications and other websites of various mutual fund
companies. The study aims to analyse the growth of assets under
management institution wise and also to examine the sector wise
mutual fund sales and mutual fund redemption. It also takes into
consideration the resource mobilization by various schemes of mutual
funds and to examine the total number of schemes and number of
portfolios. the conclusions depicted that asset under management have
shown a growth of rupees 905120 the set under management of all the
sectors mutual fund sales mutual fund redemption and scheme wise
resource mobilization total number of schemes have been increasing
from the year 2004 to 2014.

18. Monirul Islam (2016) conducted a research entitled ‘Customer

behaviour towards Purchasing Mutual Fund-A Study of Dehradun
City.’ It was conducted with an aim to understand why an investor
selects a particular mutual fund company, which qualities do investors
look for and to know which type of scheme is preferred by investors.

19. Poonam Devi (2017) In order to understand the perception of

investors towards the mutual funds and also to know about the
expectation of people for the return on mutual funds a study was
conducted by entitled ‘Performance and Analytical study of various
mutual funds.’ Different data interpretation methods and presentation
methods were used. Mostly primary data was used by the researcher.
The researcher thus concluded on the basis of results that most of the
investors like to invest in mutual funds. The time period is usually for
1 or 3 years to get the return on their investments. The main purpose
of investors of mutual fund is to get higher returns and tax benefits. It
was also seen that some people do not wish to invest in mutual funds
because of the risk factor or lack of proper knowledge.

45
20. Mital Bhayani (2017) A research was conducted with an intention to
study the recent trends in the mutual fund industry. The study was
based on the following aspects viz total assets, investor types and
location. Secondary data was collected and presented through various
charts and tables to understand the recent trends. It was observed that
even though the mutual fund industry seems to grow in India the
growth is concentrated both with respect to investor category and
place. The category constitutes institutional investors, T-15 cities and
debt investment schemes leaving huge scope for growth. However
large segment of investors are still untapped by the industry. It is a
major challenge for mutual fund houses to reach different segments of
investors. The solution prescribed through the research was to increase
the financial knowledge and awareness to encourage the investors to
invest in mutual funds. This should be done with an aim to attract the
investors towards mutual fund investment through limited distribution
network. Investor service can also be enhanced so as to cover a wider
area beyond large cities.

21. Sudarmathi. J, Dr. C. H. Bala Nageshwara Roa (2017) in their

research entitled ‘a study on investors’ behaviour towards mutual
fund’ studied the factors considered by investors before investing in
mutual funds. Also, analysed the working of mutual funds, investment
preferences and knowledge of investors. The researchers surveyed 60
respondents by using a structured questionnaire. It was found that
majority of the respondents were male and belonged to the age group
of 20-30 years. The findings also revealed that there was a strong
relationship between demographic factors and investor preferences.
On the basis of all the findings, the researchers concluded that more
awareness must be encouraged among females.

22. Geetha Sineni and Dr. S. Siva Reddy (2017) in their research
entitled ‘Investors Perception and Satisfactions Levels towards Mutual
funds in Rayalaseema Region of Andhra Pradesh.’ Tried to explore the

46
 market trends of the mutual fund industry in India. They also focused
on influence socio-economic factors, level of satisfaction among
investors. The study revealed that the investors’ perception is reliant
on the demographic profile which includes factors like the investor's
gender, age, education, marital status occupation. Annual income and
annual savings have a direct impact on the investor's choice of
investment. It was also found that investors’ satisfaction is the most
important ingredient for the success of mutual fund industry.

23. Jasvir Kaur, Nittan Arora (2018) examined the factors that affect
the attitude of investors towards mutual funds, in their research
entitled ‘A Study on Investor’s Perception towards Mutual Funds as an
Investment Option.’ 150 respondents were surveyed through
questionnaire method. The researchers found that majority of the
people had invested their money in mutual funds. Fixed deposits was
the most preferred investment. Majority of the investors consider
return as the most important reason for investing. Most of the
respondents gained knowledge about mutual funds through friends or
relatives. The majority of investors invested their money for a period
of 5-10 years. Growth fund was the most referred scheme. Also, more
than 50% respondents would like to reinvest in mutual funds.

24. Nallandula Nandini, Dr. N. Sugandan (2018) examined the

awareness and perception about mutual funds and its various schemes
among post graduate students in their research entitled ‘A Study on
Awareness and Perception about Mutual Funds of Post Graduate
Students.’ The findings of the research revealed that, large number of
students preferred investing in postal savings and bank deposits. They
were not aware of mutual funds. Hence it was suggested by the
researchers that more awareness must be encouraged. The students
intended to get safer returns on their investments. This was found to be
the main reason for not preferring to invest in stock market or mutual
funds.

47
25. Dr. Meenakshi Bindal, Dr. Bhuwan Gupta, Sweety Dubey (2019)
‘A Study on Investors Perception towards Mutual Fund Investments.’
In their study, the researchers aimed to examine investors’
responsiveness and liking towards mutual funds. Various factors
influencing selection of schemes were considered along with
satisfaction levels of investors. The problems faced by mutual funds
were also assessed. For this purpose, a sample of 150 investors in
Alwar city. It was found that majority of the respondents were males
and were in between the age group of 20-30 years. Most of the
investors preferred open ended schemes and invested in private mutual
funds. The respondents gained awareness mainly through newspapers.
They were also aware about the risks involved in mutual funds. They
considered not knowing the market value as one of the problem.

26. Juhi Ahuja (2019) in her research entitled ‘A study on Factors

influencing Investment decision of individual investors towards
mutual funds: An Indian Perspective’ tried to identify the factors that
influence investment decisions in mutual funds. Also, attempt was
made to study the influencing factors and to know about the most
preferred investment avenues. 100 respondents were surveyed for this
purpose. Based on the findings, the researcher concluded that a strong
relationship between demographic factors and investment in mutual
funds could be identified. Further, it was said that most respondents
were aware of mutual funds. However, the youth was seen to have
lesser knowledge. Major factors for influencing investment decision
comprised of high return, price and liquidity.

27. Shilpa Sampath Kumar & Dr. Umamaheswari.S & Kusuma K

Reddy (2019) ‘An analytical study on investors’ perception towards
mutual funds.’ The main purpose of the study was to analyse the
investor’s perception towards mutual fund. Also, efforts were made to
understand the various factors that influence investment decisions as
well as the relationship between demographic factors and investor
perception.

48
A STUDY ON AWARENESS OF MUTUAL FUNDS
AND PERCEPTION OF INVESTORS

CHAPTER 4: DATA ANALYSIS & INTERPRETATION

4.1 DATA ANALYSIS AND INTERPRETATION

Section ‘A’

1. Gender

In the table 1.1 given below, the respondents have been classified on the basis of their
Gender. They have been distributed among three categories namely: Male, Female and
Other respectively.

Table 1.1

Classification of respondents on the basis of their Gender

Number of
Sr. No. Gender Percentage
Respondents
1 Male 34 42.50%
2 Female 46 57.50%
3 Other 0 0%
Total 80 100%

Figure 1.1

Interpretation: From the above table and corresponding figure 1.1, it can be noted that
majority of the respondents are Females i.e. 46 which amounts to 57.5% of the total
respondents. Similarly 34 respondents are Males and constitute 42.50% of the total
respondents. No responses have been received from the other category.

49
2. Age

In the table 1.2 given below, the respondents have been classified on the basis of
their Age.

Table 1.2

Classification of Respondents on the basis of their Age

Sr. No. Age Group Number of Respondents Percentage

1 18-24 51 63.75%
2 25-31 9 11.25%
3 32-38 5 6.25%
4 39-45 6 7.5%
5 Above 45 9 11.25%
Total 80 100%

7.5%

Figure 1.2

Interpretation: From the above table and corresponding figure 1.2, it can be noted
that majority of the respondents belong to the age group 18-24 which amounts to
63.7%. The age groups ranging between 25-31 and above 45 years have accounted for
11.3% respectively. 6.5% of respondents belong to the age group of 32-38. Similarly,
the age group 39-45 constitutes 7.5% of the total respondents.

50
3. Employment Status

In the table 1.3 given below, the respondents have been classified on the basis of their
Employment Status. They have been divided into six categories. The description is as
follows:

Table 1.3

Classification of Respondents on the basis of their Employment Status

Employment Number of
Sr. No. Percentage
Status Respondents
1 Student 48 60%
Government
2 4 5%
Employee
3 Private Employee 7 8.75%
4 Professional 12 15%
5 Self employed 5 6.25%
6 Other 4 5%
Total 80 100%

5%
6.25%
5%

Figure 1.3
Interpretation: From the above table and corresponding figure 1.3, it is seen that
maximum respondents are students. They constitute 60% of the total respondents.
Government Employees and Private Employees account for 5% and 8.75%
respectively. Respondents who belong to the category Professional amount to 15%. Self
Employed people account for 6.25%. Respondents pursuing any other employment
status amount to 5%.

51
4. Annual Income

In the table 1.4 given below, the respondents have been classified on the basis of their
Annual Income.

Table 1.4

Classification of Respondents on the basis of their Annual income

Sr. No. Annual Income (in Rs.) Number of Respondents Percentage

1 Nil 32 40%
2 Below 2,50,000 20 25%
3 2,50,001 - 5,00,000 7 8.75%
4 5,00,001 - 7,50,000 12 15%
5 7,50,001 - 10,00,000 6 7.5%
6 Above 10,00,000 3 3.75%
Total 80 100%

7.5%
3.75%

Figure 1.4
Interpretation: From the above table and corresponding figure 1.4, it can be
noted that 40% of the respondents have nil annual income. 25% respondents
earn below Rs.2,50,000 annually. 8.8% of the respondents earn between
Rs.2,50,001 – 5,00,000 while, 15% earn between Rs.5,00,001 - 7,50,000
respectively. 6 respondents who account for 7.5% of total respondents have
an annual income between Rs.7,50,001 - 10,00,000. Also, only 3.75% of
respondents earn above Rs.10,00,000

52
Section ‘B’
1. An attempt has been made to classify the respondents on the basis of the question
‘Which parameters do you consider important while investing?’ Accordingly, eight
parameters have been rated on a scale of 1-5 by the respondents. (5 - Extremely
important, 4 - highly important, 3 – moderately important, 2 – less important and 1 –
not important). The eight parameters and their ratings are depicted in the following
charts (2.1.1 to 2.1.8):

1. Return

Figure 2.1.1

Interpretation: Here, the above figure 2.1.1 depicts that majority of respondents (55%)
have rated Returns at 5. It means they are of the opinion that return is the extremely
important parameter that must be considered while investing. 38.8% have rated it to be
highly important. Only 3.8% respondents have rated it to be moderately important.
Also, 1.3% respondents find it to be less important and not important respectively.

2. Risk

Figure 2.1.2

53
Interpretation: Here, the above figure 2.1.2 depicts that almost majority of
respondents (32.5%) have rated Risk at 5. It means they are of the opinion that return
is also an extremely important parameter that must be considered while investing. Also,
30% respondents opine it to be highly important. 22.5% find it to be moderately
important. However 10% of respondents find it to be a less important parameter. While,
5% assume it to be not at all important.

3. Credit Rating

Figure 2.1.3
Interpretation: Here, the above figure 2.1.3 depicts that majority of respondents (35%)
have rated Credit Rating at 5. It means they consider Credit Rating to be an extremely
important parameter. This is followed by 31.3% respondents rating it to be a highly
important parameter. 26.3% find it to be moderately important. 3.8% respondents find
it to be comparatively less important parameter while another 3.8% assume it to be not
at all important.

4. Inflation

Figure 2.1.4
Interpretation: Here, the above figure 2.1.4 depicts that almost majority of
respondents (35%) have rated Inflation at 4. It means they consider it to be a highly

54
important parameter that must be considered while investing. 32.5% respondents have
rated inflation to be moderately important. 15% have rated it to be less important while
another 15% find it to be an extremely important parameter. Only 2.5% respondents
find it to be not important.

5. Tax Benefit

Figure 2.1.5
Interpretation: Here, the above figure 2.1.5 depicts that majority of respondents
(42.5%) have rated Tax Benefit at 5. It means they are of the opinion that it is extremely
important parameter that must be considered while investing. Also, 18.8% respondents
opine it to be highly important. 20% find it to be moderately important. However 11.3%
of respondents find it to be a less important parameter. While, 7.5% assume it to be not
at all important.

6. Lock-in Period

Figure 2.1.6
Interpretation: Here, the above figure 2.1.6 depicts that almost majority of
respondents (35%) have rated Lock-in period at 5. It means they are of the opinion that
it is the most important parameter that must be considered while investing. 23.8% have
rated it to be highly important. While, 33.8% respondents have rated it to be moderately

55
important. Also, 6.3% respondents find it to be less important and 1.3% find it to be not
important.

7. Safety

Figure 2.1.7
Interpretation: Here, the above figure 2.1.7 depicts that majority of respondents (53.8)
have rated Safety at 5. It means they are of the opinion that it is the most important
parameter that must be considered while investing. Similarly, 35% respondents believe
it to be highly important. 8.8% find it to be moderately important. 1.3% consider it to
be less important and another 1.3% rate it to be not at all important.

8. Marketability

Figure 2.1.8

Interpretation: Here, the above figure 2.1.8 depicts that equal number of respondents
(37.5%) have rated Marketability at 4 and 5 respectively. It means they are of the
opinion that it is the most important parameter that must be considered while investing.
16.3% respondents find it to be moderately important. While, 2.5% consider it as not
important.

Summary:

56
 Table 2.1

Classification of respondents as per their ratings to investment parameters

(5-extremely important, 4-highly important, 3–moderately important, 2–less important, 1–not
important)

Sr. Ratings
Parameters Total
no 1 2 3 4 5

1 Return 1 1 3 31 44 80

2 Risk 4 8 18 24 26 80

3 Credit Rating 3 3 21 25 28 80

4 Inflation 2 12 26 28 12 80

5 Tax Benefit 6 9 16 15 34 80
Lock-in
6 1 5 27 19 28 80
Period
7 Safety 1 1 7 28 43 80

8 Marketability 2 5 13 30 30 80

Interpretation: In the above given table 2.1, the summary of the

ratings given by the respondents with regards to the parameters can
be seen. From this, it can be interpreted that most of the people are
aware of these parameters and do consider them while making
investment decisions. Returns is considered the most followed by
safety, tax benefit, marketability, credit rating, lock-in period, risk
and lastly inflation.

57
2. An attempt has been made to classify the respondents on the basis of the question
‘Which of the following investment avenues do you know?’ It can be depicted in
the following table and chart:
Table 2.2
Classification of respondents as per their knowledge of various investment
avenues.
Sr. Number of Percentag
Investment Avenues
No Respondents e
1 Bank (Current, Saving, FD, RD) 77 96.3%
2 Stock Market 70 87.5%
3 Gold/Silver 67 83.8%
4 Post Office 55 68.8%
5 NSC 46 57.5%
Insurance (ULIP, Annuity,
6 61 76.3%
Endowment)
7 PPF 63 78.8%
8 Mutual Funds 71 88.8%
9 Government Securities 54 67.5%
10 Real Estate 44 55%
11 Other 18 22.5%

Stock market

Insurance

Figure 2.2
Interpretation: From the above table and corresponding figure 2.2, it is seen that
majority of the respondents know about investment avenues which include Bank
(96.3%), Mutual Funds (88.8%), Stock Market (87.5%) and Gold/Silver (83.8%). PPF
(78.8%) and Insurance (76.3%) products which comprise investment benefits are also
well known avenues. These are followed by Post Office investment schemes (68.8%)
and Government Securities (67.5%). However, NSC (57.5%) and Real Estate (55%)
are comparatively less popular. It can also be noted that 22.5% of the respondents have
knowledge of other investment avenues.

58
3. An attempt has been made to classify the respondents on the basis of the question
‘Are you aware of mutual funds?’ The below given table and chart depicts the same.

Table 2.3

Classification of Respondents according to their awareness of Mutual Funds

Number of
Sr. No. Responses Percentage
respondents
1 Yes 75 93.75%
2 No 5 6.25%
Total 80 100%

6.25%

Figure 2.3

Interpretation: The above table and corresponding figure 2.3,

depicts that 93.75% of respondents are aware of Mutual Funds as an
investment avenue. Only 6.25% respondents are unaware of the
same. It can thus be noted that majority of the respondents are aware
of Mutual Funds.

59
The following questions have been answered only by those respondents who are
aware of Mutual Funds.

4. An attempt has been made to classify the respondents on the basis of the question
‘Through which mediums did you come to know about Mutual funds?’ The below
given table and chart depicts the same.
Table 2.4
Classification of Respondents according to the use of various mediums

Sr. No Mediums Number of Respondents Percentage

1 Advertisements 62 82.7%
2 Newspaper 36 48%
3 Magazine 9 12%
4 Social Media 33 44%
5 Television 39 52%
6 Peer Groups 34 45.3%
7 Financial Consultants 31 41.3%
8 Internet 45 60%
9 Other 13 17.3%

Figure 2.4
Interpretation: From the above table and corresponding figure 2.4, it can be
understood that, advertisement is a medium through which majority of the respondents
(82.7%) have gained awareness about mutual funds. Internet (60%) has also played a
vital role followed by other mediums like Television (52%) and Newspaper (48%). Peer
groups (45.3%), Social media (44%) and Financial Consultants (41.3%) have also
contributed to the same. 17.3% of respondents have gained awareness through other
mediums.

60
5. An attempt has been made to classify the respondents on the basis of the question
‘Have you invested in Mutual Funds?’ The below given table and chart depicts the
same.

Table 2.5

Classification of Respondents according to their investment in Mutual Funds.

Number of
Sr. No. Responses Percentage
respondents
1 Yes 38 50.7%
2 No 37 49.3%
Total 75 100%

Figure 2.5

Interpretation: From the above table and corresponding figure 2.5, it is seen
50.7% of respondents have replied in affirmative of having invested in
Mutual Funds. While 49.3% of respondents have denied the same. Thus it
can be noted that almost one half of the total respondents have invested in
mutual funds.

61
6. An attempt has been made to classify the respondents on the basis of the question
‘What percentage of your income do you invest in mutual funds?’ The following table
and chart depicts the same.

Table 2.6

Classification of Respondents as per to the percentage of investment in Mutual

Funds.

Sr. No Percentage of income invested Number of Respondents Percentage

1 0-5% 6 15.8%
2 5-10 % 12 31.6%
3 10-15% 9 23.7%
4 15-20% 6 15.8%
5 20 above 5 13.2%
Total 38 100%

Figure 2.6
Interpretation: From the above table and corresponding figure 2.6, it can be
interpreted that, majority of the respondents (31.6%) invest about 5-10% of
their annual income in Mutual funds. 23.7% respondents invest about 10-
15% of their income. It can be seen that about 0-5% as well as 15-20% of
income is invested by 15.8% respondents respectively. Also, 13.2%
respondents invest above 20% of their income in mutual funds.

62
7. An attempt has been made to classify the respondents on the basis of the question
‘Which schemes of mutual funds have you invested in?’ The following table and chart
depicts the same.

Table 2.7

Classification of Respondents as per their investment in schemes of Mutual

Funds

Sr. No Types of schemes Number of Respondents Percentage

1 Equity Mutual Fund Schemes 30 78.9%
2 Debt Mutual Fund Schemes 11 28.9%
3 Balanced scheme 14 36.8%
4 Hybrid schemes 12 31.6%
5 Solution oriented schemes 0 0%
6 Other schemes 3 7.9%

Figure 2.7
Interpretation: The above table and corresponding figure 2.7, depicts the
schemes of mutual funds and the number of respondents who have invested
in those schemes. It can be clearly noted that majority of respondents
(78.9%) have invested in Equity schemes. Comparatively lesser number of
respondents have invested in Balanced schemes (36.8%), Hybrid schemes
(31.6%) and Debt schemes (28.9%). No respondent has invested in Solution
oriented schemes. 7.9% respondents have invested in other schemes of
mutual funds.

63
8. An attempt has been made to classify the respondents on the basis of the question
‘In which type of scheme do you prefer to invest?’ The following table and chart
depicts the same.

Table 2.8

Classification of Respondents on the basis of type of scheme invested in

Sr. No. Types of schemes Number of respondents Percentage

1 Open ended scheme 30 78.90%
2 Close ended scheme 8 21.10%
Total 38 100%

Figure 2.8

Interpretation: The above table and corresponding figure 2.8,

shows the number of respondents who have invested in Open ended
or Close ended schemes. Out of all the respondents who have
invested in mutual funds, 78.9% have opted for Open ended scheme.
Also, 21.1% of them have opted for Close ended scheme.

64
9. An attempt has been made to classify the respondents on the basis of the question
‘Through which medium have you invested in mutual funds?’ The following table
and chart depicts the same.

Table 2.9

Classification of Respondents on the basis of medium of investment

Sr. No. Medium of investment Number of respondents Percentage

1 18 47.4%
Direct (i.e by yourself)
2 20 52.6%
Indirect (i.e through a broker)
Total 38 100%

Figure 2.9
Interpretation: The above table and corresponding figure 2.9,
represents the medium of investment (namely Direct or Indirect)
used by the respondents. It can be understood that 47.4% of the
respondents prefer investing through Direct medium which means
by themselves. However, 52.6% of respondents which constitute a
majority here, prefer investing through Indirect medium which
means through a broker.

65
10. An attempt has been made to classify the respondents on the basis of the question
‘What would be your objective while investing in Mutual fund?’ The following table
and chart depicts the same.

Table 2.10

Classification of Respondents on the basis of their investment objectives

Sr. Objectives of investing in Mutual Number of

Percentage
No Fund Respondents
1 Regular flow of income 37 49.3%
2 Long term Capital appreciation 50 66.7%
3 Short term investment 14 18.7%
4 Portfolio diversification 35 46.7%
5 Mobilisation of idle funds 38 50.7%
6 Other 7 9.3%

Figure 2.10

Interpretation: The above table and corresponding figure 2.10, represents the
investment objectives of the respondents. Majority of the respondents (66.7%) invest
with the objective of long term capital appreciation. Mobilization of idle funds and
Regular flow of income are considered by 50.7% and 49.3% of respondents. Portfolio
diversification is also an objective for 46.7% respondents. Comparatively, fewer
number of respondents (18.7%) consider short term investment as their investment
objective. 9.3% respondents invest in mutual funds with other objectives.

66
11. An attempt has been made to classify the respondents on the basis of the question
‘Which features of Mutual Funds attract you?’ Accordingly, seven features have been
rated on a scale of 1-5 by the respondents. (5 - Extremely important, 4 - highly
important, 3 – moderately important, 2 – less important and 1 – not important). The
seven features and their ratings are depicted in the following charts (2.11.1 to 2.11.7):

1. Diversification

Figure 2.11.1
Interpretation: Here, the above figure 2.11.1 depicts that majority of respondents
(38.7%) have rated Diversification at 4. It means they are of the opinion that it is a
highly important feature that influences them to invest in mutual funds. Also, 26.7%
respondents opine it to be extremely important. 30.7% find it to be moderately
important. However 4% of respondents find it to be a less important feature. While, 0%
assume it to be not at all important.

2. Better return and safety

Figure 2.11.2

67
Interpretation: Here, the above figure 2.11.2 depicts that majority of
respondents (52%) have rated better return and safety at 5. It means they are
of the opinion that it is an extremely important feature that influences them to
invest in mutual funds. 33.3% have rated it to be highly important. While,
10.7% respondents have rated it to be moderately important. Also, 2.7%
respondents find it to be less important and 1.3% find it to be not important.

3. Transparency

Figure 2.11.3
Interpretation: Here, the above figure 2.11.3 shows that majority of respondents
(38.7%) have rated transparency at 5. It means they are of the opinion that it is
extremely important feature that influences them to invest in mutual funds. This is
followed by 36% respondents rating it to be a highly important feature. 21.3% find it to
be moderately important. 2.7% respondents find it to be comparatively less important
feature while another 1.3% assume it to be not at all important.

4. Reduction in risk and transaction cost

68
 Figure 2.11.4
Interpretation: Here, in the above figure 2.11.4, it can be seen that majority of
respondents (34.7%) have rated Reduction in risk and transaction cost at 3. It means
they are of the opinion that it is a moderately important feature that influences them to
invest in mutual funds. 30.7% respondents consider it to be highly important while,
26.7% opine it to be extremely important. Only 8% have rated it to be less important.

5. Regular income

Figure 2.11.5
Interpretation: The above figure 2.11.5, represents that majority of respondents
(34.7%) have rated Regular income at 4. It means they are of the opinion that it is also
a highly important feature that influences them to invest in mutual funds. 30.7% find
it to be extremely important. 24% have rated it to be moderately important while 8%
find it to be less important. Also, 2.7% opine it to be not important.

6. Tax benefit

69
 Figure 2.11.6
Interpretation: The above figure 2.11.5, represents that majority of respondents
(34.7%) have rated Regular income at 4. It means they consider it to be a highly
important feature that influences them to invest in mutual funds. Similarly, 26.7%
have rated it to be extremely important and 20% find it to be moderately important.
However, 6.7% consider it to be a less important feature while another 6.7% find it to
be not at all important

7. Professional management

Figure 2.11.7

Interpretation: The above figure 2.11.5, represents that majority of respondents

(34.7%) have rated Regular income at 4. It means they are of the opinion that it is also
an extremely important feature that influences them to invest in mutual funds. 29.3%
have rated it to be a highly important feature. While 20% consider it to be moderately
important. No respondents opine that professional management is less important or
not at all important.

70
Summary:
Table 2.11

Classification of respondents as per their ratings to features of Mutual Funds

(5 - Extremely important, 4 - highly important, 3 – moderately important, 2 – less

important and 1 – not important).

Ratings (1 – 5)
Sr.no Features of Mutual Funds Total
1 2 3 4 5

1 Diversification 0 3 23 29 20 75

2 Better return and safety 1 2 8 25 39 75

3 Transparency 1 2 16 27 29 75

4 Reduction in risk and transaction cost 0 6 26 23 20 75

5 Regular income 2 6 18 26 23 75

6 Tax benefit 5 5 15 30 20 75

7 Professional management 0 0 15 22 38 75

Interpretation: In the above given table 2.11, the summary of the

ratings given by the respondents with regards to the features of
mutual funds can be seen. From this, it can be interpreted that most
of the people are aware of these features and do consider them while
making investment decisions. Better return and safety is considered
the most followed by professional management, transparency,
regular income, tax benefit, diversification and lastly reduction in
risk and transaction cost.

71
12. An attempt has been made to classify the respondents on the basis of the question
‘Rate mutual funds on the basis of fulfilment of your investment objective.’ The
question was applicable only to the respondents who have invested in Mutual Funds.
The following table and chart depicts the same.

Table 2.12

Classification of Respondents on the basis of fulfilment of their investment

objective

Sr. No Ratings Number of respondents Percentage

1 Highly Satisfactory 11 24.4%
2 Satisfactory 26 57.8%
3 Average 8 17.8%
4 Dissatisfactory 0 0%
5 Highly Dissatisfactory 0 0%
Total 45 100%

Figure 2.12
Interpretation: The above table and corresponding figure 2.12, depicts the ratings of
mutual funds by the respondents with regards to the fulfilment of their investment
objective. Here, it can interpreted that majority of the respondents (57.8%) have rated
Mutual Funds to be satisfactory. Also, 24.4% respondents have rated it to be highly
satisfactory. 17.8% consider it to be average. 0% of respondents find Mutual fund
investment dissatisfactory or highly dissatisfactory.

72
Section ‘C’
The following questions have been answered only by those respondents who are
unaware of Mutual Funds.

1. An attempt has been made to classify the respondents on the basis of the question
‘If you are made aware about mutual funds then would you like to invest in it?’ The
following table and chart depicts the same.

Table 3.1

Classification of Respondents according to their willingness to invest in Mutual

Funds

Sr. No. Response Number of respondents Percentage

1 Yes 4 80%
2 No 1 20%
Total 5 100%

Figure 3.1
Interpretation: From the above table and corresponding figure 3.1, it can be
seen that majority of the respondents (5) which constitutes 80% here, are
likely to invest in mutual funds if required assistance and guidance is
provided. However, 1 among the 5 respondents (20%) is not willing to invest
irrespective of awareness regarding the same.

73
2. An attempt has been made to classify the respondents on the basis of the question
‘Which mediums do you think should be used to increase awareness about mutual
funds?’ The following table and chart depicts the same.

Table 3.2

Classification of Respondents according to use of medium for increasing

awareness

Sr. No Mediums Number of respondents Percentage

1 Advertisements 3 60%
2 Investor Education Programmes 3 60%
3 Seminars by Professionals 1 20%
4 Others 1 20%
Total 5 100%

Figure 3.2
Interpretation: The above table and corresponding figure 3.2, represents the
mediums that must be used to increase awareness of mutual funds in the
opinion of the respondents. 60% of respondents prefer advertisements and
investor awareness programmes respectively. Seminars conducted by
professionals is preferred by 20% respondents while another 20% prefer
other mediums.

74
4.2 FINDINGS
On the basis of the data analysis and its interpretation, some major findings can be
noted. They are as follows:

1. It is seen that female respondents are more than the number of male respondents.
2. Majority of the respondents belong to the age group of 18 to 24.
3. Most of the respondents comprised of students followed by professionals,
private employees. Comparatively lesser respondents belonged to self-
employed, government employees and other category.
4. It was also found that the respondent’s annual income was nil. This might be
because most of the respondents were students. Excluding those, majority of the
respondents belong to the category where annual income was below 250000
followed by 500001 to 750000
5. The study enabled to understand that most people are aware about the
parameters that must be considered before making any investment decisions.
Most of the people invest money without view to earn returns. Safety and tax
benefit are also some of the factors that are considered by them. However
inflation and risk was seen to be given comparatively less importance.
6. Through the survey it was also found that people are more aware about
investment avenues in banks like current account, savings account, fixed deposit
and recurring deposit. This might be because they consider return and safety as
important parameters for making any investment decision as mentioned above.
The respondents also know about mutual funds stock market and gold and
silver. Some of the respondents do not know about insurance, PPF, post office
schemes, government securities, NSC and real estate
7. Majority of respondents were found to be aware of mutual funds. Most of them
were of the opinion that advertisement was the medium through which they
came to know about mutual funds. Internet has also contributed to a large extent
in the process.
8. It can also be noted that from the respondents who were aware of mutual funds,
almost 50% have invested in mutual funds. One of the reasons for not investing
could be lack of availability of funds due to nil annual income.
9. Majority of the respondents were found to invest 5 to 10% of their income in
mutual funds.

75
10. Equity mutual fund scheme was found to be the most preferred schemes among
the respondents followed by the balanced mutual fund scheme.
11. The respondents were found to give more preference to open ended scheme
rather than close ended scheme
12. Further it was also found that more number of the respondents prefer investing
through a broker that is through an indirect method. However other meaning
respondents prefer to invest in mutual funds by themselves.
13. It was seen that the respondents invested with the main objective of long term
capital appreciation. Their other most important objectives were mobilization
of idle funds and regular flow of income. Very few number of respondents
preferred mutual funds for short term investment purposes.
14. With regards to features of mutual funds the respondents find better return and
safety the most attractive one. They also like the advantage of professional
management. This could be one of the reason why they prefer to invest through
the indirect medium that is through a broker as mentioned earlier.
15. The respondents are found to be less interested in tax benefit as a feature of
mutual funds. They also do not find the feature reduction of risk and transaction
cost much attractive so as to influence their investment decision.
16. Majority of the respondents have found mutual funds to be satisfactory in
fulfilling their investment objectives. No respondents have found mutual funds
to be dissatisfactory or highly dissatisfactory. This could be considered as a
positive sign for the mutual fund industry in order to attract more people for
investing in mutual funds.
17. In case of those respondents who were unaware of mutual funds, were seen to
be willing to invest in mutual funds provided that they were given the required
guidance and knowledge regarding the same.
18. These respondents were of the opinion that more advertisements and
educational programs for investors must be conducted. Also, seminars by
professionals on Mutual funds must be encouraged.

76
A STUDY ON AWARENESS OF MUTUAL FUNDS
AND PERCEPTION OF INVESTORS

CHAPTER 5: CONCLUSION & SUGGESTIONS

5.1 CONCLUSION

Mutual funds are a vehicle to mobilize money from investors, to invest in different
markets and securities, in line with the investment objectives agreed upon, between the
mutual fund and the investors. They perform different roles for different constituencies.
Their primary role is to assist investors in earning an income or building their wealth,
by participating in the opportunities available in various securities and markets. It is
possible for mutual funds to structure a scheme for any kind of investment objective.
Thus, the mutual fund structure, through its various schemes, makes it possible to tap a
large corpus of money from diverse investors. The money that is raised from investors,
ultimately benefits governments, companies or other entities, directly or indirectly, to
raise moneys to invest in various projects or pay for various expenses. Thus, overall
economic development is promoted. The mutual fund industry itself, is a source of
livelihood to a large number of employees of mutual funds, distributors, registrars and
various other service providers. Higher employment, income and output in the economy
boosts the revenue collection of the government through taxes and other means. When
these are spent prudently, it promotes further economic development and nation
building.

The mutual fund industry in India is currently experiencing a lot of volatility. While
there are ample opportunities that are available, it is equally faced with numerous
challenges. Mutual fund industry has registered a growth by over 20% however, has
only two crore investors. There is still a larger untapped market in India. It can be seen
that in the present scenario, most of the people are aware about mutual funds but are
found to be hesitant to invest. Some of the reasons for the same could be lack of detailed
knowledge, more stress on safe returns and thus avoidance of risk. The mutual fund
industries must consider all these factors to ensure more investments. In the event of
the changing behavioural patterns of the investors, it is very ambiguous to predict the
future of Mutual funds in India. The investors must enjoy the benefits of mutual funds
by investing in right schemes that suit their requirements. They must also exercise
caution in the process. Thus, it can be concluded that Mutual fund industry can
contribute to the development of the nation and the investors must strive to update their
knowledge, change their negative perceptions

77
5.2 SUGGESTIONS

1. Through the research it could also be understood that in spite of being aware the
investors are still hesitant to invest in mutual funds. Majority of the respondents
(93.8%) were aware of Mutual funds but only 50.7% have invested in it. In order
to eliminate this gap, the mutual fund companies must convey the benefits of
investing to the people and educate them about mutual funds.

2. The investors must be educated about the importance of taking market risks in
order to earn a higher return. They must also be encouraged to accept the
principle of ‘Savings = Income – Investment’ which means investing most of
their income and then saving the rest rather than saving a huge chunk before.

3. They must also be made aware of the effects of inflation as it was seen that few
investors consider it while investing their funds. The mutual fund industry
should also target young generation.

4. This can be done through education programmes and seminars organised by

professionals. They must be preferably conducted on weekends to attract more
people. Advertisements in newspapers and television shall help to draw more
attention. Internet could also be used as a medium to promote mutual funds.

5. The mutual fund companies must also try to find out the needs of the people
and design their products accordingly. For example it was found that most
people prefer open ended schemes over close ended schemes. Thereby more
schemes could be designed in such a way to encourage investment.

6. The respondents considered long term capital appreciation and mobilization of

idle funds as their objectives for investing in mutual funds. It was also revealed
that most of the investors give priority to better returns and safety thus, they
might not prefer investing in risky avenues. This must also be kept in mind while
designing the products.

7. Many respondents have invested in Equity schemes and balanced schemes.

There are various other schemes that might suit the requirements of investors

78
 but they are not yet aware about them. As a solution to this problem, more
number of distributors and financial consultants could be appointed to provide
necessary guidance and advice.

8. It can also be noted that majority of the respondents were of the opinion that
mutual funds have proved to be satisfactory in terms of fulfilment of their
investment objective. It can be considered as a positive factor which can be used
to increase mouth publicity.

9. The analysis of the research also portrayed that the respondents who were
unaware of mutual funds were also willing to invest if provided with the
necessary guidance. Thus, it can be said that there is still a huge potential for
the growth of mutual fund industry.

10. In order to cater to the needs of a larger population, the mutual fund companies
must make use of technological advancements. They can also be used to make
the process of investing in mutual funds easier and convenient.

In brief, in order to capture a larger market, the mutual fund companies might need to
shift from awareness to investor education. They must also try to create a simplified
operational process. Design products to suit customer requirements. Technological
advancements can also be used in a better way to eliminate the problems involved and
create more opportunities.

79
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22. Jasvir Kaur, Nittan Arora (2018) http://www.ijlemr.com/papers/CTEMIT/part-
1/T4-153.pdf
23. Nallandula Nandini, Dr. N. Sugandan (2018)
http://ijrpublisher.com/gallery/21-december-669.pdf
24. Dr. Meenakshi Bindal, Dr. Bhuwan Gupta, Sweety Dubey (2019)
http://www.ijemr.net/DOC/IJEMR2019090125.pdf
25. Juhi Ahuja (2019) http://ijream.org/papers/IJREAMV05I0250081.pdf
26. Shilpa Sampath Kumar & Dr. Umamaheswari.S & Kusuma K Reddy (2019)
http://ijrar.com/upload_issue/ijrar_issue_20543635.pdf
WEBOGRAPHY
https://www.investopedia.com/terms/m/mutualfund.asp
https://www.thebalance.com/mutual-funds-4073989

https://en.wikipedia.org/wiki/Mutual_fund

https://www.sebi.gov.in/sebi_data/docfiles/20616_t.html

https://www.amfiindia.com/investor-corner/

https://www.dbs.com/digibank/in/articles/know-about-debt-mutual-funds

https://economictimes.indiatimes.com/mf/analysis/here-is-all-you-need-to-know-
about-your-debt-mutual-fund-categories/what-happened-to-your-debt-mutual-fund-
schemes/slideshow/63829272.cms

https://economictimes.indiatimes.com/mf/analysis/all-you-need-to-know-about-new-
hybrid-mutual-fund-categories/1-conservative-hybrid-funds/slideshow/63713497.cms

https://cleartax.in/s/equity-funds

https://cleartax.in/s/index-funds-etfs

https://cleartax.in/s/fund-of-funds

https://economictimes.indiatimes.com/mf/analysis/heres-how-your-equity-mutual-
fund-schemes-look-after-sebi-recategorisation/dividend-yield-
funds/slideshow/63695794.cms

https://cleartax.in/s/new-fund-offer-nfo#things

https://cleartax.in/s/need-know-mutual-fund-aum

icsi.edu/media/webmodules/SLCM.pdf

https://www.hdfcsec.com/hsl.docs//Mutual%20Fund%20&%20Debt%20Market%20
Annual%20Review%20and%20Outlook%202020-202001031611429255066.pdf

https://www.moneycontrol.com/glossary/mutual-fund/corpus_461.html

https://www.outlookindia.com/outlookmoney/mutual-funds/the-mutual-fund-industry-
challenges-and-opportunities-ahead-4258
 ANNEXURE

Questionnaire

1. Gender
 Male
 Female
 Other
2. Age
 18-24
 25-31
 32-38
 39-45
 above 45
3. Employment status
 Student
 Government employee
 Private employee
 Professional
 Self employed
 Other
4. What is your annual income?
 Nil
 Below 2,50,000
 2,50,001 – 5,00,000
 5,00,001 – 7,50,000
 7,50,001 - 10,00,000
 above 10,00,000
5. Which parameters do you consider important while investing? Rate the
following on a scale of 1-5 (5 being most important & 1 being least important)
 Return  Tax benefit
 Risk  Lock in Period
 Credit Rating  Safety
 Inflation  Marketability
6. Which of the following investment avenues do you know?
 Bank (Current, Saving, FD,  Insurance (ULIP, Annuity,
RD) Endowment)
 Stock Market  PPF
 Gold/Silver  Mutual Funds
 Post Office  Government Securities
 NSC  Real Estate
 Other

7. Are you aware of mutual funds

 Yes  No

8. Through which mediums did you come to know about mutual funds?
 Advertisements  Peer Groups
 Newspaper  Financial Consultants
 Magazine  Internet
 Social Media  other
 Television

9. Have you invested in mutual funds?

 Yes  No

10. What percentage of your income do you invest in mutual funds?

 0-5%  15-20%
 5-10 %  20 above
 10-15%

11. Which schemes of mutual funds have you invested in?

 Equity Mutual Fund Schemes  Solution oriented schemes
 Debt Mutual Fund Schemes  Other schemes
 Balanced scheme
 Hybrid schemes
12. In which type of scheme do you prefer to invest?
 Open ended scheme  Close ended scheme

13. Through which medium have you invested in mutual funds?

 Direct (i.e. by yourself)
 Indirect (i.e. through a broker)

14. What is your objective behind investing in mutual funds?

 Regular flow of income  Portfolio diversification
 Long term capital appreciation  Mobilisation of idle funds
 Other
 Short term investment
15. Which features of mutual funds attract you? Rate the following on a scale of
1-5 (5 being most important & 1 being least important)
 Diversification  Regular income
 Better return and safety  Tax benefit
 Transparency  Professional management
 Reduction in risk and
transaction cost

16. Rate mutual funds on the basis of fulfilment of your investment objective. ( If
not invested in mutual funds, please skip this question)
 Highly Satisfactory  Dissatisfactory
 Satisfactory  Highly Dissatisfactory
 Average

17. If you are made aware about mutual funds then would you like to invest in it?
 Yes  No
18. Which mediums do you think should be used to increase awareness about
mutual funds?
 Advertisements  Seminars by professionals
 Investor education programmes  Other