A Report ON: "Is Mutual Fund A Better Investment Plan"

A REPORT
ON
“IS MUTUAL FUND A BETTER INVESTMENT PLAN”
BY
SANDEEP KUMAR GUPTA
(09BSHYD0733)
LKP SECURITIES LTD.
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A REPORT
ON
“IS MUTUAL FUND A BETTER INVESTMENT PLAN”
BY
SANDEEP KUMAR GUPTA
(09BSHYD0733)
LKP SECURITIES LTD.
A report submitted in partial fulfillment of the requirement of

MBA Program of
IBS Hyderabad
Distribution List: Prof. T. KOTI REDDY

Faculty Guide, IBS Hyderabad
Mr. C. SRIKANT
Company Guide, LKP Securities Ltd.
Date of Submission: 14th May, 2010
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AUTHORIZATION
This report is prepared in partial fulfillment of the Summer Internship Program of the MBA
program (Class of 2011) at ICFAI Business School, Hyderabad, under the guidance of company
guide, Mr. C. SRIKANT , branch manager at LKP Securities Ltd, Hyderabad and faculty guide
Prof. T. KOTI REDDY, ICFAI Business School, Hyderabad.
Date: May 14th, 2010 Submitted by:
Sandeep Kumar Gupta
09BSHYD0733
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ACKNOWLEDGEMENT(S)
I would like to express my gratitude to Mr. C. SRIKANT, branch manager at LKP Securities Ltd,
Hyderabad for recruiting me as an intern and giving me an opportunity to work with the
company and providing me with necessary guidance and support throughout, for the successful
execution of the project.
I would also like to thank and appreciate, Prof. T. KOTI REDDY, faculty guide, IBS Hyderabad
for providing the regular guidance and support throughout the duration of internship. His regular
directions during the internship were very much valuable for the successful completion of the
project.
It has indeed been a great learning experience both professionally and personally by working on
this project at LKP Securities Ltd, Hyderabad.
Sincerely
Sandeep Kumar Gupta
09BSHYD0733
TABLE OF CONTENTS
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Authorization…………………………………………………………………3
Acknowledgement(s)…………………………………………………………4
Executive Summary…………………………………………………………..8
Literature survey………………… …………………………………………..10
CHAPTER 1
Introduction……………………………………………………………….…..14
Concept of mutual fund……………………………………………………….16
Types of mutual fund scheme…………………………………………………19
Advantage of mutual fund…………………………………………………….20
Disadvantage of mutual fund………………………………………………….21
Objective of the project……………………………………………………….22
Limitation of study………………………………….………………………...23
CHAPTER 2
Overview of the objective……………………………………………………25
`Problem formulation…………………………………………………..25
Methodology………………………………………………………………….26
Data Analysis…………………………………………………………..28
Framework of analysis……………………………………………………….29
Factor analysis…………………………………………………………30
Factor Analysis for Product Quality..………………………………………...31
Factor Analysis for Fund Responsor Quality………………………………...35
Factor Analysis for Investor Services………………………………………...38
Cluster Analysis For………………………………………………………….41
Factor Influencing the Buying decision of the Equity Investors……………..43
Major Finding of the analysis………………………………………………45
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CHAPTER 3
Objective……………………………………………………………………48
Evaluation Parameter……………………………………………………….48
Beta coefficient measure of Risk……………………………………..48
R-square……………………………………………………………....48
Standard deviation…………………………………………………....49
How to calculate the value of a Mutual Fund………………………...49
Expense Ratio………………………………………………………...50
Composition of the Portfolio…………………………………………50
Assets under management……………………………………………51
Sharpe ratio…………………………………………………………...51
P/E Ratio……………………………………………………………...52
P/B Ratio……………………………………………………………..52
Alpha…………………………………………………………………52
Tax benefit funds……………………………………………………………53
Balanced fund……………………………………………………………….55
Blue-chip Fund……………………………………………………………...57
Index Fund………………………………………………………………….59
CHAPTER 4
Findings of the Report………………………………………………………62
Key Findings………………………………………………………………..66
The Future of Mutual Fund in India………………………………………..69
Conclusion………………………………………………………………….70
Bibliography………………………………………………………………..72
Appendix I………………………………………………………………….74
Appendix II…………………………………………………………………76
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Annexure I…………………………………………………………………..78
Annexure II………………………………………………………………….83
Annexure III…….…………………………………………………………..87
Annexure IV…………………………………………………………………91
Annexure V………………………………………………………………….94
EXECUTIVE SUMMARY
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India’s economy is highly developing. The development has taken place due to the growth in the
financial system. This financial system provides the background to various investors regarding
varied options to invest. As financial markets become more sophisticated and complex, investors
need a financial intermediary who provides the required knowledge and professional expertise on
successful investing. Mutual Funds represent perhaps the most appropriate investment
opportunity for investors. No wonder the concept of Mutual Fund was initially developed in the
U.S. market, but the entry of the concept in the Indian Financial Market was in the year 1964
with the formulation of the UTI, at the initiative of the RBI and Govt. of India.
For most people, money is a delicate matter and when it comes to investing they are
wary. Simply because there are many investment options out there, each out promising the other.
An important question facing many investors is whether to invest in Banks, National Savings,
Post office, Non-banking finance companies, fixed deposits, Shares etc. or to invest distinctively
in Mutual Funds.
The Indian mutual fund industry in recent years has exponential growth and yet it is still at a very
nascent stage. We believe that the mutual fund industry has grown in terms of size or choices
available, but is a long distance from being regarded as a mature one. To understand this one has
to look at the global scenario. If one look at the global mutual fund industry, one has see that
assets have grown by more than 185% between 2000 and 2009(source-AMFI). In comparison,
Indian assets outgrew at a staggering 446%, where as the US only grew by 158% and Europe by
242%. To give an overview of a recent study conducted by Invest India, there are about 321.8
millions paid workers in India. Of this only 5.3 millions have an exposure to mutual funds. This
is less than 2% of total work force. Even more interesting fact is that 77% of them reside in super
metros and Tier I cities. Again, about 4 millions come in the Rs 90,000-5 lack income bracket.
The penetration among the less than Rs 90,000 and more than Rs 5 lack income bracket is very
low.
This project offers a valuable opportunity to take a glimpse of the mutual fund in India. In
today’s increasingly competitive and complex world there are large numbers of mutual funds
claiming to provide maximum return with minimum risk. It has become very difficult to select
the best mutual fund. There are more than 1000 schemes (source: AMFI) available for the
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investors in India. It is very difficult to select a particular scheme on the basis of their past
records. This project will try to analyze few popular mutual funds statistically on the basis of the
risk involved in each fund and the return of the same.
The one of the objective of the report is to give the outlook towards the performance of Top
Mutual Funds traded in India and to analyse various risks and returns associated with Mutual
funds and to establish a relationship between the demographics (age, income, employment status
etc.) and risk tolerance of investors. This evaluation can be done on the basis of parameters like
NAV, AUM, Beta, Standard deviation, Sharpe ratio, P/E Ratio, P/B Ratio, Portfolio Turnover,
R-Squared, Alpha and Expense Ratio. The research also intends to bring in the new trends in the
mutual fund industry and to give a futuristic insight to it.
This study also aims at tracking investor’s preferences and priorities towards
different types of mutual fund products and for identifying key features of a mutual fund for
deciphering sustainable marketing variables that influence the investors’ fund/scheme selection.
Taking a lead from this, an attempt is also made to find out the important mutual fund product
attributes that are essential in influencing the purchase decision of the investors. The study is
based on primary and descriptive research. As primary research is the true representative of the
investors’ opinion and it involves the collection of data that does not already exist. Descriptive
research provides insights into and comprehension of an issue or situation with answers to
questions such as who, what, where, when and how.
As a part of our primary research, a sample of 50-100 investors was taken. Questionnaire
consisting of related questions pertaining to mutual funds and equity were used for study.
For the analysis of the questionnaire, factor analysis is used. Factor analysis are an
interdependence technique used to reduce the number of variables in the data, to detect structure
in the relationship between variables to classify them and to create a set of factors which are
uncorrelated variables for handling multi-colinearity.
This study gives only a brief idea as to what are the investor’s point of view and their preferences
towards different major players in the country. This will help us to analyse and know the
interests of the customers. Also an attempt has been made to represent mutual fund industry by
taking a few top and best performing companies in India.
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LITERATURE SURVEY
E Mrudula and Priya Raju, book on “Mutual Fund industry in India” 1
This book has been compiled, keeping in view the increasing growth and popularity of the
mutual funds as an investment option and it attempts to provide a platform to the investors for
taking well informed investment decisions. This book basically tells about an overview of the
mutual fund industry in India.
The first article “Analysis of the Indian mutual fund industry” discusses the emergence of
mutual fund industry, its benefits, and steps for investing in mutual funds and the future outlook
and the immense contribution of the private sector. The second article “Emerging Perspective”
discusses the innovations the industry has experienced. The key challenges the Indian mutual
fund industry faces have been discussed in detail.
The third article “Mutual Funds Outsourcing: Slashing Expenses, Easing Fee” discusses the
value chain in case of outsourcing in the mutual fund industry. The role of transparency and
disclosures in Indian mutual fund industry in enabling investors to make better decisions is
discussed in the fourth article titled “Transparency and Disclosures”. It also discusses the
present disclosure requirement of mutual funds and whether such disclosures help investors in
taking investment decisions.
The fifth article “Opportunitities and challenges” is an executive summary of a study

conducted in 2003 on 185 investment management firms that collectively managed nearly 19 tn
Euros in 20 countries around the world. They include: key forces for change- demand, supply,
market structure and innovations. The sixth article “What Drives Investors Towards Mutual
Funds”, studies the factors influencing the choice of MF by an investor (6 factors has been
analyzed i.e. past records of the organization, growth prospects, credit rating, market
speculations, disclosure and early bird incentives), the options expected in a MF (8 major
facilities of a fund have been considered i.e. Repurchase facility, easy transferability, prompt
service, information adequacy, locking period, grievance redressal, investor cost effective
management) and appraisal criteria generally preferred by investors for evaluating the
performance of a MF (i.e. size of the fund, portfolio selection, NAV and Return).
1
E Mrudula and Priya Raju, book on “Mutual Fund industry in India”
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The seventh article “Five Strategies for Success” is the summary of the book “Morningstar
guide to mutual funds-five star strategies for success”. It provides the fundamentals of the
building a sound, satisfying and profitable mutual fund portfolio.
The next article “When to Say Goodbye to Mutual Funds” puts forward some satuations when
the investors should consider withdrawing their investments from the funds.
Madhumita Chakraborty, P K Jain and Vinay Kallianpur, South Asian Journal of

Management, Vol. 15, Issue No. 4, Oct-Dec 2008, “Mutual Fund Performance: An
evaluation of Select Growth Funds in India”
The report attempts to evaluate the performance of mutual funds based on rate of return as well
as risk-adjusted methods. Performance of mutual funds are compared with the risk-free returns as
well as the benchmark index (BSE 100), which is taken as a proxy for market returns. The study
provides some evidence of satisfactory performance in terms of returns generated per unit of risk
and a conclusive statement regarding the capabilities of mutual fund managers still being elusive.
Dalal Street Investment Journal, Vol. XXIV No. 25, Dec 2009, “Time to go for Mutual
Funds”
The article describes the Indian stock market to likely extend its gains, and therefore a great
opportunity for an individual to invest in mutual funds. Markets are likely to rise from the
current 17,000 level to the 21,000 level in three to six months time. This means that investors
buying mutual funds now are likely to benefit in the near future. Equity mutual funds are among
the best performing asset classes. Mutual fund industry has an enormous market potential in
India. A guide on choosing the best mutual fund has been mentioned, outlining the various
important aspects one must keep in mind while selecting.
D N Rao, August 2006, “Investment Styles and Performance of Equity Mutual Funds in
India”
Suggests and explains various methods used to compare mutual funds in India. These include
Sharpe Ratio and Standard Deviation.
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Dr Tapan K Panda (IIM-L) and Dr Nalini Prava Tripathy
“Customer Orientation in Designing Mutual Fund Products -An Analytical Approach
to Indian Market Preferences”
The investors do not evaluate all possible product attributes while making a choice, but the
marketer’s search is for identification of “The key buying criteria” or “The key choice criteria”
or “determinant attributes’ which are defined as certain features of a product offering that are
closely associated with preferences. This study aims at tracking investor’s preferences and
priorities towards different types of mutual fund products and for identifying key features of a
mutual fund for deciphering sustainable marketing variables in the design of a new mutual fund
product. Taking a lead from this, an attempt is also made to find out the important mutual fund
product attributes that are essential in influencing the purchase decision of the investors.
Madhusudhan V Jambodekar (1996) conducted a study to assess the awareness of MFs among
investors, to identify the information sources influencing the buying decision and the factors
influencing the choice of a particular fund. The study reveals among other things that Income
Schemes and Open Ended Schemes are more preferred than Growth Schemes and Close Ended
Schemes during the then prevalent market conditions. Investors look for safety of Principal,
Liquidity and Capital appreciation in the order of importance; Newspapers and Magazines are
the first source of information through which investors get to know about MFs/Schemes and
investor.
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ABOUT COMPANY
LKP A legacy in financial expertise From a humble beginning in 1948, LKP Securities
today is a well established and dynamic broking house in India. Known for it's state-of-the-
art systems and innovative processes, LKP offers a single window advantage to its clients for
all capital and money market related activities. LKP offers a wide spectrum of services that
includes Equity Broking in Cash and Derivatives, Internet based trading, DP services,
Research, Debt and Money Market Broking, Merchant Banking (category 1), Merger and
Acquisition (M&A), Primary Markets, Commodity Trading, Mutual Fund Distribution, IPO
and Life Insurance.
We believe in blending our vast experience and expertise for the benefit of our clients.
Providing value addition at every step, we ensure a dedicated and personalized service. No
wonder our clients range from individuals to institutions like Banks, Domestic and Foreign
Institutional Investors. Our belief of growing together and maintaining quality rather than
quantity to cater our enviable current clientele has pan India presence with branches network
of more than 385 locations in 147 cities, employing over 650 highly skilled professionals.
Mutual Fund distribution
LKP Investment Advisory service is an exclusive service which aims to offer tailor made wealth
management service to High Networth Individuals and Corporates / Institution. This sales force
is well qualified with necessary certifications. This division has its own operation in 5 cities in
India & is on a rapid growth trajectory
Different types of working
 Equity Profile
 Commodities
 WDM
 Life Insurances
 Mutual Fund distribution
 M&A
http://www.lkpshares.com/
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Chapter 1
INTRODUCTION
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A mutual fund is a professionally managed type of collective investment scheme that pools
money from many investors and invests it in stocks, bonds, short-term money market
instruments and other securities. Mutual funds have a fund manager who invests the money on
behalf of the investors by buying / selling stocks, bonds etc. Currently, the worldwide value of
all mutual funds totals more than $US 28 trillion1. The United States leads with the number of
mutual fund schemes. There are more than 8000 mutual fund schemes in the U.S.A.
Comparatively, India has around 1000 mutual fund schemes, but this number has grown
exponentially in the last few years. The Total Assets under Management in India of all Mutual
funds put together touched a peak of Rs. 747,525 crs. at the end of March 20102.
There are various investment avenues available to an investor such as real estate, bank deposits,
post office deposits, shares, debentures, bonds etc. A mutual fund is one more type of Investment
Avenue available to investors. There are many reasons why investors prefer mutual funds.
Buying shares directly from the market is one way of investing. But this requires spending time
to find out the performance of the company whose share is being purchased, understanding the
future business prospects of the company, finding out the track record of the promoters and the
dividend, bonus issue history of the company etc. An informed investor needs to do research
before investing. However, many investors find it cumbersome and time consuming to pore over
so much of information, get access to so much of details before investing in the shares. Investors
therefore prefer the mutual fund route.
They invest in a mutual fund scheme which in turn takes the responsibility of investing in stocks
and shares after due analysis and research. Another reason why investors prefer mutual funds is
because mutual funds offer diversification. An investor’s money is invested by the mutual fund
in a variety of shares, bonds and other securities thus diversifying the investors’ portfolio across
different companies and sectors. This diversification helps in reducing the overall risk of the
1
http://www.valuereasearchonline.com
2
http://www.amfiindia.com/spages/ammar2010repo.pdf
Portfolio. It is also less expensive to invest in a mutual fund since the minimum investment
amount in mutual fund units is fairly low (Rs. 500 or so). With Rs. 500 an investor may be able
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to buy only a few stocks and not get the desired diversification. These are some of the reasons
why mutual funds have gained in popularity over the years.
Indians have been traditionally savers and invested money in traditional savings instruments such
as bank deposits. Against this background, if we look at approximately Rs. 7.5 lakh crores3
which Indian Mutual Funds are managing, then it is no mean an achievement. A country
traditionally putting money in safe, risk-free investments like Bank FDs, Post Office and Life
Insurance, has started to invest in stocks, bonds and shares – thanks to the mutual fund industry.
However, there is still a lot to be done. The Rs. 7.5 Lakh crores stated above includes
investments by the corporate sector as well. Going by various reports, not more than 5% of
household savings are channelized into the markets, either directly or through the mutual fund
route. Not all parts of the country are contributing equally into the mutual fund corpus. 8 cities
account for over 60% of the total assets under management in mutual funds. The total number of
certified Mutual Funds Advisors is around 50,000 – whereas there are over 20 lakhs life
insurance advisors( source: Economicstimes). These are issues which need to be addressed
jointly by all concerned with the mutual fund industry. Market dynamics are making industry
players to look at smaller cities to increase penetration. Competition is ensuring that costs
incurred in managing the funds are kept low and fund houses are trying to give more value for
money by increasing operational efficiencies and cutting expenses. As of today there are 41
Mutual Fund houses in the country. Together they offer over 1000 schemes to the investor. Many
more mutual funds are expected to enter India in the next few years. All these developments will
lead to far more participation by the retail investor and ample of job opportunities for young
Indians in the mutual fund industry.
Let us now try and understand the characteristics of mutual funds in India and the different types
of mutual fund schemes available in the market.
Source: http://www.amfiindia.com
3
http://www.amfiindia.com data for mutual fund
Concept of a Mutual Fund
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A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and the
capital appreciations realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost.
FIGURE 1
Source: AMFI data
The flow chart below describes broadly the working of a mutual fund:-4
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Source: AMFI
Savings form an important part of the economy of any nation. With savings invested in various
options available to the people, the money acts as the driver for growth of the country. Indian
financial scene too presents multiple avenues to the investors. Though certainly not the best or
deepest of markets in the world, it has ignited the growth rate in mutual fund industry to provide
reasonable options for an ordinary man to invest his savings.
Investment goals vary from person to person. While somebody wants security, others might give
more weightage to returns alone. Somebody else might want to plan for his child’s education
while somebody might be saving for the proverbial rainy day or even life after retirement. With
objectives defying any range, it is obvious that the products required will vary as well.
Investors earn from a Mutual Fund in three ways:

1. Income is earned from dividends declared by mutual fund schemes from time to time.
2. If the fund sells securities that have increased in price, the fund has a capital gain. This is
reflected in the price of each unit. When investors sell these units at prices higher than
their purchase price, they stand to make a gain.
4
http://www.amfiindia.com/showhtml.aspx?page=mfconcept
3. Income is earned from dividends declared by mutual fund schemes from time to time.
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4. If the fund sells securities that have increased in price, the fund has a capital gain. This is
reflected in the price of each unit. When investors sell these units at prices higher than
their purchase price, they stand to make a gain.
5. If fund holdings increase in price but are not sold by the fund manager, the fund's unit
price increases. You can then sell your mutual fund units for a profit. This is tantamount
to a valuation gain.
Though still at a nascent stage, Indian MF industry offers a plethora of schemes and serves
broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt and
balanced funds. There are also funds meant exclusively for young and old, small and large
investors. Moreover, the setup of a legal structure, which has enough teeth to safeguard
investors’ interest, ensures that the investors are not cheated out of their hard-earned money. All
in all, benefits provided by them cut across the boundaries of investor category and thus create
for them, a universal appeal.
Investors of all categories could choose to invest on their own in multiple options but opt for
mutual funds for the sole reason that all benefits come in a package.
The history of mutual fund please goes Appendix: I.
Types of mutual fund schemes5
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A wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position,
risk tolerance and return expectations etc. The table below gives an overview into the existing
types of schemes in the Industry.
By structure:
a) Open-ended schemes
b) Close-ended schemes
c) Interval schemes
By investment objective:
a) Growth schemes
b) Income schemes
c) Balanced schemes
d) Money market schemes
Other schemes:
a) Tax saving schemes

b) Special schemes
c) Index schemes
d) Sector specific schemes
5
http://www.amfiindia.com/showhtml.aspx?page=mf
ADVANTAGES OF MUTUAL FUND
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S. No. Advantage Particulars
Mutual Funds invest in a well-diversified portfolio of securities which

Portfolio
1. enables investor to hold a diversified investment portfolio (whether
Diversification
the amount of investment is big or small).
Fund manager undergoes through various research works and has

Professional
2. better investment management skills which ensure higher returns to
Management
the investor than what he can manage on his own.
Investors acquire a diversified portfolio of securities even with a

3. Less Risk small investment in a Mutual Fund. The risk in a diversified portfolio
is lesser than investing in merely 2 or 3 securities.
Low Due to the economies of scale (benefits of larger volumes), mutual

4. Transaction funds pay lesser transaction costs. These benefits are passed on to
Costs the investors.
An investor may not be able to sell some of the shares held by him
5. Liquidity very easily and quickly, whereas units of a mutual fund are far more
liquid.
Mutual funds provide investors with various schemes with different

investment objectives. Investors have the option of investing in a
Choice of
6. scheme having a correlation between its investment objectives and
Schemes
their own financial goals. These schemes further have different
plans/options
Funds provide investors with updated information pertaining to the

7. Transparency markets and the schemes. All material facts are disclosed to
investors as required by the regulator.
Investors also benefit from the convenience and flexibility offered by

Mutual Funds. Investors can switch their holdings from a debt
8. Flexibility scheme to an equity scheme and vice-versa. Option of systematic (at
regular intervals) investment and withdrawal is also offered to the
investors in most open-end schemes.
Mutual Fund industry is part of a well-regulated investment

environment where the interests of the investors are protected by
9. Safety
the regulator. All funds are registered with SEBI and complete
transparency is forced.
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Disadvantage of Investing Through Mutual Funds
S.
No Disadvantage Particulars
.
Costs Control
Investor has to pay investment management fees and fund distribution
Not in the
1. costs as a percentage of the value of his investments (as long as he
Hands of an
holds the units), irrespective of the performance of the fund.
Investor
The portfolio of securities in which a fund invests is a decision taken by

No
the fund manager. Investors have no right to interfere in the decision
2. Customized
making process of a fund manager, which some investors find as a
Portfolios
constraint in achieving their financial objectives.
Difficulty in Many investors find it difficult to select one option from the plethora of
Selecting a funds/schemes/plans available. For this, they may have to take advice
3.
Suitable Fund from financial planners in order to invest in the right fund to achieve
Scheme their objectives.
Source: amfiindia.com
OBJECTIVE OF THE PROJECT
 To find out the important mutual fund product attributes that are essential in influencing
the purchase decision of the investors.
 To find out the important attributes that are essential in influencing the purchase decision
of the investors.
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 To analyse and calculate various risks and returns associated with Mutual funds and to
establish a relationship between the demographics (age, income, employment status etc)
and risk tolerance of investors.
 Perception and preference of investors towards equity and mutual fund.
 To give an outlook and analyse the performance of Top Mutual Funds traded in India
according to the different evolution parameter and rank them according to the investors.
 To find out the preferences of the different mutual fund in India.
LIMITATIONS OF THE STUDY
 The survey will be conducted in only Hyderabad. The standard of living, per capita
income of people, earning style, etc. of this region is different from other areas.
Therefore, the inferences drawn from the survey can’t be generalized.
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 Another major limitation may be the unwillingness of respondents to reveal information.
Due to lack of sufficient time and hesitation to reveal information regarding their
investments, it was a difficult task to extract information from them.
 I will take approximately 103 samples of the investors, which may not represent the
entire investor’s response.
 I will be given a time period of three months only, which may not suffice the required
tenure to study the MF industry.
 I will compare some of the funds of different fund houses, which may not represent the
entire Mutual Fund industry.
 This study has not been conducted over an extended period of time having both market
ups and downs. The market state has a significant influence on the buying patterns and
preferences of investors. For example, the July 2001 UTI fall has sent violent shock
waves across the MF investor community and is bound to influence the scheme
preference/selection of the investors. The study has not captured such situations.
 Advertisement that all investments are subject to market risks and the NAV (net asset
value) of the scheme may go up or down depending upon the factors and forces affecting
the securities market including the fluctuations in the interest rates. But till now mutual
fund has proved itself as the safest investment option.
 Mutual fund investing also depends upon the tax structure which changes every year with
the budget announced. The recommendations mentioned may or may not be feasible for
the next year investing patterns.
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Chapter 2
OBJECTIVE OF THIS CHAPTER
 To find out the important mutual fund product attributes that are essential in influencing
the purchase decision of the investors.
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 To find out the important attributes that are essential in influencing the purchase decision
of the investors.
 To analyse and calculate various risks and returns associated with Mutual funds and to
establish a relationship between the demographics (age, income, employment status etc)
and risk tolerance of investors.
 Perception and preference of investors towards equity and mutual fund.
Problem formulation
The investors do not evaluate all possible product attributes while making a choice, but the
marketer’s search is for identification of “The key buying criteria” or “The key choice criteria”
or “determinant attributes’ which are defined as certain features of a product offering that are
closely associated with preferences.
Taking a lead from this, an attempt is also made to find out the important mutual fund product
attributes that are essential in influencing the purchase decision of the investors. The factors
basically divide into three categories: these are product quality, fund sponsor quality, investor
service.
METHODOLOGY
There are a lot of factor that can affect the buying decision of the investors in Indian market, it
was difficult to analyze the changes of preference of Indian investor and the changes it could
bring in consumer behavior.
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What are the major that can affect the buying decision of mutual fund and equity investors?
These were the few questions we had in our mind and it was difficult to straight away solve our
research question. So, we decided to go for a twofold action:
1. Do a qualitative study to understand the major factor that influences the buying decision
and its consumers. This would include expert interviews to better understand the Indian
investor mindset.
2. Then start with a quantitative study to do a primary research on a sample of consumers,

to arrive at the results for our research question.
QUALITATIVE METHODS
E X P E R I E NC E S UR V E Y S
It is difficult to collect the data about what are the major factors that can affect the buying
decision of the investors by Indian customers. We felt that before starting the project, we need to
have certain insights about the investor behavior in the market.
To understand the Indian mutual fund market and its investor behavior, we decided to include
interviews of few technical experts which could help us in understanding the investor behavior.
Few of the Investor in SIP company were identified as experts and there interviews would be
taken at the preliminary stages of the project.
The questions that would be part of the expert interview are designed to get insights about
1. What are the major product qualities that an investor looks for?
2. What are the major Fund responser’s qualities that an investor looks for?
3. What are the major services qualities that an investor looks for?
4. What type of investors would invest in mutual fund?
5. Will there be changes in the buying decision of the investor?
The questions that would be asked to the experts are listed in the Annexure I.
QUANTITATIVE METHODS
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The project will include a Conclusive Research Design. The method that would be taken up in
the conclusive research design would be Descriptive Research which will try to find out the key
buying criteria about Mutual fund. The factors influencing the mutual fund investment would be
identified by conducting a Primary Research with help of a Closed Ended Questionnaire. The
scaling technique used will be LIKERT scale where the respondents would be asked to scale the
statements given in the questionnaire on the scale of 5. There are some information oriented
questions also.
D A TA A N A L Y S I S
The data collected would be analyzed by using a number of Multivariate Techniques. These
will include Factor Analysis. Finally to find out groups such that the objects in a group will be
similar (or related) to one another and different from (or unrelated to) the objects in other groups
among data Cluster Analysis will be applied.
 Factor Analysis
The first Multivariate technique that will be used in Project is factor analysis. Factor analysis is
used to analyze interrelationships among large no of variables and objective is the data reduction
by explaining variables in terms of common underlying dimensions called factors. For factor
analysis the variables are divided into three parts Product Quality, Fund Responsor Qualities
and Investor Services. One of the goals that it would serve is data reduction of variables. This
would simplify the next multivariable Cluster analysis .This will be done by taking advantage of
overlapping information contained in the correlation among different variables, extracting the
core information down to just few factors. Second objective of factor analysis is the substantive
interpretation. This focuses on isolating and identifying the factors. The final part is to name the
factor which would divide the variables into meaningful dimensions.
 Cluster Analysis
After determining the factors, the second step in multivariate analysis would be to investigate
group differences. Cluster Analysis usually used for grouping customers into clusters that have
28 | P a g e
similar behaviour/attitude and Helps marketer to decide target audience. With this we can find
out the different attribute that is important for different set of people having similar qualities and
by using this marketer can do Product differentiation and Offer differentiation.
SAMPLING
The questionnaire will be administered personally by our group and the responses would be
collected from the common investor and faculty members of IBS Hyderabad (convenience
sampling). The sample will be collected by Single Cross Sectional Design method. For our
survey we take the sample size of 103 respondents.
DATA ANALYSIS
INSIGHTS FROM EXPERT INTERVIEW
We took several investor interviews as part of our project. The insights from the interviews are
as follows:
 All the investors believed that the product qualities of mutual fund is subjective and may
change from person to person. But all of them felt that there is a need for improvement.
Some investor felt that these are some product qualities that mostly affect the buying
decision of the mutual fund.
 After the interviews we found that different investor have different investment objective
and having different preference about variables.
FRAMEWORK OF ANALYSIS:
To understand the savings avenue preference, scheme preference and objectives for investment
in MFs, and to identify the information sources influencing scheme selection, and the preferred
mode of communication, the respondents were asked to rank their preferences on a ranking scale.
The ranks were ascertained by obtaining the weighted mean value of the responses. To identify
the factors that influence the investors fund/scheme selection, 23 variables were identified
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through a brainstorming session and evidence from past research prior to the construction of the
questionnaire at the time of the pilot study. The people involved in brainstorming session were
selected from Hyderabad.
Based on theory, past research, and judgment of the researcher, the factors that could influence
the investors in their selection of Mutual funds/schemes was first grouped into 3 major factors –
Fund/Scheme qualities, fund sponsor qualities and the expected investor services. Then the 23
identified variables were classified under the appropriate group as follows:
A) Product Qualities
 Fund’s/Scheme’s performance record
 Fund’s/Scheme’s reputation or brand name
 Scheme’s expense ratio
 Scheme’s portfolio of investments
 Reputation of scheme(s), portfolio manager(s)
 Withdrawal facilities
 Favorable rating by a rating agency
 Innovativeness of the Scheme
 Products with tax benefits
 Entry and Exit load
B) Fund Sponsor Qualities

 Reputation of a sponsoring firm
 Sponsor offers a wide range of schemes with different investment objectives
 Sponsor has a recognised brand name
 Sponsor has a well developed Agency Net Work/Infrastructure
 Sponsor has an efficient research wing
 Sponsor’s expertise in managing money
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C) Investor Services
 Disclosure of investment objectives, method and periodicity of valuation in
advertisement
 Disclosure of the method and periodicity of the scheme’s sales and repurchase in the
offer documents
 Disclosure of NAV on every trading day
 Transparency
 Emergency need Fulfillment
 Fringe benefit like free insurance, free credit card, loans on collateral, tax benefits etc.
FACTOR ANALYSIS:
It is an interdependence technique used:
 To reduce the number of variables in the data.

 To detect structure in the relationship between variables to classify them.
 To create a set of factors which are uncorrelated variables for handling
multicolinearity
FACTOR ANALYSIS FOR PRODUCT QUALITY
1) Problem formulation
Objective of factor analysis in this is to reduce the number of variables in Product Qualities. The
factors obtained at the end of the factor analysis would be used for cluster analysis. The variables
for factor analysis are mentioned in questionnaire attached as an annexure I to this report.
Various variables were selected based upon extensive primary research and secondary research
31 | P a g e
of previous work regarding Mutual fund. The variables obtained were formed into statements
with Likert scale.
2) Construct the correlation matrix
It is important for variables to be correlated in order for the factor analysis to be appropriate.
The correlation table of factors analysis output was analyzed and significant correlation was
observed. At this stage all variables correlate fairly well and none of the correlation coefficients
are particularly large. So, we cannot eliminate any of the variables. In case any of the variable
had been highly correlated to other variables we would have conveniently dropped it as it would
have been difficult for us to put it under one factor and suppressing its dependency on others as
well. The fit of factor analysis model can be confirmed through two values which are given as
under
Bartlett’s Test of Sphericity checks for null hypothesis that there is no correlation among
variables.
Null Hypothesis (Ho): The Correlation matrix is an Identity matrix i.e. there is no correlation
between the variables, so each variable itself is a factor.
(H1): The Correlation matrix is not an Identity matrix.
Since for factor analysis to work we should have some relationships among the variables, and if
matrix is Identity we would have all the correlation coefficients as zeroes. Hence in order to do a
factor analysis we should be able to reject the Null Hypothesis. The high value for the test rejects
the null hypothesis. In our analysis we observed high value of Bartlett’s Sphericity along with
significance of 0.000.
32 | P a g e
To confirm the fitness of model we can look at the value of KMO, which is the test for sample
adequacy. High value of KMO means that correlation among pairs of variables can be explained
by other variables. Generally a value of higher than .5 is desirable. We obtained the KMO value
of .477 which means that factor analysis model is reliable.
3) Determining the method of factor analysis
There are two methods to run factor analysis- principle component analysis and common factor
analysis. Principle component factor analysis is more useful in this case as it explains the total
variance. Since our objective is to identify minimum number of factors that would explain
maximum of variance.
4) Determining the number of factors:
Total no of factors can be explained through various no of ways. We have used priori approach
in selection of factors. Initially we obtained the total number of factors as 3. However, the
communalities of variables were quite low. Also looking into data and comparing with previous
research work, we figured that 4 factors would result in better model with good fit. Hence we
used a “priori Determination” to decide on no of factors and restrict the total no of factors to 4.
5) Interpretation of factors: Rotated Component Matrix(a)
In order to obtain the better factor loading we rotated the factors. And thus we obtained Rotated
component matrix with better factor loadings.
Component
1 2 3 4
Fund’s/Scheme’s performance record -.143 .847 -.233 -.028
Reputation or brand name .494 -.444 .561 .216
Scheme’s expense ratio .682 -.111 -.336 .369
Scheme’s portfolio of investments .037 -.051 -.036 .886
Reputation of portfolio manager(s) -.116 -.157 .835 -.263
Withdrawal facilities -.588 .642 .235 .093
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Favourable rating by a rating agency -.796 -.236 -.079 .241
Innovativeness of the Scheme .309 .781 .055 -.098
Products with tax benefits -.182 .102 .878 .085
Entry and Exit load .761 -.065 -.127 .130
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a Rotation converged in 7 iterations.
Based upon rotated component matrix obtained as above we can group the various variables in to
factors as follows
Factor 1 Factor 2 Factor 3 Factor 4

Scheme’s expense ratio Fund’s/Scheme’s Reputation or brand Scheme’s portfolio of
performance record name investments
Favourable rating by a Withdrawal facilities Reputation of portfolio

rating agency manager(s)
Entry and Exit load Innovativeness of the Products with tax

Scheme benefits
Based upon clubbing of above variables the 5 factors can be defined as follows
Factor no Factor Interpretation

1 Investor confidence
2 Investor Expectation
3 Reputation of the company
4 Portfolio of investment
6) Calculation of factor scores:
The factor analysis has its own stand alone value. But objective of analysis is to reduce no of
variables and use the factors thus obtained in subsequent analysis. For this purpose it is necessary
to obtain the individual factor score for each respondent. This can be calculated based upon
following formula.
F i = Wi1*X1+Wi2*X2+…..+Wik *Xk
34 | P a g e
The SPSS software gives an option to calculate these factors scores and save them as variables.
The factors scores saved from SPSS were used for further analysis.
Factor 1:
0.682*(Scheme’s expense ratio) - 0.796*(Favorable rating by a rating agency) +

0.761*(Entry and Exit load)
Factor 2:
0.847*(Fund’s/Scheme’s performance record) + 0.642*(Withdrawal facilities) +

0.781*(Innovativeness of the Scheme)
Factor 3:
0.561*(Reputation or brand name) + 0.875*(Reputation of portfolio manager(s)) +

0.878*(Products with tax benefits)
Factor 4:
0.886*(Scheme’s portfolio of investments)
FACTOR ANALYSIS FOR FUND RESPONSOR QUALITIES
Objective of factor analysis in this is to reduce the number of variables in Fund Responsor
Qualities. The factors obtained at the end of the factor analysis would be used to run cluster
analysis. The variables for factor analysis are mentioned in questionnaire attached as an annexure
to this report.
35 | P a g e
It is important for variables to be correlated in order for the factor analysis to be appropriate.
The correlation table of factors analysis output was analyzed and significant correlation was
observed. The fit of factor analysis model can be confirmed through two values which are given
as under
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.

.582
Bartlett's Test of Sphericity Approx. Chi-Square 152.181

Df 15
Sig. .000
Bartlett’s Test of Sphericity checks for null hypothesis that there is no correlation among
variables. The high value for the test rejects the null hypothesis. In our analysis we observed high
value of Bartlett’s Sphericity along with significance of 0.000.
To confirm the fitness of model we can look at the value of KMO, which is the test for sample
adequacy. High value of KMO means that correlation among pairs of variables can be explained
by other variables. Generally a value of higher than .5 is desirable. We obtained the KMO value
of 0.582 which means that factor analysis model is reliable.
Component
1 2
Reputation of a sponsoring firm .664 .037
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Sponsor offers a wide range of schemes with different
investment objectives .810 .229
Sponsor has a recognized brand name .008 .860
Sponsor has a well developed Agency Net
-.624 -.568
Work/Infrastructure
Sponsor has an efficient research wing -.647 .519
Sponsor’s expertise in managing money -.149 -.694
factors as follows
Factor 1 Factor 2
Reputation of a sponsoring firm Sponsor has a recognized brand name
Sponsor offers a wide range of schemes with Sponsor’s expertise in managing money
different investment objectives
Work/Infrastructure
Sponsor has an efficient research wing

1 Investment Options
2 Sponsors brand value
Factor 1:
0.664*(Reputation of a sponsoring firm) + 0.810*(Sponsor offers a wide range of schemes

with different investment objectives) + (-0.624)*(Sponsor has a well developed Agency Net
Work/Infrastructure) + (-0.647)* (Sponsor has an efficient research wing)
Factor 2:
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0.860*(Sponsor has a recognized brand name) + (-0.694)*(Sponsor’s expertise in managing
money)
FACTOR ANALYSIS FOR INVESTOR SERVICES
Objective of factor analysis in this is to reduce the number of variables in investor services. The
factors obtained at the end of the factor analysis would be used to run cluster analysis. The
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variables for factor analysis are mentioned in questionnaire attached as an annexure to this
report.
The next item from the output is the Kaiser-Meyer-Olkin (KMO) and Bartlett's test. The KMO
measures the sampling adequacy which should be greater than 0.5 for a satisfactory factor
analysis to precede. Looking at the table below, the KMO measure is 0.474 which is pretty good.

.474

Df 15
Sig. .000
From the same table, we can see that the Bartlett's test of sphericity is significant. That is, its
associated probability is less than 0.05. In fact, it is actually 0.000. This means that the
correlation matrix is not an identity matrix.
Component
1 2 3
Disclosure of investment objectives, method
and periodicity of valuation in advertisement .466 -.563 .184
Disclosure of the method and periodicity of the
scheme’s sales and repurchase in the offer -.763 -.170 .279
documents
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Disclosure of NAV on every trading day .173 .880 .055
Transparency .725 -.089 .057
Emergency need Fulfillment -.192 .467 .644
Fringe benefit like free insurance, free credit
card, loans on collateral, tax benefits etc. .019 -.147 .820
factors as follows
Factor 1 Factor 2 Factor 3

Disclosure of the method and Disclosure of investment Emergency need Fulfillment
periodicity of the scheme’s objectives, method and
sales and repurchase in the periodicity of valuation in
offer documents advertisement
Transparency Disclosure of NAV on every Fringe benefit like free
trading day insurance, free credit card,
loans on collateral, tax
benefits etc.

1 Transparency
2 Service Quality
3 Fringe Benefit
Factor 1:
(-0.763)*(Disclosure of the method and periodicity of the scheme’s sales and repurchase in
the offer documents) + 0.725*(Transparency)
Factor 2:
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(-0.563)*(Disclosure of investment objectives, method and periodicity of valuation in
advertisement) + 0.880*(Disclosure of NAV on every trading day)
Factor 3:
0.644*(Emergency need Fulfillment) + 0.820(Fringe benefit like free insurance, free credit
card, loans on collateral, tax benefits etc.)
Cluster analysis for the factors affecting the mutual fund buying decision
After determining the factors, the second step in multivariate analysis would be to investigate
group differences. Cluster Analysis usually used for grouping customers into clusters that have
similar behaviour/attitude and Helps marketer to decide target audience. With this we can find
41 | P a g e
out the different attribute that is important for different set of people having similar qualities and
by using this marketer can do Product differentiation and Offer differentiation.
Problem formulation
Objective of cluster analysis in this project is to group respondents with similar preferences
together in the first place. Then looking at the clusters identifying the best profitable cluster or
group and devising a strategy to attract and please them with the investor’s preference and
offering of the schemes. The different are mentioned in the table below. The various factors
identified were formed into statements with Likert scale.

7 Transparency
8 Service Quality
9 Fringe Benefit
INTERPRETATION OF THE RESULTS
On completing the survey and analyzing the results we came across three clusters of people.
Cluster 1: The first cluster has 88 respondents.
Cluster 2: The second cluster has 15 respondents.
Importance of the factors with clusters

Clust 1. 2. 3. 4. 5. 6. 7. 8. 9.
er investor Investor Reputati porfolio Investm sponso transpere servi Fring
confide Expecta on of the of ent rs ncy ce e
nce tion company investm options brand Quali bene
ent value ty fit
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1 4.5648 3.324 4.886 4.95455 3.83977 3.9318 3.982955 4.579 4.823
2 3.58 4.693 3.787 3.53333 4.94666 5 4.933333 3.566 3.166
1. Investor confidence 1. transperency

2. Investor expectation
2. Portfolio of the investment
3. Responsors brand value
3. Fringe benefits 4. Investment options
4. Service quality
5. Reputation of the company
Cluster I Cluster II
By cluster analysis we can divide the population into two clusters having different qualities but
for the same clusters population having the similarities. The population of cluster 1 having the
more preference towards Investor confidence, Portfolio of the investment, Fringe benefits,
Service quality and Reputation of the company.
FACTOR INFFLUENCING THE BUYING DECISION OF THE EQUITY INVESTOR
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Objective of factor analysis in this is to reduce the number of variables in equity buying decision.
The factors obtained at the end of the factor analysis would be used to analyze the key buying
criteria. The variables for factor analysis are mentioned in questionnaire attached as an annexure
to this report.
The KMO measures the sampling adequacy which should be greater than 0.5 for a satisfactory
factor analysis to precede. Looking at the table below, the KMO measure is 0.527 which is pretty
good. From the same table, we can see that the Bartlett's test of sphericity is significant. That is,
its associated probability is less than 0.05. In fact, it is actually 0.000. This means that the
correlation matrix is not an identity matrix.

.527

Df 36
Sig. .005
3) Total Variance Explained
The next item shows all the factors extractable from the analysis along with their eigen values,
the percent of variance attributable to each factor, and the cumulative variance of the factor and
the previous factors. Here there is a total of 58.785 variance which is explained by the factors.
Total Variance Explained
Compon Extraction Sums of Squared Rotation Sums of Squared

ent Initial Eigenvalues Loadings Loadings
Total % of Cumulativ Total % of Cumulativ Total % of Cumulativ
44 | P a g e
Variance e% Variance e% Variance e%
1 1.636 18.174 18.174 1.636 18.174 18.174 1.556 17.285 17.285
2 1.404 15.596 33.770 1.404 15.596 33.770 1.337 14.861 32.146
3 1.155 12.830 46.599 1.155 12.830 46.599 1.219 13.548 45.694
4 1.097 12.186 58.785 1.097 12.186 58.785 1.178 13.091 58.785
5 .961 10.677 69.462
6 .827 9.193 78.655
7 .721 8.011 86.666
8 .608 6.751 93.418
9 .592 6.582 100.000
Rotated Component Matrix(a)
Component
1 2 3 4
[Higher return on investment ] -.363 .047 .683 -.318
[Risk tolerance ] .246 -.013 .699 .177
[Past performance] .749 .015 -.007 -.045
[Company market position] -.003 -.116 .027 .868
[Market reports] .377 .661 -.058 .050
[Financial reports of the
.547 .271 .248 .090
company]
[Market scenario] .588 -.282 -.023 -.520
[Analyst view] -.072 .768 -.020 -.085
[Transparency of the company] .102 -.377 .445 .038
factors as follows
Factor 1 Factor 2 Factor 3 Factor 4
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Past performance Market reports Higher return on Company market
investment position
Financial reports of the Analyst view Risk tolerance

company
Market scenario

1 Past performance and market scenario
2 Market reports
3 Higher return on investment
4 Company market position
Factor 1:
(0.749)*Past performance + (0.547)* Financial reports of the company +( 0.588)*Market

scenario
Factor 2:
0.661*Market reports + 0.768*Analyst view
Factor 3:
0.683*Higher return on investment +0.699* Risk tolerance
Factor 4:
0.868*Company market position
MAJOR FINDINGS OF THE ANALYSIS
By doing the factor analysis we find the 9 factor by 23 variables. These factors are
46 | P a g e
7 Transparency
8 Service Quality
9 Fringe Benefit
These factors are used for cluster analysis. By using cluster analysis we can divide the population
with having different preferences of these factors. After doing the cluster analysis the whole
population is divided into 2 clusters. Factors are divided as follows
Cluster 1: Investor confidence, Portfolio of the investment, Fringe benefits, Service quality
and Reputation of the company
Cluster 2: Service quality, Investor expectation, Responsors brand value, and Investment
options
By cluster analysis we can say that cluster 1 people are having the higher preference of these
factors (Investor confidence, Portfolio of the investment, Fringe benefits, Service quality and
Reputation of the company) and cluster 2 people are having the higher preference of these
factors (Service quality, Investor expectation, Responsors brand value, and Investment options).
Factor analysis for equity investors
These are the major factors that can affect the buying decision of the investors in India while
purchasing the equity

1 Past performance and market scenario
2 Market reports
3 Higher return on investment
4 Company market position
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Chapter 3
48 | P a g e
OBJECTIVE
To give an outlook and analyse the performance of Top Mutual Funds traded in India.
Evaluation Parameters
Following are the evaluation parameters based on which the analysis and comparison of various
equity schemes is done.
Measurement of risk
Beta Coefficient Measure of Risk6:
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to

the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that
calculates the expected return of an asset based on its beta and expected market returns.
Beta relates a fund’s return with a market index. It basically measures the sensitivity of funds return
to changes in market index.
If Beta = 1: Fund moves with the market i.e. Passive fund
If Beta < 1: Fund is less volatile than the market i. e Defensive Fund
If Beta >1: Funds will give higher returns when market rises & higher losses when market falls i.e.
Aggressive Fund
R-squared Measure Of Risk7:

This statistical measure represents the percentage of a fund or security's movements that can be
explained by movements in a benchmark index. For fixed-income securities, the benchmark is
the T-bill. For equities, the benchmark is the S&P 500. R-squared ranges from 0 to 100 and
reflects the percentage of a fund's movements that are explained by movements in its benchmark
index. An R-squared of 100 means that all movements of a fund are completely explained by
movements in the index. Conversely, a low R-squared indicates that very few of the fund's
movements are explained by movements in its benchmark index.
6,7
source: I M panday
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Standard Deviation:
Standard deviation is applied to the annual rate of return of an investment to measure the
investment's volatility. Standard deviation is also known as historical volatility and is used by
investors as a gauge for expected volatility.
Standard Deviation helps in analyzing the ‘quality’ of the average. It tells us how much the
individual numbers deviate from the average. In other words, how closely the average represents
the underlying numbers. Higher the Standard Deviation of a fund, means the fund is more
volatile and its’ returns are likely to fluctuate more. Investing in a fund with lower standard
deviation one can expect to reduce the uncertainty of returns. It does not mean that one will not
lose money; only the probability is lower.
How to Calculate the Value of a Mutual Fund:
The investors’ funds are deployed in a portfolio of securities by the fund manager. The value of these
investments keeps changing as the market price of the securities change. Since investors are free to
enter and exit the fund at any time, it is essential that the market value of their investments is used to
determine the price at which such entry and exit will take place. The net assets represent the market
value of assets, which belong to the investors, on a given date. NAV of all schemes must be
calculated and published at least weekly for closed-end schemes and daily for open-end schemes.
NAV = Net Assets of the scheme / Number of Units Outstanding
Where Net Assets are calculated as:-

(Market value of investments + current assets and other assets + Accrued income – current liabilities
and other liabilities – less accrued expenses) / No. of Units Outstanding as at the NAV date
The major factors affecting the NAV of a fund are:
 Sale and purchase of securities

 Sale and repurchase of units
 Valuation of assets
 Accrual of income and expenses
50 | P a g e
EXPENSE RATIO
Expense ratio is defined as the ratio of total expenses of the fund to the average net assets of the fund.
Expense ratio can actually understate the total expenses, because brokerage paid on transactions of a
fund are not included in the expenses. According to the current SEBI norms, brokerage commissions
are capitalized and included in the cost of the transactions.
Expense ratio = Total Expenses

Average Net Assets
COMPOSITION OF THE PORTFOLIO:
Credit quality of the portfolio is measured by looking at the credit ratings of the investments in the
portfolio. Mutual Fund fact sheets show the composition of the portfolio and the investments in
various asset classes over time.
Portfolio turnover rate is the ratio of lesser of asset purchased or sold by funds in the market to the net
assets of the fund.
If Portfolio ratio is 100% means portfolio has been changed fully. When Portfolio ratio is high means
expense ratio is high.
Portfolio Ratio = Total Sales & Purchase

Net Assets of fund
In order to meaningfully compare funds some level of similarity in the following factors has to be
ensured:
 Size of the funds

 Investment objective
 Risk profile
 Portfolio composition
 Expense ratios
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Assets under Management
This is the market value of assets managed by an investment company on behalf of its investors.
Asset under management (AUM) is looked at as a measure of success against the competition. It
consists of growth/decline due to both capital appreciation/losses and new money
inflow/outflow.A higher AUM portrays that the fund is better compared to one having a lower
AUM.
Sharpe Ratio
A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance.

The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10-year U.S.
Treasury bond - from the rate of return for a portfolio and dividing the result by the standard
deviation of the portfolio returns. The Sharpe ratio formula is:
R is return from the security

Rf is the Risk free return
σ= standard deviation
It is a ratio used to compare the rate of reward with the risk of gaining that reward. The higher
the ratio, the better is the risk-adjusted performance.
Sharpe Ratio = Risk Premium
Funds Standard Deviation
Treynor Ratio = Risk Premium
Funds Beta
P/E Ratio (Price-Earnings Ratio)
A valuation ratio of a company's current share price compared to its per-share earnings.
It is calculated as:
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Companies with higher growth rates command higher P/E ratios. Confidence that a company will
improve its profitability or remain profitable generally results in a higher P/E ratio. If profits are
threatened or weak, the P/E ratio is likely to drop.
P/B Ratio (Price-To-Book Ratio)
A ratio used to compare a stock's market value to its book value. It is calculated by dividing the
current closing price of the stock by the latest quarter's book value per share. It is also known as
the "price-equity ratio" and is calculated as:
A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that
something is fundamentally wrong with the company. As with most ratios, this varies by
industry. This ratio also gives some idea of whether you are paying too much, for what would be
left if the company went bankrupt immediately.
Alpha
It is a measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a
mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return
of the fund relative to the return of the benchmark index is a fund's alpha. A positive alpha of 1.0
means the fund has outperformed its benchmark index by 1%.Correspondingly, a similar
negative alpha would indicate an underperformance of 1%.
53 | P a g e
Tax Benefit Funds
Such schemes aim to provide growth of capital along with income tax exemption benefits to
investors.
Expense ratio 2.16 1.91 2.03 2.50 2.31

Portfolio turnover (%) 57.57 97 235 63 26.78
Standard Deviation 32.10 33.15 37.04 35 31.97
Sharpe Ratio .47 .37 .45 .28 .35
Beta .88 .87 .97 .95 .88
R-squared .95 .88 .87 .97 .96
P/E Ratio 24.18 22.36 25.15 23.65 24.38
P/B Ratio 5.18 3.53 3.98 3.98 4.20
Alpha 4.41 4.74 1.53 - -.94
Parameters Franklin Reliance ICICI SBI UTI Equity

India Tax saver Prudential Magnum Tax saving
Taxshield Tax plan Tax gain
NAV (G)(Rs.) 189.091 19.158 129.72 58.20 37.80
AUM (Rs. crore) 768.03 2164 1123.08 5457.2 476.19
Source: http://www.valueresearchonline.com/
 NAV of Franklin India tax shield is highest among the entire fund in this segment
followed by ICICI Prudential Tax Plan. For this we can say that FITS is the leader in this
segment leaving all other competitors’ way behind.
 SBI Magnum is having highest assets under management, which shows that this fund
enjoys the trust of its investor. This fund was launched more than 20 years ago, that may
be one of the reasons for such a huge asset under management. All other funds are no
way near this fund in terms of this criterion.
 Reliance Tax Saver is having lowest expense ratio in this criterion having expense ratio
of 1.91 followed by other funds like ICICI Prudential Tax Plan. Here, SBI Magnum
Taxgain and UTI Equity Tax Savings lag behind with high Expense ratios. The fund
managers of these funds are required to concentrate on reducing the expense ratios.
According to the expense ratio reliance tax saver is the best mutual fund scheme for these
funds.
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 Portfolio turnover of ICICI Prudential Tax Plan fund is highest and UTI Equity Tax
Savings is the lowest. Higher turnover results into various costs such as brokerage,
commissions etc that funds ultimately cover from its unit holders. Therefore, when it
comes to Portfolio Turnover- the lower the turnover, better it is for its unit holders. So we
can say that UTI equity tax saving fund is most preferred.
 SBI Magnum Taxgain is having higher standard deviation of 37.04. It measures the
extent to which the NAV fluctuates as compared to the average returns during a period. A
higher standard deviation means that the returns of the fund have been more volatile due
to high risk. It shows that SBI Magnum Taxgain is among the highly volatile funds.
 A higher Sharpe ratio is better as it represents a higher return generated per unit of risk.
Franklin India Taxshield is the best performer among all these funds. All other funds are
having more or less similar Sharpe ratio.
 A low-beta fund will rise less than the market on the way up and lose less on the way
down. When safety of investment is important, a fund with a beta of less than one is a
better option. Such a fund may not gain much more than the market on the upside; it will
protect returns better when market falls. Beta of ICICI Prudential Tax Plan is highest and
very close to 1, which shows that fund moves according to market and behaves as market
or index behaves.
 Except for Reliance Tax Saver fund and ICICI Prudential Tax Plan fund all other funds
are not having a very low r-squared and can be trusted. Confidence that a company will
improve its profitability or remain profitable results in a higher P/E ratio. UTI Equity
Tax Savings enjoys the highest position in the race with the P/E ratio of 26.78. All other
funds are close to this except for ICICI Prudential Tax Plan with a P/E Ratio of 19.50.
 Franklin India Blue chip is having highest P/B ratio, which shows the confidence of
investors on this fund.
 Reliance tax saving fund has outperformed its benchmark index with an alpha of 4.74.
Other funds have a comparatively very low alpha values or are negative in nature which
indicates their underperformance.
If we analyze the different tax saving funds according to the evaluation parameters it
is quite confused but we can say that Franklin India Taxshield is the most performing
scheme in this segment.
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Balanced Funds
Balanced funds aim to provide a long-term capital appreciation and current income by investing
in equity and equity related securities and high quality fixed income instruments.
Parameters FT India ICICI Reliance UTI

Balanced Prudential Regular Balanced
Balanced Savings
Balanced
NAV (G)(Rs.) 45.65 41.50 20.90 75.20

AUM (Rs. crore) 304.61 262.02 311.00 1057.19
Expense ratio 2.33 2.30 2.25 2.10

Portfolio turnover (%) 57.83 200 544 5.06
Standard Deviation 23.59 24.70 28.36 25.74
Sharpe Ratio .40 .22 .69 .39
Beta .89 .93 1.04 .98
R-squared .95 .96 .90 .97
P/E Ratio 26.92 30.75 29.54 22.96
P/B Ratio 6.67 4.85 3.31 3.98
Alpha .89 .93 1.04 .98
 NAV of UTI Balanced fund is the best among all the funds having NAV of 75.20
while all other funds’ NAV lies within 20 to 50. This fund has achieved NAV of sixty
plus which shows that stocks in the fund’s portfolio are extremely good and are
giving good returns.
 This type of funds usually has less amount of asset under management. These types
of funds are for those investors who want regular income on their investments along
with safety of their funds. As earlier said most of the population in India is young and
hence there are more risk takers. However, we see UTI again way ahead of its
competitors managing assets of around 1057.19 crores as compared to others, which
are having assets of less than 500 crores.
 Expense ratio of all the funds is on higher side and they are resulting into
unnecessary cut in the profits of unit holders. It shows if you invest Rs 10,000 in a
fund with an expense ratio of 1.5 per cent, then you are paying the fund Rs 150 to
manage your money. In other words, if a fund earns 10 per cent and has a 1.5 per cent
56 | P a g e
expense ratio, it would mean an 8.5 per cent return for an investor. Here, again UTI is
giving the best returns compared to all other funds.
 Among the recently available turnover ratios UTI Balanced fund is having a very less
portfolio turnover of 5.06 indicating a very low churning, which is unbeatable by its
competitors.
 All these funds are having a standard deviation almost equal, are showing that all
these funds in this segment are equally volatile, and are exposed to same risk that
other funds are exposed. FT India Balanced fund has the lowest standard deviation
and is comparatively exposed to less risk.
 Sharpe ratio is a measure that uses the standard deviation and excess return to
determine reward per unit of risk. High values indicate greater return per unit of risk.
Reliance Regular Savings Balanced fund steals the show on this factors loosely
followed by FT India Balanced.
 Beta of UTI Balanced fund is 1.04, which is very greater to 1, which shows that the
fund is in direct sync with the market while other funds are either extremely volatile
or very conservative and are not in tandem with market.
 Again, R-squared of all the balanced funds are close to 100 except for Reliance
Regular Savings Balanced fund, which is having an R-Squared of 90. This shows that
there is no strong leader in this segment.
 P/E Ratio of ICICI Prudential Balanced fund is the highest P/E Ratio showing the
confidence that the company will remain profitable.
 FT India Balanced is having highest P/B ratio, which shows the confidence of
 Alpha is often considered to represent the value that a portfolio manager adds to or
subtracts from a fund's return. In this case, Reliance Regular Savings Balanced fund
has outperformed its benchmark index with an alpha of 9.06. Other funds have a
comparatively very low alpha values.
If we analyze the different balance funds according to the evaluation parameters it is
quite confused but we can say that UTI Balance fund is the most performing scheme
in this segment.
Blue chip Funds
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Such funds aim to achieve a high degree of capital appreciation through investments in well
established, large size blue chip companies.
Parameters Franklin ICICI Reliance SBI UTI
India Prudential Equity Magnum Mastershare
Bluechip Growth Contra
Nov-1993 Jun-1998 Mar-2006 Jan-2006 Oct-1986

NAV (G)(Rs.) 194.14 123.51 14.81 14.15 49.12
AUM (Rs. crore) 57186.49 100796.02 39929.59 45132.04 56468.28
Expense ratio 1.86 2.32 1.86 2.03 1.91

Portfolio turnover (%) 62.91 71.00 69.00 171.00 17.40
Standard Deviation 31.44 29.74 29.53 35.20 31.62
Sharpe Ratio 0.43 0.29 0.26 0.23 0.37
Beta 0.87 0.83 0.80 0.97 0.87
R-squared 0.96 0.99 0.94 0.96 0.95
P/E Ratio 26.48 29.47 27.32 25.49 25.72
P/B Ratio 5.42 4.94 3.71 3.55 4.49
Alpha 4.73 0.39 -0.45 -1.66 3.01
Source: valueresearchonline.com
 NAV - Franklin Templeton Blue-chip fund has managed to maintain a very good position
and ahead of its competitors in the segment with a NAV of Rs. 181.39. This shows that
Franklin India Blue chip fund is outperforming its competitors.
 In terms of AUM, SBI Magnum Contra is the leader with assets of 3034.28 crores. It has
recently overtaken its competitor Franklin India Blue chip in terms of Asset under
management. Other competitors are no way near SBI Magnum Contra in terms of assets.
 Expense ratio is sensitive to size and type of fund. Larger the fund, lower the expense
ratio. In terms of expense ratio, Reliance Equity races ahead of its competitors because of
having lowest expense ratio. However, it is on bit higher side but still it is lesser than its
competitors, which are having expense ratio approximately 2% or more than that.
 Portfolio turnover of Reliance Equity is very low at 1.86% as compared to others,
followed by UTI Master Share at 17.4 %. ICICI Prudential Growth is having highest
portfolio turnover of 147%, which means that it is resulting into higher expenses for its
unit holders and reducing their return.
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 Franklin India Blue chip is having highest standard deviation followed by SBI Magnum
Contra and UTI Master Share. Highest Standard deviation suggests that fund is highly
volatile and can give heavy returns or losses.
 SBI Magnum Contra and Franklin India Blue chip are having comparatively higher
Sharpe ratio. All other funds are lagging behind and are having lower Sharpe ratio.
Higher the Sharpe ratio better is the performance.
 SBI Magnum Contra is having a beta of 0.99, which is same as exact 1. This shows that
the fund is in exact sync with the market and performs as market performs. All other
funds are not close to 1, which indicates that these funds are not in accordance with the
market, or are working in opposite direction.
 All these funds are having reasonable r-squared. However, SBI Magnum Contra is
having an r-squared very near to 100, which shows that Beta of fund can be trusted.
 ICICI Prudential Growth and Reliance Equity share the first position in the race with the
same P/E ratio of 26.88 all other funds lag behind except for Franklin India Blue chip
with a P/E Ratio of 26.09.
 Franklin India Blue chip is having highest P/B ratio, which shows the confidence of
 Alpha - SBI Magnum Contra has outperformed its benchmark index with an alpha of
compared to Franklin India Bluechip, which is showing an alpha of 2.83.
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Index Funds
An index fund provides returns that, before expenses, closely correspond to the total return of
COMMON STOCKS AS REPRESENTED BY THEIR BENCHMARK .
Parameters Franklin Reliance ICICI SBI UTI

India Index Banking Prudential Magnum MasterIndex
(BSE ETF SPICE Index
Sensex)
Jul-2000 May-2008 Jan-2003 Jun-1998

NAV (G)(Rs.) 49.18 1004.20 182.17 44.806 54.05
AUM (Rs. crore) 103655.98 71365.94 103889.39 36.16 103868.70
Expense ratio 1.00 0.35 0.80 - 0.75

Portfolio turnover (%) 17.72 17.00 24.00 - 37.19
Standard Deviation 34.69 - 33.82 - 35.08
Sharpe Ratio 0.27 0.27 0.27 - 0.24
Beta 0.87 0.83 0.80 0.97 0.87
R-squared 0.96 0.99 0.94 0.96 0.95
P/E Ratio 26.64 23.73 26.59 - 26.60
P/B Ratio 4.48 2.75 4.46 - 4.46
Alpha 4.73 0.39 -0.45 -1.66 3.01
 Reliance Banking ETF is having a NAV of 942.26, which is excessively high compared
to its major competitors. This shows that the stocks in the fund’s portfolio are extremely
good and are giving good returns.
 All these funds are having very less assets under management and among that UTI
Master Index is having highest assets of around 61.72 crores.
 The largest component of the expense ratio is management and advisory fees. From
management fee, an AMC generates profits. Then there are marketing and distribution
expenses. All those involved in the operations of a fund like the custodian and auditors
get a share of the pie. The expense ratio of Reliance Banking ETF is the lowest which
shows that fund manager is selecting securities after proper thinking and due diligence
which will prevent unnecessary burden of expenses on its investors.
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 Portfolio Turnover of Reliance Banking ETF is the lowest at five, which is a good
indicator of fund health and the efficiency of fund manager.
 ICICI Prudential SPICE fund has comparatively low standard deviation. However, the
standard deviations of all these funds are similar and are exposed to same risk.
 In this case, Franklin India Index (BSE Sensex) and ICICI Prudential SPICE enjoy a
comfortable position amongst the compared funds due to higher Sharpe ratios.
However, the competitor’s products have a close follow up.
 P/E Ratio of all the funds is more or less similar. This indicates the confidence that the
companies will remain profitable, giving a tough competition to each other.
 P/B ratio of all these funds is similar. This is again a tough competition, except for
Reliance Banking ETF, which has comparatively very low ratio of 2.53.
If we analyze the different Index funds according to the evaluation parameters

we can say that reliance ETF fund is the most performing scheme in this
segment.
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Chapter 4
FINDING OF THE REPORT
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Some information about the investor: Fact Analysis
What is your primary investment purpose?
17 35
6
Retirement Planning
For Tax Saving
For children education
For purchase of assets
45
The majority of the people invest for tax saving i.e. 44%. The tax saving is one of the major
issues for the investors. The second highest investment purpose is retirement planning i.e.
approximately 34% of the investor basically invest for retirement. This sample size of this
analysis is 103 which may be very less to predict the actual scenario of the primary investment
purpose.
Usually do you consult your friends and / or brokers before making an

investment choice?
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6
6
40 Every time
Often
Sometimes
Rarely
35
Never
16
By above graph we can say that 40% of the investors consult relatives or brokers every time
while making investment decision. 16% of them consult oftenly and 34% of them consult
sometimes. So we can say that majority of the investors (i.e. 90%) consult some of their relative
or broker while making their investment decision.
As an investor what do you prefer for investment most?
36
46
Mutual fund
Equity
Both
21
By this graph we can say that 46% of people invest in both mutual fund and equity. There are
major chunk of people that only invest in mutual fund.
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How do you take the investment decision related to mutual fund?
13
6
Through some advisory
Through market reports

Yourself only
58 Through magazines,
25 Newspapers etc.
Majority of the people take help of some advisory that may be some brokering firm or some
expert suggestions. But 25% of the investors take the help of market report.
What is your expected return through mutual fund?
Above 25% 11
20%-25% 86
10%-20% 5
Less than 10% 0
0 10 20 30 40 50 60 70 80 90
Each and every investors want to higher rate of return through their investment in any case. From
the above graph we can say that majority of the investor wants their return between 20% to 25%.
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What is the duration you are looking for mutual fund investment?
Less than 6 months

6 months -1 year
1 year to 2 year
2 year to 5 year
5 year and above
The majority of the investor invest for more than 1 year to 2 year. Approximately 34% of the
investors invests foe 2 to 5 years.
Usually what is your investment nature?
31
39
Long-term investor
Short-term investor
Intraday
No regular pattern
3
30
From this graph we can say that 38% of the investor, who are actually invest in equity, are long
term investor. For the long term investment their may be various reasons such as lake of time ,
66 | P a g e
high return on investment, lesser risk etc. but major chunk of the people have no regular pattern
on their investment.
What is the duration you are looking for equity investment?
10 8 10
25 Less than 1 month

1 month -3 months
3 month to 6 month
6 month to 1 Year
1 year and above
50
For investing in equity majority of investor basically invest for 3 month to 6 month i.e. 50%. For
long term investment there are less investor i.e. 10%.
Are you interested on the equity that provides more dividend?
92
100
90
80
70
60
50
40
30 11
20
10
0
No Yes
Investors are not basically interested for dividend.
Occupation
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13 10
1
Student
Professional
24 Self-employed
Housewife
Govt. Job
55
If we talk about the occupation for mutual fund investor majority of them are professionals but
we can also say that 24% of them are self employed.
KEY FINDINGS
 35 percent of respondents invest in mutual funds But majority of investors invest in both
mutual fund and equity. Of those who do not invest in mutual funds, 12 percent are
interested in doing so. Of those who do invest in mutual funds, nearly half (48 percent)
feel there are too many to choose from
 55 percent of investors are professional and 24 of them are self employed.
 For investing in equity majority of investor basically invest for 3 month to 6 month i.e.
50%. For long term investment there are less investor i.e. 10%.
 Investors are not basically interested for dividend.
When asked their primary method of learning about mutual funds.
67 percent use online research

13 percent follow analyst ratings and reports
10 percent consult a financial advisor
When asked what criteria they use to select mutual funds
74 percent of respondents said they choose funds that meet their investment objectives
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37 percent said they choose funds based on past performance
19 percent said they choose funds that provide the most income
10 percent said they choose funds that support their interests, such as global awareness
Usually what is your investment nature?

From this graph we can say that 38% of the investor, who are actually invest in equity, are long
term investor. For the long term investment their may be various reasons such as lake of time ,
high return on investment, lesser risk etc. but major chunk of the people have no regular pattern
on their investment.
What is the duration you are looking for mutual fund investment?
The majority (60%) of the investor invest for more than 1 year to 2 year. Approximately 34% of
the investors invests foe 2 to 5 years.
When asked the biggest disadvantage if mutual funds
29 percent said complex fee structure

20 percent said the cost to buy and sell them
51 percent said they currently invest to generate income
Of those who invest for income (Primary investment Purpose)
34 percent use the income to supplement retirement income

17 percent use it to allow for a more assets
44 percent use the income for retirement planning
13 percent use the income to pay down debt
The Future of Mutual Funds in India
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Apparently, nothing but change is stable in the world, which interestingly offers both –
opportunities and challenges. Change is an exciting opportunity to reposition oneself because of
the survival crisis created by unanticipated change or the excitement offered by the unfolding of
new caverns of opportunities, which were not visible to the naked eye. The future looks
nonlinear, discontinuous and unpredictable and what matters most today is the capability to deal
with the future. Therefore, it has become imperative to weave clear-cut strategies to strengthen
each link in the value chain to deal with these changing dimensions of the business landscape.
To lead one needs to be different and to be different one need to innovate strategically on a
persistent basis. Only differentiation can help someone redefine the basis of competition and
emerge as a leader.
The Indian mutual funds industry has been growing at a healthy pace of 16.44% for the last
8years, which is far superior as compared to the growth rate for the worldwide mutual fund
industry, which has been around 13% in the same period. The Indian mutual funds industry has
Rs 774,796 crores worth of assets under management as on 31 October 2009, which is a
spectacular growth from previous years. The growth can be attributed to the booming equity
markets in majority of the countries across the globe. The rise has been higher in case of India
because of the comparatively smaller base.
The Indian MF Industry have grown on the back of some really strong performance of the
Indian equity market, but, one should keep in mind the fact that the recent global economic crisis
which shook the entire world did not spare India and caused lot of upheavals in mutual fund
industry of India. Now, what remains to be seen is whether the industry is mature enough to
handle the downside as well, when the tide is not in the favor.
For the industry to emerge as a preferred investment vehicle for the common investor, it has to
overcome other hurdles also such as, penetration and expanding the market reach. The existing
network of Distributors that the industry is heavily reliant on is concentrated in few major cities
and metros only and it has to expand geographically.
CONCLUSION
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After going through a 14 weeks summer training and survey, I have come to know about
different aspects of mutual funds and mutual funds industry. India is an emerging market.
Consumption level is rising with rising earning level.
This project is basically done to find out the factor affecting the mutual fund buying decision of
the investors so by doing interviews with different experts, we found out the 22 variables and in
these 22 variables, we used the factor analysis and finally by doing the factor analysis we
clubbed them into 9 factors. These factors are Investor confidence, Investor Expectation,
Reputation of the company, Portfolio of investment, Investment Options, Sponsors brand value,
Transparency, Service Quality, and Fringe Benefits. These factors are used for cluster analysis.
By using cluster analysis we can divide the population on their different preferences of these
factors. After doing the cluster analysis the whole population is divided into 2 clusters. Factors
are divided as follows
Cluster 1: Investor confidence, Portfolio of the investment, Fringe benefits, Service quality and
Reputation of the company
Cluster 2: Service quality, Investor expectation, Responsors brand value, and Investment options
By cluster analysis we can say that cluster 1 people are having the higher preference for the
Investor confidence, Portfolio of the investment, Fringe benefits, Service quality and Reputation
of the company. We can also say that Cluster 2 people are having the higher preference for the
Service quality, Investor expectation, Responsors brand value, and Investment options.
In Factor analysis for equity investors -these are the major factors that can affect the buying
decision of the investors in India while purchasing the equity Past performance and market
scenario, Market reports, Higher return on investment, and Company market position.
This study has made an attempt to understand the financial behaviour of MF investors in
connection with the scheme preference and selection. Surveys similar to the present one need to
be conducted at intervals to develop useful models. Nevertheless, it is hoped that the survey
findings will have some useful managerial implication for the AMCs marketing.
By using the some evaluation parameters we find that which one is the most performing mutual
fund in terms of the parameters
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 If we analyze the different balance funds according to the evaluation parameters it is
quite confused but we can say that UTI Balance fund is the most performing scheme in
this segment.
 If we analyze the different tax saving funds according to the evaluation parameters
we can say that Franklin India Taxshield is the most performing scheme in this
segment.
 If we analyze the different blue chip funds according to the evaluation parameters we can
say that UTI master share fund is the most performing scheme in this segment.
 If we analyze the different Index funds according to the evaluation parameters we can say
that reliance ETF fund is the most performing scheme in this segment.
As per our analysis we can conclude that a lot of people invest in mutual fund because of their
several advantages over other type of investment. These reasons may be portfolio diversification,
professional money management, less risk, liquidity, choice of scheme, transparency, and most
important safety. Majority of the investors invest in mutual fund rather than equity investment.
So finally we can conclude that
“Mutual fund is better investment plan”
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BIBLIOGRAPHY
 Madhumita Chakraborty, P K Jain and Vinay Kallianpur, South Asian Journal of

Management, Vol. 15, Issue No. 4, Oct-Dec 2008, “Mutual Fund Performance: An
evaluation of Select Growth Funds in India”(The report attempts to evaluate the
performance of mutual funds based on rate of return as well as risk-adjusted methods.)
 Dalal Street Investment Journal, Vol. XXIV No. 25, Dec 2009, “Time to go for Mutual
Funds”. (The article describes the Indian stock market to likely extend its gains, and
therefore a great opportunity for an individual to invest in mutual funds.)
 Kotak and CNCC-TV18, “Everything you wanted to know about investing” (This
aims to describe equity mutual funds and its various types. It gives meanings of various
terms important in mutual funds.)
 D N Rao, August 2006, “Investment Styles and Performance of Equity Mutual Funds
in India” (Suggests and explains various methods used to compare mutual funds in
India.)
 SEBI – NCAER, 2000, Survey of Indian Investors, SEBI, Mumbai.
 Shankar, V., 1996, “Retailing Mutual Funds : A consumer product model”, The
Hindu, July 24, 26.
BOOKS
E Mrudula and Priya Raju, book on “Mutual Fund industry in India”
This book has been compiled, keeping in view the increasing growth and popularity of the
mutual funds as an investment option and it attempts to provide a platform to the investors for
taking well informed investment decisions.
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WEBSITES
 www.moneycontrolindia.com
 http://www.nse-india.com
 http://www.amfiindia.com
 http://www.mutualfundsindia.com
 http://www.sebi.gov.in
 www.businessmapsofindia.com
 www.ceicdata.com
 www.economictimes.com
 www.valueresearchonline.com
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APPENDIX: I
History of Mutual Fund in India
The Evolution
The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in
the year 1963. The primary objective at that time was to attract the small investors and it was
made possible through the collective efforts of the Government of India and the Reserve Bank
of India. The history of mutual fund industry in India can be better understood divided into
following phases:
Phase I. Establishment and Growth of Unit Trust of India - 1964-87

Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an
act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate
under the regulatory control of the RBI until the two were de-linked in 1978 and the entire
control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI
launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the
largest number of investors in any single investment scheme over the years. It launched ULIP in
1971, six more schemes between 1981-84, Children's Gift Growth Fund and India Fund (India's
first offshore fund) in 1986, Master share (India’s first equity diversified scheme) in 1987. By the
end of 1987, UTI's assets under management grew ten times to Rs 6700 crores.
Phase II. Entry of Public Sector Funds - 1987-1993
The Indian mutual fund industry witnessed a number of public sector players entering the
market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India
became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank
Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC
Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry
increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about
80% market share.
Phase III. Emergence of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fund management companies
(most of them entering through joint ventures with Indian promoters) to enter the mutal fund
industry in 1993, provided a wide range of choice to investors and more competition in the
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industry. Private funds introduced innovative products, investment techniques and investor-
servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.
Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after
the year 1996. The mobilization of funds and the number of players operating in the industry
reached new heights as investors started showing more interest in mutual funds.
Inventors’ interests were safeguarded by SEBI and the Government offered tax benefits to the
investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by
SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999
exempted all dividend incomes in the hands of investors from income tax. Various Investor
Awareness Programmes were launched during this phase, both by SEBI and AMFI, with an
objective to educate investors and make them informed about the mutual fund industry.
In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status as a
trust formed by an Act of Parliament. The primary objective behind this was to bring all mutual
fund players on the same level. UTI was re-organized into two parts: 1. The Specified
Undertaking, 2. The UTI Mutual Fund
Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which
are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and
PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund
players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29
funds as at the end of March 2006. This is a continuing phase of growth of the industry through
consolidation and entry of new international and private sector players.
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APPENDIX: II
Some details about factor analysis
Factor loadings: The factor loadings, also called component loadings in PCA, are the
correlation coefficients between the variables (rows) and factors (columns). Analogous to
Pearson's r, the squared factor loading is the percent of variance in that indicator variable
explained by the factor. To get the percent of variance in all the variables accounted for by each
factor, add the sum of the squared factor loadings for that factor (column) and divide by the
number of variables. (Note the number of variables equals the sum of their variances as the
variance of a standardized variable is 1.) This is the same as dividing the factor's eigenvalue by
the number of variables.
The structure matrix is simply the factor loading matrix as in orthogonal rotation,
representing the variance in a measured variable explained by a factor on both a unique and
common contributions basis. The pattern matrix, in contrast, contains coefficients which just
represent unique contributions. The more factors, the lower the pattern coefficients as a rule
since there will be more common contributions to variance explained. For oblique rotation, the
researcher looks at both the structure and pattern coefficients when attributing a label to a factor.
Communality, h2, is the squared multiple correlation for the variable as dependent using the
factors as predictors. The communality measures the percent of variance in a given variable
explained by all the factors jointly and may be interpreted as the reliability of the indicator. Low
communality. When an indicator variable has a low communality, the factor model is not
working well for that indicator and possibly it should be removed from the model. Low
communalities across the set of variables indicates the variables are little related to each other.
However, communalities must be interpreted in relation to the interpretability of the factors. A
communality of .75 seems high but is meaningless unless the factor on which the variable is
loaded is interpretable, though it usually will be. A communality of .25 seems low but may be
meaningful if the item is contributing to a well-defined factor.
77 | P a g e
Eigenvalues: Also called characteristic roots. The eigenvalue for a given factor measures the
variance in all the variables which is accounted for by that factor. The ratio of eigenvalues is the
ratio of explanatory importance of the factors with respect to the variables. If a factor has a low
eigenvalue, then it is contributing little to the explanation of variances in the variables and may
be ignored as redundant with more important factors.
Factor scores: Also called component scores in PCA, factor scores are the scores of each case
(row) on each factor (column). To compute the factor score for a given case for a given factor,
one takes the case's standardized score on each variable, multiplies by the corresponding factor
loading of the variable for the given factor, and sums these products. Thus the component scores
shown in pink multiplied by a subject's standardized measured scores on the row variables would
sum to that subject's component score on component 1. Computing factor scores allows one to
look for factor outliers. Also, factor scores may be used as variables in subsequent modeling.
Scree plot: The Cattell scree test plots the components as the X axis and the corresponding
eigenvalues as the Y axis. As one moves to the right, toward later components, the eigenvalues
drop. When the drop ceases and the curve makes an elbow toward less steep decline, Cattell's
scree test says to drop all further components after the one starting the elbow. This rule is
sometimes criticised for being amenable to researcher-controlled "fudging." That is, as picking
the "elbow" can be subjective because the curve has multiple elbows or is a smooth curve, the
researcher may be tempted to set the cut-off at the number of factors desired by his or her
research agenda.Researcher bias may be introduced due to the subjectivity involved in selecting
the elbow. The scree criterion may result in fewer or more factors than the Kaiser criterion.
Varimax rotation is an orthogonal rotation of the factor axes to maximize the variance of the
squared loadings of a factor (column) on all the variables (rows) in a factor matrix, which has the
effect of differentiating the original variables by extracted factor. Each factor will tend to have
either large or small loadings of any particular variable. A varimax solution yields results which
make it as easy as possible to identify each variable with a single factor. This is the most
common rotation option.
ANNEXURE I
78 | P a g e
QUESTIONNAIRE
T HI S QUE ST I O N N A I R E I S U SE D T O C OLL E C T PR I MAR Y DAT A RE L AT E D T O T HE
M UT UAL F U N D . T H I S ST U D Y A I MS T O FI ND OUT T HE FAC T OR S T HAT ASSOC I AT E
W I T H T HE M U T U A L FU N D I N V E ST ME NT AS W EL L AS E QUI T Y I NVE ST ME NT I N I N D I A .
P L E ASE FI L L T H E Q U E ST I O N N A I R E .
1. What is your primary investment purpose?

Retirement Planning For Tax Saving
For children education For purchase of assets
2. Usually do you consult your friends and / or brokers before making an investment
choice?
Every time Often
Sometimes Rarely
Never
3. As an investor what do you prefer for investment most?

Mutual fund
Equity
Both Equity and Mutual Fund
Go to part A or Part B for Mutual Fund or Equity respectively
Part A
4. Why do you prefer only mutual fund?(Tick any one reason)
Mutual Funds are professionally managed.

They do not require De-mat Account
They do not require continuous monitoring
Mutual funds provide risk diversification
79 | P a g e
5. What are the major parameters you consider before investing in mutual fund? (Rank
them according to you, on 1-5 scale 1- being the least preferred , 5- being the highest
preferred)
A) Product Qualities
Parameters Rating
Fund’s/Scheme’s performance record
Reputation or brand name
Scheme’s expense ratio
Scheme’s portfolio of investments
Reputation of portfolio manager(s)
Withdrawal facilities
Favourable rating by a rating agency
Innovativeness of the Scheme
Products with tax benefits
Entry and Exit load
B) Fund Sponsor Qualities
Parameters Rating
Reputation of a sponsoring firm
investment objectives
Sponsor has a recognized brand name
Work/Infrastructure
Sponsor has an efficient research wing
Sponsor’s expertise in managing money
C) Investor Services
Parameters Rating
Disclosure of investment objectives, method and
periodicity of valuation in advertisement
Disclosure of the method and periodicity of the scheme’s
sales and repurchase in the offer documents
80 | P a g e
Disclosure of NAV on every trading day
Transparency
Emergency need Fulfillment
Fringe benefit like free insurance, free credit card, loans
on collateral, tax benefits etc.
6. How do you take the investment decision related to mutual fund?

Through some advisory Through market reports
Yourself only Through magazines, Newspapers etc.
7. What is your expected return through mutual fund?

Less than 10% 10%-20%
20%-25% Above 25%
8. Generally which mutual fund house you prefer for investment?

Reliance MF UTI MF
ICICI Prudential SBI MF
Franklin Templeton
Any other please specify ___________
9. What is the duration you are looking for mutual fund investment?
Less than 6 months 6 months -1 year
1 year to 2 year 2 year to 5 year
5 year and above
Part B
10. Usually what is your investment nature?

Long-term investor Short-term investor
Intraday No regular pattern
11. How do you take the investment decision?

Market rumors / Market Report Own (yourself)
Through brokers Some advisory
81 | P a g e
12. What is your expected return through equity per year?
Less than 10% 10%-20%
20%-25% Above 25%
13. What are the major parameters you consider before investing in Equity? (Rank them
according to you, on 1-5 scale)
Parameters Rating
Higher return on investment
Risk tolerance
Past performance
Company market position
Market reports
Financial reports of the company
Market scenario
Analyst view
Transparency of the company
Different ratios
14. What is the duration you are looking for equity investment?
Less than 1 month 1 month -3 months
3 month to 6 year 6 month to 1 year
1 year and above
15. Are you interested on the equity that provides more dividend?
Yes
No
16. If you are having 5 lakh as an investment how do you bifurcate them for investment?
(i.e. For your 100% investment how much you can investment in mutual fund and in
equity)
82 | P a g e
------------------------
DEMOGRAPHICS
Name Age ______
Gender Male Female
Occupation
Student Professional
Self-employed Housewife
Others (please specify):
Income level ( per annum)
Below 2 lakh 2 lakh to 5 lakh
5 lakh to 8 lakh 8 lakh and above Not earning presently
Online questionnaire
https://spreadsheets.google.com/viewform?
formkey=dFdWN3FRLUppUDJfM2dqRURFLUpHVmc6MQ
Annexure II
FACTOR ANALYSIS FOR PRODUCT QUALITY
83 | P a g e

.477

df 45
Sig. .000
Communalities
Initial Extraction
Fund’s/Scheme’s performance record 1.000 .792
Reputation or brand name 1.000 .802
Scheme’s expense ratio 1.000 .727
Scheme’s portfolio of investments 1.000 .790
Reputation of portfolio manager(s) 1.000 .805
Withdrawal facilities 1.000 .822
Favourable rating by a rating agency 1.000 .754
Innovativeness of the Scheme 1.000 .718
Products with tax benefits 1.000 .822
Entry and Exit load 1.000 .616
Compon Extraction Sums of Squared Rotation Sums of Squared

ent Initial Eigenvalues Loadings Loadings
Total % of Cumulativ Total % of Cumulativ Total % of Cumulativ
84 | P a g e
Variance e% Variance e% Variance e%
1 2.816 28.159 28.159 2.816 28.159 28.159 2.432 24.322 24.322
2 2.261 22.607 50.767 2.261 22.607 50.767 2.044 20.444 44.766
3 1.550 15.502 66.269 1.550 15.502 66.269 2.032 20.319 65.085
4 1.019 10.193 76.462 1.019 10.193 76.462 1.138 11.377 76.462
5 .780 7.796 84.258
6 .506 5.062 89.320
7 .476 4.756 94.075
8 .307 3.073 97.148
9 .193 1.932 99.080
10 .092 .920 100.000
Component Matrix(a)
Component
1 2 3 4
85 | P a g e
Fund’s/Scheme’s performance record .425 -.712 .292 .143
Reputation or brand name -.492 .672 .257 .204
Scheme’s expense ratio -.786 -.240 .026 .224
Scheme’s portfolio of investments -.247 -.007 -.274 .809
Reputation of portfolio manager(s) .316 .748 .369 -.093
Withdrawal facilities .812 -.191 .149 .321
Favourable rating by a rating agency .490 .150 -.681 .167
Innovativeness of the Scheme .114 -.483 .677 .115
Products with tax benefits .422 .616 .409 .311
Entry and Exit load -.724 -.115 .275 .058
a 4 components extracted.
Component
1 2 3 4
Fund’s/Scheme’s performance record -.143 .847 -.233 -.028
Reputation or brand name .494 -.444 .561 .216
Scheme’s expense ratio .682 -.111 -.336 .369
Scheme’s portfolio of investments .037 -.051 -.036 .886
Reputation of portfolio manager(s) -.116 -.157 .835 -.263
Withdrawal facilities -.588 .642 .235 .093
Favourable rating by a rating agency -.796 -.236 -.079 .241
Innovativeness of the Scheme .309 .781 .055 -.098
Products with tax benefits -.182 .102 .878 .085
Entry and Exit load .761 -.065 -.127 .130
Component Transformation Matrix
Component 1 2 3 4
1 -.833 .431 .278 -.208
2 -.076 -.644 .761 -.010
3 .548 .577 .540 -.276
4 -.024 .258 .229 .938
86 | P a g e
87 | P a g e
Annexure III
FACTOR ANALYSIS FOR FUND RESPONSORS QUALITIES

.582

df 15
Sig. .000
88 | P a g e
Communalities
Initial Extraction
Reputation of a sponsoring firm 1.000 .442
1.000 .708
investment objectives
Sponsor has a recognized brand name 1.000 .739
1.000 .711
Work/Infrastructure
Sponsor has an efficient research wing 1.000 .687
Sponsor’s expertise in managing money 1.000 .504
Extraction Sums of Squared Rotation Sums of Squared

Initial Eigenvalues Loadings Loadings
Compon % of Cumulativ % of Cumulativ % of Cumulativ
ent Total Variance e% Total Variance e% Total Variance e%
1 2.237 37.277 37.277 2.237 37.277 37.277 1.926 32.093 32.093
2 1.555 25.919 63.195 1.555 25.919 63.195 1.866 31.102 63.195
3 .898 14.960 78.155
4 .585 9.752 87.908
5 .479 7.991 95.899
6 .246 4.101 100.000
89 | P a g e
Component Matrix(a)
Component
1 2
Reputation of a sponsoring firm .514 -.421
investment objectives .752 -.378

Work/Infrastructure -.843 .003
Component
1 2
Reputation of a sponsoring firm .664 .037
investment objectives .810 .229

Work/Infrastructure -.624 -.568

Component 1 2
1 .737 .676
2 -.676 .737
90 | P a g e
91 | P a g e
Annexure IV
FACTOR ANALYSIS FOR INVESTER SERVICES

.474

df 15
Sig. .000
92 | P a g e
Communalities
Initial Extraction
Disclosure of investment objectives, method and
periodicity of valuation in advertisement 1.000 .569
Disclosure of the method and periodicity of the scheme’s

sales and repurchase in the offer documents 1.000 .689
Disclosure of NAV on every trading day 1.000 .808

Transparency 1.000 .536
Emergency need Fulfillment 1.000 .670
Fringe benefit like free insurance, free credit card, loans on
collateral, tax benefits etc. 1.000 .695

1 1.607 26.778 26.778 1.607 26.778 26.778 1.392 23.204 23.204
2 1.268 21.131 47.909 1.268 21.131 47.909 1.369 22.817 46.022
3 1.092 18.195 66.104 1.092 18.195 66.104 1.205 20.083 66.104
4 .797 13.287 79.391
5 .752 12.533 91.924
6 .485 8.076 100.000
93 | P a g e
Component Matrix(a)
Component
1 2 3
and periodicity of valuation in advertisement -.565 .324 .381
scheme’s sales and repurchase in the offer .575 .571 -.181
documents
Disclosure of NAV on every trading day .381 -.795 .177
Transparency -.545 -.228 .432
Emergency need Fulfillment .670 -.097 .460
card, loans on collateral, tax benefits etc. .258 .379 .696

Component
1 2 3
and periodicity of valuation in advertisement .466 -.563 .184

scheme’s sales and repurchase in the offer -.763 -.170 .279
documents
Disclosure of NAV on every trading day .173 .880 .055
Transparency .725 -.089 .057
Emergency need Fulfillment -.192 .467 .644
card, loans on collateral, tax benefits etc. .019 -.147 .820

Component 1 2 3
1 -.719 .547 .429
2 -.443 -.836 .324
3 .536 .042 .843
ANNEXURE V
94 | P a g e
FACTOR ANALYSIS FOR EQUITY INVESTORS

.527
df 36
Sig. .059
Communalities
Initial Extraction
[Higher return on investment ] 1.000 .702
[Risk tolerance ] 1.000 .580
[Past performance] 1.000 .564
[Company market position] 1.000 .768
[Market reports] 1.000 .585
[Financial reports of the company] 1.000 .442
[Market scenario] 1.000 .695
[Analyst view] 1.000 .602
[Transparency of the company] 1.000 .352
95 | P a g e
1 1.636 18.174 18.174 1.636 18.174 18.174 1.556 17.285 17.285
2 1.404 15.596 33.770 1.404 15.596 33.770 1.337 14.861 32.146
3 1.155 12.830 46.599 1.155 12.830 46.599 1.219 13.548 45.694
4 1.097 12.186 58.785 1.097 12.186 58.785 1.178 13.091 58.785
5 .961 10.677 69.462
6 .827 9.193 78.655
7 .721 8.011 86.666
8 .608 6.751 93.418
9 .592 6.582 100.000
Component Matrix(a)
Component
1 2 3 4
[Higher return on investment ] -.220 .356 -.103 .718
[Risk tolerance ] .207 .463 .441 .358
[Past performance] .692 .170 .068 -.227
[Company market position] -.221 -.058 .795 -.291
[Market reports] .576 -.439 .154 .192
.587 .066 .279 .125
company]
[Market scenario] .531 .426 -.430 -.217
[Analyst view] .239 -.576 -.012 .462
[Transparency of the company] -.040 .565 .164 .062
96 | P a g e
Component
1 2 3 4
[Risk tolerance ] .246 -.013 .699 .177
[Past performance] .749 .015 -.007 -.045
[Company market position] -.003 -.116 .027 .868
[Market reports] .377 .661 -.058 .050
.547 .271 .248 .090
company]
[Market scenario] .588 -.282 -.023 -.520
[Analyst view] -.072 .768 -.020 -.085
[Transparency of the company] .102 -.377 .445 .038
Component Score Coefficient Matrix
Component
1 2 3 4
[Risk tolerance ] .143 .030 .571 .172
[Past performance] .487 -.039 -.036 .004
[Company market position]
.055 -.093 .021 .743
[Market reports] .207 .473 -.008 .059
.334 .190 .207 .108
company]
[Market scenario] .375 -.252 -.072 -.408
[Analyst view] -.103 .589 .049 -.083
[Transparency of the company]
.076 -.257 .335 .046
97 | P a g e

A Report ON: "Is Mutual Fund A Better Investment Plan"

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A REPORT

“IS MUTUAL FUND A BETTER INVESTMENT PLAN”

LKP SECURITIES LTD.

“IS MUTUAL FUND A BETTER INVESTMENT PLAN”

LKP SECURITIES LTD.

A report submitted in partial fulfillment of the requirement of

Distribution List: Prof. T. KOTI REDDY

Date of Submission: 14th May, 2010

Date: May 14th, 2010 Submitted by:

Sandeep Kumar Gupta

Sandeep Kumar Gupta

Major Finding of the analysis………………………………………………45

E Mrudula and Priya Raju, book on “Mutual Fund industry in India” 1

The fifth article “Opportunitities and challenges” is an executive summary of a study

Madhumita Chakraborty, P K Jain and Vinay Kallianpur, South Asian Journal of

Concept of a Mutual Fund

Investors earn from a Mutual Fund in three ways:

Types of mutual fund schemes5

a) Tax saving schemes

ADVANTAGES OF MUTUAL FUND

Mutual Funds invest in a well-diversified portfolio of securities which

Fund manager undergoes through various research works and has

Investors acquire a diversified portfolio of securities even with a

Low Due to the economies of scale (benefits of larger volumes), mutual

Mutual funds provide investors with various schemes with different

Funds provide investors with updated information pertaining to the

Investors also benefit from the convenience and flexibility offered by

Mutual Fund industry is part of a well-regulated investment

The portfolio of securities in which a fund invests is a decision taken by

OBJECTIVE OF THE PROJECT

LIMITATIONS OF THE STUDY

OBJECTIVE OF THIS CHAPTER

2. Then start with a quantitative study to do a primary research on a sample of consumers,

INSIGHTS FROM EXPERT INTERVIEW

B) Fund Sponsor Qualities

 To reduce the number of variables in the data.

FACTOR ANALYSIS FOR PRODUCT QUALITY

2) Construct the correlation matrix

3) Determining the method of factor analysis

4) Determining the number of factors:

5) Interpretation of factors: Rotated Component Matrix(a)

Factor 1 Factor 2 Factor 3 Factor 4

Favourable rating by a Withdrawal facilities Reputation of portfolio

Entry and Exit load Innovativeness of the Products with tax

Factor no Factor Interpretation

6) Calculation of factor scores:

0.682*(Scheme’s expense ratio) - 0.796*(Favorable rating by a rating agency) +

0.847*(Fund’s/Scheme’s performance record) + 0.642*(Withdrawal facilities) +

0.561*(Reputation or brand name) + 0.875*(Reputation of portfolio manager(s)) +

0.886*(Scheme’s portfolio of investments)

FACTOR ANALYSIS FOR FUND RESPONSOR QUALITIES

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.

Bartlett's Test of Sphericity Approx. Chi-Square 152.181

3) Interpretation of factors: Rotated Component Matrix(a)

Factor no Factor Interpretation

4) Calculation of factor scores:

0.664*(Reputation of a sponsoring firm) + 0.810*(Sponsor offers a wide range of schemes

FACTOR ANALYSIS FOR INVESTOR SERVICES

2) Construct the correlation matrix

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.

0.682(Scheme’s expense ratio) - 0.796(Favorable rating by a rating agency) +

0.847(Fund’s/Scheme’s performance record) + 0.642(Withdrawal facilities) +

0.561(Reputation or brand name) + 0.875(Reputation of portfolio manager(s)) +

0.664(Reputation of a sponsoring firm) + 0.810(Sponsor offers a wide range of schemes

(0.749)Past performance + (0.547) Financial reports of the company +( 0.588)*Market

0.661Market reports + 0.768Analyst view

0.683Higher return on investment +0.699 Risk tolerance