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The Study of Recent Trends of Mutual Funds and Analysis of Determinants

Influencing Investor's Behavior Towards Mutual Fund Investment Among
Indian Investors with Reference to

Article · February 2021

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Alochana Chakra Journal ISSN NO:2231-3990

The Study of Recent Trends of Mutual Funds and Analysis of

Determinants Influencing Investor’s Behavior Towards Mutual Fund
Investment Among Indian Investors with Reference to Jaipur City

Dr. ShaifaliMathur
Assistant Professor, IIS (deemed to be University), Jaipur

ABSTRACT
More and more investors have begun to keep their faith in mutual funds in the last four and
half years. The fund managers have started creating of folios (MF accounts) and their
numbers has increased steadily. Mutual Fund among various other investment options is
gaining popularity among investors because of its convenient nature and at the same time
they are also providing facilities of easy operations at good returns. Mutual funds provide a
platform for common investors to participate in the Indian market with fund management
irrespective to the amount invested. The research is conducted on 200 people of Jaipur city
to find out the factor that influence an investment decision of investors with respect to
mutual funds. The present paper also aims to bring out the trends of past few years in
Indian mutual funds industry and it also spotlights the factors which influenced Indian
investors to invest in mutual funds.

Key words: Mutual funds, Determinants, Recent Trends

INTRODUCTION
A mutual fund is a well managed investment portfolio. A mutual fund is a form of collective
investments that takes money from investors and invests that same money in stock market ,
bonds, and other securities . Now a day, there is a tough competition in financial revenues
due to increase in the investment products . People can choose any investment option to
invest their savings . In this project I studied about the determinants which influence our
Indian inventors behavior towards mutual fund as an investment option . At the same time is
also studied about the past few years trends in mutual fund industry. This paper makes an
attempt to identify various determinants influence to the mutual fund investors and the
trends in mutual fund market. This study will helpful for the investors, who don‟t have a

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knowledge about mutual funds and by analyzing of past 5 year trends they can also
understand the future scope of mutual funds .

REVIEW OF LITERATURE
MitalBhayani (2017) , “ A Study Of Recent Trends In Indian Mutual Fund Industry”:
Apaper defines the recent trends in Indian mutual fund industry. It is observed that mutual
funds have become an important part in investment options . There are many changes in
investment industry in India like huge pace of reinventions, changes in monetary and
political policies of government . In the same line the study also identifies the major changes
In mutual funds industry which can be chosen as an investment option.

Dr. Vechalekar N.M (2014), “Perception of Indian Investor towards investment in mutual
fund”; the surveywas conducted in a Pune city to analyze an investment perception towards
mutual funds . The study reveal the level of awareness of investors regard monthly income
plans chosen by them . While studying the perceptions the researcher come to know that
investors are paying more attention on the reputation and the growth of a company in near
future .Therefore , those investments that has low risk with higher return policies are most
preferable by the investors . It was also found that the most favored mutual funs for
investment is the diversified portfolios with high tax benefits .

Singh and Jha (2009), “Awareness and acceptability of mutual funds”; The researchers
come to know that people are more interested in investing in mutual funds rather than a
stock market as mutual funds has a non risky nature, liquidity and high return on
investment and diversified portfolios . They also come to know that people are less aware
with SIPs (Systematic Investment Plans ) . The researchers also studied the other factors
which the investors considered before investing in mutual funds. The banking sector also
plays an important role in mutual funds which helps to understand the investor‟s perception.

Ms. T.R. Rajeswari (2000) “Factors Influencing The Mutual Funds” ;Mutual funds is a
product in a market which is designed to focus on small investors salaried people , and stock
market who never know the benefits of investing in stock market . At the retail levels the
investors have a very unique groups . To complete the changing financial needs of the
investors the suitable funds? Schemes are designed . For this a survey was conducted among
350 mutual fund investors in 10urban & semi-urban cities to study the factors influencing
the funds ? Schemes selection behavior of retail investors . This paper discussed that

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findings from the survey . It is hoped that it may have some useful managerial selection for
the AMCs in their marketing and product designing field.

Shanmugham (2000) “A Study Of Investment Choice Of Individual Investors”;There is a

survey conducted of an individual investor to know that on what information source the
investors are depended on . The results are : economical , sociological , psychological
factors on which the investors are depended on .

RESEARCH OBJECTIVES
1) To study the preferences of investors towards mutual funds.
2)To study the determinants on which mutual funds are selected as an investment option.
3. To study the recent trends that help us to identify the growth of mutual funds as an
investment option.

HYPOTHESIS
H0-Investment expertise of investorhassignificant role in determining the Mutual fund‟s
investment decisions.

H0- Investor Consultation with Advisorhassignificant role in determining the Mutual fund‟s
investment decisions.

H0- Investor knowledge of neutral information has significant role in determining the Mutual
fund‟s investment decisions.

H0- - Investor‟sage, family size and personal incomehas significant role in determining the
Mutual fund‟s investment decisions.

RESEARCH METHODOLOGY
1.RESEARCH DESIGN : Exploratory research design

2.RESEARCH APPROACH: The approach adopted in this study is survey approach

3.RESEARCH INSTRUMENT:- The research instrument used in the study is Questionnaire

and Personal interview method. The questionnaire has both open end and close end
questions.

SAMPLING

SAMPLING AREA:- JAIPUR CITY

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SAMPLE SIZE:- The sample size of the study is 200 investors. Only salaried people (on
Job) are selected in this research.

SAMPLING PROCEDURE:- The sampling procedure used in this study is convenience and
simple random sampling.

DATA COLLECTION

PRIMARY DATA - In this research primary data was collected through structured
questionnaires .

SECONDARY DATA -In this secondary data was collected by reviewing various research papers
& articles , books ,e-journals , economic times , times of India , etc.

STATISTICAL TOOL – Data collected was then statistically analyzed using Regression Analysis.
Data from the questionnaire was complied, investigated for integrity, analyzed & presented in the
form of pie charts, bar graphs & other graphical representations is done.

CURRENT SCENARIO OF INDIAN MUTUAL FUNDS INDUSTRY

The year 2018 was not a stable year for the Indian stock markets. Foreign investors discard
Indian equities worth Rs 33,014 crore and debt instruments worth Rs 47,795 crore. The
Indian Mutual fund industry has witnessed considerable growth since its inception but
Indian Mutual Fund Industry is going through a very tough time for the last for the last
12 months . The Assets Under Management (AUM) of the Indian Mutual Fund market
reached 24 Trillion in 2018. Everyone was expecting that 2019 is going to be a spectacular
year for the equity market but so far there is a same situation in 2019 also.

Key Trends in the Mutual Fund Industry

The mutual fund market is expecting to witness these major trends:

1. Mass Adoption

Fund houses are extremely positive about the industry‟s future. Their expectations have got
a major growth after the AUM increased by Rs. 5.5 trillion (or Rs. 5.5 lakh crore) between
March 2017 and March 2019.

2. SIPs will keep Increasing

Systematic investment plan (SIP) appear as the backbone of the MF industry. SIP inflows
increased by 158% (Rs. 3,122 crore to Rs. 8,055 crore) from April 2016 to March 2019.

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3. Changes in Regulatory Environment

Some of the recent launches state that there might be an increase in the strategy-based ETFs
(Exchange Traded Funds). The distributors may attempt to push the insurance-cum-
investment products for earning higher in advance commissions.

Trend of Mutual Funds in India

Total Mutual Fund AUM-Data : 2009 to 2019

In India mutual fund industry‟s asset under management (AUM) has been growing at a rapid
pace. The total AUM has reached around Rs 25.50 lakh crore in August 2019. The asset
under management of Debt, Equity and Hybrid schemes at the end of August 2019 stood at
Rs 13.22 lakh crore, Rs 7.16 lakh crore and Rs 3.38 lakh crore, respectively.There are
thousands of mutual funds available in India and an investor has to choose the best mutual
scheme based on their investment objective.

Determinants /Factors influencing Investment Decisions:

By reviewing various researches mentioned in review of literature I have taken following

factors for my research:

1. Investment expertise of investorsis operationalised as the extent to which investors are

experienced and understand the mutual fund investment risk.

2. Investor Consultation with Advisor- An intermediary play very significant role in

influencing investment decisions of investor particularly when investor have little
knowledge while selecting the assets of its portfolio. An advisor could be a broker, family
member or a friend. These advisors influences investment decision of an investor based on

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their own investment experiences. Following aspects have been considered in respect of
consultation of advisor

• Extent of consultation with a broker

• Extent of consultation with family members

• Extent of consultation with friends

3.Investor knowledge of neutral information- There are other sources of information

which investors feel to be more informative for investment decisions. Other sources of
information can be price movement in the equity funds, current economic indicators, and the
fluctuation/developments in the mutual fund index. In the study information is termed
„neutral information‟ because fluctuations in mutual funds‟ prices, knowledge and
understanding of macroeconomic indicators, and developments of mutual funds indexes are
not directly related to potential investors‟ characteristics.Investor knowledge of „neutral
information‟ plays an important role in investment decision making process. The concept of
neutral information, in the context of this study, is defined as the investors‟ understanding of
recent mutual fund price movementthe current economic indicators (e.g., business cycle,
GDP, etc.),thefluctuation/developments in the mutual fund content.

4. Some other factors such as AGE , FAMILY SIZE and PERSONAL INCOME (PER
MONTH) also influence investors investment decisions ,therefore these factors are also
taken into consideration for analysis and evaluation.

Investment decision of investors –Investors decisions can be analysed by taking into

consideration following aspects :

 Measuring what proportion of total individual portfolio investor allocate in mutual

funds to obtain higher rate of return.
 Measuring what proportion of total: individual portfolio investor allocate in mutual
funds to diversify risk.

Hypothesis testing

Regression analysis (multiple regression method) is used as statistical technique. It is

statistical technique of modelling relationship between variables.
Regression equation:

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y=α + β1x1 + β2x2 + β3x3 + β4x4+ β5x5+ β6x6

Y= dependent variable (investor‟s decision)

X1= investor consultation of an advisor

X2= expertise of investor
X3 = investors knowledge of neutral information
X4= Age
X5= Family Size
X6= personal income (per month)

Table 1

b
Model Summary
Std. Error of the
Model R R Square Adjusted R Square Estimate
a
1 .516 .266 .227 .27704
a. Predictors: (Constant), NUMBER OF EARNING MEMBERS PER FAMILY, PERSONAL
INCOME (PER MONTH), INVESTORS KNOWLEDGEOFNEUTRAL INFORMATION,
INVESTOR CONSULTATION OF AN ADVISOR , AGE , INVESTORS EXPERTISE,
FAMILY SIZE

b. Dependent Variable: IDOI

Data is normally distributed. The R value represents the simple correlation R=0 .516 which
indicate that degree of correlation between variables is only .516.

The R2 indicates total variation in the dependent variables that is investors decision for
investment in mutual funds can be explained by independent variables that are number of
earning members per family, personal income (per month), investors knowledge of neutral
information, investor consultation of an advisor , age , investors expertise, family size.

R2= .266, in this case only 26.6% of variation in the dependent variable is due to
independent variables. So we can say that there are some more factors influencing the
decision of investors for investment in mutual funds.

Table 2

a
ANOVA
Model Sum of Squares df Mean Square F Sig.
b
1 Regression 3.723 7 .532 6.929 .000
Residual 10.285 134 .077
Total 14.007 141
a. Dependent Variable: IDOI

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b. Predictors: (Constant), NUMBER OF EARNING MEMBERS PER FAMILY, PERSONAL

INCOME (per month), INVESTORS KNOWLEDGEOFNEUTRAL INFORMATION, INVESTOR
CONSULTATION OF AN ADVISOR , AGE , INVESTORS EXPERTISE, FAMILY SIZE

Here, p< .05 which indicates that overall the regression model statistically significantly
predicts the outcome variable (i.e. it is good fit for the data). As significance level or p
value = .000.so we can say that null hypothesis is rejected at 5% level of
Significance.Model is overall fit But Values of R and R2 are less so we can say that there
are some more factors that influence the decision making of investors towards mutual funds.

Table 3

a
Coefficients
95.0%
Unstandardized Standardized Confidence
Coefficients Coefficients Interval for B
Lower Upper
Model B Std. Error Beta t Sig. Bound Bound
1 (Constant) 1.124 .186 6.051 .000 .757 1.491
INVESTOR CONSULTATION OF
.026 .058 .035 .454 .650 -.089 .141
AN ADVISOR (ICA)
INVESTORS EXPERTISE( EOI) .273 .051 .415 5.329 .000 .172 .375
INVESTORS
KNOWLEDGEOFNEUTRAL .151 .042 .275 3.625 .000 .069 .233
INFORMATION(IKONI)
AGE -
-.034 .025 -.111 .179 -.083 .016
1.352
FAMILY SIZE -.007 .038 -.017 -.188 .851 -.082 .068
PERSONAL INCOME (per month) .008 .028 .021 .275 .784 -.047 .062
NUMBER OF EARNING
.002 .030 .004 .053 .958 -.058 .061
MEMBERS PER FAMILY
a. Dependent Variable: IDOI

By putting the values in the Regression Equation we get following equation-

Y= 1.124 + .026 (ICA) + .273 (EOI) + .151 (IKONI) + (-0.034) (AGE) + (-0. 007)
(FAMILY SIZE) + .008 (PERSONAL INCOME) + .002 ( NO. OF EARNING
MEMBERS)

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FINDINGS
1. The age group of 21-30 years is investing in mutual funds as they are a good risk taker
in their young age.
2. Large number ofrespondents are not investing in mutual funds as they presume higher
risk in mutual fund investment.
3. Investors who have invested in mutual fund have a partial knowledge of their
investments as an investor.
4. Nature of fund is considered as a most important factor while selecting for mutual fund .
Nature of fund means whether mutual funds areopen-end funds, unit investment trusts, and
closed-ended funds equity funds, balanced funds, etc.

5. People generally like invest only 10-20% of their total saving in mutual funds through
Systematic Investment Plan.

LIMITATIONS OF THE STUDY:

1. Most of the respondents are not ready to share their true information.

2. The study has not been conducted over an extended time period considering both market
ups and downs. The market state has a significant influence on the buying techniques and
preferences of investors. The study cannot capture such situations.

3. The study is limited to the investors of Jaipur city; therefore the inferences cannot be
generalized.

SUGGESTIONS

1. The mutual fund product designers have to craft strategies to introduce innovative
products to improve the scope of the mutual funds market.

2. To increase the loyalty and trust among the investors, proper information and
knowledge should be provided to them.

3. Financial consultants must ensure transparency and responsibility and they should be
capable of catering the needs of the retail investors as well as marketing the mutual fund
products.

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CONCLUSION:

The mutual funds have emerged as one of the important part of financial intermediaries
which cater the needs of the retail investors. The major factors influencing the
investment decision of retail investors are nature of fund, personal factor, fund manager,
performance. SIP schemes are the most preferred. Bitter past experience is the major
preventing factor while considering investment options. Investor‟s satisfaction with
regard to mutual fund investors may be scaled to average.

BIBLIOGRAPHY:

1. BajracharyaBilas Raja (Jun2018):”A Study Of Investors‟ Awareness Owards Mutual

Funds In Kathmandu Metropolitan City, Nepal,”Kaav International Journal Of Law,
Finance & Industrial Relations, Kijlfir/Jan-Jun2018/ Vol-5/ Ss-1/Siiciktsd9page
No.92-97issn: 2349 2589i.

2. BhayaniMital (2017) “A study of recent trends in Indian Mutual Fund Industry”

International Research Journal of Engineering and Technology (IRJET) ,e-ISSN:
2395 -0056, Volume: 04 Issue: 04 , Apr -2017 p-ISSN: 2395-0072 .

3. Dr. Vechalekar N.M (2014), “Perception of Indian Investor towards Investment in

Mutual Fund”, IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-
5933, p-ISSN: 2321-5925 PP 66-74.

4. Singh. andJha, . (2009), “An empirical study on the awareness & acceptability of
mutual fund”, 49-55, Regional Student‟s Conference,
ICWAI,https://www.researchgate.net/publication/261708631_An_empirical_study_
on_awareness_acceptability_of_mutual_fund

5. Shanmugham (2000) A Study of Investment Choice of Individual Investors. Tata

McGraw-Hill Publishing Company Limited, New Delhi, 2000.

6. Ms. T.R. Rajeswari (2000) Factors Influencing the Mutual Funds The Indian
Journal of Commerce, Volume 54, No. 4, October-December, 2001 PP: 44-45

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