CHAPTER 1: INTRODUCTION

1
 CHAPTER 1:
INTRODUCTION
1.1 INTRODUCTION
“People spend hours in comparing and studying mobile phone models, before they buy.
This is however never replicated when they buy financial products that have far
reaching consequences”.
Indian financial system is one of the largest financial systems in the world with a broad
variety of banking, financial and capital market institutions and instruments. Indian
financial system analyses the initiatives aimed at developing a healthy, efficient and
market-oriented system by deregulating interest rates, development of market instruments
for pricing of public debt and bank loans, upgrading of India’s regulatory and accounting
standards to international norms, adjustments in monetary and financial policies, exchange
rate management for an increasingly liberalized open economic and financial environment.

Since last decade, the Indian economy has witnessed a number of structural and
fundamental changes in the financial markets. While Indian economy is on growth
trajectory, there is a wide spread realization amongst all in the financial spectrum that for
such growth to be sustainable, a corresponding deepening of financial sector must precede.
And, such deepening is possible, only when individuals and households are financially
literate.

The economies around the world have increasingly considered financial literacy as a key
pillar for the development of a sound financial system. In current times, financial literacy
has gained the attention of policymakers, regulators, governments and several other
organizations. In this area, substantial efforts have been made and resources have been
developed by the financial education providers to promote financial literacy through a
multitude of financial education programmes.

The growth and development of the Indian economy and the expansion of financial
markets through liberalization, privatization and globalization have given a way to a
plethora of financial products either as an investment alternative or a credit one. But, on
the other hand, financial illiteracy or low level of financial literacy prevents the
individuals from making a judicious choice with regard to his/her financial decisions. As a
result, the individuals are not able to choose the most suitable investment alternative

2
which can beat the rate of inflation prevailing in the economy and give them a net positive
return.

The investor is a person who invests money in order to make a profit. Investors who do
not want to take the risk of capital market volatility, prefer mutual fund as an investment
avenue. In India, the mutual fund industry has been in existence since 1963. Mutual fund
raises money by selling stakes of the fund to the public, much like any other type of
company that can sell stock itself to the public. It then takes the money which receives
from the sale of its stakes (along with any money made from previous investments) and
uses it to purchase various investment vehicles, such as stocks, bonds and money market
instruments. In turn, the public had given money to the mutual fund when purchasing
stakes in its underlying schemes. Each unit of these schemes reflects the share of an
investor in the respective fund and its appreciation, is judged by the Net Asset Value
(NAV) of the scheme. The NAV is directly linked to the bullish and bearish trends of the
markets as the pooled money is invested either in equity shares or in debentures or
treasury bills.

In India, policymakers have recognized financial literacy as an essential life skill.

Developing and promoting financial literacy through financial education has become an
important policy priority that complements financial consumer protection, inclusion and
prudential regulation. In India, the government has set up the Investors Education and
Protection Fund (IEPF) with the objective to support activities relating to investor
education, awareness and protection. The role of IEPF is to educate, empower and protect
investors by equipping them with information, fundamental knowledge and skills to
evaluate their saving/investment/credit options and enabling them to understand the
implications of alternative financial decisions and make the citizens more empowered on
the subject of personal finance by promoting financial literacy, that is crucial in today’s
financial markets.

Due to developments in the financial markets and demographic, economic and policy
changes, financial markets are becoming more sophisticated. Today’s investors across the
nation, have more options to spend, save and invest their money for a shorter and/or longer
period of time, as compared to their previous generations. These investors have greater
access to a number of credit, saving and investment instruments provided by the large
range of entities through on-line as well as off-line. Under the new pension plan, i.e.

3
Defined Contribution Plan (DCP) has shifted the financial burden from employer to
employee/ workers in terms of their financially secured retirement.

Over the last decade, the Indian economy has grown at a rapid pace. However, this growth
has faced increased pressure from both moderation in investment demand and an uncertain
global environment. Singh (2008) commented that ―we must not forget that growth is not
the only measure of the development. Our ultimate objective is to achieve broad based
improvement in the living standards for all our people‖ (p.iii).

If growth is sufficiently inclusive, it would certainly provide an environment conducive to

bring about a broad-based improvement in living standards. This improvement in living
standards would seek the distribution of higher quality and quantity of goods and services
to the individuals and to the society, thereby contributing to material well-being. Thus, for
the Indian economy, the growth would need to be accompanied with a broad based
economic development. The basic tenet of ―process of development‖ is given in the tenth
five year plan, which stated that ―The process of development in any society should
ideally be viewed and assessed in terms of what it does for the average individual. The
decade of the 1990s saw a visible shift in the focus of development planning from the
mere expansion of the production of goods and services and the consequent growth in per
capita income to planning for enhancement of human well-being. Later, it was realized
that human development means much more than the rise or fall of national income. It is
about the quality of life, the level of human well-being and the access to basic social
service.‖ (Planning Commission, 20032 , p.15)

Overall, due to changing scenario of financial markets, financial products and services
innovations through financial engineering, developments in information and
communication technology, multifaceted features involved in the myriad of financial
products, the speed with which financial markets and new financial instruments have
emerged and/or number of institutions enter into the financial market with the more
complex products, changes in the pension arrangement, increase in the life expectancy and
the role of technology advances in marketing and delivering the financial products and/or
services in the financial services industry, do not only provide more choices to consumers,
but also challenges to understand the benefits and costs associated with the innovations,
and more specifically, the risk-return matrix inherent to each innovation and hence, leave

4
many individuals ill-equipped to cope up with the sophisticated choices that they need to
make, for wise saving and investment decisions.

On the part of consumers, the financial literacy is essential as it helps consumers

understand how to avoid becoming involved in transactions those are financially
destructive. Financial literacy may help the consumers/ investors to make a more realistic
assessment of given opportunity for saving or investment, enhance the skill and bargaining
power in financial matter, bring financial efficiency in terms of life time utility and
financial well being, active debt management, evaluating and choosing the right financial
product with confidence, control the spending, encourage the saving and investment
behavior and thus, make them prepared for retirement planning.

The Planning Commission (20033 ) has stated that the three critical dimensions of human
well-being as mentioned in the tenth five years plan are (p. 15):

1. Longevity: The ability to lead a long and healthy life.

2. Education: The ability to read, write and acquire knowledge.

3. Command over the resources: The ability to enjoy a decent standard of living and have
a socially meaningful life.

For financial systems and economy, financial literacy may result into increase in the
demand for financial products and services, greater competition, innovations and
financially engineered products which may satisfy the specific financial need of investors,
self-funding for retirement especially where government would no longer be there to
provide the social security after retirement and may overcome the “procyclicality” in
lending. At community level too, financial literacy may have considerable benefits, in
particular it may be helpful in enhancing the financial inclusion, avoid voluntary exclusion
in the financial markets and increasing the awareness among the investment community
on financial issues, thereby creating an informed citizenry which can evaluate the
appropriateness of government financial policies in an effective and efficient manner.

The absence of financial literacy or low level of financial literacy may result into lack of
healthy financial ways of thinking, lack of necessary financial knowledge and difficulties
in applying financial knowledge, which may lead to poor financial judgments and hence
poor personal financial management. Financially illiterate individual either voluntarily do
financial exclusion or may prefer to get the financial information from unreliable sources,

5
the analysis of which may result into misallocation of private wealth, can mire the
household into debt and lead to much lower living standards.

Thus, financial literacy is a hugely significant issue for financial systems of any country,
as it both drives and distorts investment behavior, the composition and direction of
demand for products of competing financial sector interests. Thus financial literacy means
empowering the investors to make correct choices when it comes to taking financial
decisions, be it investing/leveraging/ protecting. It is an important element for promoting
financial inclusion and ultimately financial stability. This may help individuals to
prioritize financial goals, make them aware of opportunities and risks associated with the
financial products and help them to invest with specific time horizons to meet their
financial goals and objectives. Thus, the developments in the domestic financial markets
suggest the importance of investigating the level of financial literacy, and its role in
investors‟ investment decision making.

Investors are the backbone of capital market. A developing economy, like India, needs a
growing amount of savings to flow to corporate enterprises. The level of equity market
participation of the retail investors has been increasing over the past few years. Investment
is the flow of capital which is used for productive purposes. There is a great emphasis on
investment for being the primary instrument of economic growth and development for a
country. There are a large number of investment instruments available today. Some of
them are marketable and liquid while others are non-marketable and illiquid. There are
instruments which are highly risky while others are almost riskless. The investors choose
avenues, depending upon their specific need, risk appetite, and return expected.
Investment avenues can broadly be categorized into two spheres, namely, economic
investment and financial investment. Purchasing of a physical asset such as a building or
equipment is an economic investment. Economic investments contribute to the net
additions to the capital stock of a society. Financial investments, on the other hand, refer
to investment in financial instruments like shares, debentures, insurance policies, mutual
fund units etc. Financial investments help in creating the capital stock of the country. In
the long term, investment is important for improving productivity and increasing the
competitiveness of an economy. Arup Kumar Sarkar Assistant Professor Department of
Commerce Sidho-Kanho-Birsha University, Purulia West Bengal, India Dr. Tarak Nath
Sahu Assistant Professor Department of Commerce with Farm Management Vidyasagar
University Midnapore West Bengal, India www.pbr.co.in Pacific Business Review

6
International 08 Without investment, an economy could enjoy high levels of consumption,
but this creates an unbalanced economy. The states having more commitments to
investment are more progressive. In India, few states have created a niche for economic
development, the main reason being that they attracted large investments. As investments
have a ‘multiplier’ effect, they generate income and employment and create demand and
consumption. In today’s economy, money holds a significant role in one’s life as in order
to trounce the difficulties in future it is necessary to invest money.

Today there are many investment options available to investors. Some of them include
bank deposits, bonds, stocks, mutual fund investment and corporate debentures. Investors
invest money in banks, bonds and corporate debentures where the risk is low. On the
contrary, stocks of companies have high risk but the returns are also proportionately high.
The recent trends since last year clearly suggest that the average investors have lost money
in equities. People have now started opting for portfolio managers who have the expertise
in stock markets. There are many institutions in India which provide wealth management
services. An average investor has found a safe place with the mutual funds.

Mutual funds play a vital role in resource mobilization and its efficient allocation to the
productive sources of the economic system. These funds have financial Intermediation,
development of capital markets and growth of the corporate sector throughout the world.
The process of liberalization, deregulation and restructuring of the Indian economy has
created the necessity for efficient allocation of scarce financial resources. In this process
of development, mutual funds have emerged as strong financial intermediaries and are
playing an important role in bringing stability to the financial system and efficiency to the
resource allocation process. The mutual fund industry is a fast growing sector of the Indian
financial markets. They have become a major vehicle for mobilization of savings,
especially from the small and household savers for investment in the capital market.

Mutual Funds entered the Indian Capital Market in 1964 with a view to providing the
retail investors, the benefit of diversification of risk, assured returns and professional
management. Since then, they have grown phenomenally in terms of number, the size of
operation, investor base and scope. Being a part of financial markets although mutual
funds industry is responding very fast by understanding the dynamics of investor’s
perceptions towards rewards, still they are continuously following the race in their
endeavor to differentiate their products responding to sudden changes in the economy.

7
Every type of investment, including mutual funds, involves risk. Risk refers to the
possibility that investors will lose money (both principal and any earnings) or fail to make
money on an investment. A fund's investment objective and its holdings are influential
factors in determining how risky a fund is. Reading the prospectus will help the investors
to understand the risks associated with that particular fund. Thus, it is time to understand
and analyze investors perceptions of such risks and expectations, and unveil some
extremely valuable information to support financial decision making of mutual funds.

A mutual fund pools the money of people with certain investment goals. The money
invested in various securities depending on the objectives of the mutual fund scheme and
the profits (or loss) are shared among investors in proportion to their investment.
Investments in securities are spread across a wide cross-section of industries and sectors.
Diversification reduces the risk because all stocks may not move in the same direction in
the same proportion at the same time.

Mutual fund issues units to the investors in accordance with quantum of money invested
by them. Investors of mutual funds are known as unit holders. The profits or losses are
shared by the investors in proportion to their investment. The mutual funds normally come
out with a number of schemes with different investment objectives which are launched
from time to time. A mutual fund is required to be registered with Securities and Exchange
Board of India (SEBI) which regulates securities markets before it can collect funds from
the public. A mutual fund is a collective savings scheme. Mutual funds play an important
role in mobilizing the savings of small investors and channelizing the same for productive
ventures in the Indian economy.

A mutual fund in India can raise resources through the sale of units to the public. It can be
set up in the form of a trust under the Indian 4 Trust Act. The mutual fund serves as a link
between the investors and the securities market by mobilizing savings from the investors
and investing them in the securities market to generate returns. Thus, a mutual fund is akin
to portfolio management services. Although, both are conceptually same, they are
different from each other. Portfolio management services are offered to high net worth
individuals; taking into account of risk profile, their investment is managed separately. In
the case of mutual funds, savings of small investors are pooled under a scheme and the
returns are distributed in the same proportion in which the investments are made by the
investors/unit holders.

8
Investment is referred to as the sacrifice of present consumption and investing that saved
money in some financial product with an expectation of earning higher returns in the
future. But the accessibility to large amount of information creates a lot of confusion
among the individuals, moreover it is very time consuming as well since the investors are
many a times not capable of processing the available information. In addition to that, it is
also necessary to have a sound knowledge of the existing investment options so as to
arrive at good investment decision.

Nowadays, numerous investment avenues are available with differing risk-return levels,
differing liquidity and marketability. An investor has to pick an appropriate investment
avenue that satisfies his particular need and risk-taking appetite. Investment became an
important part of economy of any nation. With the saving invested in various options
available to the people, money act as driver for the growth of the country. Investment
benefits both economy and society. It is the outgrowth of economic development and
maturing of modern capitalism. For an economy as a whole aggregate investment
sanctioned in the current period is a major factor in the determining aggregate demand and
here level of employment in the long term. Current investment determines the economy’s
future productive capacity ultimately a growth in the standard of living. By increasing the
personal wealth investing can contribute to higher overall economic growth and prosperity
(Murithi, 2012). Investment refers to the employment of funds with aim of achieving
additional income or growth in value. It involves the commitment of resources which have
been saved or put away from current consumption in the hope that some benefits will
accrue in future. It is basically reward for waiting (Preeti singh, 2009).Investment can be
explained as purchase of a financial product or other item of value with an expectation of
favorable future returns. Saving is left over the disposable income where as when these
savings are used to generate further returns are known as investment
(www.investorwords.com) The investment behaviour consists of why they want to invest,
how much of their disposable income they want to invest, for how many years/months
they want to invest and the most importantly the timing of such investment (Chakraborty,
2012) Investor refers to the person who puts their money in investment products in the
expectation of favorable future returns. The future returns may be in the form of capital
appreciation, income in the form of interest, dividend, bonus and other benefits.

1.2 INVESTMENT AVENUES

9
There are number of avenues/options available to investors in which investors can make
investments. The selection of the mode of investment depends upon the risk bearing
capacity of investors. The investment avenues can be categorized on the basis of risk
bearing capacity of investors in the following paragraphs.

Bank Fixed Deposits: Once an explicit quantity of cash is deposited in bank with a hard
and fast rate of interest and for specific fundamental quantity, then such deposit is termed
fixed deposit. All the banks provide fixed deposit theme with a large vary of tenures
starting from 7 days to 10 years. On maturity the investor is entitled to receive principal
quantity at the side of interest attained at pre-specified rate of interest

Bank Saving Account: A saving account is an account provided by bank to people to

avoid wasting cash and earn interest on the money control within the account. A saving
account is accustomed economize for specific expenses or for extended term indefinite
goals. The interest given on saving deposits is nominal. At present, rate of interest ranges
4% to 6% per year.

Public Provident Fund: Public provident fund could be a saving seed tax saving and
retirement fund schemes introduced by central government. PPF account will be opened at
any head post office or nationalized banks and any branch of banking concern of Asian
country. The PPF account matures after fifteen years from the date of the primary
investment. A minimum yearly deposit of Rs. 500 is needed to open and maintain PPF
account. A most deposit of Rs. 1, 50,000 will be created in PPF account. The present rate
of interest on public provident fund is 8.1% per annum.

Government Securities: The securities issued by central government, state government

and quasi government are called government securities. These are thought of low risk
securities since these are secured through onerous power of state. Government securities
have 3 styles. It includes (a) Treasury bills (b) Treasury notes (c) Treasury bonds.

Mutual Funds: A mutual fund is an institutional device throws which investors pool their
funds to invest in a diversified portfolio of securities, thus spreading and reducing risk
(Gupta, 2015). A fund may be a professionally managed investment theme sometimes
goes past associate quality Management Company that brings along a bunch of individuals
and invests in stocks, bonds and different securities. There are numerous kinds of mutual
funds. It includes (a) open ended schemes (b) close ended schemes (c) interval schemes

10
(d) equity funds (e) debt funds (f) money market funds (g) Growth funds (h) Income funds
(i) Liquid funds.

Life Insurance: Life Insurance may be a contract between an individual and insurance
company for variety of years covering either life time period or a set number of years.
There are 2 parties within the insurance contract one is insurance firm (insurance
Company) and insured (person who is taking insurance policy). Once capitalist takes an
insurance policy on his portfolio he should pay some installment to the insurance
company. This installment is named premium. The vital kind of insurance policies are (a)
Whole life policy (b) Limited payment life policy (c) Endowment policy (d) Joint life
policy (e) Sinking fund policy

Debentures: A debenture could be a tool or instrument to borrow cash at a hard and fast
rate of interest. It's essentially employed by giant firms. Certificate of indebtedness
represent a contract wherever by one party lends cash to a different party on planned terms
with regards to rate of interest, maturity amount, etc. A debenture could be a document
beneath the corporate’s seal that provides for payment of a principal and interest on it at
regular intervals that is typically secured by mounted or floating charge on company’s
property or enterprise and that acknowledges a loan to the company. The necessary kinds
of debentures are (a) Registered debentures (b) Bearer debentures (c) Secured debentures
(d) Unsecured debentures (e) Redeemable debentures (f) Non redeemable debentures (g)
Convertible debentures (h) Non convertible debentures

Bonds: A bond could be a debt investment in which capitalist loans cash to an entity
(typically company or governmental) which borrows funds for a particular period of time
at a variable or fixed rate. Bonds are employed by corporations, municipalities, states, and
governments to lift cash and finance a range of the projects and activities. These area unit
debt instruments issued by government having a set tenure of 6 years and also the current
rate of interest on bonds is 8% per annum paid half yearly. The government of India
launched bonds 1st time in 2003.The necessary forms of bonds are (a) Convertible and
non convertible bonds (b) Sinking fund bonds (c) Secured and Unsecured bonds (d)
Redeemable and irredeemable bonds (e) Joint bonds.

Equity Shares: The equity shareholders are the real owners of company. They have
voting rights in the meeting of the company. They have control over the working of the
company. Equity shareholders get dividend after paying it to the preference shareholders

11
and debenture holders. The rate of dividend depends upon profits of the company. They
may get a higher rate of dividend or may not get anything on liquidation of company.
These shareholders get refund of capital only after satisfying claims of creditors and
preference shareholders. The investors in the shares have risk of income as well as of their
share money.

Commodity Market: Commodity market is a market that trades in primary economic

sector rather than manufactured goods. Commodity market can include physical trading
and derivatives trading using forwards, futures, options, etc. It is a physical or virtual
market place for buying, selling and trading raw or primary products such as gold, silver,
oil, etc and thus these are currently about 50 major commodities market worldwide and
that facilitate investment trade in approximately 100 primary products.

Forex Market: Foreign exchange market may be a international localized or over the
counter marketplace for mercantilism currencies. This includes all aspects of shopping for,
marketing and exchanging currencies at current or determined costs. The exchange market
provides physical and institutional structure through that the money of one country is
changed for that of another country. The speed of exchange between currencies is decided
and exchange transactions are physically completed. An foreign exchange dealings is
associate degree agreement between a client and a marketer that a given quantity of one
currency is to be delivered at a fixed rate for a few alternative currency.

1.3: PROBLEM OF THE STUDY

A mutual fund is deemed to be an institutional entity that encompasses the commonly

desired and schematically accumulated financial goals of the community for investors.
The money collected from a plethora of source is invested by the fund manager in various
types of securities depending on their duly specified objectives. The mutual fund in its
rudimentary conceptualization is a collection of stocks or bonds, where an investor holds a
share, which represents a part of the fund holding. A proportionate sharing of income
earned through such investors and capital appreciation witnessed by the schemes is duly
carried out. It must, however, be mentioned that this proportional sharing by the unit
holders is governed by the number of units owned by them. A mutual fund is, therefore,
the most suitable investment option available for a common man as it provides an
opportunity to invest in a diversified, yet professionally managed the portfolio. Mutual

12
funds act as a gateway to enter into big companies hitherto to an ordinary investor with his
small investment.

An investor means a person who invests his savings. Investment is an activity, which is
different from savings. Savings are generated when a person abstains from present
consumption for a future use. Savings keep the cash idle and do not earn anything. Hence
the saver has to find a temporary repository for his savings until they are required for his
future. This results in investment. Increase in investments is because of hike in working
population, enhanced family incomes and consequent savings, availability of large and
attractive investment alternatives and increase in investment related publicity. Investment
has become a household word and is very popular with the people at large. Investment is a
word of many interpretations. When a person has advanced some money to others, he may
consider his loan as an investment. He expects to get back the principal along with interest
at a future date. Another person may have purchased a land for the purpose of value
appreciation and may consider it is an investment. The investors consider their investment
needs, goals, objectives and constraints in making investment decisions; it is not possible
to make a successful investment decision at all times. In the past, the equity investment
was considered to be a risky investment and hence only rich and business class people had
entered in the stock market transactions. But to-day, the equity investment has become a
household word and even middle class people also actively involved in equity investment
operations with the results that the total investments on equity in various companies in
India had increased tremendously. The investment made with the help of rumours and tips
may erode off the amount invested. As there is a general attitude prevailing that making
out of the stock market is easy, many enter the stock market without prior knowledge and
get their fingers burnt. In Indian stock market, the majority of the investors are investing
their money in shares based on their own assumptions and others’ decision. In buying a
share number of factors are to be considered like the standing of the company, political
and economical environments, condition of the financial, market and psychological
factors. These considerations help to purchase the shares with least cost and selling them
at high price. It is better to invest after careful study and a systematic evaluation in the
form of fundamental and technical analysis. Many investors neglect this evaluation due to
inefficiency or lack of knowledge of the importance of such an analysis. As a result they
enter the market 6 without adopting any systematic approach. Therefore they are not able
to predict the future movements and they lose more when the market turns bearish. Even

13
though the Government of India has established many supervisory bodies to take over the
various operations of the stock market, it has not yet attained stability.

A behavioural finance expert has stated that investors’ financial decision making is not
always driven by just mental considerations. The investors have revealed more human
traits in investment decision making such as fear, risk seeking and aversion, peer group
pressures and pleasure rather than going in a systematic manner. Psychological and
behavioural factors play a vital role in investment decision rather than fundamental
analysis of facts and figures. It is a well known fact that the ability of human beings to
make complex decisions is limited and emotionally and psychologically biased. The
attitude of investors is examined from their risk bearing capacity.

It is evident from the existing literature (Chapter II Review of Literature) that mutual fund
companies have offered a number of schemes. The investors decision making, perception,
investment strategy, expectations etc are closely related to the behaviour of 5 investors.
Mutual fund market is highly influenced by the behaviour and attitude of investors. In
India, though the mutual fund industry has been in existence since 1964, (with the
establishment of UTI), no major study has been done regarding the investors perceptions
related aspect with special reference to mutual funds in the study area. In Karnataka the
awareness and knowledge regarding mutual funds are good. Hence, this study has made an
attempt to examine the “Investors Perceptions towards Mutual Funds in South
Mumbai: A Study with reference to Selected Mutual Funds” to fill this research gap.

It should be noted that the “expectations” of investors play a vital role in the financial
markets. They influence the price of the securities, the volume traded and various other
financial operations in actual practice. These „expectations‟ of investors are influenced by
their “perception” and humans generally relate perception to action. The beliefs and
actions of many investors are influenced by the dissonance effect and endowment effect.
A study on the investors perception towards investment in mutual funds is an attempt to
evaluate the behavioural aspects of fund selection techniques of individual investors and
also to assess the conceptual awareness of MFs during the period.

1.4: OBJECTIVES OF THE STUDY

The objectives of the study are:

1. To study the various aspects relating to mutual funds industry in India.

14
2. To study the growth of mutual funds industry in India in terms of resource mobilisation
and asset under management.

3. To examine the investment pattern of mutual funds investors.

4. To study the satisfaction level of investors towards investment in mutual funds.

5. To know the investors perception towards mutual funds.

1.5. HYPOTHESIS OF THE STUDY

Keeping in view of the objectives of the study the following hypotheses have been
formulated:

Hypothesis 1:
HO: There is no significant relationship between gender of the respondents and their level
of satisfaction towards investment in mutual fund.

H1: There is a significant relationship between gender of the respondents and their level of
satisfaction towards investment in mutual fund.

Hypothesis 2:
HO: There is no significant relationship between age of the respondents and their level of
satisfaction towards investment in mutual fund.

H1: There is a significant relationship between age of the respondents and their level of
satisfaction towards investment in mutual fund.

Hypothesis 3:
HO: There is no significant relationship between the marital status of the respondents and
their level of satisfaction towards investment in mutual fund.

H1: There is a significant relationship between the marital status of the respondents and
their level of satisfaction towards investment in mutual fund.

Hypothesis 4:
HO: There is no significant relationship between educational qualification of the
respondents and their level of satisfaction towards investment in mutual fund.

15
H1: There is a significant relationship between educational qualification of the
respondents and their level of satisfaction towards investment in mutual fund.

Hypothesis 5:
HO: There is no significant relationship between the occupational status of the
respondents and their level of satisfaction towards investment in mutual fund.

H1: There is a significant relationship between the occupational status of the respondents
and their level of satisfaction towards investment in mutual fund.

1.6: SCOPE OF THE STUDY

The financial market in India has become organized. Now a days investor use to trade in
various stock markets in all over India. At that time it becomes necessary to know
behavior of investor in equity market. Today the investor has various options available to
have investment of their saving. When an investor is investing his money in stock market,
he may seek equity market. There are total 24 stock markets in India which are located in
different cities of India. Investing in equities in a market like India is speculative and
involves risk that may be greater than other types of investment strategies. Investor
behavior is one of the three “golden rules”. Investor behavior is essential and an excellent
chance for success with investment plan (Shorr, 2007). A better understanding of
behavioral process and outcomes is important for financial planners because an
understanding of how investors generally respond to market movements should help
investment advisors devise appropriate asset allocation strategies for their clients. For
companies, identifying the most influencing factors on their investors’ behavior would
affect their future policies and strategies. For government, identifying the most influencing
factors on investors’ behavior would affect the required legislations and the additional
procedures needed in order to satisfy investors’ desires and also to give more support to
market efficiency (Al-Tamimi, 2006)1 . Efficient Market Hypothesis believes that an
investor takes decisions rationally, based entirely on economic fundamentals of the stocks.
These fundamentals are generally the EPS, Book value, PE ratio along with the projected
future cash flows of the firm and overall scope for growth in the sector.

This study was mainly planned to understand the various investment opportunities
available for people and also to understand the preferred investment avenues. This
research study surely will provide for a better understanding of the investment avenues

16
available to an investor from various institutions. The findings of study present a
comparison between selected investment avenues.

1.7: LIMITATION OF THE STUDY

1. The study is limited to 200 respondents of the selected South Mumbai area only.

2. Due to cost and time constraints, the investigation is restricted to selected area only.

3. Due to the time lag between collection and publication of official data, it became
difficult to give very recent data.

4. The reluctance of some respondents to disclose their full investment particulars has an
adverse impact on the study.

1.8: RESEARCH METHODOLOGY OF THE STUDY

This is an empirical research based on the survey method. To get a proper insight into the
problems of this study, the researcher interacted with the investors who invest in various
mutual funds schemes, having a specialized knowledge in the field of mutual funds.

1.8.1 Sources of Data: The present study is conducted with the help of both primary and
secondary data.

1.8.1. I. Primary Data: Primary data has been collected from the individual investors
through a sample survey. The survey was conducted with the help of predesigned
questionnaire to examine the effect of service quality offered by the mutual fund company,
on the satisfaction level of the customer and customer loyalty, a modified SERVQUAL
scale relevant to the company was prepared. The questionnaire consists of the
SERVQUAL instrument developed and updated by Parasuraman et al. (1994), three
dimensions and few statements were added based on literature review done, the
dimensions include tangibility, reliability, responsiveness, assurance, empathy, after sales
service, physical facilities and modern services were taken, finally six dimensions and 35
statements were considered for the study. Besides the dimensions of service quality two
additional outcomes of service quality were included viz. Customer satisfaction and
customer loyalty, which were derived by going through the literature conducted, personal
interviews with academicians, managers and customers of various sectors of company.

The respondents were asked to evaluate their level of satisfaction on both expectation as
well as their perception level. Further, for the service quality outcomes i.e. customer

17
satisfaction and customer’s loyalty, 10 items were asked and only the perception level of
the respondents was taken into account, since both these aspects occur after the 68 service
is rendered/delivered. All the items were measured on Likert’s five-point scale, the scale
ranged from 5 (strongly agree) to 1 (strongly disagree). Apart from service quality,
questions regarding rating of various services of the banks, rating the overall service
quality and number of years as customer of the bank were also included in the
questionnaire. The scores obtained through Likert’s scale were classified into five groups,
viz., ‘strongly disagree’ (1), ‘disagree’ (2), ‘uncertain’ (3), ‘agree’ (4) and ‘strongly agree’
(5) In order to determine the dimensions of service quality factor analysis was done.

1.8.1. II. Secondary Data: The secondary data has been collected with the help of books,
magazines, articles, thesis, dissertations, newspapers, websites, official publications by
Government of India, Government of Karnataka, reports from Securities Exchange Board
of India (SEBI), Bulletin, Handbook of statistics on Indian securities market, Association
of Mutual Funds in India (AMFI), RBI publications and reports, mutual fund companies
related websites etc.

1.8.3 Sampling Design: According to the Association of Mutual Funds in India (AMFI),
there are 44 Assets Management Companies (AMCs) are in existence during the study
period. Out of 44 Assets Management Companies, 35 Assets Management Companies are
in private sector and 09 are in public sector. During the literature, it was found that more
number of investors have preferred and invested their money in public sector mutual fund
companies namely UTI Mutual fund, SBI Mutual Fund and LIC Nomura Mutual Fund.
The researcher has collected names and address of the unit holders (investors) of various
area from the respective mutual fund headquarters and applied convenient sampling
method for the analysis purpose. However utmost care was taken to have a representative
sample and it was restricted to 200 respondents. One hundred each from SBI mutual fund
and LIC 10 Nomura mutual fund are selected from public sector mutual fund companies
for the present study purpose.

1.8.4 Tools and Techniques Used For Analysis: The research data has been analyzed by
using statistical tools and techniques such as percentages and cross tab to test the
association between the investors socio-economic characteristics and their opinions.

1.9. EXPECTED CONTRIBUTION OF THE STUDY

18
Mutual funds companies should come forward with full support for the investors in terms
of advisory services, participation of investors in portfolio design, ensure full disclosure of
related information to investors, and ensure that proper consultancy is given by mutual
fund companies to the investors in understanding the terms and conditions of different
mutual fund schemes, such as type of fund designing should be promoted that will ensure
the satisfaction of the needs of the investors. Mutual funds information should be
published in an investor-friendly language and style to educate investors. It should be
developed by mutual fund companies so as to enable the investors to analyze the risks
associated with investments made by them. There has been a tremendous growth in the
mutual fund industry in India, attracting large investments not only from the domestic
investors but also from the foreign investors. The growing middle-class household
families with limited risk-bearing capacity, it provides better returns than any other long-
term securities. The high rate of savings and a rapid liberalizing economy is expected to
elevate the mutual fund sector to new hikes. Today, a lot of investment opportunities are
available to the investors in the financial markets. According to the investors opinion, the
main reason for the quick popularity of the mutual funds is the guarantee to redeem at net
asset values. The investors have realized the benefits of investing in mutual funds.

Many studies have been done previously on the mutual fund in India. The present study,
not only covered the perception but also it covered the attitude of the mutual fund
investors. This helps to know in detail about mutual fund industry and its business growth
and future prospects. The present study would be much helpful to the policy makers and
administrators of the mutual fund companies to draw appropriate policies to enhance the
satisfaction of the mutual fund investors and for the betterment of the mutual fund
companies. This study would also help the future researchers in carrying out their research
in the field of mutual fund and investor attitude in some other areas with multi-
dimensional aspects. The present study helps the people to save and invest their surplus
money for various productive purposes. It leads to capital accumulation for the nation and
better returns to the investors. The present study is an attempt that has been made to know
the investors perception towards mutual funds. It involves the understanding of the basic
concept of mutual funds, various schemes of mutual funds, investment alternatives, factors
influencing investment, investors expectation regarding the mutual funds and investors
preference of different mutual funds schemes etc.

19
CHAPTER 2: REVIEW OF LITERATURE

20
 CHAPTER 2:

REVIEW OF LITERATURE

2.1 INTRODUCTION:

A review of theoretical and empirical literature pertaining to the topic of the study is an
integral part of any research work. Investment play a crucial role in reducing risk and
transaction cost while investing in the stock markets. They offer a more efficient route of
investing. In the process of encouraging more investments, they help in realizing true
prices of securities. This, in turn, helps to attract investments through the initial public
offer route and mobilize the savings of Indian households. A number of studies on the
growth and financial performance of mutual funds have been carried out during the past
years in the developed and developing countries. A brief review reveals the wealth of
contributions towards the performance evaluation of mutual fund, market timing and stock
selection abilities of the fund manager.

2.2. REVIEW OF ARTICLES:

Review of research articles includes national and international level pertaining to the
mutual funds area are summarised as below.

21
Sarita Bahl (2012) conducted survey on investment behavior of working women in
Punjab and concluded that 78% women in Punjab invested their savings and 22% women
did not make investments and out of 78% women, most of women invested their money in
insurance plans as they were not willing to take risk to attain gain and want to had a safe
future.

Prof. M. Kothai Nayaki (2013) was undertaken a study on investors behavior towards the
different alternatives with special reference to Coimbatore city and it was analyzed that the
respondents had chosen negotiable securities as their first preference and second place was
occupied by non-negotiable securities followed by real assets and the fourth, fifth and
sixth places were occupied by mutual funds, tax sheltered schemes and life insurance
respectively. It was also concluded that investor’s most important objective was return on
the investment and investor considers liquidity as the most important factor before making
their investments.

Dr. Arparna Samudra et.al (2012) studied the investment behavior of middle class
households in Nagpur and found that bank deposits remained the most preferred
investment option of middle class income in Nagpur with 41% respondents marked it as
relatively most preferred instrument. This was followed by life insurance where 30%
respondents marked it as second relatively preferred instrument. Small savings such as
public provident funds, post office saving deposits were third preferred investment option.
It was found that majority of the respondents said that they look for high returns while
investing in any instrument. 60% of the respondents had reported that there had been a
change in their investment pattern in last five years and change in income had been prime
reason for change in investment pattern and it was also found that 52% of the respondents
had reported that they take investment decisions on their own.

Dr. Mandeep Kaur et.al (2012) had done study on understanding individual investor’s
behavior and stated that the individual’s decision to invest in the financial market was
greatly influenced by variety of benefits each individual wanted from owning a particular
stock. It was also concluded that investor’s portfolio practices, preferences, risk
perceptions, intentions, pattern of investment and their awareness level affected portfolio
decision of investor. Knowledge about the expectations, demographic profile, attitude of
an investor towards risk, personal circumstances played a vital role in the financial
markets.

22
Dr. Dhiraj Jain et.al (2012) analyzed the saving and investment pattern of school
teachers with reference to Udaipur. The aim of the study was to determine relationship
between the saving and investment literacy among school teachers. It was concluded that
in today’s world money played a vital role in one’s life and that the importance of money
had been started being recognized by school teacher’s community. They knew the
importance of money so they were initiated themselves to prepare budget and lesson down
their expenses to meet the future consequences. It had been evident from study that most
of the school teachers were saving their money as bank deposits for the purposes of their
children’s education, marriage and as security after retirement.

Deepak Sood et.al (2014) studied the impact of demographic factors of people preference
various investment avenues and revealed that majority of the investors had knowledge
about securities and found that most of the male investors liked to invest in PPF, LIC, DS
and RE and female investors wanted to invest in PPF and LIC and as the age increases
investors preferred less risk instruments instead of high risk instruments. Investors whose
age was less than 25 they preferred to invest in SD but whose age was between 40-60 they
preferred to invest in PPF, LIC, RE and education played an important role in the decision
regarding selection of investment. Graduates liked to invest in SD and postgraduate as
well as people with professional qualification liked to invest in PPF and LIC. According to
occupation people who were on government and private job preferred to invest in SD and
PS but professionals they want to invest in LIC and PPF according to their suitability of
risk and return. Students preferred equity portion. Income was one of the major factor that
influenced investment, whose income was less than Rs. 2,40,000 prefer to invest in SD
and whose income between Rs. 2,40,000-5,00,000 preferred LIC and PPF. So it was
wholly concluded that most of the people invested in LIC, PPF and SD in Ludhiana region
of Punjab.

Prof.CA Yogesh. P et.al (2012) conducted survey on investment perspective of salaried

people and found that investment mutual fund was one of the most favored option of
youngsters today and real estate market was also one of which youngsters prefer fixed
deposits were opted by senior citizens. Gold was still preferred to extent especially when it
came to the females saving tax was one of the major reasons behind investment by youth.
Other traditional investment options like fixed deposit or post office schemes NSC, NSS,
KVP or IVP were losing their way due to blocking of funds and lower returns.

23
Sanjay Das (2013) had examined small investor’s perception on mutual funds in Assam
and concluded that the mostly small investors had positive approach towards investing in
mutual funds. The study also revealed that the female segment was not fully tapped and
even there was low target on higher income group people. It was also revealed that
liquidity, flexibility, tax saving, service quality and transparency were the factors which
had a higher impact on the perception of investors. Therefore it was imperative on the part
of fund managers to enhance these features for attracting more investors and also to retain
the trust of investor in them.

Dr.Balwinder Singh et.al (2011) had made study on the determinants of investment
decisions of working women and had found that working women rank basic saving
purposes to be foremost consideration while investing. While investing, the family related
matters such as children education, children marriage, life protection and medical
expenses had a much more impact on the minds of married working women than on
unmarried ones. The facility to encash the investments whenever required was also an
important objective while deciding to invest. The working women were significantly
influenced by marketing skills of investment advisors and she decided for investments on
her own or on the guidance of her husband or other family members.

Suman (2012) had done study on the investment behavior of individual investors in stock
market. It was found that annual income and the annual saving were given importance of
consideration by respondents because level of income decided the level of savings.
Today’s investors were fully aware about stock market. The market movements affected
the investment pattern of investors in the stock market.

Irwin, Brown, FE (1965) analyzed issues relating to investment policy, portfolio turnover
rate, the performance of mutual funds and its impact on the stock markets. The mutual
funds had identified that a significant impact on the price movement in the stock market.
They concluded that, on an average, funds did not perform better than the composite
markets and there was no persistent relationship between portfolio turnover and fund
performance.

Mc Kelvey (1966) study entitled “Intangible factors in stock evaluation” work pointed out
that when making an investment decision, one should look for certain factors beyond
current earnings and dividends. The factor suggested in his study are growth trend, quality
of growth, qualitative factors, management factors, the validity of earnings, use of

24
leverages, diversification, shareholder relations and other intangible factors. The
intangible factors are stocks with restricted voting rights, full of voting right, the
reputation of the underwriter and the length of time the shares which have been marketed.
The study emphasizes that current earnings and yield are important factors in determining
the attractiveness of the stock, but they are not the only ones.

Jensen (1968) has developed a composite portfolio evaluation technique concerning risk-
adjusted returns. The researcher evaluated the ability of 115 fund managers in selecting
securities during the period 1945-66. Analysis of net returns indicated that 39 funds have
above-average returns, while 76 funds yielded abnormally poor returns. Using gross
returns, 48 funds showed above average results and 67 funds below average results. Jensen
concluded that there was very little evidence that funds were able to perform significantly
better 16 than expected as fund managers were not able to forecast securities price
movements.

Smith and Tito (1969) have examined the inter-relationships between the three widely
used composite measures of investment performance and suggested a fourth alternative,
identified some aspects of differentiation in the process. While ranking the funds on the
basis of ex-post performance, alternative measures produced little differences. However,
conclusions differed widely when performance was compared with the market. In view of
this, they suggested modified Jensen‟s measure based on estimating equation and slope
coefficient.

Friend, Blume and Crockett (1970) has compared the performance of 86 funds with
random portfolios. The study concluded that mutual funds performed badly in terms of
total risk. Funds with higher turnover outperformed the market. The size of the fund did
not have any impact on their performance.

Roger E. Potler (1970) has found empirical evidence suggesting the same basic factors
motivating professional and non-professional investors. The factors were a desire for
income from dividends, rapid growth and quick profits through and purposeful investment
as a protective outlet for savings.

Arditti (1971) found that Sharpe‟s conclusion got altered when the annual rate of return
was introduced as a third dimension. He found that contrary to Sharpe‟s findings the
average fund performance could no longer be judged inferior to the performance of DJIA.
Fund managers opted higher risk for better annual returns.

25
Fama (1972) developed methods to distinguish observed return due to the ability to pick
up the best securities at a given level of risk from that of predictions of price movements
in the market. He introduced a multi-period model allowing evaluation on a period-
byperiod and on a cumulative basis. He branded that, return on a portfolio constitutes of
return for security selection and return for bearing risk. His contributions combined the
concepts from modern theories of portfolio selection and capital market equilibrium with
more traditional concepts of good portfolio management.

Klemosky(1973) analyzed investment performance of 40 funds based on quarterly returns

during the period 1966-71. He acknowledged that biases in Sharpe, Treynor, and Jensen‟s
measures, could be removed by using mean absolute deviation and semistandard deviation
as risk surrogates compared to the composite measures derived from the CAPM.

McDonald and John (1974) has examined 123 mutual funds and identified the existence
of a positive relationship between objectives and risk. The study identified the existence of
a positive relationship between return and risk. The relationship between objective and
risk-adjusted performance indicated that more aggressive funds experienced better results.

Gupta (1974) evaluated the performance of mutual fund industry for the period 1962-71
using Sharpe, Treynor, and Jensen models. All the funds covered under the study
outperformed the market irrespective of the choice of market index. The results indicated
that all the three models provided identical results. All the mutual fund subgroups
outperformed the market using DJIA while income and balanced groups underperformed
S&P 500.

Meyer’s (1977) findings based on stochastic dominance model revalidated Sharpe‟s

findings with the caution that it was relevant for mutual funds in the designated past,
rather than for the future period.

Gupta Ramesh (1989) evaluated fund performance in India comparing the returns earned
by schemes of similar risk and similar constraints. An explicit risk-return relationship was
developed to make comparison across funds with different risk levels. His study
decomposed total return into a return from investors risk, return from managers‟ risk and
target risk. Mutual fund return due to selectivity was decomposed into return due to the
selection of securities and timing of investment in a particular class of securities.

26
Vidhyashankar S (1990) identified a shift from bank or company deposits to mutual
funds due to its superiority by way of ensuring a healthy and orderly development of
capital market with adequate investor protection through SEBI interference. The study
identified that mutual funds in the Indian capital market have a bright future as one of the
predominant instruments of savings by the end of the century.

Sarkar A K (1991) critically examined mutual fund evaluation methodology and pointed
out that Sharpe and Treynor performance measures ranked mutual funds in spite of their
differences in terms of risk. The Sharpe and Treynor index could be used to rank the
performance of portfolios with different risk levels.

Batra and Bhatia (1992) appreciated the performance of various funds in terms of return
and funds mobilized. UTI, LIC and SBI Mutual Fund are in the capital market for many
years declaring dividends ranging from 11 percent to 16 percent. The performance of
Canbank Mutual Fund, Indian Bank Mutual Fund and PNB Mutual Fund were highly
commendable. The performance of many schemes was equally good compared to
industrial securities.

Gangadhar V (1992) identified mutual funds as the prime vehicle for mobilization of
household sectors‟ savings as it ensures the triple benefits of steady return, capital
appreciation and low risk. He identified that open-end funds were very popular in India
due to its size, economies of operations and for its liquidity. Investors opted for mutual
funds with the expectation of higher return for a given risk, greater convenience and
liquidity.

Lal C and Sharma Seema (1992) identified that the household sector‟s share in the
Indian domestic savings increased from 73.6 percent in 1950-51 to 83.6 percent in 1988-
89. The share of financial assets increased from 56 percent in 1970-71 to over 60 percent
in 1989-90 bringing out a tremendous impact on all the constituents of the financial
market.

Sahu R K (1992) identified mutual funds as a suitable investment vehicle to strengthen

the capital market, as the total assets were around Rs.30,000 crores while the total
resources in equity were less than 15 percent of market capitalization.

Venugopalan S (1992) opined that India (15 million) ranks third in the World next to
U.S.A. (50 million) and Japan (25 million) in terms of a number of shareholders ensuring

27
the spread of equity cult. However, many investors face hardships in the share market due
to lack of professional advice, inability to minimize risk, limited resources and
information.

Shashikant Uma (1993) critically examined the rationale and relevance of mutual fund
operations in Indian Money Markets. She pointed out that money market mutual funds
with low-risk and low return offered conservative investors a reliable investment avenue
for short-term investment.

Sahu R K and Panda J (1993) identified that the savings of the Indian public in mutual
funds was 5 to 6 percent of total financial savings, 11 to 12 percent of bank deposits and
less than 15 percent of equity market capitalization. The study suggested that mutual funds
should develop suitable strategies keeping in view the savings potentials, growth prospects
of investment outlets, national policies and priorities.

Saha Asish and Rama Murthy Y Sree (1993-94) identified that return, liquidity, safety
and capital appreciation played a predominant role in the preference of the schemes by
investors. The preference of the households towards shares and debentures was 7 percent
by 1989-90. Mutual funds being an alternative way for the direct purchase of stocks
should be managed effectively adopting investment analysis, valuation models, and
portfolio management techniques. The study suggested that fund managers could adopt
portfolio selection techniques to make more informed judgments rather than making
investments on an intuition basis.

Shukla and Singh (1994) attempted to identify whether portfolio manager‟s professional
education brought out superior performance. They found that equity mutual funds
managed by professionally qualified managers were riskier but better diversified than the
others. Though the performance differences were not statistically significant, the three
professionally qualified fund managers reviewed outperformed by others.

Kale and Uma (1995) conducted a study on the performance of 77 schemes managed by 8
mutual funds. The study revealed that growth schemes yielded 47 percent CAGR, tax-
planning schemes 30 percent CAGR followed by balanced schemes with 28 percent
CAGR and income schemes with 18 percent CAGR.

The Delhi-based Value Research India Pvt. Ltd (1996) conducted a survey covering the
bearish phase of Indian stock markets from 30th June 1994 to 31st December 1995. The

28
survey examined 83 mutual fund schemes. The study revealed that 15 schemes provided
negative returns, of which, 13 were growth schemes. Returns from income schemes and
income-cum-growth schemes were more than 20 percent. From the point of risk-adjusted
monthly returns, of the growth schemes, 28 (52.8 percent) could beat the index even in a
bear phase.

Tripathy Nalini Prava (1996) identified that the Indian capital market expanded
tremendously as a result of economic reforms, globalization and privatization. The
household sector accounted for about 80 percent of country‟s savings and only about one-
third of such savings were available for the corporate sector. The study suggested that
mutual funds should build investors confidence through schemes meeting the diversified
needs of investors, speedy disposal of information, improved transparency in operation,
better customer service and assured benefits of professionalism.

Jayadev M (1996) studied the performance of UTI Mastergain 1991 and SBI Magnum
Express from 1992-94 with 13 percent return offered by post office monthly income
deposits as a risk-free return. Mastergain earned an average return of 2.89 percent as
against market earnings of 2.84 percent. The volatility of Magnum Express was high
compared to Mastergain. Master gain had a superior performance over its benchmark
(Economic Times Ordinary Share Price Index) by taking greater risk than the market.
Mastergain indicated a lesser degree of diversification of the portfolio with lower R2 value
and very high unique risk. Magnum Express portfolio was well diversified with higher R2
value along with lower unique risk and total risk. Both the funds did not earn superior
returns because of lack of selectivity on the part of the fund managers indicating that the
funds did not offer the advantages of professionalism to the investors.

Sahadevan S and Thiripalraju M (1997) stated that mutual funds provided an

opportunity for the middle and lower income groups to acquire shares. The savings of
household sector constituted more than 75 percent of the GDS along with a shift in the
preference from physical assets to financial assets and also identified that savings pattern
of households shifted from bank deposits to shares, debentures and mutual funds.

Irissappane Aravazhi (2000) evaluated the investment pattern and performance of 34

close-end schemes from 1988-98 and elicited the views of investors and managers
belonging to Chennai, Mumbai, Pune and Delhi. The survey identified that the investors
desired a return equivalent to market. 16 schemes reported greater risk than the market

29
volatility. The majority of the schemes had a lower beta. Negative values in the case of
Treynor and Sharpe index among many schemes indicated the mockery of the market. He
further identified that the fund managers of 26 schemes had missed the chance of gaining
from scheduling with response to changes in the market. Gupta

Amitabh (2000) identified that the IMFI had come a long way since its inception in 1964.
The transformation in the previous decade was the outcome of policy initiatives taken by
the Government of India to break the monolithic structure of the industry in 1987 by
permitting public sector banks and insurance sectors to enter the market.

Ramesh Chander (2000) examined 34 mutual fund schemes with reference to the three
fund characteristics with 91-days treasury bills rated as risk-free investment from January
1994 to December 1997. Returns based on NAV of many sample schemes were superior
and highly volatile compared to BSE SENSEX. Open-end schemes outperformed close-
end schemes in term of return. Income funds outsmarted growth and balanced funds.
Banks and UTI sponsored schemes performed fairly well in relation to sponsorship.
Average annual return of sample schemes was 7.34 percent due to diversification and 4.1
percent due to stock selectivity. The study revealed the poor market timing ability of
mutual fund investment. The researcher also identified that 12 factors explained the
majority of total variance in portfolio management practices.

Gupta Amitabh (2001) evaluated the performance of 73 selected schemes with different
investment objectives, both from the public and private sector using Market Index and
Fundex. NAV of both close-end and open-end schemes from April 1994 to March 1999
was tested. The sample schemes were not adequately diversified, risk and return of
schemes were not in conformity with their objectives, and there was no evidence of market
timing abilities of mutual fund industry in India.

Roshni Jayam’s (2002) Study brought out that equities had a good chance of appreciation
in future. The researcher was of the view that, investors should correctly judge their
investment objective and risk appetite before picking schemes, diversified equity funds
were typically safer than others and index funds were the best when market movements
were not certain. The researcher suggested Systematic Withdrawal Plan (SWP) with
growth option was more suitable for investors in need of regular cash inflows.

Bansal Manish (2003) survey of 2,819 respondents revealed that the percentage of
investors holding only UTI schemes reduced. The unit holders loyalty seemed to have

30
become a myth as investors were looking for performance. Unit-holders spread their
holdings over two or more funds with an urge to diversify increasing competitive mutual
fund environment.

Singh, Jaspal and Subhash Chander (2003) identified that past record and growth
prospects influenced the choice of scheme. Investors in mutual funds expected repurchase
facility, prompt service and adequate information. Return, portfolio selection and NAV
were important criteria‟s for mutual fund appraisal. The ANOVA results indicated that
occupational status; age had insignificant influence on the choice of scheme. Salaried and
retired categories had priority for past record and safety in their mutual fund investment
decisions.

Saha, Tapas Rajan (2003) identified that Prudential ICICI Balanced Fund, Zurich(I)
Equity Fund were the best among the equity funds while Pioneer ITI Treasury scheme was
the best among debt schemes. They concluded that the efficiency of the fund managers
was the key to the success of mutual funds and so the AMCs had to ensure more
professional outlook for better results.

Rajarajan (2003) in the research article titled “Investors Demographics and Risk Bearing
Capacity” has focused on finding out whether there exists any relationship between Indian
investors demographics characteristics and their risk-bearing capacity. The paper also
identifies the pattern of demographics on the risk bearing capacity of investors. The study
was conducted in Chennai with a sample of 450 investors. The risk bearing capacity was
measured in the study as the percentage of investment in the high-risk assets to total
financial assets.

Satish D (2004) opined that investors from seven major cities in India had a preference for
mutual funds compared to banking and insurance products. Investors expected a moderate
return and accepted the moderate risk. 60 percent of investors preferred growth schemes.
The image of AMC acted as a major factor in the choice of schemes. Investors had the
same level of confidence towards shares and mutual funds.

Sharath Jutur (2004) Studied on 58 schemes during the bear period (September 1998 to
April 2002). He identified that the risk was low for 37 schemes, below average risk for 11
and of average risk for 10 schemes. Risk-return analysis revealed that average mutual
funds were found to be with low unsystematic and high total risk. The return was positive
in the case of 46 schemes, with 30 schemes yielding above 5 percent. 32 schemes have

31
positive Treynor ratio, 30 schemes have positive Sharpe ratio and 35 schemes have
positive Jensen measure due to the bearish market with low CAPM returns.

Venkateshwarlu M (2004) had analyzed investors from the twin cities of Hyderabad and
Secunderabad. Investors preferred to invest in open-end schemes with growth objectives.
Chi-squared value revealed that the size of income class is independent of preference
pattern and dependent on the choice of fund floating institution. Reasonable returns and
long-term strategy adopted by the scheme were the criteria of scheme selection. Investors
perceived that too many restrictions led to the average performance of mutual funds in
India.

Ramamurthy and Reddy (2005) conducted a study to analyze recent trends in the mutual
fund industry and drawn a conclusion that the main benefits for small investors are
efficient management, diversification of investment, easy administration, nice return
potential, liquidity, transparency, flexibility, affordability, wide range of choice and a
proper regulation governed by SEBI. The study also analyzed about recent trends in
mutual fund industry like various exit and entry policies of mutual fund companies,
various schemes related to real estate, commodity, bullion and precious metals, entering of
the banking sector in a mutual fund, buying and selling of mutual funds through online.

Sondhi H J and Jain P K (2005) examined 17 public and 19private sector mutual fund
equity schemes. The mean and median returns for the aggregate period (1993-2002) were
lower than the returns on 364 days treasury bills and higher than the BSE 100 index.
Alliance Equity fund was the top performer and Canbonus and LIC Dhanvikas(I) were the
worst performers.

Muthappan P K and Damodharan E (2006) evaluated 40 schemes for the period April
1995 to March 2000. The study identified that majority of the schemes earned returns
higher than the market but lower than 91 days Treasury bill rate. The average risk of the
schemes was higher than the market. 15 schemes have an above average monthly return.
Growth schemes earned an average monthly return. The risk and return of the schemes
were not always in conformity with their stated investment objectives. The sample
schemes were not adequately diversified, as the average unique risk was 7.45 percent with
an average diversification of 35.01 percent. 23 schemes outperformed both in terms of
total risk and systematic risk schemes with positive alpha values indicated superior

32
performance. The study concludes that the Indian mutual funds were not properly
diversified.

S. Mohannan (2006) in his article put emphasis on the Indian mutual fund industry which
is one of the fastest growing sectors in the Indian capital and financial markets. Stating
that the mutual fund industry has been dramatic improvements in quantity as well as the
quality of product and service offerings. Results founded that mutual funds assets under
management grew by 96% between the end of 1997 and June 2003 and as a result it
increased from 8% of GDP to 15%.

Sahoo and Hathy (2007) in the article titled “Prediction of Mutual Funds: Use of Neural
Network Technique” apply a forecasting model on a testing set consisting of monthly Net
Asset Values of mutual funds of GIC, LIC and UTI for the period 2001-2004 to predict the
performance of the funds. The findings reveal that financial neural networks must be used
to learn and generalize data as it is substantiated by the authors that the Multi Layer
Perception (MLP) is a model superior to another statistical model of forecasting. The
paper is an excellent work on finding alternatives predictive model for mutual fund
performance.

Noronha(2007) has evaluated the performance of 11 equity schemes of three asset

management companies with the help of Sharpe and Treynor measure for a period April
2002-March 2005. The study found that equity, tax plan and index funds offer
diversification and are able to earn better returns as compared to sector specific funds. The
study is a commendable work on the performance of MFs highlighting the better-earning
capacity of equity, tax plans and index funds.

Prasad Phani Kumar and Umesh Maiya (2008) have made an attempt to study the
growth of mutual fund industry in India. The study focuses basically, on the growth of
mutual fund industry in India. The growth of the mutual fund industry was studied under
various parameters like Assets Under Management (AUM), resources mobilized and the
transactions done by the mutual fund Industry in the stock market. The study found out
that the majority of the resources mobilized by the mutual funds schemes are through the
income/debt schemes. It is concluded that more efforts have to be made by the mutual
funds to create awareness among the investors regarding the earnings potential of the
equity/growth schemes.

33
Guha (2008) focused on return-based style analysis of equity mutual fund in India using
quadratic optimization of an asset class factor model proposed by William Sharpe. The
study found the “Style Benchmarks” of each of its sample of equity funds as optimum
exposure to 11 passive asset indexes. The study also analyzed the relative performance of
the funds with respect to their style benchmarks. The results of the study showed that the
funds have not been able to beat their style benchmarks on the average.

Hitesh (2009) has made a study on “Resource Mobilization by Indian Mutual Fund
Industry”. His objectives of the study are to analyze a total number of schemes under
mutual funds, sector wise as well as a category in resource mobilized by mutual fund
industry. He also discussed advantages of investing mutual funds such as professional
management, diversification and convenient administration, returns potential, low costs,
liquidity, transparency, flexibility, choice of schemes, tax benefits and well regulated. He
suggested and concluded that income schemes, liquid/MM schemes, growth schemes have
shown growth during the study period. In terms of resource mobilization, liquid/money
market, growth, ELSS and income funds have emerged as the most popular schemes
among investors and this three account for more than about 70 percent of the resources
mobilization by Indian mutual fund industry.

Prabakaran and Jayabal (2010) evaluated the performance of mutual fund schemes. The
study conducted with a sample of 23 schemes chosen as per the priority given by the
respondents in Dharmapuri district covered a period from April 2002 to March 2007. The
study used the methodology of Sharpe, Jensen and Fama for the performance evaluation of
mutual funds. The results of the study found that 13 schemes out of 23 schemes selected
had superior performance than the benchmark portfolio in terms of Sharpe ratio, 13
schemes had the superior performance of Treynor ratio and 14 schemes have superior
performance according to Jensen measure. The Fama‟s measure indicated in the study that
the returns out of diversification were less. Thus, the Indian mutual funds were not
properly diversified.

Garg (2011) examined the performance of top ten mutual funds that was selected on the
basis of previous years return. The study analyzed the performance on the basis of return,
standard deviation, beta as well as Treynor, Jensen and Sharpe indexes. The study also
used Carhart‟s four-factor model for analyzing the performance of mutual funds. The
results revealed that Reliance Regular Saving Scheme Fund(RRSSF) had achieved the

34
highest final score and Canara Robeco Infra fund had achieved the lowest final score in
the one-year category.

Yadav J.S. and Yadav O.S. (2012) in their article entitled “The Indian Stock Market: A
Comparative Study of Mutual Funds and Foreign Institutional Investors” analysis the
comparison between mutual funds and Foreign Institutional Investors (FIIs). It was found
that though India is an attractive destination for investment by Foreign Institutional
Investors, investments made by the mutual funds were greater than investment made by
FII‟s. During the recession MF industry has played a vital role in pushing the economy
upward while FII‟s withdrew their investment, showing the importance of MF‟s in Indian
economy.

Usha Rekha (2012) has taken initiative to study on “Growth of Indian Mutual Fund
Industry-A Review”. She discussed the history of mutual funds in India. The mutual fund
industry started with the setting up of Unit Trust of India (UTI) in 1964, enjoyed the
monopoly power up to 1987. Public sector banks were allowed to establish mutual funds
in 1987. Since 1993, the private sector and foreign institutions were permitted to set up
mutual funds. By the end of March 2011, there are 41 fund houses under 1131 schemes
with assets under managed by Rs.592250 crores. She concluded that the Indian mutual
fund industry is to witness rapid growth in AUM over next few years. The fund houses
should concentrate on innovative product offerings, efficient service delivery and
supportive technology. The mutual fund industry needs to develop products to fulfill the
need of customers and help the customer understand how the product cater to their needs.

Kumaresan (2012) in his article entitled “A Study on Asset Under Management of Indian
Mutual Fund Industry” was analysed the growth of the mutual fund industry in India. He
suggested that mutual funds are attracting only low percent of GDP, the asset under
management of the fund in India is found to be 9.5 percent. Hence, the association of
mutual fund houses should give wide publicity about the availability of different schemes,
meeting the objectives of a different category of investors. He concluded that mutual fund
industry in India today is at a threshold of significance growth. The outlook continues to
be extremely positive in terms of AUM growth. In spite of many problems plaguing the
Indian mutual fund sector, this sector has emerged as a significant financial intermediary.

Narasimhan (2013) had made an attempt to study on “Mutual Funds: A Change in Indian
Investment Perspective”. He discussed that mutual funds have a new „mantra‟ for Indian

35
investors. Mutual funds market plays a predominant role on par with another investment
instrument. There has been a tremendous shift from traditional investment avenues like
N.S.C. and P.P.F. etc to mutual funds and this trend is rapidly increasing day-by-day. He
concluded that mutual funds play an important role in supporting the capital market, which
is quite essential for supporting a growing economy like India and also plays a leading role
in the development of secondary securities market.

Karigoleshwar S.F (2007) has conducted a research about the “Investment in Mutual
Funds: A Study of Investors in Gulbarga City”. Here the researcher observed that out of
100 respondents 52 percent of the respondents have invested in mutual funds. The study
reveals that 71 percent of respondents are interested in investing in mutual funds in future.
He suggested that investors relation play a vital role in mobilizing the resources. Most of
the mutual fund companies have ignored this and failed to communicate to the investors
about their organization and operation. So, he suggested the mutual fund companies
should build a mechanism, which will help to develop better investor relationship.

Megil Subha (2009) in his study on “Attitude of Investors towards Mutual Fund”,
examined the expectation of mutual fund investors, the investors prefers to invest in a
mutual fund with the expectation of getting regular income. Similarly as an investment
and to get tax benefit they prefer to invest their savings in mutual fund. Another great
expectation about a mutual fund is that they should give guaranteed return which is not
there.

Krishnamurthi S (1997) identified mutual funds as an ideal investment vehicle for small
and medium investors with limited resources, to reap the benefits of investing in blue chip
shares through firm allotment in primary market, avoid due shares, access to price
sensitive information and spread risk along with the benefits of professional fund
management.

Lalit K. Bansal (1997) in his book “Management and Working of Mutual Funds”
explains the mutual funds in pre-1992 and post 1992 period. It covers various mutual fund
schemes, it‟s accounting, calculation of NAV, analysis of U.S.64 - scheme, management
of various schemes etc.

Jayadev (1998) in his book entitled “Investment Policy and Performance of Mutual
Funds” reveals the state of Indian Public Sector mutual funds. The study covers the rate of
return risk investment policy, regulation and pricing of mutual fund schemes. The

36
spotlight of the study was investing in mutual funds means the investor is expected to high
risk. Thus, a strong regulatory framework is advocated for mutual funds to protect the
investor.

Chander (2002) wrote a book on “Performance Appraisals of Mutual Funds in India”,

examined the risk –return of mutual funds with a view to investigating mutual fund
performance in terms of theoretical performance evaluation model developed by Sharpe,
Treynor and Jensen. In his study, he also made a comprehensive decomposition of
portfolio performance attribute to various activities of fund manager such as stock
selectivity, market timing, risk bearing and diversification. In addition, the author also
examines the contemporary portfolio management practices with regard to portfolio
construction, portfolio management, portfolio performance evaluation, and investor
service and disclosure practices.

Amitabh Gupta (2002) A research book entitled “Mutual funds in India”, evaluated
performance of 73 Indian mutual fund schemes and examined the market abilities of the
mutual fund manager. The study period is from 1994 to 1999. The book explained the
growth and development of mutual fund industry in India during the period of 1987 to
2001. The author concluded that India fund manager did not seem to have generated
excess return during the study period. It found that Indian mutual funds, particularly the
private sector fund, had also taken the initiative to improve their investors services and
distribution network.

Sadhak (2003) wrote a book on “Mutual Funds in India Marketing Strategies and
Investment practices”, discussed that the mutual funds industry is still in a nascent stage in
India, but has assumed considerable significance in the post-liberalized market economy.
He critically examines the recent growth and performance of mutual funds in India, while
identifying the constraints in their development. He addresses the major structural,
regulatory and operational issues pertaining to Indian mutual funds, keeping in mind the
changing perceptions of investors and the emerging market structure. Considering the
growing globalization of Indian financial markets and their integration with world
markets, he also outlines the conceptual framework and established operational practices
of mutual funds in developed countries such as the USA, UK and Japan. In the process, he
provides valuable data relating to mutual funds in these countries and in India. Overall, the
book focuses on strategic directions for mutual funds with regard to marketing and

37
investment to enable them to cope with the emerging challenges in the fastchanging
savings and capital markets in India.

Rao Mohana P (1998) opined that UTI followed by LIC Mutual Fund dominated the
market with 54 and 15 schemes respectively. His interview with 120 respondents showed
that 96 percent invested in UTI due to better service and return. 50 percent of shareholding
and 25 percent of unit-holding respondents were from metro cities. Investor‟s services,
income–cum-growth option and capital appreciation were very important aspects while
choosing a fund. He identified that the close-end schemes were very popular among
investors and respondents in general expected private sector funds to improve the quality
of services, investors confidence besides reducing fraud and mismanagement.

Nalini Prava Tripathy (2007) wrote a book on “Mutual Funds in India: Emerging Issues”
author covered the different aspects of the financial markets in India, as money market,
capital market, DFHI, financial sectors reforms etc. And also discussed on history,
importance, classifications, advantages, emerging issues of mutual funds in India.
Regulations and SEBI guidelines relating to mutual funds are focused. AMFI is an apex
body of all Asset Management Companies (AMC), which has been registered with SEBI.
AMFI brought down the Indian Mutual Fund Industry to professional and healthy market
with ethical lines enhancing and maintaining standards. Mutual funds marketing, mutual
fund derivatives, future scenario of the mutual fund industry and a message for investors
relating to investing in mutual funds. These aspects are focused in her book.

Sundar Sankaran (2012) in his book entitled on “Indian Mutual Funds Hand Book”
author covered different aspects relating to the mutual funds such as parties involved,
types of schemes, NAV, benefits of investing in mutual fund like tax efficiency, choice of
risk position, professional management, investment convenience, liquidity etc. Mutual
funds comparison with other products like company fixed deposits, bank deposits, bonds
and debentures, equities life insurance products are also discussed. The legal structure of
mutual funds in India like a sponsor, trusteeship, AMC, maintenance of investors records,
unique client code, custody of investments, setting up of mutual fund operation etc.
Investments in mutual funds schemes such as equity, debt and derivatives also focused.
Performance evaluation of mutual funds schemes comparison with risk, return and risk
adjusted return tools such as Sharpe ratio, Treynor ratio, Jensen Alpha, Eugene Fama,
Appraisal ratio, Modigliani, Sortino ratio are also discussed in his book.

38
Ingle D.V. (2013) wrote a book entitled on “Mutual Funds in India”, the author discussed
different aspects related to the history of mutual fund in India in various phases since 1964
to 2004. Also highlighted on the significance, fundamental attributes, regulations and
problems relating to mutual funds etc covered in the book. The author has focused on UTI
mutual fund under various aspects like bifurcation, trustees, AMC, custodian, transfer
agents, objectives, investment philosophy, tax implications, value added services and
major schemes offered by UTI mutual fund industry have been discussed. He also covered
in his book, that Indian economy is one of the fastest growing economies of the world and
targeting a GDP growth of 9 percent in the eleventh plan period, the role of the financial
sector, as well as the role of mutual funds industry in India, is an important segment of the
financial market for resource mobilization. The consistency in the performance of mutual
funds has been a major factor that attracts many investors. The mutual fund industry
growth is estimated at about 50 percent much higher than that of bank fixed deposits
which are growing at about 20 percent.

Shome (1994) has carried out a research on “A Study of Performance of Indian Mutual
Funds”, based on growth schemes examined the performance of the mutual fund industry
between April 1993 to March 1994 with BSE SENSEX as a market surrogate. The study
revealed that, in the case of 10 schemes, the average rate of return on mutual funds were
marginally lower than the market return while the standard deviation was higher than the
market. The analysis also provided that the performance of a fund was not closely
associated with its size.

Wangal K.A. (1999) in his thesis “The functions of Unit Trust of India and its
Contribution in Indian Economy: 1985 to 1995” concluded that UTI played a very active
role in capital formation and investment in the Indian Industries. UTI promoted and
mobilized savings at the national level and achieved significant growth. UTI earned
significant earning through the various schemes. UTI distributed it‟s earning to unit holder
consistently. A number of unit holders grew substantially. UTI worked successfully in the
country as well as abroad.

Ramesh Chander (2000) in his doctoral dissertation entitled, “Performance Appraisal of

Mutual Funds in India” studied the investment performance of selected Mutual Funds in
terms of risk and returns across the fund characteristics. Besides, the study examined the
portfolio management practices of mutual fund managers with respect to portfolio

39
construction, portfolio management, portfolio evaluation, disclosure practices and
investors services. The researcher concluded that in terms of average returns, the majority
of the sample mutual fund schemes have recorded superior Performance compared to a
benchmark portfolio.

Leelamma M (2004) conducted a doctoral research on “Performance Appraisal of SBI

Mutual Funds with special reference to Kerala State”. Her objectives of the study was to
analyse to what extent the mutual fund is effective as an investment mode to the investors,
the various investment alternatives available to the investors in comparison with mutual
funds and know how far the SBI mutual fund schemes are able to win the confidence of
the investors. She finds, entry of private sector mutual funds which adversely affect the
public or bank and institution sponsored by mutual funds. The downward phase of the
stock market has a negative impact on mutual fund industry. The poor growth rate in NAV
of public sector mutual funds badly affected the Industry. She suggested and concluded to
keep up the brand image in the minds of people through better performance both in the
case of returns as well as after sales services. Give more financial information to the
investors so that they can take decisions on their own investment. There are different
Investment avenues available with varying degrees of risk and return. SBI MF schemes
adopt time-bound investment programmes. The real benefit can only be realized at the
time of redemption. Temporary fluctuations in NAV and re-purchase price do not reflect
the real benefits.

Miglani (2006) has undertaken a research on the topic “Performance Appraisal of Mutual
Funds in India: Empirical Evaluation of Risk and Timing Performance”. The study made
to present an insight into the mutual fund industry rather the capital market. Mutual fund
industry is changing rapidly and no one can predict for the next moment to come.
Objectives of the study were to examine the growth and development of mutual fund
industry in India and to evaluate the performance of selected mutual fund schemes. He has
selected a sample of 98 mutual fund schemes having different investment objectives. Both
the public and private sector, were selected for the purpose of performance evaluation and
also for testing the market timing abilities of the Indian fund managers. For evaluating the
performance of mutual fund scheme modules such as rate of return, Sharpe, Treynor,
Jensen differential return, Sharpe differential return, Appraisal module had been used. He
finds and concluded that, during the first stage, UTI achieved a formative growth because
no competitor was available there due to corruption and red tapism in government sector

40
where fund did not show any meaningful growth. Out of total resource mobilized by all
the Mutual fund, UTI still holds the maximum share. However, the trend has moved in
favour of the private sector, more sharply after 1998-99. Risk and return analysis indicates
that majority of the schemes of fund manager are investing its collection in risky assets for
getting maximum return. Beta value shows that only tax planning schemes are not
investing according to their systematic risk.

Lakshmi (2007) has undertaken a work entitled “Performance of the Indian Mutual Fund
Industry: A Study With Special Reference to Growth Schemes”. Her objectives of the
study were to appraise the performance of mutual fund industry in India under the
regulated environment and the relationship between the performance of market index with
that of the growth schemes. She find that the mutual fund industry had undergone a lot of
mergers, acquisitions and closures besides the entry of many new mutual funds. In the
study it is suggested that mutual funds should build confidence in the existing unit holders
as well as the public which was not covered so far. Mutual funds have to prove as an ideal
investment vehicle for retail investors by way of assuring better returns in relation to the
risk involved and by way of better customer services. Mutual funds as institutional
investors have to ensure professional market analysis, optimum diversification of the
portfolio, minimizing risk and optimizing of return. She concluded that the IMFI had
shown a good progress in terms of a number of private sector Indian mutual funds, a
number of schemes launched, funds mobilized and assets under management. There had
been a good number of schemes launched particularly in close-end type with income
objective.

Chetna. T. Parmar (2010) had conducted doctoral research on “An Empirical

Investigation on Performance of Mutual Fund Industry in India”. The objectives of the
study was to evaluate the growth of mutual funds, examine the return from selected MF
and documents investments on selected assets allocation trends of mutual funds. Here
researcher has selected a sample of 19 equity diversified mutual fund schemes, 15
balanced index and income scheme and 10 long term and short term period schemes of
various public and private sector mutual funds industry. The study also used the various
tools for analysis measurement of schemes such as averages, standard deviation, Beta, R-
square, Sharpe ratio, earning per share and price to book ratio. It is found that, in current
scenario mutual fund is better option for investment than any other option because it
provides higher return with professionally managed portfolio, good research team

41
continuously watch on performance of not just Indian stock exchange but international
capital market and to know industry growth and industrial life cycle, fundamental analysis
of particular company, so that investors preferred to invest in mutual fund when compared
to investment in direct equity. The study suggested that it is important to understand that
each mutual fund has different risks and rewards. In general, the high potential returns, the
higher the risk of loss. If you are in risk averse investor, you make an investment in Gilt
and money market/liquid funds, which shows low risk, compare to other schemes
operating in the market. The mutual fund companies should explore adequate risk to
generate a good return. Mutual fund research team should select tools to analyze risk liked
Value at Risk and Beta. The risk is compared with the same class of scheme with different
AMC.

Naushad Alam (2010) has carried out a doctoral research on “Indian Mutual Funds
Industry since Liberalization: A Case Study of HDFC Mutual Fund”. The objectives of the
study were to find out the impact of liberalization on the growth trend of the Indian mutual
funds industry and to evaluate the role of mutual funds in the mobilization of household
sector savings. The statistical tools used for the analysis of data were Mean, variance,
standard deviation and linear regression. For evaluating the performance of mutual funds,
the rate of return, Sharpe Ratio, Treynor Ratio, Jensen Measure, Sharpe Differential
Measure and Famas Composite of Investment Performance measures were used. It is
noticed that entry of private sector mutual funds adversely affected the prospects of banks
sponsored by other public sector mutual funds. As the share, net resource mobilization of
these institution supported mutual funds has gone down gradually since the inception of
private sector mutual funds. It is also suggested that HDFC mutual funds in order to
become number one asset management company should continue to provide a better return
and after sale service to its customer. HDFC mutual funds should organize regular
refresher course for agents and broker. This will improve their skill and more money will
be channelized for investment.

Raja Mannar’s (2013) work entitled “Performance of Mutual Funds in Private Sector
Banks”. Has discussed an overview of mutual fund industry in India such as global
scenario, growth, classification, advantages and disadvantages, shortcoming operations of
mutual funds. The objectives of the study were the performance of mutual fund industry in
India and to examine the basic characteristics of the fund houses, and the operational
parameters of the mutual fund schemes pertaining to the four private sector banks like

42
HDFC, ICICI Prudential, Axis and Kotak Mahindra. The study revealed that the market
return was compared with portfolio return for all the selected schemes. The return earned
from all the HDFC Mutual Funds was more than market return for the entire study period
with the exception of the midcap fund. However, the similar positive difference was less
in ICICI Prudential Mutual Fund. The reverse trend was observed in the case of midcap
fund inferior to market. The Axis fund underperformed the market during the study period.
It is suggested and concludes that all the mutual funds are operated in the public sector.
Hence, the private sector may be allowed to float mutual funds, intensifying competition
in this industry. Due to operations of many mutual funds, there is a need for appropriate
guidelines for self-regulation in respect of publicity /advertisement and inter-scheme
transactions within each mutual fund. Mutual fund Industry has emerged dominant
financial intermediary in Indian capital market. The main objective of investing in the
mutual fund is to diversify risk. Though the mutual fund invests in a diversified portfolio,
the fund managers take different levels of risk in order to achieve the scheme Meenakshi
Garg (2014) objectives.

Meenakshi Garg (2014) conducted a research on the topic of “A Study on Performance

Evaluations of Selected Mutual funds in India”. Here an attempt has been made to
examine the trends in terms of growth, size, volume etc. of mutual funds in India and
evaluate the financial performance of selected mutual funds in India. For evaluating the
financial performance of selected mutual funds, the period of the study was taken by the
researcher from April 2002 to March 2013. The sample was selected Tax Saving Schemes,
ETF, Growth (Equity Diversified) and Index/sectorial and Contra Fund. She finds that Tax
saving schemes out-performed the market in terms of absolute return in different years of
the study. However, these schemes and market returns did not provide an adequate return
to cover risk-free return and total risk of the scheme. The market performance funds have
a significant positive influence on the entire sample schemes performance. The present
NAV is positively and significantly correlated with the past NAV for all the time lags of
the selected schemes. The study also suggested that the mutual fund must ensure not only
good performance over the market but also consistency in their return. This is possible
only when latest techniques and modes of forecasting are followed by the asset
management companies while making their future projections.

2.6. RESEARCH GAP:

43
This research had reviewed more than 100 studies related in the field of mutual funds. But
most of the reviews are based on the performance of the mutual funds. No one of the
research is related to the investors perceptions towards mutual funds. After 2005, the
mutual fund companies are increased rapidly and also increased the number of investors.
All these research at the international level and national level shows that still there are
ambiguous areas in a mutual fund. There are no universally applicable techniques and
hence, the researcher aimed at making an earnest attempt in analyzing the Investors
Perceptions Towards Mutual Funds in Hyderabad Karnataka 48 Area: A Study with
reference to Selected Mutual Funds. So that, this research is very useful to the mutual fund
companies and investors.

2.7. CONCLUSION:

In this chapter, the various work carried on mutual funds over a period of 25 years has
been reviewed and presented. From this review, one is logically led to believe that a lot of
research has been pursued in the field of a mutual fund over the years. To sum up the
review of the literature, it may be seen that research has been pursued on various aspects
of investment, such as investment experience, investor styles, investment decision factors,
statistical tools used in investment strategy, regulation of the financial market and so on. A
lot of ground is yet to be covered in the direction of individual investors perception
towards the mutual fund. The various changes in technology, media, communication,
human behaviour, growth in the number of companies and the changing phase of
corporate issues have all contributed to changes in the individual investment attitude and it
has provided scope for research in this direction.

44
CHAPTER 3: MUTUAL FUNDS INDUSTRY IN
INDIA – AN OVERVIEW

45
 CHAPTER 3

MUTUAL FUNDS INDUSTRY IN INDIA – AN OVERVIEW

In this chapter an attempt has been made to study the theoretical aspects relating to the
mutual fund in PART – A and profile of the selected mutual fund in PART-B.

PART - A

3.1. INTRODUCTION:

Mutual funds are one of the most favoured investment routes for the small and medium
investors across the world. Ideally, mutual funds provide opportunities for small investors
to participate in the capital market without assuming a very high degree of risk. An
important principle of investment in the capital market is diversification. A small investor
is not able to have a diversified portfolio mainly due to the paucity of resources.

Basically, mutual funds are institutions that mobilize resources from the small investors.
The savings of small investors are, thereafter, utilized to purchase the securities of
companies and corporations. It is, thus, an institutional arrangement for resource
mobilization from small, marginal and household sector investors. Such accumulated
funds are utilized to acquire shares and securities of reputed companies. Mutual funds
become a major vehicle for mobilization of savings, particularly from small and household
sectors, for the investment in stock market. The Importance of mutual funds has been
increasing in the capital market by expanding the investors base. In the 1992-93 budget,
the finance Minister proposal to allow to set up mutual funds in joint and private sectors
has further gained the momentum and significance for the mutual funds1.

A mutual fund is an institutional device or an investment vehicle through which, the

investors pool their funds under the direction of an investment manager. These funds are
invested in a wide variety of portfolios of securities in such a way as to minimize risk,
while ensuring safety and steady return. A mutual fund is an institutional device to bridge
the gap between the supply and demand of capital in the market.

Mutual fund is the major types of investment companies. Investment companies are
financial intermediaries (middlemen) that pool the funds of investors who are seeking
some general investment objective and invest them in a number of frequently traded
different types of securities(e.g.,common stock, bonds, money market securities). These

46
pooled funds provide thousands of investors with proportional ownership of diversified
portfolios which are operated by the professional investment manager.

A mutual fund is an institutional arrangement wherein savings of millions of investors are

pooled together for investment in a diversified portfolio of securities to spread risk and
ensure steady return. These funds bring a wide variety of securities within the reach of the
most modest of investors. It is essentially a mechanism of pooling together savings of a
large number of investors for collective investment with an approved objective of
attractive yield and appreciation in value. The mutual funds offer different investment
objectives such as growth, income and tax planning.

India is the fifth largest economy in the world and it ranks above France, Italy, the United
Kingdom, and Russia. It has the third largest GDP in Asia. It is the second largest of the
emerging nations. India is also one of the few markets in the world which offer high
prospects of growth and earning potential in all sectors of business. The Indian capital
market has been increasing tremendously during last few years. With the reforms of the
economy, reforms of industrial policy, public sector, and the financial sector, the economy
has been opened up and many developments have been taking place in the Indian capital
market. In order to help the small investors, the mutual fund industry has come and
occupies an important place.

Mutual funds are financial intermediaries that pool the financial resources of investors and
invest those resources in portfolios of assets4. Mutual funds are basically institutional
arrangement for pooling of funds from small investors and invest them in the best
financial instruments. A mutual fund is a trust that pools the saving of a number of
investors who share 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 instruments and the
capital appreciations realized are shared by its unit holders in proportion to the number of
units owned by them. Mutual funds help small and medium size investors to participate
today‟s complex and modern financial scenario. The advantages for the investors are a
reduction in risk, expert professional management, diversified portfolios, the liquidity of
the investment, a variety of schemes and tax benefits.

47
3.2. ORIGIN OF MUTUAL FUND:

The history of mutual funds institutions is very old in other countries particularly in
Europe and America and they are operating very successfully for the last five decades in
these countries. In the very beginning, Egyptians and Phoenicians started selling shares in
vessels and caravans to share the risk involved in this transactions.

Mutual funds originated in Belgium, where, in 1882, a company was started to finance
investments in national industries associated with high risks under the name of „Societe
Generale de Belgiue”. In the 1860s, this movement spread to England. In 1868, the
„Foreign and Colonial Government Trust‟ was formed to spread risks for investors over a
large number of securities. The history of mutual funds started in the USA from the
beginning of the 20th century. In the beginning, investments companies were formed in
America. The first open-end investment company was formed in America in 1924. After
World War II, due to great depression, the growth of these investment companies curtail
towards the end of the 1920s. „Massachusetts Investors Trust‟(MIT) organized the first
modern mutual fund, State Street Investment Corporation is the second followed just four
months later in 1928, first „Investment counsel Trust‟, now „Scudder Income Fund‟ was
organized as a first no-load fund.

Mutual funds emerged during the 1920‟s in Canada when many close-ended investment
companies were organized. „The Canadian Investment Fund‟ was the first mutual fund set
up in Canada in 1932. Subsequently, hundreds of mutual funds emerged and expanded
their wings in many countries in Europe, the Far East and Latin America.

3.3. CONCEPT OF MUTUAL FUND:

A Mutual Fund is a trust registered with the Securities and Exchange Board of India
(SEBI), which pools up the money from individual/corporate investors and invests the
same on behalf of the investors/unit holders, in equity shares, government securities,
bonds, call money markets etc. and distribute the profits. 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. This pooled income is professionally
managed on behalf of the unit-holders, and each investor holds a proportion of the
portfolio i.e., entitled not only to profits when the securities are sold but also subject to any
losses in value as well.

48
A Mutual fund is just the connecting bridge or a financial intermediary that allows a group
of investors to pool their money together with a predetermined investment objective. The
Mutual fund will have a fund manager who is responsible for investing the gathered
money into specific securities (stocks or bonds). When you invest in mutual funds, you are
buying units or portions of the mutual fund and thus on investing becomes a shareholder
or unit holder of the fund.

A mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realized is shared by its unit holders in
proportion to the number of units offers an opportunity to invest in a diversified,
professionally managed a basket of securities at a relatively low cost.

A mutual fund is a form of collective investment that pools money from many investors
and invests their money in stock, bonds, short-term money market instruments, and/or
other securities. In a mutual fund, the fund manager trades the funds underlying securities,
realizing capital gains or losses, and collects the dividend or interest income. The
investment proceeds are then passed along to the individual investors. The value of a share
of the mutual fund, known as the net asset value per share (NAV), is calculated daily
based on the total value of the fund divided by the number of shares currently used and
outstanding.

Conceptually, a mutual fund is a single large professionally managed investment

organization that combines the money of many individual investors having similar
investment objectives. It invests this money in a wide variety of securities and individual
investors share its income and expenses, its profits and losses, its capital appreciation and
growth in proportion to their shareholdings. In other words, a mutual fund is a type of
Investment institutions, which mobilizes savings of individuals and institutions and
channelizes these savings in corporate securities to provide investors a steady stream of
returns and capital appreciation.

49
 The chart given below indicates the concept of mutual fund

Chart-3.1 Concept of Mutual Fund

Source: www.appuonline.com

3.4. DEFINITION OF MUTUAL FUND:

It is worthwhile that in India in terms of Securities and Exchange Board of India (Mutual
Funds) Regulations, 1996 a mutual fund means “a fund established in the form of trust to
raise monies through the sale of units to the public or a section of the public under one or
more schemes for investing in securities, including money market instruments”.

According to the Mutual Fund Fact Book(Published by the Investment Company Institute
of the U.S.) “A Mutual Fund is a service organization that receives money from
shareholders, invests it, earns returns on it, attempts to make it grow and agrees to pay the
shareholder cash on demand for the current value of his investment”.

A non-depository or nonbanking financial intermediary which acts as an important vehicle

for bringing wealth holder and deficit units together, indirectly, is known as „Mutual
Fund‟. Mutual fund is corporations that accept money from savers and then use this

50
money to buy stocks, long-term bonds, and short-term debt instruments issued by business
or Government units. These corporations pool funds and thus reduce risk by
diversification.

Encyclopedia American defines the concept of a mutual fund as, “Mutual funds are open-
end investment companies that invest shareholders money in a portfolio of securities. They
are an open end in that they normally offer new share to the public on a continuing that
they are always able to sell their shares back to the fund at net asset value that is the
present market value of the portfolio behind each outstanding share”.

3.5. CHARACTERISTICS OF MUTUAL FUND:

Some noteworthy distinctiveness of mutual funds which are considered to be universal in

nature irrespective of the type of fund is summarized as under.

3.5.1. Mobilization of funds: Mutual fund helps to mobilize the savings of small investor
by launching schemes which are specially designed to meet their investment preferences.
In this way, the scattered savings of small investors are accumulated into a common fund
of considerable amount and then invested in a number of financial instruments available in
the capital market. Hence, the retail investors get an opportunity to participate in the
prosperity of a large number of companies.

3.5.2. Diversification of risks: Mutual funds with the collected funds from small investors
can ensure diversification. The investment collected from various investors of a mutual
fund scheme are invested in the scrip of a number of companies so as to make certain the
diversification of the portfolio, which results in the diminution of the magnitude of risk.

3.5.3. Allocation of returns with fellow investors: Returns earned on the plentiful of
scrip of various companies, that constitute the portfolio of a mutual fund scheme are
distributed among the investors after the deduction of administration expenditure. The
degree of returns earned depends on the value of the underlying portfolio and as well on
the proceeds earned on the various scrips that make up the portfolio of an individual
investor.

3.5.4. Expert services: Mutual fund employs experts and professional managers to take
the investment decision and to efficiently manage the portfolio of the individual investors.
Thus, the professional insight and the dynamic approach towards the investment of the
resources provide these managers an edge over the individual investor.

51
Chart-3.2

Operational Flow Chart Mutual Fund

3.6. HISTORY OF MUTUAL FUND INDUSTRY IN INDIA:

Mutual funds came into existence in India with the setting up of UTI under UTI Act, 1963.
The mutual fund industry in India started in 1963 with the formulation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank.

The history of mutual funds in India can broadly divided into five distinct phases.

Chart-3.3 History of Mutual Fund

52
The origin of mutual fund industry in India is with the introduction of the concept of a
mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from
the year 1987 when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both
quality-wise as well as quantity-wise. Before, the monopoly of the market had seen an
ending phase; the Asset Under Management (AUM) was 67 billion. The private sector
entry to the fund family raised the AUM to 470 billion in March 1993 and as on March
2013 total mutual funds are around 43 in numbers with approximately in Rs. 8,16,657
crores as Assets Under Management.

3.6.1 First Phase – 1964 to 1987 (Establishment and Growth):

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. US-64 helped to fulfill the twin objectives of mobilizing retail savings and investing
those savings in the capital market and passing on the benefits so accrued to the small
investors.

UTI launched more innovative schemes in the 1970s and 80s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between1981-84, Children's Gift
Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (India‟s

53
first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured
returns) during the 1990s. At the end of 1988, UTI's assets under management grew ten
times to Rs.6,700 crores.

Following table provides the Net assets of Indian Mutual Fund Industry (UTI) from1964-
1987.

Table-3.1 Net Assets of Indian Mutual Fund Industry (UTI) from 1970-71 to1986-87

Table 3.1 shows the net assets of the Indian mutual fund industry (UTI) from 1964-65 to
1986-87. The net investable fund of UTI mutual fund industry is increased from Rs.24.67
crores in the year 1964-65 to Rs. 4563.68 crores in 1986-87. Net accretion of funds is
increased from Rs. 1.27 crores in the year 1964-65 to Rs.1345.34 crores in 1986-87. The
same information has been graphically represented.

Graph-3.1 Net Assets of the Indian Mutual Fund Industry (UTI) from 1964-1987

54
3.6.2 Second Phase –1987 to 1993 (Entry of Public Sector Funds):

The 1980s witnessed the beginning of the process of liberalization of the industrial sector
by the Government of India, in pursuit of faster industrial and economic development.
This not only brought in changes in the environment for Indian industries, corporate sector
and the capital market but also led to the emergence of demand for newer financial
services such as issue management, corporate counselling etc. Once it became apparent
that its development objectives could not be met solely by using financial institutions and
commercial banks, the Government removed the monopoly in the mutual fund industry in
1987 by permitting large number of companies to raise funds through equity market and
encouraging equity ownership through tax incentives. The following table provides the
data pertaining to resource mobilization by the UTI and other public sector mutual funds
during the period from 1987- 1993 and the below table presents the data pictorially.

Table-3.2 Cumulative Resources Mobilized by UTI and Other Public Sector Mutual
Funds from 1987-88 to 1992-93

55
The above table 3.2 clearly shows the cumulative resources mobilized by UTI and other
public sector mutual funds has been increased from Rs.4563.88 crores in the year 1986-87
to Rs.47733.50 crores during the year 1992-93. The same information has been depicted
with the help of graph.

Graph-3.2 Gross Resources Mobilized by UTI and Other Public Sector Mutual
Funds

56
Thus, after two decades of UTI monopoly, the mutual fund industry began to include some
more players, though all of them from the public sector. State Bank of India Mutual Fund
was the first followed by the Canara Bank Mutual Fund (December 1987), Punjab
National Bank Mutual Fund (August 1989), Indian Bank Mutual Fund (November 1989),
Bank of India (June 1990), Bank of Baroda Mutual Fund (October 1992), Life Insurance
Corporation of India in 1989 and General Insurance Company in 1990. The end of 1993
resource mobilized by mutual funds industries was Rs.47733.50 crores. However, UTI
remained to be the leader with about 80% market share.

Table-3.3 Phase-II of Mutual Fund Industry

From the above Table 3.3 it is evident that during the year 1992-93 amount mobilized by
UTI mutual fund and public sector mutual fund is Rs. 13,021 crores and asset under

57
management is Rs.47,004 crores. The mobilisation of gross domestic savings is 6.1
percent.

3.6.3 Third Phase –1993 to 1996 (Emergence of Private Sector Funds):

In the history of mutual funds, a new era was started with the entry of private sectors in the
mutual funds industry during 1993- 1996. During this period, private domestic and foreign
players were allowed in the mutual fund industry. Finally, in the year 1992-93, the
Government allowed private sector player to setup the mutual fund.

As a result, a number of private sectors mutual funds came up. With the entry of private
sector funds in 1993, a new era started in the Indian mutual fund industry, giving the
Indian investors a wider choice of fund family, some of them are Kothari Pioneer Mutual
Fund, ICICI Mutual Fund, Birla Mutual Fund, Morgan Stanly Mutual Fund etc.

Also, 1993 was the year in which the first mutual fund Regulations came into being, under
which all mutual funds, except UTI, were to be registered and governed. The erstwhile
Kothari Pioneer which is now merged with Franklin Templeton was the first private sector
mutual fund registered in July 1993. The rising number of mutual and increasing
competition in the industry offers investors a wide choice, as a result, they began to give
investors improved services.

The private sector funds provided an added benefit to the investor as these were generally
setup as a partnership or the joint venture with foreign mutual funds. The latter provided
the technology and experience in managing the funds.

Thus, it was the phase of private sector funds entering in mutual fund market thereby
affecting investors, providing sufficient choice of fund, numerous managers as well as a
big flow of funds.

58
 Table-3.4 Net Resources Mobilized by Private Sector Mutual Fund

Table 3.4 clearly shows the net resources mobilized by private sector mutual funds which
is decreased from Rs. 1586.74 billion in the year 2007-08 to Rs. 825.23 billion during
2012-13.

3.6.4 Fourth Phase –1996 to 2004 (Growth and SEBI Regulations):

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI
after the year 1996. The mobilisation of funds and the number of players operating in the
industry reached new heights as investors started showing more interest in mutual funds.
Investors 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-organised into two parts: 1) The specified undertaking, 2) The UTI mutual
fund.

Graph-3.3 Growth in Asset Under Management

59
Presently Unit Trust of India operates under the name of UTI mutual fund and its past
schemes (like US-64, Assured Return Schemes) are being gradually wound up. However,
UTI mutual fund is still the largest player in the industry. In 1999, there was a significant
growth in mobilisation of funds from investors and assets under management which is
supported by the following data:

Table-3.5 Net Resources Mobilized by Mutual Funds from 1973-74 to 2013-14

Table 3.5 clearly shows the net resources mobilized by UTI, bank sponsored, FII
sponsored and private sector mutual funds industries which is increased from Rs.0.31
billion during the year 1973-74 to Rs.1586.77 billion during 2007-08 and there is fall
down Rs. 546.07 billion in the year 2013-14. The same information has been drawn with
the help of graph.

60
 Graph -3.4 Net Resources Mobilized by Mutual Funds from 1973-74 to 2013-14

3.6.5 Fifth Phase - 2004 Onwards (Growth and Consolidation):

After the year 2003, during this phase, the flow of funds into the mutual funds industry
considerably increased. This was due to tax benefits and improvement in the quality of
investor service which has resulted in a positive growth in the mutual fund industry in
India. However, in the year 2003, due to the revocation of the Unit Trust of India Act,
1963, UTI was bifurcated into two separate entities. This phase is known for the division
of UTI into separate entities. The phase had harsh experience for UTI. It was divided into
two separate entities. One is the specified undertaking of the Unit Trust of India; running
under the supervision and the rules framed by Government of India and does not come
under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund
Ltd, sponsored by State Bank of India (SBI), Punjab National Bank (PNB), Bank of
Baroda (BOB) and Life Insurance Corporation of India (LIC). It is registered with SEBI
and function under the Mutual Fund Regulations. With the division of the former UTI
which had in March 2000 more than Rs.76,000 crores of AUM (Asset Under
Management) and with the setting up of a UTI Mutual Fund, conforming to the SEBI
Mutual Fund Regulations and with recent mergers taking place among different private
sector funds, the mutual fund industry has entered its current phase of consolidation and
growth.

Table-3.6 Net Assets of Mutual Fund Industry in India

61
The above Table 3.6 reveals the net assets of mutual funds industry in India from 2004-05
to 2012-13. The net asset of UTI and other mutual funds has been increased from
Rs.139616 crores in the year 2004-05 to Rs.664792 crores during year 2012-13. The same
information has been graphically represented.

Graph No-3.5 Net Assets of Mutual Fund Industry in India

3.7. ORGANISATION OF A MUTUAL FUND:

The organization of a mutual fund is how the mutual funds are controlled by various
entities. A number of entities are involved in the organization of a mutual fund. This helps
in the proper management of the mutual fund portfolio.

The organization of a mutual fund contains entities such as:

1. Sponsors of Mutual Funds

2. Investment Management Company or Asset Management Company

62
3. The Trustees

4. Board of directors

5. Mutual Fund Shareholders

6. Transfer Agents

7. SEBI

8. Association of Mutual Funds in India (AMFI)

Mutual funds operations in India involve the following entities: the unit holder, sponsor,
trustees, the asset management companies, the custodian and the registrars and transfer
agent. There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund.

Chart No: 3.4 ORGANISATIONAL SETUP

Source: www.finance.indiamart.com

The organization consists of the following entities:

3.7.1Unit holder:

Unit holder means a participant in the scheme of a mutual fund.

3.7.2Sponsor:

63
The sponsor of mutual funds is a promoter of a company. The sponsor may be a bank, a
financial institution, or financial service company. It may be Indian or foreign. SEBI
Regulation, 1996 contains a certain provision regarding the sponsor of the mutual funds.
As per the definitions of SEBI Regulation Act 1996, “A sponsor is any person while
acting alone or combination with another body corporate who establishes a mutual fund”.
The sponsor should have a sound track record and general reputation of fairness and
integrity in all his business and transaction. The regulations specify that the sponsor
should contribute at least 40% to the net worth of the AMC.

3.7.3Trustees:

A trust is a national entity that cannot contract in its own name, so the trust enters into
contracts in the name of trustees. Appointed by the sponsor, the trustee can be either
individuals or a corporate body. As per 1996 regulations, a mutual fund shall be
constituted in the form of a trust and the instrument of trust shall be in the form of a deed,
duly registered under the provisions of the Indian registration Act, 1908 (16 of 1908),
executed by the sponsor in favour of trustees named in such instruments. The mutual fund
is managed by the board of trustees, or Trustee Company, and the sponsor executes the
trust deeds in favour of the trustee. Money is raised by the mutual fund by the sale of units
under various schemes as per SEBI guidelines.

3.7.4 Assets Management Company:

It is also referred to as investment manager, is a separate company appointed by the

trustees to run the mutual funds. According to Regulation 20(d) of SEBI (mutual funds)
Regulations, 1993, an “Asset Management Company” means a company formed and
registered under Company Act, 1956 and approved by the board under Regulation 20 of
the Company Act. The asset management company shall be authorized for business by
SEBI on the basis of following criteria:

 AMCs, which already exist, should have a soundtrack record, fairness in dealing coupled
with a good reputation.

 The Director of AMCs should have ten years of professional experience in relevant field
and a man of high integrity.

 The board of the asset management company should have at least 50 percent,
independent director.

64
 The AMC should have minimum net worth of Rs. 5 crores.

3.7.5 Custodian:

The custodian handles the investment back office operations of a mutual fund. As per
SEBI Regulation 1996, the mutual fund shall appoint a custodian for carrying out
custodial services for schemes of the fund and intimate the same to SEBI within fifteen
days of the appointment of the custodian. The responsibilities of custodians are as follows:

 Receipt and delivery of securities

 Holding of securities.

 Collecting income

 Holding and processing cost

3.7.6 Registrar and Transfer agent:

The transfer agents are appointed by the mutual fund companies for the purpose of
maintaining records of the shareholders. The maintenance of the shareholder's accounts,
calculation of dividends to be the disbursed, sending information to the shareholders of the
account statements, notices and income tax information. Some of the transfer agents sends
information to the shareholders transactions and account balances. They also maintain
customer service departments in order the cater to the queries of the shareholders The
registrars and transfer agents handle investors related services such as issuing units,
sending fact sheet and annual reports and so on. Some funds handle such function in-
house, while other outsource it to SEBI registrars and transfer agents.

3.7.7SEBI:

The primary aim of the Securities Exchange Board of India is to protect the interest of the
mutual fund investors. The SEBI has formulated several policies for better functioning and
controls the mutual funds. In the year 1993, SEBI issued guidelines pertaining to the
mutual funds. All mutual funds, the private sector and public sector are regulated by the
guidelines of the SEBI. The Asset Management Company managing the funds has to be
approved by the SEBI.

3.7.8Association of Mutual Funds in India (AMFI):

65
It was set up on 22nd August 1995. It was established with the aim to function as a non-
profit organization. This association is the chief governing body of all Asset Management
Companies (AMC) and is registered with Securities and Exchange Board of India (SEBI).
With the increase in mutual fund players in India, a need for mutual fund association was
generated to function as a non-profit organisation. Hence Association of Mutual Funds in
India (AMFI) was incorporated on 22nd August 1995. AMFI is as the apex of all Asset
Management Companies which has been registered with SEBI. All the AMCs that have
launched mutual fund scheme are its members till date. It functions under the supervision
and guidelines of its board of directors. AMFI has brought the Indian mutual fund industry
to a professional and healthy market with ethical lines enhancing and maintaining
standards. It follows the principles of both protecting and promoting the interest of mutual
funds as well as their unit holders.

The structure of a mutual fund in India presented in the following chart 3.5.

3.8. THE SPONSORS OF ASSOCIATION OF MUTUAL FUNDS IN INDIA:

In India currently there are 44 mutual funds industries are participated. The following are
major sponsors of Association of Mutual Funds in India (AMFI). They are classified into
bank sponsored, institutions, private sector India, predominantly India joint ventures, and

66
predominantly foreign joint ventures are listed in below and managed by Association of
Mutual Funds in India(AMFI).

Major Mutual Funds Players is managed by Association of Mutual Funds in India

(AMFI):
A. Bank Sponsored
1. Joint Ventures - Predominantly Indian
1. BOI AXA Investment Managers Private Limited
2. Canara Robeco Asset Management Company Limited
3. SBI Funds Management Private Limited
4. Union KBC Asset Management Company Private Limited

2. Joint Ventures - Predominantly Foreign

5. Baroda Pioneer Asset Management Company Limited.

3. Others

6. IDBI Asset Management Ltd.

7. UTI Asset Management Company Ltd

B. Institutions
1. Joint Ventures - Predominantly Indian
8. LIC NOMURA Mutual Fund Asset Management Company Limited

2. Indian
9. IIFCL Asset Management Co. Ltd.

C. Private Sector
1. Indian
10. Deutsche Asset Management(India) Pvt. Ltd.
11. Escorts Asset Management Limited
12. IL&FS Infra Asset Management Limited
13. India Infoline Asset Management Co. Ltd.
14. Indiabulls Asset Management Company Ltd.
15. JM Financial Asset Management Private Limited

67
16. Mahindra Asset Management Company Limited(KMAMCL)
17. L&T Investment Management Limited
18. Motilal Oswal Asset Management Company Limited
19. Peerless Funds Management Co. Ltd.
20. PPFAS Asset Management Pvt. Ltd.
21. Quantum Asset Management Company Private Limited
22. Reliance Capital Asset Management Ltd.
23. Sahara Asset Management Company Private Limited
24. Shriram Asset Management Co. Ltd.
25. SREI Mutual Fund Asset Management Pvt. Ltd.
26. Sundaram Asset Management Company Limited
27. Tata Asset Management Limited 28. Taurus Asset Management Company Limited

2. Foreign
29. BNP Paribas Asset Management India Private Limited
30. Franklin Templeton Asset Management (India) Private Limited
31. Goldman Sachs Asset Management (India) Private Limited
32. Mirae Asset Global Investments (India) Pvt. Ltd.
33. Pramerica Asset Managers Private Limited

3. Joint Ventures - Predominantly Indian

34. Axis Asset Management Company Ltd.
35. Birla Sun Life Asset Management Company Limited
36. DSP BlackRock Investment Managers Private Limited
37. HDFC Asset Management Company Limited (Corporate Identification Number -
U65991MH1999PLC123027)
38. ICICI Prudential Asset Mgmt.Company Limited
39. IDFC Asset Management Company Limited
40. Religare Invesco Asset Management Company Private Limited
4. Joint Ventures - Predominantly Foreign
41. HSBC Asset Management (India) Private Ltd.
42. ING Investment Management (India) Pvt. Ltd.
43. JPMorgan Asset Management India Pvt. Ltd.
44. Principal Pnb Asset Management Co. Pvt. Ltd.
68
 The legal structure of Indian mutual funds as laid down by SEBI is shown in below
figure.
Chart-3.6
Structure of Mutual Fund Industry in India:

3.9. BENEFITS OF MUTUAL FUND:

The following are the benefits of mutual funds summarized as below.

3.9.1. Investment Avenue:

One of the basic characteristics of a mutual fund is that it provides an ideal avenue for
investment for persons of small means, and enables them to earn a reasonable return with
the advantages of relatively better liquidity. It offers investors a proportionate claim on the
portfolio of assets that fluctuate in value in comparison to the value of the assets that
comprise the portfolio.

3.9.2. Professional Management:

It provide the services of experienced and skilled professionals, backed by a dedicated

investment research team that analyses the performance and prospects of companies and
selects suitable investments to achieve the objectives of the scheme.

3.9.3. Mobilizing Small Savings:

It mobilizes funds by selling their own shares, known as units. To any investor, a unit in
mutual funds means ownership of a proportional share of securities in the portfolio of a
mutual fund. This gives the benefit of convenience and the satisfaction of owning shares in

69
many industries. Thus, mutual funds are primarily investment intermediaries to acquire
individual investments and pass on the returns to small fund investors.

3.9.4. Diversified Investment:

Diversified investment of funds in various industry segments spread across the country.
This is beneficial to small investors who cannot afford to have the shares of highly
established companies due to high market price. Hence, mutual funds allow millions of
investors to have an investment in a variety of securities of many different companies.

3.9.5. Better Liquidity:

It offers to its investors the benefit of better liquidity of investment. In the case of open-
ended mutual fund units, it is possible for the investor to divest holdings any time during
the year at the Net Asset Value (NAV). In the case of close-ended mutual funds, it is
obligator that units are listed and traded, thus offering a secondary market for the units.
Further, a high level of liquidity is possible for the fund holders because of more liquid
securities in the mutual fund portfolio. These securities could be converted into cash at any
time. Moreover, mutual fund schemes provide the advantage of an active secondary
market by allowing the units to be listed and traded on the stock exchange.

3.9.6. Reduced Risks:

There is only a minimum risk attached to the principal amount and return for the
investments made in mutual fund schemes. This is usually made possible by expert
supervision, diversification and liquidity of units. It provides small investors the access to
a reduced investment risk resulting from diversification, economies of scale in transaction
cost and professional finance management.

3.9.7. Investment Protection:

Mutual funds in India are largely regulated by guidelines and legislative provisions put in
place by regulatory agencies such as the SEBI. The Securities Exchange Commission
(SEC) in the USA allows for the provision of safety of investments. In order to protect the
investor interest, it is incumbent on the part of mutual funds to broadly follows the
provisions laid down in this regard.

70
3.9.8. Switching Facility:

It provides investors with flexible investment opportunities, whereby it is possible to

switch from one scheme to another. This flexibility enables investors to shift from income
scheme to growth scheme, or vice-versa or from a close-ended scheme to an open-ended
scheme, all at will.

3.9.9. Tax Benefits:

An attractive benefit of a mutual fund is that the various schemes offered by them provide
tax shelter to the investor. This benefit is available under the provisions of the Income Tax
Act.

3.9.10. Low Transaction Costs:

The cost of purchase and sale of mutual fund units is relatively lower. This is due to the
large volume of money being handled by mutual funds in the capital market. The fees
payable, as brokerage fee and trading commissions are lower. This obviously enhances the
quantum of distributable income available to investors.

3.9.11. Economic Development:

Mutual funds makes a contribution to the development of a country’s economy. The

efficient functioning of mutual funds contributes to an efficient financial system. This, in
turn, paves the way for efficient allocation of the financial resources of the country, thus
contributing to the economic development. This is made possible through the mobilization
of more savings and chennelising them to the most productive sectors of the economy.

3.10.LIMITATIONS OF MUTUAL FUND:

The following are some of the limitations of mutual funds.

3.10.1. Tax issues:

Although, the returns on investment are quite high, a mutual fund cannot guarantee lower
tax bills. The tax amounts are usually high, especially in the case of short-term gains.

3.10.2. Investor issues:

A mutual fund requires a deep and long-term analysis of the amount of investment and its
potential investment areas. If the companies fund manager changes regularly, it may
adversely affect the returns on investment.
71
3.10.3. Fluctuating Returns:

Mutual funds are like many other investments where there is always the possibility that the
value of the mutual fund will depreciate, unlike fixed income products, such as bonds and
treasury bills, mutual funds experience price fluctuations along with the stocks that make
up the fund.

3.10.4. Over Diversification:

Although diversification is one of the keys to successful investing, many mutual fund
investors tend to over diversify. The idea of diversification is to reduce the risks associated
with holding a single security; over diversification occurs when investors acquire many
funds that are highly related and as a result, reduce benefits of diversification.

3.10.5. High Costs and Risks:

Mutual funds provide investors with professional management, but it comes at a cost.
Funds will typically have a range of different fees that reduce the overall payout. In
mutual funds, the fees are classified into two categories shareholder fees and annual
operating fees.

The shareholder fees, in the forms of loads and redemption fees, are paid directly by
shareholders purchasing or selling the funds. The annual fund operating fees are charged
as an annual percentage – usually ranging from 1-3%. These fees are assessed to mutual
fund investors regardless of the performance of the fund. Mutual funds are subjected to
market risks or assets risks. If the investment is not sufficiently diversified, it may involve
huge losses.

3.10.6. No Guarantees:

No investment is risk-free. If the entire stock market declines in value, the value of mutual
fund shares will go down as well, no matter how balanced the portfolio. Investors
encounter fewer risks when they invest in mutual funds than when they buy and sell stocks
on their own. However, anyone who invests through a mutual fund runs the risk of losing
money.

3.10.7. Fees and Commissions:

A funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or “loads” to compensate brokers, financial consultants, or

72
financial planners. Even if you don‟t use a broker or other financial advisor, you will pay
a sales commission if you buy shares in a load fund.

3.10.8. Taxes:

During a typical year most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If you find makes a profit on its sales, you will
pay taxes on the income. You received, even if you reinvest the money you made.

3.10.9. Management Risk:

When you invest in a mutual fund, you depend on the funds manager to make the right
decisions regarding the funds portfolio. If the manager does not perform as well as you
had hoped, you might not make as much money on your investment as you expected. Of
course, if you invest in index funds, you forego management risk because these funds do
not employ managers.

3.10.10. Hidden Costs:

There is soft money or hidden brokerage fees that the mutual funds use for research.
Usually, this money may be used for giving incentives to the fund managers like vacations
for them and their families. Investors must examine the mutual funds turnover rate or
ratio. Turnover rate or ratio is the percentage of mutual fund holdings that have been sold
over in the past year. The higher the turnover rate, the higher the likelihood of the large
hidden brokerage costs.

3.10.11. Cost of Diversification:

The diversification advantage provided by the mutual funds become a disadvantage as

they curb the possibility for large gains in individual shares. For example, if an investor
owned Infosys share for a decade, she could have a large capital gain from her investment.
But a mutual fund that owned Infosys share might report small gain since the fund usually
holds a small percentage of an individual share.

Table-3.7 Banks versus Mutual Funds in a Nutshell

73
3.11. CLASSIFICATION OF MUTUAL FUND:

Investors have the option of choosing from a wide variety of schemes in a mutual fund,
depending upon their requirements. Mutual funds adopt different strategies to achieve
these objectives and accordingly offer different schemes of investments. The following
section presents a detailed classification of mutual funds. In India, various mutual funds
are offering a variety of schemes to investors. These schemes can be broadly classified
into four categories.

1) Operational classification.

2) Return based classification.

3) Investment based classification.

4) Geographic classification.

74
3.11.1 Operational Classification:

Operational classification of mutual funds classified into three categories they are as
follows.

3.11.1.a Open-ended Scheme:

When a fund is accepted and liquidated on a continuous basis by a mutual fund manager, it
is called „open-ended scheme‟. The fund manager buys and sells units constantly on
demand by the investors. Under this scheme, the capitalization of the fund will constantly
change, since it is always open for the investors to all sell or buy their share units (shares
in the USA, units in India). The scheme provides an excellent liquidity facility to
investors, although the units of such scheme are not listed. No intermediaries are required.
There is a certainty in repurchase in price, which takes place in accordance with the
declared NAV.

3.11.1.b Close-ended Scheme:

When units of a scheme are liquidated (repurchased) only after the expiry of a specified
period, it is known as a close-ended scheme. Accordingly, such funds have fixed
capitalization and remain as a corpus with the mutual fund manager. Units of the close-
ended scheme are to be quoted and therefore traded, on the floors of a stock exchange in
the secondary market. The price is determined on the basis of demand and supply.
Therefore, there will be two prices, one that is market-determined and the other, which is
NAV-based. The market price may be either above or below NAV. Managing a
closeended scheme is comparatively easy as it gives fund managers ample opportunity to
evolve and adopt long-term investment strategies depending on the life of the scheme.
Need for liquidity arises after a comparatively longer period, i.e., normally at the time of
redemption.

The main point of distinction between the open-ended and close-ended scheme are as
follows:

75
 Table-3.8 Distinction between Open-ended and Close-ended Scheme

3.11.1.c Interval Scheme:

It is a kind of close-ended scheme with a peculiar feature that it remains open during a
particular part of the year for the benefit of investors, either to off load their holdings or to
undertake purchase of units at the NAV, Under SEBI (MF) Regulations, every mutual
fund is free to launch any or both types of schemes, including interval scheme. In the
USA, UK and Canada, close-ended funds are popularly known as investment
companies/trust, whereas open-ended funds are known as mutual funds.

3.11.2. Return based Classification:

Under this classification fall those mutual fund schemes that are designed to meet the
diverse needs of investors and to earn a good return. Returns expected are in the form of
regular dividends of capital appreciation or a combination of these two.

3.11.2.1. Income fund scheme:

The scheme that is tailored to suit the needs of investors who are particular about regular
returns is known as „income fund scheme‟. The scheme offers the maximum current
income, whereby the income earned by units if distributed periodically. Such funds are
offered in two forms. The first scheme earns a target constant income at relatively low
risk, while the second scheme offers the maximum possible income. This obviously

76
implies that the higher expected return comes with a higher potential risk of the
investment.

3.11.2.2. Growth fund scheme:

It is a mutual fund scheme that offers the advantage of capital appreciation of the
underlying investment. For such funds, investment is made in growth-oriented securities
that are capable of appreciating in the long run. Growth funds are also known as nest eggs
or long haul investments. In proportion to such capital appreciation, the amount of risks to
be assumed would be far greater.

3.11.2.3. Conservative fund scheme:

A scheme that aims at providing a reasonable rate of return, protecting the value of the
investment and achieving capital appreciation, may be designated as „conservative fund
scheme‟. These are also known as middle-of-the-road funds since such funds offer a blend
of all these features. Further, such fund divided their portfolio into common stocks and
bonds in such a way as to achieve the desired objectives.

3.11.3 Investment based Classification:

Investment based classifications of mutual funds are classified into various categories they
are illustrated with below chart-3.7.

Chart-3.7 Broad Mutual Fund Type

77
1. Equity Funds: A kind of mutual fund strength is derived from equity-based
investments is called „equity fund scheme‟. Equity funds are considered to be the more
risky funds as compared to other fund types, but they also provide higher returns than
other funds. It is advisable that an investor looking to invest in an equity fund should
invest for long term i.e. for 3 years or more. There are different types of equity funds each
falling into different risk bracket which are stated below.

1. a) Aggressive Growth Funds: In Aggressive Growth Funds, fund managers aspire for
maximum capital appreciation and invest in less researched shares of speculative nature.
Because of these speculative investments Aggressive Growth Funds (AGF) become more
volatile and thus, are prone to higher risk than other equity funds.

1.b) Growth Funds: Growth Funds also invest for capital appreciation (with a time
horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense
that they invest in companies that are expected to outperform the market in the future.
Without entirely adopting speculative strategies, Growth Funds invest in those companies
that are expected to post above average earnings in the future.

1.c) Equity Income or Dividend Yield Funds: The objective of Equity Income or
Dividend Yield Equity Funds is to generate high recurring income and steady capital
appreciation for investors by investing in those companies which issue high dividends
(such as Power or Utility companies whose share prices fluctuate comparatively lesser

78
than other companies' share prices). Equity Income or Dividend Yield Equity Funds are
generally exposed to the lowest risk level as compared to other equity funds.

1.d) Equity Linked Savings Schemes (ELSS): Except for a small portion of the
investment in the liquid money market, diversified equity funds invest mainly in equities
without any concentration on a particular sector(s). These funds are well diversified and
reduce sector-specific or company-specific risk. However, like all other funds, diversified
equity funds to be exposed to equity market risk. One prominent type of diversified equity
fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum
of 90% of investments by ELSS should be in equities at all times. ELSS investors are
eligible to claim a deduction from taxable income (up to Rs 1 lakh) at the time of filing the
income tax return. ELSS usually has a lock-in period and in the case of any redemption by
the investor before the expiry of the lock-in period makes him liable to pay income tax on
such income(s) for which he may have received any tax exemption(s) in the past.

1. e) Equity Index Funds: Equity Index Funds have the objective to match the
performance of a specific stock market index. The portfolio of these funds comprises of
the same companies that form the index and is constituted in the same proportion as the
index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less
risky than equity index funds that follow narrow sectoral indices (like BSE BANKEX or
CNX Bank Index etc). Narrow indices are less diversified and therefore, are riskier.

1. f) Value Funds: Value Funds invest in those companies that have sound fundamentals
and whose share prices are currently under-valued. The portfolio of these funds comprises
of shares that are trading at a low Price to Earning Ratio (Market Price per Share/Earning
Per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may
select companies from diversified sectors and are exposed to lower risk level as compared
to growth funds or Specialty funds. Value stocks are generally from cyclical industries
(such as cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it
is advisable to invest in value funds with a long-term time horizon as a risk in the long
term, to a large extent, is reduced.

1. g) Specialty Funds: Specialty Funds have stated criteria for investments and their
portfolio comprises of only those companies that meet their criteria. Criteria for some
Specialty funds could be to invest/not to invest in particular regions/companies. Specialty

79
funds are concentrated and thus, are comparatively riskier than diversified funds.
Following are the major types of Specialty funds;

1.g.i. Sector Funds: Sector funds are those mutual funds or ETFs that invest in a single
sector like Information Technology, Telecommunications, Pharmaceuticals, etc. In this
type of investment, there is very little or no diversification. The purpose of sector funds is
to take advantage of a growing sector. So it is important to understand the various sectors
and the trends in their growth. Exiting at the right time is crucial to avoid loss. If you are
holding a wrong sector at the wrong time it will adversely affect your portfolio. 1.g.ii
Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one
or more foreign companies. Foreign securities funds achieve international diversification
and hence they are less risky than sector funds. However, foreign securities funds are
exposed to foreign exchange rate risk and country risk.

1.g.iii Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower
market capitalization than large capitalization companies are called Mid-Cap or Small-Cap
Funds. The market capitalization of Mid-Cap companies is less than that of big, blue-chip
companies (less than 500 crores but more than 2500 crores) and Small-Cap companies
have market capitalization of less than 500 crores. Market Capitalization of a company can
be calculated by multiplying the market price of the company's share by the total number
of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies
are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices
of these companies and consequently, investment gets risky.

1.g.iv Option Income Funds: While not yet available in India, options income funds
write options on a large fraction of their portfolio. Proper use of options can help to reduce
volatility, which is otherwise considered as a risky instrument. These funds invest in big,
high dividend yielding companies, and then sell options against their stock positions,
which generate stable income for investors.

2. Money Market / Liquid Funds: Money market / liquid funds invest in short-term
(maturing within one year) interest bearing debt instruments. These securities are highly
liquid and provide safety of investment, thus making money market / liquid funds the
safest investment option when compared with other mutual fund types. However, even
money market / liquid funds are exposed to the interest rate risk. The typical investment

80
options for liquid funds include Treasury Bills (issued by governments), Commercial
papers (issued by companies) and Certificates of Deposit (issued by banks).

3. Hybrid Funds: As the name suggests, hybrid funds are those funds whose portfolio
includes a blend of equities, debts and money market securities. Hybrid funds have an
equal proportion of debt and equity in their portfolio. There are following types of hybrid
funds in India:

3. a) Balanced Funds: The portfolio of balanced funds include assets like debt securities,
convertible securities, and equity and preference shares held in a relatively equal
proportion. The objectives of balanced funds are to reward investors with a regular
income, moderate capital appreciation and at the same time minimizing the risk of capital
erosion. Balanced funds are appropriate for conservative investors having a long-term
investment horizon.

3. b) Growth and Income Funds: Funds that combine features of growth funds and
income funds are known as Growth-andIncome Funds. These funds invest in companies
having the potential for capital appreciation and those known for issuing high dividends.
The level of risks involved in these funds is lower than growth funds and higher than
income funds.

3.c) Asset Allocation Funds: Mutual funds may invest in financial assets like equity,
debt, money market or non-financial (physical) assets like real estate, commodities etc..
Asset allocation funds adopt a variable asset allocation strategy that 103 allows fund
managers to switch over from one asset class to another at any time depending upon their
outlook for specific markets. In other words, fund managers may switch over to equity if
they expect equity market to provide good returns and switch over to debt if they expect
debt market to provide better returns. It should be noted that switching over from one asset
class to another is a decision taken by the fund manager on the basis of his own judgment
and understanding of specific markets, and therefore, the success of these funds depends
on upon the skill of a fund manager in anticipating market trends.

4. Debt/Income Funds: Funds that invest in medium to long-term debt instruments issued
by private companies, banks, financial institutions, governments and other entities
belonging to various sectors (like infrastructure companies etc.) are known as
Debt/Income Funds. Debt funds are low-risk profile funds that seek to generate fixed
current income (and not capital appreciation) to investors. In order to ensure regular

81
income to investors, debt (or income) funds distribute a large fraction of their surplus to
investors. Although debt securities are generally less risky than equities, they are subject
to credit risk (risk of default) by the issuer at the time of interest or principal payment. To
minimize the risk of default, debt funds usually invest in securities from issuers who are
rated by credit rating agencies and are considered to be of "Investment Grade". Debt funds
that target high returns are riskier. Based on different investment objectives, there can be
following types of debt funds:

4. a) Diversified Debt Funds: Debt funds that invest in all securities issued by entities
belonging to all sectors of the market are known as diversified debt funds. The best feature
of diversified debt funds is that investments are properly diversified into all sectors which
result in risk reduction. Any loss incurred, on 104 account of default by a debt issuer, is
shared by all investors which further reduces the risk for an individual investor.

4.b) Focused-Debt Funds: Debt funds that invest in all securities issued by entities
belonging to all sectors of the market are known as diversified debt funds. The best feature
of diversified debt funds is that investments are properly diversified into all sectors which
results in risk reduction. Any loss incurred, on account of default by a debt issuer, is
shared by all investors which further reduces risk for an individual investor.

4.c) High Yield Debt Funds: As we now understand that risk of default is present in all
debt funds, and therefore, debt funds generally try to minimize the risk of default by
investing in securities issued by only those borrowers who are considered to be of
"investment grade". But, High Yield Debt Funds adopt a different strategy and prefer
securities issued by those issuers who are considered to be of "below investment grade".
The motive behind adopting this sort of risky strategy is to earn higher interest returns
from these issuers. These funds are more volatile and bear higher default risk, although
they may earn at times higher returns for investors.

4.d) Assured Return Funds: Although it is not necessary that a fund will meet its
objectives or provide assured returns to investors, but there can be funds that come with a
lock-in period and offer assurance of annual returns to investors during the lock-in period.
Any shortfall in returns is suffered by the sponsors or the Asset Management Companies
(AMCs). These funds are generally debt funds and provide investors with a lowrisk
investment opportunity. However, security of investments depends on upon the net worth
of the guarantor (whose name is specified in advance in the offer document). To safeguard

82
the interests of investors, SEBI permits only those funds to offer assured return schemes
whose sponsors have adequate net-worth to guarantee returns in the future. In the past,
UTI had 105 offered assured return schemes (i.e. Monthly Income Plans of UTI) that
assured specified returns to investors in the future. UTI was not able to fulfill its promises
and faced large shortfalls in returns. Eventually, the government had to intervene and took
over UTI's payment obligations on itself. Currently, no AMC in India offers assured return
schemes to investors, though possible.

4.e) Fixed Term Plan Series: Fixed Term Plan Series usually are closed-end schemes
having short-term maturity period (of less than one year) that offer a series of plans and
issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans are
not listed on the exchanges. Fixed term plan series usually invest in debt/income schemes
and target short-term investors. The objective of fixed term plan schemes is to gratify
investors by generating some expected returns in a short period.

5. Gilt Funds: Have also known as „Government Securities‟ in India Gilt Funds invest in
government papers (named dated securities) having medium to long term maturity period.
Issued by the Government of India, these investments have little credit risk (risk of
default) and provide safety of principal to the investors. However, like all debt funds, gilt
funds too are exposed to interest rate risk. Interest rates and prices of debt securities are
inversely related and any change in the interest rates results in a change in the NAV of
debt/gilt funds in an opposite direction. 6. Other: Other mutual funds are also classified
into four categories they are commodity funds, real estate funds, exchange traded funds
and fund of funds.

6.a) Commodity Funds: Are those funds that focus on investing in different commodities
(like metals, food grains, crude oil etc.) or commodity companies or commodity futures
contracts are 106 termed as Commodity Funds. A commodity fund that invests in a single
commodity or a group of commodities is a specialized commodity fund and a commodity
fund that invests in all available commodities is a diversified commodity fund and bears
less risk than a specialized commodity fund. "Precious Metals Fund" and Gold Funds (that
invest in gold, gold futures or shares of gold mines) are common examples of commodity
funds.

6.b) Real Estate Funds: Funds that invest directly in real estate or lend to real estate
developers or invest in shares/securitized assets of housing finance companies, are known

83
as Specialized Real Estate Funds. The objective of these funds may be to generate regular
income for investors or capital appreciation.

6.c) Exchange Traded Funds (ETF): Exchange Traded Funds provide investors with
combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds
follow stock market indices and are traded on stock exchanges like a single stock at index-
linked prices. The biggest advantage offered by these funds is that they offer
diversification, the flexibility of holding a single share (tradable at index-linked prices) at
the same time. Recently introduced in India, these funds are quite popular abroad.

6.d) Fund of Funds: Mutual funds that do not invest in financial or physical assets, but do
invest in other mutual fund schemes offered by different AMCs, are known as Fund of
Funds. Fund of Funds maintains a portfolio comprising of units of other mutual fund
schemes, just like conventional mutual funds maintain a portfolio comprising of
equity/debt/money market instruments or non-financial assets. Fund of Funds provides
investors with an added advantage of diversifying into different mutual fund schemes with
even a small amount of investment, which further helps in the diversification of risks.
However, the expenses of Fund of Funds are quite high on account of compounding
expenses of investments into different mutual fund schemes.

In addition to the schemes mentioned above, following are the other schemes that are
designed and operated by mutual fund managers:

a) Load funds: Where mutual fund managers charge a fee over and above the NAV from
the purchaser.

b) No load funds: Where no load-fee is charged because very little effort is made to
promote the sale of the fund unit, except through direct advertising.

c) Money Market Mutual Funds (MMMF)

d) Offshore mutual funds: Also known as regional or country funds, where the funds are
mobilized from abroad for deployment in the Indian market.

e) Other funds: property fund, art funds, commodity funds, energy funds etc.

3.11.4. GEOGRHAPIC CLASSIFICATION:

84
3.11.4.1 Domestic Mutual Funds: Domestic mutual fund schemes mobilise the savings
of the country citizens. However, NRIs and foreign investors can invest in these schemes.
All the schemes in vogue in the country are domestic mutual fund schemes.

3.11.4.2 Off-shore Mutual Funds: these funds enable NRIs and international investors to
participate in the Indian capital market. Further, these funds are governed by the rules and
procedures laid down for the purpose of approving and monitoring their performance by
the Department of Economic Affairs, Ministry of Finance and the directions of RBI.

Table-3.9 Total Number of Schemes Under Mutual Funds

Table 3.9 reveals the total number of schemes under mutual funds. Mutual funds schemes
increased from 450 in the year 2004-05 to 1638 during the year 2013-14. It indicates that

85
more number of schemes offered by the mutual funds industries are income/debt oriented
schemes and growth/equity oriented schemes. The same information has been drawn with
the help of graph.

Graph-3.6 Total Number of Schemes under Mutual Funds

3.12. MUTUAL FUND COMPANIES IN INDIA:

The concept of mutual funds in India dates back to the year 1963. The era between 1963
and 1987 marked the existence of only one mutual fund company in India with Rs. 67
billion Assets Under Management (AUM), by the end of its monopoly era, the Unit Trust
of India (UTI). By the end of 80s decade, a few other mutual fund companies in India took
their position in mutual fund market. The new entrants into mutual fund companies in
India were SBI Mutual Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund,
Indian Bank mutual Fund and Bank of India Mutual Fund.

The succeeding decade showed a new horizon in the Indian mutual fund industry. By the
end of 1993, the total AUM of the industry was Rs. 470.04 billion. The private sector fund
started penetrating the fund families. In the same year the first Mutual Fund Regulations
came into existence with the re-registering of all mutual funds except UTI. The regulations
were further given a revised shape in 1996. Kothari pioneer was the first private sector
mutual fund company in India which has now merged with Franklin Templeton. Just after
ten years with private sector player‟s penetration, the total assets rose to Rs. 1218.05
billion. Today there are around 44 mutual funds companies participated in India and over
1638 schemes with total assets under management around Rs.49,50,335crores and also
total resource mobilized by mutual funds industry is Rs. 5,65,01,279 crores.

Mutual fund companies in India are classified into two categories.

86
3.12.1. PUBLIC SECTOR MUTUAL FUNDS:

a) Unit Trust of India Mutual Fund (UTI Mutual Fund):

The Unit Trust of India (UTI) is India‟s first mutual fund organization. It is the single
largest mutual fund in India which came into existence with the enactment of UTI Act in
February 1964. The initial capital of the Trust was Rs.5 Crores which was subscriber fully
by the Reserve Bank of India. The life insurance corporation. The State Bank of India and
the Scheduled Banks and other financial institutions. The general management of the
affairs and business of the trust is vested in a board of trustees. To create a diversified
financial conglomerate and to meet investors varying needs under a common umbrella,
UTI has set up a number associated company in the field of banking, securities trading,
investors, servicing, investment advice and training.

UTI Asset Management Company Private Limited, established on January 14, 2003,
manages the UTI Mutual Fund with the support of UTI Trustee Company Private Limited.
UTI Asset Management Company presently manages a corpus of over Rs.20,000 Crores.
The patrons of UTI mutual Fund are Bank of Baroda( BOB), Punjab National Bank
(PNB), State Bank of India(SBI), and Life Insurance Corporation of India(LIC). The
schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds,
Index Funds, Equity Funds and Balance Funds.

b) Bank of Baroda Mutual Fund (BOB Mutual Fund):

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992, under
the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the
AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank
AG is the custodian.

c) State Bank of India Mutual Fund (SBI Mutual Fund):

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch the
offshore fund, the India Mangum Fund with a corpus of Rs. 225 Crores approximately.
Today it is the largest Bank sponsored Mutual Fund in India. They have already launched
35 schemes out of which 15 have already yielded handsome returns to investors. State
Bank of India Mutual Fund has more than Rs.5,500 Crores as AUM. Now it has an
investors base of over 8 lakhs spread over 18 schemes.

87
d) Canbank Mutual Fund:

Canbank Mutual Fund was setup on December 19, 1987, with Canara Bank acting as the
sponsor. Canbank Investment Management Service Ltd. Incorporated on March 2, 1993 is
the AMC. The Corporate Office of the AMC is in Mumbai.

e) INSURANCE SECTOR MUTUAL FUNDS:

i) LIC Mutual Fund: Life Insurance Corporation of India set up LIC Mutual Fund on
19th June 1989. It contributed Rs. 2 Crore towards the corpus of the Fund. LIC Mutual
Fund was contributed as a Trust in accordance with the provisions of the Indian Trust Act,
1882. The Company started its business on 29th April 1994. The Trustees of LIC Mutual
Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd. as the
investment managers for a mutual fund.

ii) GIC Mutual Fund: GIC Mutual Fund, sponsored by General Insurance Corporation of
India (GIC), a Government of India undertaking and the four Public Sector General
Insurance Companies, viz. National Insurance Co. Ltd (NIC), The New Indi Assurance
Co. Ltd (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd
(UII) and is constituted as a Trust in accordance with the provisions of the Indian Trusts
Act, 1882.

3.12.2. PRIVATE SECTOR MUTUAL FUNDS:

a) Birla Sun Life Mutual Fund:

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
Financial. Sun Life Financial is a global organisation evolved in 1871 and is being
represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from
India. Birla Sun Life Mutual Fund follows a conservative long-term approach to
investment. Recently it crossed an AUM of Rs. 10,000 Crores.

b) HDFC Mutual Fund:

HDFC Mutual Fund was set up June 30, 2000, with two sponsors namely Housing
Development Finance Corporation Limited and Standard Life Investments Limited.

c) ING Vysya Mutual Fund:

88
ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee
Company. It is a joint venture of Vysya and ING. The AMC, ING Investment
Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

d) Prudential ICICI Mutual Fund:

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the
largest life insurance companies in the US of America. Prudential ICICI Mutual Fund was
set up on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The
Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI
Asset Management Company Limited incorporated on 22nd of June 1993.

e) TATA Mutual Fund:

TATA Mutual Fund (TMF) is s Trust under the Indian Trust Act, 1882. The sponsors for
Tata Mutual Fund are Tata Sons Ltd. and Tata Investment Corporation Ltd. The
Investment manager is Tata Asset Management Limited and Tata Trustee Company Pvt.
Limited. Tata Asset Management Limited is one of the fastest in the country with more
than Rs. 7,703 Crore ( as on April 30, 2005) of AUM.

f) Kotak Mahindra Mutual Fund:

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is

presently having more the 10 lakh investors in its various schemes. KMAMC started its
operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to
investors with varying risk-return profiles. It was the first company to launch dedicated
gilt scheme investing only in government securities.

g) Reliance Mutual Fund:

Reliance Mutual Fund (RMF) was established as a trust under Indian Trust Act, 1882. The
sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is
the Trustee. It was registered on June 30, 1995, as Reliance Capital Mutual Fund which
was changed on March 11, 2004. Reliance Mutual Fund was formed for the launching of
various schemes under which, units are issued to the public with a view to contributing to
the capital market and to provide investors the opportunities to make investments in
diversified securities.

h) Sahara Mutual Fund:

89
Sahara Mutual Fund was set up on July 18, 1996, with Sahara India Financial Corporation
Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on
August 31, 1995, works as the AMC of Sahara Mutual Fund. The paid-up capital of the
AMC stands at Rs. 25.8 Crore.

3.13 GROWTH OF MUTUAL FUND INDUSTRY:

Mutual funds play a vital role in resource mobilization and its efficient allocation to the
productive sources of the economic system. In this process of development, mutual funds
have emerged as strong financial intermediaries and are playing an important role in
bringing stability to the financial system and efficiency to the resource allocation process.
Mutual fund industry today is one of the most preferred investment avenues in India.
Mutual funds increase the mobilization of investable funds of the society by pooling the
interest of a great number of small savers towards the financial system of the country.
Resource mobilization means the movement of money or money equals from the none or
less productive section to the productive section. Mutual fund industry in India is a fast
growing industry is regulated by the Securities and Exchange Board of India (SEBI).

Growth of mutual fund industry is based on the growth of Assets Under Management
(AUM), resource mobilisation by mutual funds, SEBI registered market
intermediaries/institutions, assets under custody of custodians, total number of schemes
under mutual funds, trends in transactions on stock exchanges, unit holding pattern,
investment by mutual funds, trends in resource mobilisation by mutual funds etc.

3.13.1 Growth of Asset Under Management:

The Asset Under Management (AUM) meant that the market value of the total
investments of a fund as on a particular date. The Asset Management Company collected
money from the investors and was one of the visible faces of the mutual fund. As this
money had to be invested and managed, the Assets Management Company had an
investment team. The collected fund had to be managed so as to get the expected returns
from the money market. The fund was generally known as the Asset Under Management
(AUM).

The mutual fund industry has been grown rapidly in recent years. A corpus of Rs. 8,25,240
crores of Assets Under Management (AUM) are being managed by nearly 1638 various
mutual funds schemes. The growth of asset under management is shown in the table 3.10

90
 Table-3.10 Growth of Assets Under Management

From the above table 3.10 it is evident that growth of assets under management. The asset
under management has been increased from Rs. 1,49,600 crores in the year 2004-05 to Rs.
8,25,240 crores during the year 2013-14. The same information has been depicted with the
help of graph.

Graph-3.7 Growth of Assets Under Management

3.13.2 Scheme-Wise Asset Under Management of Mutual Fund Industry:

Indian mutual fund industry is playing an important role in the stock market. Many of the
mutual fund industry like the public, private offered a variety of schemes such as
income/debt fund, growth/equity fund, balanced fund, exchanged traded fund and fund of

91
funds overseas. Income/debt fund are very high level of assets under management because
of these funds are provide high recurring income and steady capital appreciation for
investors by investing in those companies which are issue high dividends. The table 3.11
inferred that scheme wise asset under management of mutual fund industry.

Table-3.11 Scheme-Wise Asset Under Management of Mutual Fund Industry

Source: Compiled and calculated from the data published in various annual reports of
SEBI

Table 3.11 shows that the highest scheme-wise asset under management scheme are
income/debt fund which has been increased from Rs.1,06,250 crores in the year 2004-05
to Rs. 6,00,945 crores during the year 2013-14. Lowest scheme are fund of funds is also
increased from Rs. 2,681 crores in the year 2008-09 to Rs.3,191 crores during 2013-14.
The same information has been graphically represented.

Graph-3.8 Scheme-Wise Asset Under Management of Mutual Fund Industry

92
3.13.3 Assets under the Custody of Custodians:

A custodians role is safekeeping of physical securities and also keeping a tab on the
corporate actions like rights, bonus, and dividends declared by the companies in which the
fund has invested. The Custodian is appointed by the Board of Trustees. The custodian
also participates in a clearing and settlement system through approved depository
companies on behalf of mutual funds, in the case of dematerialized securities. In India
today, securities (and units of mutual funds) are no longer held in physical form but
mostly in dematerialized form with the Depositories. The holdings are held in the
Depository through Depository Participants (DPs). Only the physical securities are held by
the Custodian. The deliveries and receipt of units of a mutual fund are done by the
custodian or a depository participant at the instruction of the AMC and under the overall
direction and responsibility of the Trustees. Regulations provide that the Sponsor and the
Custodian must be separate entities.

93
 Table-3.12 Assets under the Custody of Custodians

The above Table 3.12 clearly shows the number of custodians are increased from 639 in
the year 2004-05 to 1815 during the year 2013-14. Assets under custodians amounts is
also increased from Rs. 1,26,286 crores in the year 2004-05 to Rs.7,65,820 crores during
2013-14. The same information has been presented with the help of graph.

Graph -3.9 Assets under the Custody of Custodians

3.13.4 Resource Mobilisation by Mutual Funds:

Mutual funds play an important role in the mobilisation of household savings for
deployment in the capital market. Under mobilisation of funds includes total funds

94
mobilised by the public sector, the private sector and UTI mutual fund companies.
Redemption includes repurchase as well as redemption. Net inflow is the difference
between mobilisation of funds and redemption.

Table-3.13 Resource Mobilisation by Mutual Fund Industry

Table 3.13 shows the resource mobilisation by mutual fund industry. Mobilisation of
funds increased from Rs.8,39,708 crores in the year 2004-05 to Rs.97,68,100 crores during
2013-14. Redemption is also increased from Rs.8,37,508 crores in the year 2004-05 to
Rs.97,14,318 crores during 2013-14. Net inflow increased from Rs.2,200 crores in the
year 2004-05 to Rs.53,782 crores during 2013- 14. The same information has been
graphically represented.

Graph -3.10 Resource Mobilisation by Mutual Fund Industry

95
3.13.5 Scheme-Wise Resource Mobilisation by Mutual Fund Industry:

From the above graph it is evident that out of Rs.5,65,01,279 crores (100 percent) resource
mobilisation by mutual fund industry the highest scheme wise resource mobilized fund is
income/debt scheme with Rs.5,57,46,280 crores (98.66 percent) and lowest is the fund of
funds Rs.7,827 crores(0.01percent). The same data has been presented with the help of
graph.

3.13.6. Sector-Wise Total Resources Mobilized by Mutual Fund Industry:

Sector wise as well as total resource mobilised by mutual fund industry in India categories
into three groups according to nature of mutual funds industry. They are namely.

96
a) UTI Mutual Fund:

b) Public Sector Mutual Fund: These includes ICICI mutual fund, IDBI mutual fund,
SBI mutual fund, Canara bank mutual fund, Indian bank mutual fund, Bank of India AXA
mutual fund, Bank of Baroda mutual fund, Punjab National bank mutual fund, GIC mutual
fund, LIC mutual fund.

c) Private Sector Mutual Fund: HDFC mutual fund, Reliance mutual fund, Birla Sun
Life mutual fund, Tata mutual fund, Franklin Templeton mutual fund, DSP Black Rock
mutual fund, Deutsche mutual fund, Sundaram mutual fund, Religare mutual fund, Axis
mutual fund, Fidelity mutual fund, JM Financial mutual fund, PRINCIPAL mutual fund,
BNP Paribas mutual fund, HSBC mutual fund, Goldman Sachs mutual fund, Peerless
mutual fund, Taurus mutual fund, L & T mutual fund, Paramedical mutual fund, Morgan
Stanley mutual fund, Indiabulls mutual fund, Union KBC mutual fund etc. The below
table 3.15 displays sector wise total resources mobilized by mutual fund industry.

Graph-3.12 Sector-Wise Total Resources Mobilized by Mutual Fund Industry

Table fig 3.12 shows the sector-wise total resource mobilized by mutual fund industry.
Out of Rs.5,65,01,279 crores (100 percent) resource mobilised, the highest resource
mobilised by mutual fund industry is private sector mutual fund i.e. Rs. 4,56,07,034 crores
(80.72 percent) and the lowest is the UTI mutual fund industry Rs. 46,46,556 crores (8.22
percent). The same information has been graphically represented.

3.13.7 Market Intermediaries/ Institutions:

The term financial intermediary includes all kinds of organization which intermediate and
facilitates financial transactions of both individuals and corporate customers. Thus, it
refers to all kinds of financial institutions and investing institutions which facilitate

97
financial transactions in the financial markets. The below table 3.16 focuses on the SEBI
registered market intermediaries/ intuitions.

Table-3.16 SEBI Registered Market Intermediaries/Institutions

The above table clearly shows the SEBI registered market intermediaries/institutions
which are increased from 39 in the year 2004-05 to 51 during 2010-11 and again there is
fall down to 50 in the year 2013-14. The same information has been depicted with the help
of graph.

Graph-3.13 SEBI Registered Market Intermediaries/Institutions

98
 Graph-3.14 Mutual Funds Registered Companies with SEBI

The above figure shows the mutual funds companies registered with SEBI. Both public
sector and private sector mutual funds companies have been increased from 39 in the year
2004-05 to 50 during the year 2013-14. Majority of the mutual fund companies registered
with SEBI are private sector mutual funds. The same information has been graphically
represented.

99
 Table-3.18 Trends in Resource Mobilisation by Mutual Funds Industries

Table 3.18 reveals the trends in resource mobilisation by mutual funds industries. Gross
mobilisation has been increased from Rs.8,39,708 crores in the year 2004-05 to
Rs.97,68,101 crores during the year 2013-14. Redemption includes purchase as well sale
of total units amount in the capital market. Redemption is also increased from Rs.8,37,508
crores in the year 2004-05 to Rs.97,14,318 crores during the year 2013-14. Net
inflow/outflow is the difference between gross mobilisation and redemption. Net

100
inflow/outflow has been also increased from Rs. 2,200 crores in the year 2004-05 to
Rs.53,783 crores during the year 2013-14.

Graph-3.15 Trends in Resource Mobilisation by Mutual Fund

Table-3.19 Trends in Transactions on Stock Exchanges by Mutual Funds

Table 3.19 shows the trends in transaction on stock exchanges by mutual funds. Equity
and Debt mutual funds total net purchase/sale increased from Rs.17,435 crores in the year

101
2004-05 to Rs.5,22,023 crores during the year 2013-14. The same information has been
graphically represented.

Graph-3.16 Trends in Transactions on Stock Exchanges by Mutual Funds

3.14. Investment Made by Mutual Funds Companies:

Investment plays a vital role in the mobilisation of savings through the small and medium
term of investors by the mutual fund companies. Mutual funds companies are investing in
various schemes such as income, growth, liquid, debt, equity, tax savings, gilt, ELSS
balanced, ETF Fund of Fund etc. The below table focuses on the investment made by
mutual fund companies particularly equity and debt scheme are presented below.

102
 Table-3.20 Investment Made by Mutual Funds

The above Table 3.20 shows the investment made by mutual funds. Net investment made
by equity and debt mutual funds increased from Rs.17,435 crores in the year 2004-05 to
Rs.5,22,023 crores during the year 2013-14. The same information has been graphically
represented.

Graph-3.17 Investment Made by Mutual Funds

103
PART-B

In this section, a profile of the selected mutual funds for the present study is covered.

3.15. PROFILE OF UTI MUTUAL FUND:

3.15.1 Introduction:

The Unit Trust of India (UTI) is India‟s first mutual fund organization. It is the single
largest mutual fund in India which came into existence with the enactment of UTI Act in
February 1964. The initial capital of the Trust was Rs.5 Crores which was subscribed fully
by the Reserve Bank of India. The life insurance corporation. The State Bank of India and
the Scheduled Banks and other financial institutions. The general management of the
affairs and business of the trust is vested in a board of trustees. To create a diversified
financial conglomerate and to meet investors varying needs under a common umbrella,
UTI has set up number associate companies in the field of banking, securities trading,
investors servicing, investment advice and training.

The economic turmoil and the wars in the early sixties depressed the financial markets,
making it difficult for both existing and new entrepreneurs to raise fresh capital. The then
Finance Minister, T.T. Krishnamachari, setup the idea of a Unit Trust which would
mobilize savings of the community and invest these savings in the capital market. His
ideas took the form of the Unit Trust of India, which commenced operations from July
1964 „with a view to encouraging savings and investment and participation in the income,
profits and gains accruing to the corporation from the acquisition, holding, management
and disposal of securities‟. The regulations passed by the Ministry of Finance (MOF) and
the parliament from time to time regulated the functioning of UTI. Different provisions of
the UTI Act laid down the structure of management, scope of business, powers and
functions of the trust as well as accounting, disclosures, and regulatory requirements for
the Trust.

UTI was set up as a trust without ownership capital and with an independent Board of
Trustees. The Board of Trustees manages the affairs and business of UTI. The Board
performs its functions, keeping in view the interest of the Unit holders under various
Schemes.

In order to recover from the adverse affects by war in 1962, resource crunch had to be
garnished to a better economic condition, growth in industrial sector, new economic order

104
for the country, a novel step forward would be establishment of an institution which would
mobilize savings from the common man and then channelise them into the corporate
sector, the then Prime Minister Pandit Jawaharlal Nehru felt the need of such on the
suggestion of Shri. T. T. Krishnamachari, the then Finance Minister of India. The Reserve
Bank of India was entrusted the task of setting up such an institution and Unit Trust of
India bill was introduced in Parliament. It was introduced by the then Finance Minister. In
the context of National Economic development, the concept of setting up UTI as new
institution combining the characteristics of Mutual Funds (MFs) of USA and Unit Trust of
the U.K. to provide resource support for corporate growth through channelising household
savings was the brain child of Shri.T.T. Krishnamachari. A separate act was enacted in
parliament entitled Unit Trust of India Act, 1963.

3.15.2 UTI’s Associates:

UTI has setup associate companies in the fields of banking, securities trading, investor
servicing, investment advice and training, towards creating a diversified financial
conglomerate and meeting investors varying needs under a common umbrella.

 UTI Bank Limited: UTI Bank was the first private sector bank to be setup in 1994. The
Bank has a network of 121 fully computerized branches spread across the country. The
bank offers a wide range of retail, corporate and forex services.

 UTI Securities Exchange Limited: UTI securities exchange Limited was the first
institutionally sponsored corporate stockbroking firm incorporated on June 28, 1994, with
a paidup capital of Rs.300 million. It is wholly owned by UTI and promoted to provide
secondary market trading facilities, investment banking, and other related services. It has
acquired membership of NSE, BSE, OTCEI and Ahmadabad Stock Exchange (ASE).

 UTI Investor Services Limited: UTI Investor services limited was the first institutionally
sponsored Registrar and Transfer agency set up in 1993. It helps UTI in rendering prompt
and efficient services to the investor.

 UTI Institute of Capital Markets: UTI Institute of Capital Market was set up in 1989 as a
non-profit educational society to promote professional development of capital market
participants. It provides specialized professional development programmes for the varied
constituents of the capital market and is engaged in research and consultancy services. It
also serves as a forum to discuss ideas and issues relevant to the capital market.

105
 UTI Investment Advisory Services Limited: UTI Investment Advisory Services Limited,
the first Indian investment advisor registered with SEC, US, was setup in 1988 to provide
investment research and back office support to other offshore funds of UTI.

 UTI International Limited: UTI International Limited is a 100 percent subsidiary of UTI,
registered in the Island of Guernsey, channel Islands. It was set up with the objective of
helping in the UTI offshore funds in marketing their products and managing funds. UTI
International Limited has an office in London, which is responsible for developing new
products, new business opportunities, maintaining relations with foreign investors and
improving communication between UTI and its clients and distributors abroad.

 UTI has a branch office at Dubai, which caters to the needs of NRI investors based in six
Gulf countries, namely, UAE, Oman, Kuwait, Saudi Arabia, Qatar and Bahrain. This
branch office acts as a liaison office between NRI investors in the Gulf and UTI offices in
India.

 UTI has extended its support to the development of Unit Trusts in Sri Lanka and Egypt.
It has participated in the equity capital of the Unit Trust Management Company of Sri
Lanka.

3.15.3 Promotion of Institutions:

The Unit Trust of India has helped in promoting / co-promoting many institutions for the
healthy development of the financial sector. These institutions are; Infrastructure Leasing
and Financial Services (ILFS) , Credit Rating and Information Services Limited (CRISIL),
Stock Holding Corporation of India Limited (SHCIL), Technology Development
Corporation of India Limited (TDCIL), Over the Counter Exchange of India Limited
(OTCEIL), National Securities Depository Limited (NSDL), North-Eastern Development
Finance Corporation Ltd. (NEDFCL).

3.15.4 Board of Trustees:

Upon formation of Unit Trust of India, the general supervision and management of the
UTI was entrusted to the Board Trustees. The Board was expected to act on business
principles, having regard to the interest of the unit holders. Chairman was appointed by the
RBI. Four trustees to be nominated by RBI, one each to is nominated by LIC and SBI, two
trustees to be elected by contributing institutions other than RBI, IDBI, LIC and SBI and

106
one executive trustee appointed by RBI (IDBI now) since they are the contributors of the
initial capital to the UTI.

3.15.5 Functions of UTI Mutual Fund: UTI was empowered to sell and purchase units,
introduce unit schemes, invest, acquire, hold and dispose of securities, keep money and
deposit, formulate insurance-linked savings, borrow money and issue bond etc.

3.15.6 Management of UTI Mutual Fund:

The management of officers and business of UTI is managed by the Board of Trustees
with a full-time Chairman appointed by Government of India. There are nine directors. It
constituted an Advisory Board of Mutual Fund and advisory Board of India fund
exclusively. Besides, a separate Board of Director of India Growth Fund Inc. Unit Trust of
India (UTI) was established in 1963 by the parliament with the enactment of UTI Act,
1963. The objective of it was to provide an opportunity for the middle and lower income
groups to acquire without much difficulty, property in the firm of shares. This institution is
intended to cater mainly to needs of individual investors whose means are small.

3.15.7 The Constitution of UTI Mutual Fund:

Unit Trust of India is a Statutory Corporation constituted under the UTI Act, 1963 with a
view to encouraging savings and investment and participation in the income profits and
gains accruing to the trust from the acquisition, holding management and disposal of
securities. It commenced its operations with effect from 1st July 1964.

3.15.8 Objectives of UTI Mutual Fund:

The objectives of the Unit Trust of India are as follows;

a) To mobilize savings, particularly from the low and middle-income groups.

b) To channelise these savings into productive investment and to provide an assured

income to savers.

c) It provides the savers with expert investment service, portfolio management and assured
income.

d) The risk-averting savers would not normally invest in stock and capital market. They
are afraid to do so due to lack of expertise and easy access.

107
e) The UTI provides expert management of their funds, steady income and liquidity for
their investment through repurchase facility.

f) The UTI mobilizes the savings through the sale of its units and operates a number of
schemes with varied characteristics to suit the requirements of savers and investors.

3.15.9 Vision of UTI Mutual Fund:

To be the most preferred Mutual Fund.

3.15.10 Mission of UTI Mutual Fund:

*The most trusted brand, admired by all stakeholders.

*The largest and most efficient money manager with a global presence.

*The best in class customer service provider.

*The most preferred employer.

*The most innovative and best wealth creator.

*A socially responsible organization known for best corporate governance.

3.15.11 Genesis:

January 14, 2003, is when UTI Mutual Fund started to pave its path following the vision
of UTI Asset Management Co. Ltd. (UTIAMC), which was appointed by UTI Trustee Co.
Ltd. for managing the schemes of UTI Mutual Fund and the schemes transferred/migrated
from the erstwhile Unit Trust of India.

3.15.12 Asset Under Management of UTI Mutual Fund:

To know latest corpus of UTIAMC UTI Mutual Fund has a track record of managing a
variety of schemes catering to the needs of every class of citizens. It has a nationwide
network consisting 149 UTI Financial Centres (UFCs) and UTI International offices in
London, Dubai and Singapore. UTIAMC has a well-qualified, professional fund
management team, which has been fully empowered to manage funds with greater
efficiency and accountability in the sole interest of the unit holders. The fund managers are
ably supported by a strong in-house securities research department. To ensure investors'
interests, a risk management department is also in operation.

3.15.13 Reliability:

108
UTIMF has consistently reset and upgraded transparency standards. All the branches,
UFCs and registrar offices are connected on a robust IT network to ensure cost-effective
quick and efficient service. All these have evolved UTIMF to position as a dynamic,
responsive, restructured, efficient and transparent entity, fully compliant with SEBI
regulations.

3.15.14 Investment Philosophy of UTI Mutual Fund:

UTI Mutual Fund‟s investment philosophy is to deliver consistent and stable returns in the
medium to long term with a fairly lower volatility of fund returns compared to the broad
market. It believes in having a balanced and well-diversified portfolio for all the funds and
a rigorous in-house research based approach to all its investments. It is committed to
adopting and maintain good fund management practices and a process based investment
management. UTI Mutual Fund follows an investment approach of giving as equal
importance to asset allocation and sectoral allocation, as is given to security selection
while managing any fund. It combines topdown and bottom-up approaches to enable the
portfolios/funds to adapt to different market conditions so as to prevent missing an
investment opportunity. In terms of its funds performance, UTI Mutual fund aims to
remain consistently in the top quartile vis-à-vis the funds in the peer group.

3.15.15 Trustee:

UTI Trustee Company Private Limited, a company incorporated under The Companies
Act, 1956 will be the Trustee of transferred/migrated schemes, which is the first and sole
trustee of the Mutual Fund under the Trust Deed dated December 9, 2002, executed
between the Sponsors and the Trustee Company (the Trustee).

3.15.16 Sponsor:

UTI Mutual Fund was carved out of the erstwhile Unit Trust of India (UTI) as a SEBI
registered mutual fund from 1st February 2003. The Unit Trust of India (Transfer of
undertaking & Repeal) Act 2002 was passed by the Parliament, paving the way for the
bifurcation of UTI into – Specified Undertaking of Unit Trust of India (SUUTI); and UTI
Mutual Fund (UTIMF). UTI Mutual Fund is promoted by the four of the largest Public
Sector Financial Institutions as sponsors, viz., State Bank of India, Life Insurance
Corporation of India, Bank of Baroda and Punjab National Bank with each of them
presently holding an 18.5% stake in the paid up capital of UTI AMC. T Rowe Price Group

109
Inc (TRP Group) through its wholly owned subsidiary T Rowe Price International Ltd.
(TRP) has acquired a 26% stake in UTI Asset Management Company Limited (UTI
AMC). The sponsors are neither responsible nor liable for any loss resulting from the
operation of the scheme beyond the contribution of Rs.10,000/- made by them towards
setting up the Mutual Fund.

3.15.17 Schemes of UTI Mutual Fund:

The following are the major types of schemes are offered by UTI mutual fund company

I.A) Equity Funds Category:

1. UTI Master Share

2. UTI Master Plus

3. UTI Equity Fund

4. UTI Contra Fund

5. UTI Wealth Builder Fund

6. UTI India Lifestyle Fund

B) Speciality/Theme Based Funds

1. UTI Infrastructure Fund

2. UTI Dividend Yield Fund

3. UTI Services Industries Fund

4. UTI Master Value Fund

5. UTI Mid Cap Fund

6. UTI Leadership Equity Fund

7. UTI Master Growth

8. UTI MNC Fund

9. UTI Opportunities Fund

C) Sector Funds

110
1. UTI Software Fund

2. UTI Banking Sector Fund

3. UTI Energy Fund

4. UTI Pharma and Health Care Fund

5. UTI Transpiration and Logistics Fund

D) Tax Planning Funds

1. UTI Equity Tax Savings Plan

2. UTI Long Term Advantage Fund-Ser I

3. UTI MEPUS

4. UTI Spread Fund

II. Index Funds Category

1. UTI Master Index Fund

2. UTI Nifty Index Fund

3. UTI Nifty Select Fund

4. UTI Sunder

III. Asset Allocation Funds Category

1.UTI Variable Investment Scheme

IV. Balance Funds Category

1. UTI Balance Fund

2. UTI CCP Advantage Fund

3. UTI Children‟s Career Balanced Plan

4. UTI Mahila Unit Scheme

5. UTI Crts

6. UTI Unit Linked Insurance Plan

111
7. UTI Retirement Benefit Pension Plan

V. Income Funds Category

1. UTI Short Term Income Fund

2. UTI G-SEC Investment Plan

3. UTI G-SEC Short Term Plan

4. UTI Gilt Advantage Fund

5. UTI Bond Fund

6. UTI Liquid Plus Fund

7. UTI Monthly Income Scheme

8. UTI MIS-Advantage Plan

VI. Liquid Fund Category

1. UTI Floating Rate Fund

2. UTI Money Market Fund

3. UTI Liquid Fund Cash Plan

3.16. PROFILE OF SBI MUTUAL FUND

3.16.1Corporate Profile:

With 28 years of rich experience in fund management, it brought forward expertise by

consistently delivering value to investors. It has a strong and proud lineage that traces back
to the State Bank of India (SBI) - India's largest bank. It has a Joint Venture between SBI
and AMUNDI (France), one of the world's leading fund management companies.
Excellence has no substitute and to ensure excellence right from the first stage of product
development to the post-investment stage, it is guided by the philosophy of „growth
through innovation‟ and stable investment policies. This dedication is what helps the
customers to achieve their financial objectives.

3.16.2 Vision of SBI Mutual Fund:

112
To be the most preferred and the largest fund house for all asset classes, with a consistent
track record of excellent returns and best standards in customer service, product
innovation, technology and HR practices.”

3.16.3 Services of SBI Mutual Fund:

Mutual Funds Investors are our priority. Our mission has been to establish Mutual Funds
as a viable investment option to the masses in the country. Working towards this it
developed innovative, need-specific products and educated the investors about the added
benefits of investing in capital markets via Mutual Funds. Today, it has been actively
managing investor's assets not only through investment expertise in domestic mutual
funds, but also offshore funds and portfolio management advisory services for institutional
investors. This makes it one of the largest investment management firms in India,
managing investment mandates of over 5.4 million investors.

3.16.4 Portfolio Management and Advisory Services:

SBI Funds Management has emerged as one of the largest player in India advising various
financial institutions, pension funds, and local and international asset management
companies. It has excelled by understanding investor's requirements and terms of
risk/return expectations, based on which it suggest customized asset portfolio
recommendations. It also provides an integrated end-to-end customized asset management
solution for institutions in terms of advisory service, discretionary and non-discretionary
portfolio management services.

3.16.5 Offshore Funds:

SBI Funds Management has been successfully managing and advising India's dedicated
offshore funds since 1988. SBI Funds Management was the 1st bank sponsored asset
management company fund to launch an offshore fund called 'SBI Resurgent India
Opportunities Fund' with an objective to provide our investors with opportunities for long-
term growth in capital, through well-researched investments in a diversified basket of
stocks of Indian Companies.

3.16.6 Investment Philosophy (Growth through innovation) of SBI Mutual Fund:

The expert team of experienced and market savvy researchers prepare comprehensive
analytical and informative reports on diverse sectors and identify stocks that promise high

113
performance in the future. Innovation is the process of turning ideas into concrete plans for
progressive growth. It always seek to provide investors with opportunities for progressive
growth through innovative products, superior stock selection and active portfolio
management. Accordingly, we also enhance and optimize asset allocation and stock
selection based on internal and external research. Derivatives are used to hedge and
rebalance portfolios to keep the risk factors at reasonable levels, The three main phrases,
which act as a guiding force for the investment performance, are as follows:

1. Long-term capital appreciation for the investor: The fund manager's view is not guided
by any momentum play but by the objective of generating sustainable performance for the
investor.

2. Superior stock selection: The team is encouraged to be ahead of the rest of the industry
in terms of identifying new ideas & opportunities.

3. Active fund management: While the performance of all the funds is benchmarked
against a specific index, it do not encourage our investment team to replicate the index
composition with the fund portfolio.

3.16.7 Optimal Risk Management:

Risk Management is an inherent part of any business. As one of the core focus areas, each
of the strategies is subject to close scrutiny on a continuous basis. Regulatory agencies
around the world are placing increasing pressure on institutions to measure and manage
risk better. At SBI Funds Management, it follow enterprise wide approach to risk
management with a dedicated, experienced and professional risk management team
covering significant functions of the organization. Risk Management focuses on:

 Identifying actual and potential areas of risk.

 Assessing the adequacy of internal controls.

 Proposing risk mitigating measures and.

 Safeguarding investor interest through ongoing analysis and monitoring.

3.16.8 History of SBI Mutual Fund:

SBI Mutual Fund (SBIMF) was set up as a Trust by the settlers, State Bank of India on
June 29, 1987 with SBI Mutual Fund Trustee Company Private Limited (The Trustee

114
Company) as a Trustee in accordance with the provisions of the Indian Trust Act, 1882
and is duly registered under the Registration Act, 1908. The Trustee has entered into an
Investment Management Agreement dated May 14, 1993 and also a supplemental thereto
on April 28, 2003, which was replaced by Restated and Amended Investment
Management Agreement December 29, 2004 with SBI Funds Management Private Ltd.
(the AMC) to function as the investment Manager for all the Schemes of SBI MF. SBI MF
was registered with SEBI on December 23, 1993 under Registration Code MF-009/93/3.

3.16.9 Schemes of SBI Mutual Fund:

The following are the various mutual funds schemes offered by SBI Mutual Fund
Company.

I] Equity Funds and Scheme:

The primary objective of the equity asset class is to provide capital growth/appreciation by
investing in the equity and equity related instruments of companies over medium to long
term.

1. Equity/Growth Fund:

a. SBI Mangum Equity Fund

b. SBI Mangum Global Fund

c. SBI BlueChip Fund

d. SBI Mangum Multicap Fund

e. SBI Mangum Multiplier Fund

f. SBI Small and Midcap Fund

g. SBI Mangum Midcap Fund

h. SBI Emerging Business Fund

2. Sectoral Funds:

a. SBI Contra Fund

b. SBI FMCG Fund

c. SBI IT Fund

115
d. SBI Pharma Fund

e. SBI Banking and Financial Services Fund

3. Thematic Funds:

a. SBI Mangum COMMA Fund

b. SBI Infrastructure Fund

c. SBI PSU Fund

4. ELSS Funds:

a. SBI Mangum Taxgain Scheme-1993

b. SBI Tax Advantage Fund-Series-I

c. SBI Tax Advantage Fund-Series-II

d. SBI Tax Advantage Fund-Series-III

5. Index Funds:

SBI Nifty Index Fund

6. Market Neutral Strategy:

SBI Arbitrage Opportunities Fund

II. Debt/Income Fund and Schemes:

The schemes in this asset class generally invest in fixed income securities such as bonds,
corporate debentures, government securities (gilts), money market instruments, etc. and
provide regular and steady income to investors.

1. SBI Savings Fund

2. SBI Corporate Bond Fund

3. SBI Mangum Income Fund

4. SBI Treasury Advantage Fund

5. SBI Dynamic Bond Fund

6. SBI Mangum Gilt Fund- Short Term Plan

116
7. SBI Mangum Gilt Fund- Long Term Plan

8. SBI Short Term Debt Fund

9. SBI Ultra Short Term Debt Fund

III. Liquid Funds and Schemes:

The strategy for liquid funds include investments in short investment horizon, which
includes 'cash' assets such as treasury bills, certificates of deposit and commercial paper.

1. SBI Mangum Insta Cash Fund

2. SBI Mangum Insta Cash Fund-Liquid Floater

3. SBI Premier Liquid Fund

IV. Hybrid Schemes:

These schemes invest in a mixture of debt and equity securities in different proportions as
prescribed in the Scheme Information Document.

1. SBI Magnum Children's Benefit Plan

2. SBI Magnum Balanced Fund

3. SBI Regular Savings Fund

4. SBI Magnum Monthly Income Plan

5. SBI Magnum Monthly Income Plan-Floater

6. SBI Dynamic Asset Allocation Fund

V. Fixed Maturity Plans:

These are closed ended debt schemes with a fixed maturity date and they invest in debt &
money market instruments maturing on or before the date of the maturity of the scheme.

1. SBI Debt Fund Series A - 1 (15 Months)

2. SBI Debt Fund Series A - 2 (15 Months)

3. SBI Debt Fund Series A - 4 (786 Days)

117
4. SBI Debt Fund Series A - 5 (411 Days)

5. SBI Debt Fund Series 14 Months

6. SBI Debt Fund Series 15 Months

7. SBI Debt Fund Series 180 Days 26

8. SBI Debt Fund Series 36 Months

9. SBI Debt Fund Series 36 Months

10. SBI Debt Fund Series 36 Months 6

VI. Exchange Traded Funds and Schemes:

Exchange Traded Funds/ Schemes (ETFs) are a basket of securities that are traded on the
stock exchange.

1. SBI –ETF Gold

2. SBI –ETF SENSEX

3. SBI -ETF Nifty Bank

4. SBI –ETF BSE 100

5. SBI-ETF Nifty Next 50

6. SBI –ETF Nifty 50

7. SBI –ETF 10 Year Gilt

8. Direct Redemption

VII. Fund of Funds Schemes:

A "Fund of Funds Scheme" means a mutual fund scheme that invests primarily in other
schemes of the same mutual fund or other mutual funds.

1. SBI Gold Fund

3.17. PROFILE OF LIC NOMURA MUTUAL FUND

3.17.1 History of LIC Mutual Fund:

118
LIC Mutual Fund was established on 20th April 1989 by LIC of India. Being an associate
company of India's premier and most trusted brand, LIC Mutual Fund is one of the well
known players in the asset management sphere. With a systematic investment discipline
coupled with a high standard of financial ethics and corporate governance, LIC Mutual
Fund is emerging as a preferred Investment Manager amongst the investor fraternity. LIC
Mutual Fund endeavours to create value for its investors by adopting innovative and
robust investment strategies, catering to all segments of investors. LIC Mutual Fund
believes in providing delight to its customers and partners by way of superior investment
experience and unparalleled service thereby truly bring them Khushiyaan, Zindagi Ki.

3.17.2 A New Dawn:

LIC Mutual Fund was established on 20th April 1989 by LIC of India. A name
synonymous with trust in the financial system of our country, LIC of India has delivered
hope to millions of lives every day for the past 59 years. The company today, is the largest
life insurer in the world and has insured more than 250 million lives.

3.17.3 Pillars of Support:

It was empowered by a foundation of strength that adds momentum to its endeavours. The
joint venture partners:

1. LIC Housing Finance Ltd.:- One of the largest Housing Finance companies in India,
with over 15.56 lakh prudent house owners who have enjoyed its financial assistance.

2. GIC Housing Finance Ltd.:- With a presence of 59 branches across the country, tie-
ups with builders and corporates, GIC HFL provides finance to individual borrowers for
various housing finance needs.

3. Corporation Bank - With a nationwide network of 2364 fully automated CBS

branches, 2998 ATMs and 4685 Branchless Banking Units across 4685 villages.

3.17.4 The Onset of an Eternal Smile

LIC Mutual Fund's journey so far has been promising. Partnering with our stakeholders,
LIC Mutual Fund is committed to deliver Khushiyaan, Zindagi Ki.

3.17.5 Vision of LIC Mutual Fund:

“To be a trusted partner in wealth creation and a mutual fund of choice”.

119
3.17.6 Mission of LIC Mutual Fund:

"Within the realms of good corporate governance, financial ethics, consistent fund
performance, imparting knowledge and creating awareness to empower investors achieve
financial goals".

3.17.7 Schemes of LIC Mutual Fund:

The following are various products offered for the investors of LIC mutual fund.

1. Equity fund Categories:

1. Banking and Financial Services Fund.

2. Diversified Equity Fund Series .

3. Diversified Equity Fund Series .

4. Equity Fund.

5. Growth Fund.

6. Index Fund Nifty Plan.

7. Index Fund Sensex Plan.

8. Infrastructure Fund.

9. Mid-cap Fund.

10. RGESS Fund Series .

11. RGESS Fund Series .

2. Exchange Traded Fund Categories:

1. Exchange Traded Fund-Nifty 100.

2. Exchange Traded Fund-Nifty 50.

3. Exchange Traded-Sensex.

4. G-SEC Long Term ETF.

3. Debt Fund Categories:

1. Bond Fund.

120
2. Income Plus Fund.

3. G-SEC Fund.

4. Savings Plus Fund.

5. Childrens Fund.

6. Monthly Income Plan.

7. Interval Fund Monthly Plan-Series (1).

8. Interval Fund Quarterly Plan-Series (1).

9. Interval Fund Quarterly Plan-Series (2).

10. Interval Fund Annual Plan-Series (1).

4. Hybrid Fund Categories:

1. Balanced Fund.

2. Dual Advantage Fund-Series (1).

3. Dual Advantage Fund-Series (2).

4. Dual Advantage Fund-Series (3).

5. Unit Linked Insurance Scheme (ULIC).

6. CAPRO Fund-Series (1).

7. CAPRO Fund-Series (2).

8. CAPRO Fund-Series (3).

9. CAPRO Fund-Series (4).

10. CAPRO Fund-Series (5).

5. Liquid Fund Categories:

1. Liquid Fund.

3.18. CONCLUSION:

Mutual funds are essentially financial intermediaries. They have become a critical link
among the various financial segments in the economy. Today, they play a crucial role in

121
the mobilisation of resources, especially from small savers. On account of the huge
resources at their disposal they also emerged as the dominant players in the capital market.
Indian mutual fund industry is expected to witness rapid growth in Assets Under
Management(AUM), resources mobilisation, trends in transaction on stock exchanges by
mutual funds, market intermediaries, various schemes offered by the industries over the
next few years.

With the structural liberalization policies, the Indian economy, no doubt is likely to return
to a high growth path in few years. Hence, mutual funds organizations are needed to
upgrade their skills and technology. It has to overcome the bottlenecks in growth of
mutual fund industry. There is a need for strong regulatory framework, transparency and
disclosure policies, customer involvement, up gradation of technology, innovation in
products etc., to serve in the competitive environment.

122
CHAPTER 4: DATA ANALYSIS AND
INTERPRETATION OF DATA

123
 CHAPTER-IV

INVESTMENT PATTERN OF MUTUAL FUNDS INVESTORS

4.1. INTRODUCTION:

The income a person receives may be used for purchasing goods and services that he/she
currently requires. It may also be saved for the purchase of goods and services that he/she
may require in the future. The person saving a part of his income tries to find a temporary
repository for his savings until they are required to finance his future expenditure. This
results in investment.

According to Martin, “Investment is the employment of funds with the aim of achieving
additional rewards from the investor point of view”2. Investing has been an activity
confined to the rich and business class in the past. This can be attributed to the fact that
availability of investible funds is a pre-requisite to the deployment of funds, but today
investment has become a household word and is very popular with people from all walks
of life.

4.2. CLASSIFICATION OF INVESTORS IN MUTUAL FUNDS:

124
Indian investors have been able to invest through mutual funds since 1964. Indian mutual
funds have been organized through the Indian Trust Acts, under which they enjoyed
certain tax benefits. Public sector banks and insurance companies setup mutual funds
(between 1987and1992). Private sector mutual funds have been allowed since 1993, which
brought competition to the mutual fund industry. This has resulted in the introduction of
new products and improvement of services.

The Association of Mutual Funds in India (AMFI) classifies the Mutual Fund investors
into five groups. (a) Corporates (b) Banks and Financial Institutions (c) Foreign
Institutional Investors (d) High Net worth Individuals and (e) Retail investors.

4.2.a. Corporates or Corporate Investors:

A corporate entity or a company is defined as „an institution and an artificial person

created to conduct business‟ where company invests in mutual fund organizations. A
raider is a corporate investor who intends to take over a company by buying a controlling
interest in its stock and installing new management.

4.2.b. Banks and Financial Institutions (or Institutional investors):

These are organizations which pool large sums of money and invest those sums in
companies. Institutional investors will have a lot of influence in the management of
corporations because they will be entitled to exercise the voting rights in a company.
Furthermore institutional investors have the freedom to buy and sell shares because they
can play a large part in the companies to stay solvent.

4.2.c. Foreign Institutional Investors (FIIs):

FIIs have been allowed to invest in the Indian securities market since September 1992
when the Guidelines for Foreign Institutional Investment were issued by the Government.
The SEBI (Foreign Institutional Investors) Regulations were enforced in November 1995,
largely based on these Guidelines. The regulations require FIIs to register with SEBI and
to obtain approval from the Reserve Bank of India (RBI) under the Foreign Exchange
Regulation Act to buy and sell securities. Open foreign currency and rupee bank accounts
have to remit and repatriate funds. Once SEBI registration has been obtained, FII does not
require any further permission to buy or sell securities or to transfer funds in and out of the
country, subject to the payment of applicable tax. Foreign investors, whether registered as
FIIs or not, may also invest in Indian securities outside the FII process. Such investment

125
requires case-by-case approval from the Foreign Investment Promotion Board (FIPB) in
the Ministry of Industry and RBI, or from RBI depending on the size of investment and
the industry in which the investment is to be made. Investment in Indian securities are also
possible through the purchase of GDRs. Foreign currency is converted by bonds and
foreign currency bonds issued by Indians that are listed, traded and settled overseas that
are mainly denominated in dollars. Foreign financial service institutions have also been
allowed to set up joint ventures in stock broking, asset management companies, merchant
banking and other financial services firms along with Indian partners.

4.2.d. High Networth Individuals (HNI):

A classification used by the financial services industry is to denote an individual or a

family with high net worth. Although there is no precise definition of how rich somebody
must be to fit into this category, high net worth is generally quoted in terms of liquid
assets over a certain figure. The exact amount differs by the financial institution and
region. The categorization is relevant because high net worth individuals generally qualify
for separately managed investment accounts instead of regular mutual funds. HNIs are in
high demand by private wealth managers. The more money a person has, the more work it
takes to maintain and preserve those assets. These individuals generally demand (and can
justify) personalized services in an investment management, estate planning, tax planning
and so on.

4.2.e. Retail Investors:

Individual investors who buy and sell securities for their personal account and not for
another company or organization. Also known as an "individual investor" or "small
investor". Retail investors buy in much smaller quantities than larger institutional
investors.

4.3. DEMOGRAPHIC PROFILE OF THE RESPONDENTS:

The below table presents the details about the demographic profile of the respondents in
terms of gender, age group, education, occupation, marital status, family annual income
and their annual savings.

Table-4.3 Demographic Profile of the Respondents

Demographic Frequency No of Percentage

126
 Factors Respondents
(N)
Gender Male 225 75
Female 75 25
Total 300 100.00
Age Group Below – 30 45 15.00
31-40 110 36.67
41-50 95 31.67
Above 50 50 16.66
Total 300 100.00
Education Primary 25 8.33
Secondary 30 10.00
Graduate 120 40.00
Post Graduate 90 30.00
Professional Degree 35 11.67
Total 300 100.00
Occupation Self employed 40 13.33
Business 50 16.67
Salaried 140 46.67
Profession 60 20.00
Retired 10 3.33
Total 300 100.00
Marital Status Married 255 85.00
Unmarried 45 15.00
Total 300 100.00
Annual Up to Rs.1,00,000 65 21.67
Income Rs.1,00,001 – Rs.3,00,000 105 35.00
Rs.3,00,001 – Rs.5,00,000 90 30.00
Above Rs.5,00,000 40 13.33
Total 300 100.00
Annual Up to Rs.10,000 30 10.00
Savings Rs.10,001 to 25,000 65 21.67
Rs.25,001 to 50,000 85 28.33
Rs.50,001 to 1,00,000 105 35.00

127
 Above Rs.1,00,000 15 5.00
Total 300 100.00
Source: Field Investigation

4.4. GENDER OF THE RESPONDENTS:

The gender of the respondents is one of the important factors in the investment of mutual
funds schemes in the stock market. The gender among the investors may have its own
influence on the expectation and perception on the investment and also the risk factor on
the market in the capital market. The male investors in general may take more risks
compared to the female investors while the female investors expect a consistent fair return
from their investment. The distribution of investors on the basis of their gender is
illustrated in Table 5.4.

Table-4.4 Gender of the Respondents

Gender No of Respondents (N) Percentage

Male 225 75
Female 75 25
Total 300 100.00
Source: Field Investigation

Table 5.4 reveals the gender of the respondents. Out of 300 respondents, 225(i.e.75
percent) respondents are male and remaining 75(i.e.25 percent) respondents are female.
This shows that the female respondents are very less when compared to male respondents.
The reason may be due to lack of awareness of mutual fund schemes among the male
counterparts. The another reason for such unfavorable gender of female to male is,
generally many women may not favor doing the job due to social system. Hence they do
not have economic empowerment. The same data has been presented with the help of
graph.

128
 GENDER
80% 75%
70%

60%

50%

40%

30% 25%
20%

10%

0%
Male Female

Series 1

4.5. AGE OF THE RESPONDENTS:

The age of the investor plays an important role in the investment pattern among the
investors. The youngsters, in general are taking more risk compared to elders. The elders
are expecting a consistent fixed income from their investments. It is highly imperative to
analyze the age among the investors in order to provide a background of the investors.
Age is an important variable to explain investors behaviour. In the present study, the age
of the investors have confined to below 30 years, 31-40, 41-50 and above 50 years. The
distribution of investors on the basis of age factor is shown in Table 5.5.

Table-4.5 Age of the Respondents

Age Group No of Respondents (N) Percentage

Below – 30 45 15.00
31-40 110 36.67
41-50 95 31.67
Above 50 50 16.66
Total 300 100.00
Source: Field Investigation

The above Table 5.5 shows the age of the respondents. Out of 300 respondents, 45 (i.e.15
percent) respondents belong to below 30 years. 110(i.e. 36.67 percent) respondents are

129
from 31-40 age groups, 95(i.e.31.67 percent) respondents are from 41-50 years and
remaining 50(i.e.16.66 percent) respondents are above-50 years of age group. It may be
concluded from the above table that normally when a man reaches the age of 30 years,
he/she feels more necessity of investing in mutual funds for income and financial security.
The same information has been graphically represented.

AGE OF THE RESPONDENTS

40%
36%
35%
32%
30%

25%

20%
17%
15%
15%

10%

5%

0%
Below 30 yrs 31-40 yrs 41-50 yrs Above 50 yrs

AGE OF THE RESPONDENTS

4.6. EDUCATIONAL BACKGROUND OF THE RESPONDENTS:

Education is the key that opens the doors in life which is essentially social in character. It
is considered as the harbinger of social changes which unlocks the gates of modernization.
Education is an important input for the development of not only man but also the entire
development process. It is a key process as it equips persons with necessary attitude and
knowledge for change. Education is the means by which the principles of co-operation are
enabled to function effectively. The level of education represents the educational
qualification of the investors. Since the level of education may provide the knowledge and
exposure on the capital market among the investors, it is included as one of the profile
variables. The highly educated investors are having more capacity to analyze the market
conditions and also more knowledge to select the appropriate investment avenues. At the
same time lesser educated investors are highly influenced by the advisors, brokers, friends
and relatives in decision making. In the present study, the respondents educational
qualification has been classified into primary, secondary, graduate, post graduate and
professional degree.

130
 Table-4.6 Educational Qualification of the Respondents

Education No of Respondents (N) Percentage

Primary 25 8.33
Secondary 30 10.00
Graduate 120 40.00
Post Graduate 90 30.00
Professional Degree 35 11.67
Total 300 100.00
Source: Field Investigation

The above Table 5.6 shows the educational qualification of the respondents. Out of 300
respondents, 25(i.e.8.33 percent) respondents are having primary education. 30(i.e.10
percent) respondents have secondary educational qualification. 120(i.e. 40 percent)
respondents are graduates, 90(i.e.30 percent) respondents are post graduates and remaining
35(i.e. 11.67 percent) respondents are professional degree holders. The majority of the
respondents educational qualification is high i.e. graduate and post graduate. It is because
of the high level of education people are aware of mutual fund schemes. The same
information has been graphically represented.

Graph-5.5 Educational Qualification of the Respondents

EDUCATIONAL QUALIFICATION
45%
40%
40%

35%
30%
30%

25%

20%

15% 12%
10%
10% 8%

5%

0%
Primary Secondary Graduate Post Graduate Professional Degree

EDUCATIONAL QUALIFICATION

4.7. OCCUPATIONAL BACKGROUND OF THE RESPONDENTS:

131
Occupational background represents the occupation of the investors at present. Since the
occupational background among the investors, may have its own impact on the investment
behaviour among them, it is included as one of the profile variables. The fixed income
earners are very confident on the fair and consistent return from their investment, whereas
the other income earners are willing to take risks in market fluctuations. All groups of
investors are now part of mutual fund investment. The occupations of the investors are
confined to self-employed, business, salaried, profession and retired persons. The
occupational background of the respondents is presented in Table 5.7.

Table-4.7 Occupational Background of the Respondents

Occupation No of Respondents (N) Percentage

Self employed 40 13.33
Business 50 16.67
Salaried 140 46.67
Profession 60 20.00
Retired 10 3.33
Total 300 100.00
Source: Field Investigation

The above table 5.7 shows the occupational background of the respondents. Out of 300
respondents, 50 (i.e.16.67 percent) respondents are businessmen, 140 (i.e.46.67 percent)
respondents are salaried, 60(i.e.20 percent) respondents are professionals, 10 (i.e.3.33
percent) respondents are retired person and remaining 40(i.e.13.33 percent) respondents
belongs to self-employed. The analysis of the above table reveals that majority of the
respondents are salaried and next substantial number of the respondents are professionals,
businessmen, self-employed and retired persons. The data has been depicted with the help
of graph.

Graph-5.6 Occupational Background of the Respondents

132
 OCCUPATIONS
50% 47%
45%
40%
35%
30%
25%
20%
20% 17%
15% 13%
10%
5% 3%
0%
Self-Employed Business Salired Profession Retired

OCCUPATIONS

4.8. MARITAL STATUS OF THE RESPONDENTS:

Marital status is one of the very important factors in investment. Marriage makes men and
women responsible for earning money to maintain a better standard of living of the family.
It plays a vital role in investment decisions. Investment pattern and strategy are closely
related to the marital status of the investor. The distribution of investors based on their
marital status is given in Table 5.8.

Table-4.8 Marital Status of the Respondents

Marital Status No of Respondents (N) Percentage

Married 255 85.00
Unmarried 45 15.00
Total 300 100.00
Source: Field Investigation

The above table shows the marital status of the respondents. Out of 300 respondents 255
(i.e.85 percent) respondents are married and remaining 45(i.e.15 percent) respondents are
unmarried. Marital status is one of the major determinants for investors. Marital status

133
affects investment pattern of investors. The marital sentiments force for the future
prospects. Due to various family commitments, the married investors are concentrating
more on investment in mutual funds. The data has been depicted with the help of graph.

Graph-5.7 Marital Status of the Respondents

MARITAL STATUS
90% 85%
80%

70%

60%

50%

40%

30%

20% 15%
10%

0%
Married Un-Married

MARITAL STATUS

4.9. ANNUAL INCOME OF THE RESPONDENTS:

Income means what a person acquires in return for service. In the understanding of the
socio-economic status of any group, data about the level of income is also essential
because income is the most decisive factors. In olden days, income in monetary terms had
been a variable of secondary significance. Caste and land ownership factors were
considered in status determination. Annual income means the income earned throughout
the year. It includes all possible sources of income. This income is the base for all
investment activities. Investors those who earn more annual income are ready to take more
risk and also invest more amounts. In the present study, the annual income earned by the
respondents is classified into four categories i.e. up to Rs.1,00,000, Rs.1,00,001-
Rs.3,00,000, Rs.3,00,001-Rs.5,00,000 and above Rs.5,00,000. Table 5.9 shows the annual
income of the respondents.

Table-4.9 Annual Income of the Respondents

Annual Income No of Respondents (N) Percentage

Up to Rs.1,00,000 65 21.67

134
 Rs.1,00,001 – Rs.3,00,000 105 35.00
Rs.3,00,001 – Rs.5,00,000 90 30.00
Above Rs.5,00,000 40 13.33
Total 300 100.00
Source: Field Investigation

Table 5.9 displays the annual income of the respondents. Out of 300 respondents,
65(i.e.21.67 percent) of the respondents have annual income up to Rs.1,00,000, 105 (i.e.35
percent) respondents have annual income of Rs.1,00,001-Rs.3,00,000, 90(i.e.30 percent)
respondents have annual income of Rs.3,00,001-Rs.5,00,000 and lastly 40(i.e.13.33
percent) respondents have annual income of above Rs.5,00,000. The majority of
respondents have annual income between Rs.1,00,001-Rs.3,00,000 and Rs.3,00,001-
Rs.5,00,000 respectively. The same information has been graphically represented.

Graph-5.8 Annual Income of the Respondents

ANNUAL INCOME
40%
35%
35%
30%
30%

25%
22%
20%

15% 13%

10%

5%

0%
Up to Rs.1,00,000. Rs.1,00,001-Rs.3,00,000. Rs.3,00,001-Rs.5,00,000. Above Rs.5,00,000.

ANNUAL INCOME

4.10. ANNUAL SAVINGS OF RESPONDENTS:

Annual savings among the investors denotes the difference between annual income and
expenditure among the investors. It also represents the saving of the investors in any form
of assets. Since the savings is the base for investment on various avenues, it is included in
the present study. The higher amount of savings may lead to higher investment and also an

135
investment in mutual funds. The annual savings in the present study is confined up to
Rs.10,000, Rs.10,001 – Rs. 25,000, Rs.25,001 –Rs.50,000, Rs.50,001- Rs.1,00, 000 and
above Rs.1,00,000.

Table-4.10 Annual Savings of the Respondents

Annual Savings No of Respondents (N) Percentage

Up to Rs.10,000 30 10.00
Rs.10,001 to 25,000 65 21.67
Rs.25,001 to 50,000 85 28.33
Rs.50,001 to 1,00,000 105 35.00
Above Rs.1,00,000 15 5.00
Total 300 100.00
Source: Field Investigation

The Table 5.10 shows the annual savings of the respondents. Out of 300 respondents,
30(i.e.10 percent) respondents have annual savings of up to Rs.10,000, 65(i.e.21.67
percent) respondents are annual savings of their money between Rs.10,001-25,000,
85(i.e.28.33 percent) respondents are annual savings of Rs. 25,001- 50,000, 105(i.e.35
percent) respondents have annually savings Rs.50,001-1,00,000 and lastly 15(i.e. 5
percent) respondents have saved their money above Rs.1,00,000. The data has been
depicted with the help of graph.

Graph-4.9 Annual Savings of the Respondents

136
 ANNUAL SAVINGS
40%
35%
35%

30% 28%

25%
22%
20%

15%
10%
10%
5%
5%

0%
Upto Rs. 10,000. Rs.10,001- Rs.25,001- Rs.50,001- Above Rs.1,00,000.
Rs.25,000. Rs.50,000. Rs.1,00,000.

ANNUAL SAVINGS

4.11. FAMILY SIZE OF THE RESPONDENTS:

The family size of the investors represents the total family members living with the
investor. Since the family size is one of the important profile variables, it is included in the
present study. The family size may have its own influence on the investment pattern and
behaviour among the investors. The highest number of family size lead to more family
commitments, the investor with higher family size may not take more risk on investment
in capital market. At the same time, the lesser family size may lead to more savings and
the investors from that type of family are willing to take more risk in the capital market.
The family size among the investor is confined up to 2, 3 to 5, 6 to 8 and above 8. The
distribution of investors on the basis of their family size is shown in the Table 5.11.

Table-5.11 Family Size of the Respondents

Family Size ( In Members) No of Respondents (N) Percentage

Up to 2 25 8.33
3 to 5 75 25.00
6 to 8 110 36.67
Above 8 90 30.00
Total 300 100.00

137
Source: Field Investigation

The above Table 5.11 displays the family size of the respondents. Out of 300 respondents,
110 (i.e.36.67 percent) of the respondents belongs to 6 to 8 family members, 90(i.e.30
percent) respondents have their family size above 8 members, 75(i.e.25 percent)
respondents have family size of 3 to 5 members and remaining 25(i.e.8.33 percent)
respondents have up to 2 members in family. The same information has been graphically
represented.

Graph-5.10 Family Size of the Respondents

FAMILY SIZE
40%
37%
35%
30%
30%
25%
25%

20%

15%

10% 8%

5%

0%
Up to 2 3 to 5 6 to 8 Above 8

FAMILY SIZE

4.12. INVESTMENTS IN MUTUAL FUNDS:

There are various investments avenues which are available for investors to allocate their
savings. From the analysis of the risk perception of investors (Chapter VI) it is clear that
investors are highly financial conservative. Therefore they prefer efficient portfolio which
will give maximum return with minimum risk. As mutual funds ensure a reasonable level
of return, it is essential to know how much they invest in mutual funds. For the purpose of
the amount of investment in mutual funds categorised into five groups, they are less than
Rs.5,000, Rs.5,001-Rs.10,000, Rs.10,001-Rs.20,000, Rs.20,001- Rs.40,000 and above
Rs.40,000. The below table shows that the amount of investments in mutual funds by the
respondents under study.

138
 Table-4.13 Amount of Investments in Mutual Funds by the Respondents

Amount of No of Percentage Cumulative Percentage

Investment Respondents (N)

Less than Rs.5,000 105 35.00 35.00

Rs.5,001 – Rs.10,000 72 24.00 59.00
Rs.10,001- Rs.20,000 53 17.67 76.67
Rs.20,001 – Rs.40,000 38 12.67 89.34
Above Rs.40,000 32 10.66 100.00
Total 300 100.00
Source: Field Investigation

The above table reveals that amount of investment in mutual funds by the respondents.
Out of 300 respondents, 105 (i.e.35 percent) respondents have invested less than Rs.5,000
in mutual funds and 32 (i.e.10.66 percent) of respondents have invested their money above
Rs.40,000. The same information has been graphically represented.

Graph-4.11 Amount of Investments in Mutual Funds by the Respondents

AMOUNT OF INVESTMENT IN MUTUAL FUNDS

40%
35%
35%

30%

25% 24%

20% 18%

15% 13%
11%
10%

5%

0%
Less than Rs.5000. Rs.50001- Rs.10,001- Rs.20,001- Above Rs.40,000.
Rs.10,000. Rs.20,000. Rs.40,000.

AMOUNT OF INVESTMENT IN MUTUAL FUNDS

Table-4.14 Gender-Wise Classification of Investments Made by the Respondents

Amount of Gender Total

139
 Investment Male Female
Less than Rs.5,000 79 26 105
(35.00)
Rs.5,001 – Rs.10,000 54 18 72
(24.00)
Rs.10,001- Rs.20,000 40 13 53
(17.67)
Rs.20,001 – Rs.40,000 28 10 38
(12.67)
Above Rs.40,000 24 8 32
(10.66)
Total 225 75 300
(75) (25) (100)
Source: Field Investigation

The above table reveals that the gender-wise classification of investment made by the
respondents. Out of 300 respondents 225 are male (i.e.75 percent) respondents and
remaining 75 (i.e.25 percent) are female respondents. It clearly indicates that the male
respondents are more knowledgeable and experienced when compared with female
respondents. The less number of female investors clearly indicates that they are still
financially not empowered to make a investment.

Table-4.15 Age-Wise Classification of Investments Made by the Respondents

Amount of Age Total

Investment Below - 30 31-40 41-50 Above 50
Less than Rs.5,000 15 39 33 18 105 (35.00)
Rs.5,001 – Rs.10,000 11 26 23 12 72 (24.00)
Rs.10,001- Rs.20,000 8 19 17 9 53 (17.67)
Rs.20,001 – Rs.40,000 6 14 12 6 38 (12.67)
Above Rs.40,000 5 12 10 5 32 (10.66)
Total 45 110 95 50 300
(15.00) (36.67) (31.67) (16.66) (100)
Source: Field Investigation

140
The above Table-5.15 indicates the age-wise classification of investment made by the
respondents. Out of 300 respondents the highest 110 respondents belongs to the age group
of 31-40. The lowest being 50 under the age group of above 50 years. It indicates that the
middle aged persons are more interested in investment activity to safeguard their future.

Table-4.16 Annual Income-Wise Classification of Investments Made by the

Respondents

Amount of Annual Income (in rupees) Total

Investment Up to Rs.1,00,00 Rs.3,00,001 Above
Rs.1,00,000 1 to to Rs.5,00,000
Rs.3,00,00 Rs.5,00,000
0
Less than 23 37 31 14 105 (35.00)
Rs.5,000
Rs.5,001 – 16 25 21 10 72 (24.00)
Rs.10,000
Rs.10,001- 11 19 16 7 53 (17.67)
Rs.20,000
Rs.20,001 – 8 13 12 5 38 (12.67)
Rs.40,000
Above Rs.40,000 7 11 10 4 32 (10.66)
Total 65 (21.67) 105 (35.00) 90 (30.00) 40 (13.33) 300
(100)
Source: Field Investigation

It is evident from the above table that 105 respondents representing 35 percent of the total
are having income level between Rs.1,00,001 to Rs.3,00,000. As many as 105 respondents
have made an investment less than Rs.5,000 and only 32 respondents representing 10.66
percent of the total have invested more than Rs.40,000.

4.13. DURATION OF INVESTMENTS IN MUTUAL FUNDS:

Investors and their investment horizon are of different types. Someone may be interested
in making investments for a short period of time, while others are interested in medium
term investments or long-term investments. Actually, mutual fund investments are good

141
for long term investments. The benefits of mutual fund investment can be enjoyed only
when one make investments at least for more than three years i.e. for the medium term.
The investors were asked to give their opinion on the period of investments they prefer.
The below table exhibits a duration of investments in mutual funds by the respondents.

Table-4.17 Duration of Investments in Mutual Funds by the Respondents

Duration of Investment No of Percentage Cumulative Percentage

Respondents (N)

Less than 3 years 105 35.00 35.00

3-5 years 88 29.33 64.00
5-10 years 62 20.67 85.00
Above 10 years 45 15.00 100.00
Total 300 100.00
Source: Field Investigation

The above table reveals the duration of investment in mutual funds by the respondents.
Out of 300 respondents 35 percent of the investors are investing their money for less than
3 years period, 29.33 percent of them invested between 3-5 years, 20.67 percent were for a
period of 5-10 years and lastly, 15 percent of them have invested for above 10 years
period. The same information has been graphically presented.

Graph-5.12 Duration of Investments in Mutual Funds by the Respondents

142
 DURATION OF INVESTMENTS
40%
35%
35%

30% 29%

25%
21%
20%
15%
15%

10%

5%

0%
Less than 3 yrs 3-5 years 5-10 years Above 10 years

DURATION OF INVESTMENTS

The results are shown with the help of cross tabulation of gender and duration of
investment.

Table-4.18 Gender-Wise Duration of Investments in Mutual Funds by the

Respondents

Duration of Investment Gender Total

Male Female
Less than 3 years 79 26 105 (35.00)
3-5 years 66 22 88 (29.33)
5-10 years 46 16 62 (20.67)
Above 10 years 34 11 45 (15.00)
Total 225 75 300
(75) (25) (100)
Source: Field Investigation

Table 5.18 shows the gender-wise duration of investments in mutual funds by the
respondents. Out of 105 respondents 79 respondents of them are male and remaining 26
are female respondents who belongs to the duration of investment of less than 3 years. Out
of 88 respondents 66 of them are male respondents and 22 are female respondents with 3-5
years of duration of the investment. Out of 62 respondents, 46 of them are male
respondents and 16 are female respondents with investment in 5-10 years. Lastly out of 45

143
respondents 34 respondents are male and 11are female respondents with a duration of
investment in mutual funds is above 10 years.

Table-4.19 Age-Wise Duration of Investments in Mutual Funds by Respondents

Duration of Age Total

Investment Below - 30 31-40 41-50 Above 50

Less than 3 years 16 39 33 17 105 (35.00)

3-5 years 13 32 28 15 88 (29.33)
5-10 years 9 23 20 10 62 (20.67)
Above 10 years 7 16 14 8 45 (15.00)
Total 45 110 95 50 300
(15.00) (36.67) (31.67) (16.66) (100)
Source: Field Investigation

The table 5.19 shows the duration of investment according to the age of the respondents.
Maximum number of investors (110) fall under the age group of 31-40 years. Interestingly
35 percent of the respondents have made an investment for a less than 3 years duration. It
shows that they are more interested in current income.

Table-4.20 Annual Income-Wise Duration of Investments in Mutual Funds by the

Respondents

Duration of Annual Income (in rupees) Total

Investment Up to Rs.1,00,00 Rs.3,00,001 Above
Rs.1,00,000 1 to to Rs.5,00,000
Rs.3,00,00 Rs.5,00,000
0
Less than 3 23 37 31 14 105 (35.00)
years
3-5 years 19 31 26 12 88 (29.33)
5-10 years 13 22 19 8 62 (20.67)
Above 10 years 10 15 14 6 45 (15.00)
Total 65 (21.67) 105 (35.00) 90 (30.00) 40 (13.33) 300
(100)

144
Source: Field Investigation

It is evident from the above table that the choice of duration of investment based on their
income. Only 6 respondents of above Rs.5,00,000 income have made an investment for a
period of more than 10 years. It is found from the data that only 15 percent of the total
respondents have made investment for a long term i.e. above 10 years. Majority of the
investors prefer short-term because of risk and uncertainty.

4.14. INVESTMENT OBJECTIVES OF THE INVESTORS:

Every investor has a definite objective behind his investment decision. The motive of
every investor investing in funds varies as per circumstances. These objectives vary from
investor to investor due to various factors like financial level, family environment, the
interest of the family members etc. These objectives reflect the investor‟s investment
strategy, selection of schemes, holding period etc., The objectives of the savings are
confined to retirement, to meet contingencies, to save tax, to purchase an asset, and to
meet the educational needs of children.

Table-4.21 Investment Objectives of the Respondents

Investment Objectives No of Percentage Cumulative

Respondents (N) Percentage

For Tax Deduction 55 18.00 18.33

To Provide for Retirement 115 38.33 56.66
To Meet Contingencies 30 10.00 66.66
For Children‟s Education 80 26.67 93.33
For purchase of Assets 20 6.67 100.00
Total 300 100.00
Source: Field Investigation

The above table reveals the investment objectives of the respondents. Out of 300
respondents 115 (38.33 percent) respondents have an objectives of investment to provide
for retirement, 80 (26.67 percent) of them have invested because for children‟s education,
55 (18.33 percent) for tax deduction purpose and remaining 50 (16.67 percent) of them
have their investment objectives to meet both the contingencies and for purchase of assets.
The data has been depicted with the help of graph.

145
 Graph-5.13 Investment Objectives of the Respondents

INVESTMENT OBJECTIVES
40% 38%
35%
30% 26%
25%
20% 18%
15%
10%
10% 7%
5%
0%
n t s on s
tio en cie et
c em en ati As
s
du rir g uc
De e t en E d of
x
rR nt en as
e
Ta o dr
r fo tC hi
l rch
Fo e ee u
ov
id M orC rP
Pr To F Fo
To

INVESTMENT OBJECTIVES

The above results are shown with the help of cross tabulation of gender and investment
objectives.

Table-4.22 Gender-Wise Classification of Investment Objectives of the Respondents

Investment Objectives Gender Total

Male Female
For Tax Deduction 41 14 55 (18.33)
To Provide for Retirement 86 29 115 (38.33)
To Meet Contingencies 23 7 30 (10.00)
For Children’s Education 60 20 80 (26.67)
For purchase of Assets 15 5 20 (6.67)
Total 225 75 300
(75) (25) (100)
Source: Field Investigation

The table No 5.22 reveals that, out of 225 male respondents about 86 respondents have
made investment with the objective of providing for retirement. The purchase of assets
being the other objectives which shows that only 5 female respondents have indicated as
investment objective where as 15 of the male respondents have expressed the similar
opinion.

146
 Table-4.23 Age-Wise Classification of Investment Objectives of the Respondents

Investment Age Total

Objectives Below - 30 31-40 41-50 Above 50

For Tax Deduction 8 20 18 9 55 (18.33)

To Provide for 17 42 36 20 115 (38.33)
Retirement
To Meet 5 11 9 5 30 (10.00)
Contingencies
For Children’s 12 30 25 13 80 (26.67)
Education
For purchase of 3 7 7 3 20 (6.67)
Assets
Total 45 110 95 50 300
(15.00) (36.67) (31.67) (16.66) (100)
Source: Field Investigation

The above table shows the age-wise investment objectives of the respondents. About 42
respondents under the age-group of 31-40 years have said that their investment objective is
to provide for retirement. It is interesting to note that an equal number of respondents (3)
who belongs to the age group of below 30 years and above 50 years have said their
objective is purchase of assets. Again it is to be noted that an equal number of respondents
(7) who belongs to the age group of 31-40 years and 41-50 years are shown interest in
purchase of assets. Both the young age and old age people are least bothered about
purchase of assets. But people of middle aged are more interested in purchase of assets.

Table-4.24 Annual Income-Wise Classification of Investment Objectives of the

Respondents

147
 Investment Annual Income (in rupees) Total
Objectives Up to Rs.1,00,001 Rs.3,00,00 Above
Rs.1,00,00 to 1 to Rs.5,00,000
0 Rs.3,00,000 Rs.5,00,00
0
For Tax 12 19 17 7 55 (18.33)
Deduction
To Provide for 25 40 35 15 115 (38.33)
Retirement
To Meet 7 11 8 4 30 (10.00)
Contingencies
For Children’s 17 28 24 11 80 (26.67)
Education
For purchase of 4 7 6 3 20 (6.67)
Assets
Total 65 (21.67) 105 (35.00) 90 (30.00) 40 (13.33) 300
(100)
Source: Field Investigation

Table 5.24 reveals the Annual income of the respondents and their investment objectives.
Out of 105 respondents who falls under the income category of Rs.1,00,001-3,00,000, the
maximum of 40 respondents have an objective of providing for retirement. There are only
3 respondents with income of above Rs.5,00,000 have the objective of purchasing the
asset.

4.15. EXPERIENCE OF INVESTMENT IN MUTUAL FUND:

The experience of an investor in investment is a vital factor for successful investing. The
experience of investors in the field of investment brings out changes in investment
attitude, preference towards investment avenues and the extent of diversification in 245
investment4. Long years of experience help the investor to understand the complex and
behaviour of the market and adopt a suitable strategy for investment. The level of
experience is confined to less than 3 years, 3-5 years, 5-10 years and more than 10 years.
The distribution of investors on the basis of their years of experience in investing in
mutual fund is presented in below table.

148
 Table-4.25 Experience of Investment in Mutual Fund

Experience of Investment No of Percentage Cumulative

Respondents (N) Percentage

Less than 3 years 65 21.67 21.67

3-5 years 87 29.00 50.67
5-10 years 118 39.33 90.00
More than 10 years 30 10.00 100.00
Total 300 100.00
Source: Field Investigation

The above Table 5.25 clearly shows the experience of investment in mutual fund. Out of
300 respondents 118(39.33 percent) belongs to 5-10 years of experience of investment in
mutual fund, 87(29.00 percent) respondents of them are 3-5 years of experience, 65 (21.67
percent) respondents are having the experience of less than 3 years and lastly 30(10
percent) respondents are having more than 10 years of experience of investment in mutual
funds. The same information has been drawn with the help of graph.

Graph-5.14 Experience of Investment in Mutual Fund

EXPERIENCE OF INVESTMENT
45%

40% 39%

35%

30% 29%

25% 22%
20%

15%
10%
10%

5%

0%
Less than 3 yrs 3-5 yrs 5-10 yrs More than 10 yrs

EXPERIENCE OF INVESTMENT

149
4.16. RETURN EXPECTATION OF THE INVESTORS:

Return is the reward for taking the risk. There is a common belief that higher the risk, the higher
will be the return. The investors are interested in investing in securities which optimize the risk–
return trade-off. The investors were administered by their opinion towards return expectation in the
mutual fund. The response collected from the investors were tabulated and presented in the table
5.26.

Table-4.26 Return Expectation of the Respondents

Return Expectation No of Percentage Cumulative

Respondents (N) Percentage

Low return 35 11.67 11.67

Moderate return 49 16.33 28.00
High return 96 32.00 60.00
Very high return 120 40.00 100.00
Total 300 100.00
Source: Field Investigation

The above table reveals the return expectation of the respondents. Out of 300 respondents,
120(40 percent) respondents expects a very high return, 96(32 percent) respondents expect
high return, 49(16.33 percent) respondents have expected a moderate return and lastly
35(11.67 percent) respondents have expected low return while investing in mutual funds.
The data has been depicted with the help of graph.

Graph-5.15 Return Expectation of the Respondents

150
 RETURN EXPECTATION
45%
40%
40%

35% 32%
30%

25%

20%
16%
15% 12%
10%

5%

0%
Low Return Moderate Return High Return Very High Return

RETURN EXPECTATION

The above result is also shown with the help of cross tabulation of gender and income
factors.

Table-4.27 Gender-Wise Classification of Return Expectation by the Respondents

Return Expectation Gender Total

Male Female
Low return 26 9 35 (11.67)
Moderate return 37 12 49 (16.33)
High return 72 24 96 (32.00)
Very high return 90 30 120 (40.00)
Total 225 75 300
(75) (25) (100)
Source: Field Investigation

Table No 5.27 represents the gender-wise classification of respondents and their return
expectation. The analysis of data reveals that both male and female respondents are having
very high return expectation.

Table-4.28 Annual Income-Wise Classification of Return Expectation by the

Respondents
151
 Return Annual Income (in rupees) Total
Expectation Up to Rs.1,00,001 Rs.3,00,00 Above
Rs.1,00,00 to 1 to Rs.5,00,000
0 Rs.3,00,000 Rs.5,00,00
0
Low return 12 19 17 7 35 (11.67)
Moderate return 25 40 35 15 49 (16.33)
High return 7 11 8 4 96 (32.00)
Very high return 17 28 24 11 120 (40.00)
Total 65 (21.67) 105 (35.00) 90 (30.00) 40 (13.33) 300
(100)
Source: Field Investigation

The annual income and return expectation of the respondents is shown in table 5-28. 42
respondents out of 105 who belongs to the income group of Rs.1,00,001-3,00,000 have
indicated the very high return expectation. Irrespective of the income category 40 percent
of the total respondents have very high return expectation.

4.17. PREFERENCE OF INVESTMENT AVENUES OF THE INVESTORS:

Investment is the most important thing today. People are earning handsomely, but do not
know where, when, and how to invest. Today everyone should realize that the financial
planning is a must in order to know where one stands financially and also to focus one‟s
financial efforts in the right direction. A proper understanding of money, its value, the
available investment, various financial institutions, the rate of return etc., should be
planned. There are various investment avenues which are available for the investors for
investing their money for getting a return. The table 5.29 shows the investors preference in
various investment avenues.

Table-4.29 Preference of Investment Avenues of the Respondents

152
 Investment Avenues No of Percentage Cumulative
Respondents (N) Percentage

Bank deposit 55 18.33 18.33

Gold 23 7.67 26.00
Real estate 15 5.00 31.00
Chits 13 4.33 35.33
Pension and provident fund 20 6.67 42.00
Shares 45 15.00 57.00
Mutual funds 26 8.67 65.67
Insurance 76 25.33 91.00
Postal savings 27 9.00 100.00
Total 300 100.00
Source: Field Investigation

The above table reveals the preference of investment avenues of the respondents. Out of
300 respondents 76 (i.e.25.33 percent) respondents preferred insurance, 55 (i.e.18.33
percent) respondents preferred to bank deposits, 45 (i.e15 percent) respondents preferred
shares, 27(i.e.9 percent) respondents for postal savings, 26(i.e.8.67 percent) respondents
preferred in mutual funds, with total of 71(i.e.23.67 percent) respondents preferred in gold,
real estate, chits and pension and provident fund.

4.18. TYPE OF INVESTORS:

The period of holding investment indicates how long the investors hold his investment.
Some investors hold their investments up to 3 years are called as short term investors. The
investors holding investment above the 3 years, they are long-term investors. The period
of holding is very important factor to be considered for investment. In the present study,
the holding period is confined to long term and short term investors. The distribution of
investors on the basis of their holding period is given in the table 5.30.

Table-5.30 Period of Holding Investment in Mutual Funds

153
 Type of Investors No of Percentage Cumulative
Respondents (N) Percentage

Short term (Up to 3 years) 128 42.67 42.67

Long term (Above 3 years) 172 57.33 100.00
Total 300 100.00
Source: Field Investigation

4.19 Awareness of Mutual Funds Schemes:

Awareness of mutual funds schemes is very important for the investors before investing in
various mutual funds schemes, type of the scheme, size of scheme, risk, return, safety,
liquidity etc., in the market.

Table-5.30 Awareness of Mutual Funds schemes by the Respondents

Awareness of Scheme No. of Respondents Percentage

Aware 264 88
Unaware 36 12
Total 300 100.00
Source: Field Investigation

From the above Table 6.1 it is evident that out of 300 respondents, 264 (88 percent)
respondents opined that they are aware about the mutual funds schemes and remaining
36(12 percent) respondents unaware regarding the mutual funds schemes.

4.20 Level of Satisfaction:

Here an attempt has been made to know the level of satisfaction of the respondents with
regards to investment made in mutual funds schemes in the present study. The level of
satisfaction is classified into three categories like low, medium and high.

Table- 4.31 Level of Satisfaction of the Respondent

154
 Level of Satisfaction No. of Respondents Percentage
Low 46 15.33
Medium 173 57.67
High 81 27.00
Total 300 100.00
Source: Field Investigation

The above table 6.2 clearly shows the level of satisfaction of the respondents. Out of 300
respondents 46(15.33 percent) respondents are having low level of satisfaction towards
investment made in mutual funds schemes, 173(57.67 percent) respondents are having
medium level of satisfaction and 81(27 percent) respondents are having high level of
satisfaction in mutual funds schemes. The same information has been graphically
represented.

4.21. Testing of Hypothesis:1

HO: There is no significant relationship between gender of the respondents and their level
of satisfaction towards investment in mutual fund.

H1: There is a significant relationship between gender of the respondents and their level
of satisfaction towards investment in mutual fund.

Table-5.32

Gender and Level of Satisfaction towards Investment in Mutual Fund

Gender Level of Satisfaction Total

Low Medium High
Male 30 155 40 225
Female 16 18 41 75
Total 46 176 81 300
Source: Primary Data.

Table 6.3 shows the testing of hypothesis on relationship between the gender and level of
satisfaction towards investment in mutual fund. It reveals that the null hypothesis has been
rejected and alternative hypothesis is accepted. Hence, it is concluded that there is a
significant relationship between the gender and level of satisfaction of the investors
towards investment in mutual fund.

155
4.22. Testing of Hypothesis:2

HO: There is no significant relationship between age of the respondents and their level of
satisfaction towards investment in mutual fund.

H1: There is a significant relationship between age of the respondents and their level of
satisfaction towards investment in mutual fund.

Table-5.33 Age and Level of Satisfaction Towards Investment in Mutual Fund.

Age Group Level of Satisfaction Total

Low Medium High
Below 30 5 30 10 25
31-40 21 63 26 110
41-50 12 58 25 90
Above 50 8 22 20 50
Total 46 176 81 300
Source: Primary Data.

From the above table it is evident that testing of hypothesis on relationship between the
age and level of satisfaction towards investment in mutual fund. It is evident that the null
hypothesis has been accepted and alternative hypothesis is rejected. It can be concluded
that there no significant relationship between the age and level of satisfaction of the
investors towards investment in mutual fund.

4.23. Testing of Hypothesis:3

HO: There is no significant relationship between the marital status of the respondents and
their level of satisfaction towards investment in mutual fund.

H1: There is a significant relationship between the marital status of the respondents and
their level of satisfaction towards investment in mutual fund.

Table-5.34 Marital Status and Level of Satisfaction Towards Investment in Mutual

Fund

Marital Status Level of Satisfaction Total

156
 Low Medium High
Married 34 155 40 225
Unmarried 12 18 41 75
Total 46 176 81 300

Table above clearly shows the testing of hypothesis on relationship between the marital
status and level of satisfaction towards investment in mutual fund. It reveals that the null
hypothesis has been rejected and alternative hypothesis is accepted. It can be concluded
that there is a significant relationship between the marital status and level of satisfaction of
the investors towards investment in mutual fund.

4.26. Testing of Hypothesis:4

HO: There is no significant relationship between educational qualification of the

respondents and their level of satisfaction towards investment in mutual fund.

H1: There is a significant relationship between educational qualification of the

respondents and their level of satisfaction towards investment in mutual fund.

Table-5.36 Educational Qualification and Level of Satisfaction Towards Investment

in Mutual Fund

Educational Level of Satisfaction Total

Qualification Low Medium High
Primary 5 30 10 25
Secondary 11 33 26 110
Graduate 12 58 25 90
Post Graduate 8 22 10 50
Professional Degree 10 20 10 40
Total 46 176 81 300
Source: Primary Data.

Table reveals that testing of hypothesis on relationship between the educational

qualification and level of satisfaction towards investment in mutual fund. It is evident that
the null hypothesis has been rejected and alternative hypothesis is accepted. It can be
concluded that there is a significant relationship between the educational qualification and
level of satisfaction of the investors towards investment in mutual fund.

157
4.27. Testing of Hypothesis:5

HO: There is no significant relationship between the occupational status of the

respondents and their level of satisfaction towards investment in mutual fund.

H1: There is a significant relationship between the occupational status of the respondents
and their level of satisfaction towards investment in mutual fund.

Table-5.37 Occupational Status and Level of Satisfaction Towards Investment in

Mutual Fund

Occupation Level of Satisfaction Total

Low Medium High
Self employed 4 31 16 25
Business 10 32 20 110
Salaried 13 58 25 90
Profession 9 22 10 50
Retired 10 20 10 40
Total 46 176 81 300
Source: Primary Data.

Table shows the testing of hypothesis on relationship between the occupational status and
level of satisfaction towards investment in mutual fund. It reveals that the null hypothesis
has been 264 accepted and alternative hypothesis is rejected. It can be concluded that there
is no significant relationship between the occupational status and level of satisfaction of
the investors towards investment in mutual fund.

4.30. CONCLUSION:

Investment is the allocation of funds to assets and securities after considering their return
and risk factors. The investor plans for long horizon after considering the fundamental
factors and assumes the moderate risk. The main objectives of rational investors are
maximizing returns and minimizing risk, safety of the principle, tradebility and liquidity.
The investors are having the option to invest money in mutual funds and other financial
instruments like equity shares, debentures, bonds, warrant and bank deposits. A common
investors who invests their savings into the different assets are not very much aware of the
mutual funds. Financial markets are constantly becoming more efficient by providing
more promising solutions to the investor. The study reveals that the investors are more

158
interested in high return on their investment and at the same time they want to play safe by
choosing the investment duration.

159
CHAPTER 5: FINDINGS, SUGGESTIONS AND
CONCLUSION OF THE STUDY

160
 CHAPTER-V

FINDINGS, SUGGESTIONS AND CONCLUSION OF THE STUDY

7.1. INTRODUCTION:

The study analyses about the investors perception and preferences towards the mutual
funds. It explains that many investors prefer to invest in the mutual fund in order to have
high returns at the low level of risk, safety and liquidity. The world of investment has been
changing day-by-day. So, investors perception and preferences towards investment pattern
have changed. The investors behavioural aspects, performance and their investment
decision are highly influenced by their socio-economic profile as well as the investment
characteristic. After reviewing the literature, researcher considers age, gender, education,
occupation, marital status and annual income for the socio-economic profile and other
mutual fund investment details as the profile of investors.

Here an attempt is being made to recapitulate the main findings of the study and offer
some suggestions to popularise the mutual funds.

7.2. FINDINGS:

The following are some of the important findings of the present study.

1. It has been found that majority (75 percent) of the respondents belong to male category.
It may be because of more awareness and knowledge when compared to female
respondents.

2. It is found that 36.67 percent and 31.67 percent of the respondents belong to the age
group of 31-40 years and 41-50 years respectively. Normally when a man reached at the
age of 30 years he/she feels that more necessity for investing in mutual funds schemes for
the future benefits and safety.

3. It is found from the present study that 40 percent and 30 percent of the respondents
belong to graduate and postgraduate respectively. It indicates that educated people are
showing more interest in investing in mutual funds schemes.

4. It is found in the present study that majority of the respondents i.e. 140 belongs to
salaried class who have invested more in mutual funds schemes. It may be because of
regular income earned by the salaried persons, future safety and assured benefits of
investment in mutual funds schemes.

161
5. It is found that majority i.e.255 (85 percent) of the respondents are married people.
Married persons are having more responsibility when compared to an unmarried person.

6. It is found that 105 (i.e.35 percent) of the respondents belongs to annual income group
of Rs.1,00,001-Rs.3,00,000 followed by 90 (i.e30 percent) respondents in the category of
Rs.3,00,001- Rs.5,00,000. So, it indicates that people who belong to the middle class
category are investing more in mutual funds. Income means what a person acquires in
return for his/her service. Income is one of the most decisive factors. It is essential to
know the socio-economic status of any group in the society.

7. It can be observed that 105 (i.e.35 percent) of respondents annually save their money
between Rs.50,001-Rs.1,00,000 for investing.

8. It is found that 105(i.e.35 percent) of the respondents are invested their money in
mutual funds schemes is less than Rs.5,000. Followed by 72(i.e.24 percent) of the
respondents Rs.5,001-Rs.10,000, 53(i.e.17.67 percent) of the respondents Rs.10,000-
Rs.20,000. It may be the reason that minimum amount of investment in mutual funds
schemes is Rs.5,000.

9. It can be observed that more number of respondents have got information about the
mutual funds schemes through brokers (90 respondents) and advertisement (73
respondents).

10. It is found that 110 (i.e.36.67 percent) of the respondents belongs to 6 to 8 size family
members followed by 30 percent who are above 8 members.

11. It is found in the study that 180(i.e.60 percent) of the respondents used brokers as
channels for investing in mutual funds schemes.

12. It is observed that 60 (i.e.20 percent) and 45 (i.e.15 percent) of the respondents have
invested in the growth and tax savings funds. The reason is that growth fund provides the
regular income and capital appreciation and tax saving scheme offer a tax exemption for
investors.

13. It is noticed that 194(i.e.64.67 percent) of the respondents have paid money through
cheques. It can be said that they felt safety of their money to transact through banks for
investment in mutual fund schemes.

162
14. It is found that 125 (i.e.41.67 percent) of the respondents have invested money in
mutual funds schemes on yearly basis. Some investors have invested when the market
value of scheme is high. Many people invested on regular basis and some of them invested
occasionally.

15. It is found that according to garret ranking techniques 1st rank is given by the
respondents for pension and provident fund and last rank (10th) for chits while giving
preference to various investment avenues by the investors.

16. It is found that 119 (i.e.39.67 percent) and 67 (i.e.22.33 percent) of the respondents
have expected a high return and tax exemption as the reason for investment in mutual
funds schemes respectively. It is because of mutual funds schemes that provide regular
and high return and tax benefits for the investors.

17. It is found that 106 (i.e.35.33 percent) of the respondents are expected the proper
balanced risk of their investment in mutual funds schemes. Every investment is risky
because some risks are controllable by the investors and some of them issuers of securities
by planning. Others cannot be so controlled and they are to be borne compulsorily by the
investor.

18. It is found that 114 (i.e.38 percent) and 83 (i.e.27.67 percent) of the respondents have
expected very high safety and high safety of their investments in mutual funds schemes
respectively. It may be because of the safety that one of the attributes for the investment.

19. It is found that 118 (i.e.39.33 percent) of the respondents have 5-10 years of
experience in investing mutual funds schemes. Experience is very important factor to be
considered in mutual funds schemes because of more experience investors, have the more
knowledge about the risk, return, safety and liquidity.

20. It is found that during the study period growth of Asset Under Management (AUM)
has increased from Rs.1,49,600 crores in the year 2004-05 to Rs.8,25,240 crores during
the year 2013- 14.

21. It is found that the number of custodians and amounts has increased from 639 and
Rs.1,26,286 crores in the year 2004-05 to 1815 and Rs.7,65,820 crores during the year
2013-14.306

163
22. It has been found that during the study period total resource mobilisation by mutual
funds industries increased from Rs. 8,39,708 crores in the year 2004-05 to Rs.97,68,100
crores during the year 2013-14.

23. It is observed that highest scheme-wise resource mobilisation by mutual funds

industries are income/debt scheme which increased from Rs.7,98,673 crores in the year
2004-05 to Rs.97,09,762 crores during the year 2013-14.

24. It is found that SEBI registered market intermediaries/ institutions increased from 39
in the year 2004-05 to 50 during the year 2013-14.

25. It is found that majority of the respondents i.e.61.7 percent are agreed that mutual
funds are useful for small investors.

26. It has been found that 49 percent of the respondents are agreed that the mutual funds
give higher returns than other investments.

27. It is found that 46.4 percent of the respondents are agreed that mutual funds with large
corpus of fund perform better in the market.

28. It is found that most of the respondents (i.e.47.7 percent) are agreed that public sector
mutual funds are more secured than private sector mutual funds.

29. It is found that 53.6 percent respondents are agreed that public sector mutual funds
perform better.

30. It is found in the present study that 57 percent of the respondents are agreed that
mutual funds have better professional expertise than individual investor.

31. It is found that 52.6 percent of the respondents are agreed that there is a total
transparency in mutual funds operations.

32. It was found that 65.3 percent of the respondents are agreed that returns from mutual
funds are more than expected.307

33. It is found in the present study that 65.9 percent of the respondents are agreed that
mutual funds provide easy withdrawal facilities to investors.

34. It is found that 59.3 percent of the respondents are agreed that mutual funds provide
better tax benefits to investors.

164
35. It is found in the present study that 58.3 percent of the respondents are agreed that
management costs charged to the funds are reasonable.

36. It is found in the present study that 64 percent of the respondents are agreed that
mutual funds provide innovative schemes with different objectives to the investors.

37. It is found that 68.6 percent of the respondents are agreed that the regulatory bodies
like SEBI and others are able to control funds properly.

38. It is found in the present study that 64.3 percent of the respondents are agreed that the
mutual funds are healthy for Indian environment.

39. It is found that 72 percent of the respondents are agreed that information on mutual
funds is easily available to the investors.

7.3. SUGGESTIONS:

The following suggestions have been offered in the light of findings.

1. Investor education is a very important factor for Indian environment. Research and
awareness programmes should be conducted for investors.

2. During the period of the study, it was found that majority of the investors invest their
money in growth and tax saving fund. This indicates that more effort has to be made by
the mutual funds to create awareness among the investors regarding the earning potential
of their schemes.

3. Education also plays a key role in mutual fund investment. Highly qualified persons use
the internet for getting the information. Their behaviour of getting information is different
from other respondents. Mutual funds companies should update their websites regularly.

4. Mutual funds companies should launch new and innovative schemes according to the
varied needs of the investors. There is a lack of innovative products in the market. People
have the capacity to invest and this capacity has to be explored by the mutual funds
companies. With the increasing awareness among the retail investors about capital
markets, the mutual funds companies should come up with innovative schemes to fulfill
the requirement of the retail investors.

165
5. Mutual funds companies should dispatch their annual report in time to their investors so
that the investors are informed about the companys financial position. This will help the
investor to know the status of their investment and plan further.

6. Mutual funds company should develop varied products with the different risk-return
combination in order to meet the investment needs of different categories.

7. Safety is the most important attributes of investment. Most of the investors have
expected more safety of their investment. So it is suggested that mutual funds company
should give more preference to safety of money.

8. Mutual funds company is not providing information adequately regarding their

schemes. Therefore it can be suggested that mutual fund company should provide the
information to investors through newspapers, prospects, magazines etc in time.

9. The minimum amount of investment in various schemes of mutual fund is i.e.Rs.5,000,

it should be reduced to Rs.500 so that it will help to the people with low and middle-
income group to invest in the mutual fund schemes.

10. Mutual fund company should properly maintain its investment portfolio to provide
better services to its unit holders.

11. It should be mandatory for mutual fund companies to establish investor grievance cell.
A separate ombudsman scheme should be initiated for redressing the grievances of mutual
fund investors effectively. Each mutual fund should be required to establish its own
investor‟s grievance cell. This will help to sort out investor‟s grievance.

12. Mutual funds should build investors confidence through schemes meeting the
diversified needs of investors, speedy disposal of information, improved transparency in
operation, better customer service and assured benefits of professionalism.

13. It is suggested that the investors should not consider only one or two factors for
investing in mutual fund but they should consider other factors such as higher return,
degree of transparency, efficient service, fund management and Reputation of mutual fund
in selection of mutual funds.

14. Innovative technologies like integration of fund managers, dematerialization, online

trading, creation and development of web pages must be brought in mutual fund markets
for its growth and attracting the educated investors.

166
15. Investors are the hub of the mutual funds market. Their satisfaction is the most
important factor. Hence, the satisfaction of the investor should be ensured by providing
safety, return and liquidity for their investments.

16. Investors should think before investing, collect and analyze enough information about
the funds plan to invest. Try to know the AMC, fund manager and his experience and
research section of the particular fund which is selected for investment.

5.4. CONCLUSION:

Mutual funds companies should come forward with full support for the investors in terms
of advisory services, participation of investors in portfolio design, ensure full disclosure of
related information to investors, and ensure that proper consultancy is given by mutual
fund companies to the investors in understanding the terms and conditions of different
mutual fund schemes, such as type of fund designing should be promoted that will ensure
the satisfaction of the needs of the investors. Mutual funds information should be
published in an investor-friendly language and style to educate investors. It should be
developed by mutual fund companies so as to enable the investors to analyze the risks
associated with investments made by them.

There has been a tremendous growth in the mutual fund industry in India, attracting large
investments not only from the domestic investors but also from the foreign investors. The
growing middle-class household families with limited risk-bearing capacity, it provides
better returns than any other long-term securities. The high rate of savings and a rapid
liberalizing economy is expected to elevate the mutual fund sector to new hikes. Today, a
lot of investment opportunities are available to the investors in the financial markets.
According to the investors opinion, the main reason for the quick popularity of the mutual
funds is the guarantee to redeem at net asset values. The investors have realized the
benefits of investing in mutual funds.

5.5. SCOPE FOR FURTHER RESEARCH:

Mutual Fund is a wide area of research that no single study can cover its different
dimensions. Based on the study done by the researcher, the following areas are identified
for further research. Since the present study is restricted to South Mumbai, it could be
extended to the state level and subsequently to the national level. Attitudes of institutional
and corporate investors towards mutual funds. A comparative study of investors

167
perceptions and attitude towards mutual funds between the two cities, one of them should
be a metropolitan area. Investors attitude towards a particular asset management
company’s funds may be analyzed. Study on the mutual funds investment style. The
performance of mutual funds industry in India.

BIBLIOGRAPHY

168
BIBLIOGRAPHY

BOOKS:

1. Amitabh Gupta (2002) “Mutual Funds in India”, Anmol Publication Pvt. Ltd, New
Delhi.

2. Bansal Lalith K (1997) “Mutual Fund-Management and Working”, Deep and Deep
Publishers, New Delhi.

3. Bharti V. Pathak (2003) “Indian Financial System” Pearson Education Pvt. Ltd., New
Delhi.

4. Chander, R (2002) “Performance Appraisals of Mutual Funds in India”, Excel Books,

New Delhi.

5. E.Gordon and K.Natarajan (2003) “Financial Markets and Services”, Himalaya

Publishing House, New Delhi.

169
6. Francies Cherunilam(2007) “Business Environment” Himalaya Publishing House, New
Delhi.

7. Gurusamy S(2004),“Financial Services and System, Vijay Nicole Imprints Pvt. Ltd.,
Chennai, p.268.

8. H.R.Machiraju (2007) “Financial Management”, Vikas Publishing House Pvt. Ltd.,

New Delhi.

9. Ingle D.V. (2013) “Mutual Funds in India” New Century Publications, New Delhi.

10. Jayadev M (1998) “Investment Policy and Performance of Mutual Funds” Kanishka
Publishers, New Delhi.

11. Krishnamurthi S (1997) “Genesis of Mutual Funds in India”, Vision Books, New
Delhi.

12. L.M.Bhole (2006) “Financial Institutions and Markets” Tata McGraw Hill, New Delhi.

13. Nalini Prava Tripathy, (2007) “Mutual Funds in India: Emerging Issues” Excel Books,
New Delhi.

14. Punithvathy Pandian(2006) “Security Analysis and Portfolio Management” Vikas

Publishing House Pvt. Ltd., New Delhi.314

15. Ralph G. Norton (1999) “Investing for Income A Bond Mutual Fund Approach to
High-Return, Low-Risk Profits”, McGraw-Hill Professional Publishing, New York.

16. Rao Mohana P (1998) “Working Of Mutual Fund Organisations In India”, Kanishka
Publishers, New Delhi.

17. Ravi.M.Kishore (2009) “Financial Management”, Taxmann Allied Services (P) Ltd.,
New Delhi.

18. Sadhak, H. (2003) “Mutual Funds in India Marketing Strategies and Investment
Practices”, Response Books New Delhi.

19. Singh,D (2003) “Mutual Funds in India”, Rajat Publication New Delhi.

20. Stephen.P.Robbins (2003) “Organisational Behaviour” Prentice – Hall India.

21. Sundar Sankaran (2012) “Indian Mutual Funds Hand Book” Vision Books Pvt. Ltd,
Delhi.

170
22. V.A.Avadhani (2003) “Investment Management”, Himalaya Publishing House, New
Delhi.

23. V.K.Bhalla (2004) “Investment Management”, S. Chand & Company Ltd., New Delhi.

24. Vasant Desai (2005) “The Indian Financial System and Development”, Himalaya
Publishing House, New Delhi.

ARTICLES & JOURNALS:

1. Agrawal, Ashok Motilal, (2000) “Mutual Funds- Emerging Trends and Prospects”,
Finance India, Vol. XIV (4), December, pp.1271-1275.

2. Angol (1992) “Role of Self-Regulatory Organisation in Mutual Fund Industry in India”,

Chartered Financial Analyst, Vol.7 (1), p.11.

3. Ansari (1993) “Mutual Funds in India: Emerging Trends”, The Chartered Accountant,
Vol. 42(2), August, pp.88-93.315

4. Arditti (1971) “Another Look at Mutual Fund Performance”, Journal of Financial and
Quantitative Analysis, Vol. 3, pp.909- 912.

5. Bansal L K, (1991) “Challenges For Mutual Funds in India”, Chartered Secretary, Vol.
21(10), October, pp.825-26.

6. Bansal, Manish (2003) “Mutual Funds: Eight Steps to nirvana”, Chartered Financial
Analyst, Vol. 9(12), December, pp.34-40.

7. Batra and Bhatia, (1992) “Indian Mutual Funds: A study of Public sector”, paper
presented UTI Institute of Capital Market, Mumbai.

8. Deepak Agrawal, (2011) “Measuring Performance of Indian Mutual Funds” Finance

India, Available at SSRN: http://ssrn.com/abstract=1311761

9. Elango R, (2004) “Which fund yields more returns?” The Management Accountant,
Vol.39 (4), p.283-290.

10. Fama, (1972) “Components of Investment Performance”, Journal of Finance, Vol.27,

pp.551-567.

11. Friend, Blume, Crockett, (1970) Mutual Funds and Other Institutional Investors – A
new perspective, McGraw Hill Book Company, New York.

171
12. Fund Meyer, (1977) “Further Applications of Stochastic Dominance to Mutual
Performance”, Journal of Financial and Quantitative Analysis, Vol. 12, pp.917-924.

13. G.Prasad, T.V.V.Phani Kumar and Umesh Maiya (2008) “Growth of Mutual Fund
Industry in India”, Southern economist, Vol. 46, No. 23 & 24, April 1 & 15, pp.15-18.

14. G.V. Narasimhan (2013) “Mutual Funds: A Change in Indian Investment Perspective”
Southern economist, Vol.51, No.20, February 15,

15. Gangadhar V (1992) “The Changing Pattern of Mutual Funds in India”, The
Management Accountant, Vol. 27 (12), December, pp.924-28.316

16. Garg, Sanjay (2011) “A Study on Performance Evaluation of Selected Indian Mutual
Funds”, International Journal of Innovation Creativity and Management (IJICM), Vol.1
(1), pp.1- 10.

17. Guha.S (2008) “Performance of Indian Equity Mutual Fund visà-vis their Style
Benchmarks”, The ICFAI Journal of Applied Finance, Vol.14, No.1, pp.49-81.

18. Gupta Amitabh (2000) “Investment Performance of Indian Mutual Funds: An

Empirical Study”, Finance India, Vol. XIV (3), September, pp.833-866.

19. Gupta Amitabh, (2001) “Mutual Funds in India: A Study of Investment Management”,
Finance India, Vol. XV (2), June, pp.631-637.

20. Gupta L C, (1992) Mutual Funds and Asset Preference, Society for Capital Market
Research and Development, First Edition, New Delhi.

21. Gupta O P and Sehgal, Sanjay (1998) “Investment Performance of Mutual Funds: The
Indian Experience”, Paper Presented in Second UTI-ICM Capital Markets Conference,
December 23-24.

22. Gupta, (1974) “The Mutual Fund Industry and Its Comparative Performance”, Journal
of Financial and Quantitative Analysis, Vol.6, p.894.

23. Gupta, Ramesh (1989) “Mutual Funds”, The Management Accountant, Vol. 24(5),
May, pp.320-322.

24. Hitesh S.Viramgami (2009) “Resource Mobilization by Indian Mutual Fund Industry”,
Indian Journal of Finance, Vol. III No.3, pp.33-38.

172
25. Irissappane, Aravazhi (2000) “Paradigm Shifts In The Performance Of Indian Mutual
Funds: An Analysis With Reference To Close-Ended Funds Of Selected Institutions”, UTI
Institute of Capital Markets, Mumbai.

26. Irwin, Brown, FE, et al., (1965) “A Study of Mutual Funds: Investment Policy and
Investment Company Performance” 317 reprinted in Hsiu-kwangwer and Alan Jzakon
(Ed.) Elements of Investments, New York: Holt, Renchart and Winston, pp.371- 385.

27. J.S. Yadav and O.S. Yadav (2012), “The Indian Stock Market: A Comparative Study
of Mutual Funds and Foreign Institutional Investors” Indian Journal of Finance, Vol. 6 No.
9.

28. Jayadev M, 1996“Mutual Fund Performance: An Analysis of Monthly Returns”,

Finance India, Vol. X (1), March, pp.73-84.

29. Jensen Michael C (1968) “The Performance of Mutual Funds In the Period 1945-
1964”, Journal of Finance, Vol. 23, pp.389-416.

30. Kale and Uma, (1995) “A Study on the Evaluation of the Performance of Mutual
Funds in India”, National Insurance Academy, Pune, India.

31. Kevin S., (2006), Portfolio Management, Prentice Hall of India Pvt. Ltd, New Delhi,
p.10.

32. Klemosky, (1973) “The Bias in Composite Performance Measures”, Journal of

Financial and Quantitative Analysis, Vol. 8, pp.505-514.

33. Klemosky, (1977) “How Consistently Do Managers Manage”, Journal of Portfolio

Management, Vol.3, pp.11-15.

34. Kumar V K, (1999) “In Search Of Turnaround Strategies for Mutual Fund Industry”,
The Management Accountant, (May 1999) Vol. 34(5), pp.337-343.

35. Lakshmi.R (2009) “Investor Servicing: Where is the Future?” Southern Economist.
Vol.44 (18), May, pp.64.

36. Lal C and Sharma Seema, (1992) “Mutual Fund-A Buoyant Financial Instrument”,
Finance India, Vol. VI (4), December, pp.11-18.

37. Martin J. Pring, (1976), Investment Psychology Explained, John Wiley & sons Inc,
New York, p.30.

173
38. Matthew,Tingchi Liu, (2007), „Segment Variables Of Chinese Mutual Fund Individual
Investors‟, Investment Management and Financial Innovations, Volume 4, Issue 4,
p.101318

39. McDonald and John, (1974) “Objectives and Performance of Mutual Funds, 1960-69”,
Journal of Financial and Quantitative Analysis, Vol. 9, pp.311-333.

40. McKelvey Kent J.(1966) “Intangible Factors in Stock Evaluative”, Financial

Executive, August.

41. Muthappan P K & Damodharan E (2006) “Risk-Adjusted Performance Evaluation of

Indian Mutual Funds Schemes”, Finance India, Vol. XX (3), September, pp.965-983.

42. Narasimhan M S and Vijayalakshmi S (2001) “Performance Analysis of Mutual Funds

in India”, Finance India, Vol. XV (1), March, pp.155-174.

43. Noronha, M.R (2007) “Performance Evaluation of Equity Based Mutual Funds: A case
study of Three Assets management companies in India”, The Management Accountant,
Vol.42 (7), July, pp.527-534.

44. P Alekhya, (2012) “A Study on Performance Evaluation of Public & Private Sector
Mutual Funds in India”, Asia Pacific Journal of Marketing & Management Review, Vol.1
No. 2, October, pp.147 – 168.

45. P.Kumaresan (2012) “A Study on Asset Under Management of Indian Mutual Fund
Industry”, Namex International Journal of Management Research, Vol.2, Issue No.2 July-
December, pp.17- 22.

46. Prabakaran, G and Jayabal (2010) G Performance Evaluation of Mutual Fund Schemes
in India: An Empirical Study. Finance India, Vol.24 (4), 2010, pp.1347-1363.

47. Rajarajan, V. (2003) “Investors Demographics and Risk Bearing Capacity “, Finance
India, Vol.17 (2), pp.565-576.

48. Ramamurthy B.M. And Reddy S (2005) “Recent Trends in Mutual Fund Industry”
SCMS Journal of Indian Management.

49. Ramesh Chander (2000) “Performance Appraisal of Mutual Funds in India”, Finance
India, Vol.XIV (4), December, pp.1256- 1261.319

174
50. Roger E. Potler (1970) “Motivating Factor Guiding the Common Stock Investor”, The
Journal of Finance, 25 December, p.1184.

51. Roshni Jayam (2002) “Debt Be Not Proud, Equity‟s Back”, Business Today, April,
p.42.

52. S. Mohannan (2006) “Mutual Fund Industry in India; development and growth”,
Global Business and Economics Review. Vol. 8, No. ¾, pp.280-289.

53. Saha Asish and Rama Murthy Y Sree (1993-94) “Managing Mutual Funds: Some
Critical Issues”, Journal of Social and Management Science, Vol. XXII (1), pp.25-35.

54. Saha, Tapas Rajan (2003) “Indian Mutual Fund Management”, Management
Accountant, Vol. 38(10), October, pp.765-771.

55. Sahadevan S and Thiripalraju M, (1997) “Mutual Funds: Data Interpretation and
Analysis”, Prentice Hall of India Private Limited, New Delhi.

56. Sahoo,P.K. and P.R. Hathy (2007) “Prediction of Mutual Funds: Use of Neural
Network Technique” The ICFAI Journal of Applied Finance, Vol.13(13), pp.5-15.

57. Sahu R K (1992) “A Critical Review of the Mutual Fund Regulations”, Chartered
Secretary, Vol. 22(12), December, pp.1076-1078.

58. Sahu R K and Panda J (1993) “The Role and Future of Mutual Funds in India”,
Management Accountant, February, pp.1-3.

59. Sanjay Kant Khare (2007) “Mutual Funds: A Refuge for Small Investors”, Southern
Economist, January 15, pp.21-24.

60. Santhi N., G.B (2013) “The Growth of Mutual Funds & Regulatory Challenges”,
Indian Journal of Applied Research, III (5).2013.

61. Sarkar A K, (1991) “Mutual Funds in India - Emerging Trends”, The Management
Accountant, Vol. 26 (3), March, pp.171-174.

62. Sathis D, (2004) “Investors Perceptions: A Survey by MARCH Marketing

Consultancy & Research”, Chartered Financial Analyst, Vol. 10(7), July, pp.35-36.320

63. Shah Ajay and Thomas Susan (1994) “Performance Evaluation of Professional
Portfolio Management in India”, paper presented, CMIE, 10 April.

175
64. Sharath Jutur, (2004) “Evaluating Indian Mutual Funds”, Chartered Financial Analyst,
July, p.83.

65. Sharma, D. (2013) “Performance evaluation of Indian Equity Mutual Funds”, The
Indian Journal of Commerce, Vol.66 (2), April.

66. Shashikant, Uma (1993) “Accounting Policy and Practices of Mutual Funds: The Need
for Standardization”, Prajan, Vol. XXIV (2), pp.91-102.

67. Shukla and Singh, (1994) “Are CFA Charter Holders Better Equity Fund Managers”,
Chartered Financial Analysts, Vol. 2, pp.68-74.

68. Singh, Jaspal and Subhash Chander, (2003) “What Drives the Investors towards
Mutual Funds: An Empirical Analysis”, The ICFAI Journal of Applied Finance, Vol. 9(8),
November, pp.38- 46.

69. Smith and Tito (1969) “Risk-Return Measures of Post-Portfolio Performance” Journal
of Financial and Quantitative Analysis, Vol. 4, pp.449-471.

70. Sondhi H J and Jain P K, (2005) “Financial Management of Private and Public Equity
Mutual Funds in India: An Analysis of Profitability”, The ICFAI Journal of Applied
Finance, July, pp.14-27.

71. Tripathy, Nalini Prava, (1996) “Mutual Fund in India: A Financial Service in Capital
Market”, Finance India, Vol. X (1), March, pp.85-91.

72. Usha Rekha (2012) “Growth of Indian Mutual Fund Industry-A Review”, Orient
journal of law and social sciences, Vol.VI, issue2, January, pp.50-60.

73. Value Research India Pvt. Ltd,(1996) “Mutual Fund” Delhi, India. 321

74. Venkateshwarlu M (2004), “Investors‟ Perceptions of Mutual Funds”, Southern

Economist, January 15, pp.14-16.

75. Venugopalan S, (1992) “Mutual Funds”, Chartered Secretary, Vol. XXII (8), August,
pp.691-694.

76. Vidhyashankar S, (1990) “Mutual Funds: Emerging Trends in India”, Chartered

Secretary, Vol. 20(8), August, pp.639-640.

77. Williamson, (1972) “Measurement and Forecasting of Mutual Fund Performance:

Choosing an Investment Strategy”, Financial Analysts Journal, Vol. 28, pp.78-84.
176
78. Yadav R A and Mishra, Biswadeep (1996) “Performance Evaluation of Mutual Funds:
An empirical analysis”, MDI Management Journal, Vol. 9(2), July, pp.117-125.

THESIS & DISSERTATION:

THESIS & DISSERTATION:

1. Chetna.T. Parmar( 2010) “An Empirical Investigation on Performance of Mutual Fund

Industry in India.” a published thesis: Saurashtra University, Rajkot.

2. Karigoleshwar S.F (2007) “Investment in Mutual Fund: A study of investors in

Gulbarga city”, an unpublished dissertation: Gulbarga University, Gulbarga.

3. Lakshmi.N (2007) “Performance of the Indian Mutual Fund Industry: A Study With
Special Reference to Growth Schemes”, a published thesis: Pondicherry University,
Puducherry.

4. Leelamma.M (2004) “Performance Appraisal of SBI Mutual Funds with special

reference to Kerala State”, a published thesis: Mahatma Gandhi University, Kottayam.

5. Mamta Bantra (2010) “Marketing Practice of Mutual Funds”, a published thesis:

Maharshi Dayanand University Rohtak.

6. Meenakshi Garg (2014) “A Study on Performance Evaluations of Selected Mutual

funds in India”, a published thesis: Maharishi Markandeshwar University, Haryana.322

7. Megil Subha(2009) “Attitude of Investors towards Mutual Fund”, an unpublished

dissertation: Manonmaniam Sundaranar University, Tirunelveli.

8. Miglani S.K (2006) “Performance Appraisal of Mutual Funds in India: Empirical

Evaluation of Risk and Timing Performance”, an unpublished thesis: Maharshi Dayanand
University, Rohtak.

9. Naushad Alam (2010) “Indian Mutual Funds Industry since Liberalization: A Case
Study of HDFC Mutual Fund”, an unpublished thesis: Aligarh Muslim University Aligarh.

10. Raja Mannar B. (2013) “Performance of Mutual Funds in Private Sector Banks”, an
unpublished thesis: Sri Venkateswara University, Tirupati.

11. Ramesh Chander (2000) “Performance Appraisal of Mutual Funds in India”, Finance
India, Vol.14, No.4, pp.1256-1261.

177
12. Shome, (1994) “A Study of Performance of Indian Mutual Funds”, unpublished thesis:
Bundelkhand University, Jhansi.

13. Wangal K.A (1999) “The functions of Unit Trust of India and its Contribution in
Indian Economy: 1985 to 1995”, an unpublished thesis: RTM University Nagpur.

178
179