A Study on the Preference of Investors for Mutual Funds as

an Investment Avenue and its Performance Evaluation with

reference to

Project Report
Submitted
In partial fulfilment of the fourth semester requirement for the

Award of the degree

of
Master of Business Administration
of
Mahatma Gandhi University, Kottayam
by
Submitted by

NEHA S
(Reg No. 22214451)

Under the Guidance of

Ms. Anney Chacko
Assistant Professor

2022 - 2024
 DECLARATION

I Neha S (Reg. No. 22214451) hereby declare that the entire work embodied in this report
entitled “A STUDY ON THE PREFERENCE OF INVESTORS FOR MUTUAL FUNDS
AS AN INVESTMENT AVENUE AND ITS PERFORMANCE EVALUATION” has been
carried out by me under the supervision and guidance of Ms. Anney Chacko, Assistant
Professor, Department of Business Administration, St. Berchman’s College,
Changanacherry (Autonomous) in partial fulfilment of the fourth semester requirements for
the award of the degree of Master of Business Administration.

I also declare that this record of own work done by me during the course of my study has not
been submitted to Mahatma Gandhi University or any other university or institution for the award
of fellowship, degree or diploma and this represent my independent work.

Place: Changanacherry NEHA S.

Date:
 ACKNOWLEDGEMENT

If words are considered as a symbol of approval and token of Acknowledgement, then the
following words play the heralding role of expressing my gratitude. A great deal of time and
much effort has gone into developing and researching the project. A lot of people have
participated directly or indirectly in the completion of this project.

Above all, I believe that, it is the Grace of God which led me to complete this project work
successfully in the stipulated time.

I owe special deft to Rev. Fr. Reji P Kurian, Principal of St. Berchaman’s College
Changanacherry (Autonomous) for his over whelming support and direction.

I sincerely express my deep gratitude to Dr Thomas Varghese, Director of Berchman’s

Institute of Management Studies, Changanacherry for the support and encouragement, he has
given to me.

I would like to thank Prof. Joychen Manuel, Head of the Department of Business
Administration for his kind cooperation and providing me with the academic support.

I am beholden to Ms. Anney Chacko, Faculty Guide and Assistant Professor of Department
of Business Administration, for the valuable guidance and suggestion and the spirit behind the
scene to bring the project in the present shape.

Last but not least I would not be doing justice myself, if I do not thank my parents, family
members, friends and all the loved ones for the support, encouragement and help given to me.
 EXECUTIVE SUMMARY

This research project delves into the preferences of investors regarding mutual funds, focusing
specifically on the performance evaluation of ICICI Prudential Mutual Fund. The study
encompasses a diverse demographic, shedding light on investor profiles, attitudes, and
decision-making factors. Notably, the majority of respondents express a preference for mutual
funds, with an emphasis on the historical performance of funds as a crucial factor in their
investment decisions. The project also explores the correlation between investor preferences
and personal income, revealing a significant positive relationship.

In assessing the performance of mutual funds, a detailed examination of ICICI Prudential

Mutual Fund provides valuable insights. The fund's historical performance, risk tolerance, and
investor behaviour are scrutinized to offer a comprehensive evaluation. The study identifies
areas of strength and potential improvement, providing actionable recommendations to
enhance investor satisfaction and engagement with ICICI Prudential Mutual Fund. The
project's findings contribute not only to academic research but also offer practical implications
for investors and fund managers alike.

In conclusion, this research project serves as a robust exploration of investor preferences for
mutual funds, specifically within the context of ICICI Prudential Mutual Fund. The findings
underscore the importance of historical performance in shaping investor decisions and provide
a nuanced understanding of the factors influencing mutual fund choices. The executive
summary encapsulates the project's significance, offering a concise yet comprehensive
overview for stakeholders, investors, and industry professionals interested in the dynamics of
mutual fund preferences and performance evaluation.
 CHAPTER - 1

INTRODUCTION
1.1 Background of the Study

The financial sector in India has undergone a transformative journey, marked by substantial
reforms and developments in the financial markets. This evolution has been instrumental in
shaping the investment landscape, with Mutual Funds (MFs) emerging as a central pillar.
Notably, these investment vehicles have garnered considerable popularity, especially among
small retail investors who seek diversified and professionally managed portfolios. The sector's
growth is further fuelled by the advent of innovative schemes introduced by a growing number
of players in both public and private sectors. These schemes not only cater to the diverse
requirements of domestic investors but also extend their reach to a global audience, reflecting
the dynamic and inclusive nature of India's financial market.
A noteworthy shift in investor behaviour is observed, with a growing number of individuals,
especially those with modest financial means, choosing Mutual Funds. This change is fuelled
by the availability of sophisticated and intelligently designed investment plans within the MF
sphere. The presence of expert fund managers, making strategic investment decisions, positions
Mutual Funds as a superior option. This trend indicates a broader recognition among investors,
regardless of their financial status, regarding the advantages of seeking professional guidance
for their investments. Consequently, the rise of Mutual Funds ensures that a more extensive
demographic can now actively participate in the realm of finance.
Navigating a swiftly evolving market landscape, characterized by a diverse array of Mutual
Fund plans, necessitates a comprehensive understanding of investor needs. Both government
and private entities offer a multitude of plans designed to adapt to the dynamic requirements
of investors. These plans not only differ in their risk profiles but also encompass various types
of investments, providing investors with a spectrum of choices. The critical analysis of factors
influencing investor needs becomes instrumental, aiding both investors and fund managers in
making well-informed decisions within this intricate financial milieu.
Understanding what holds significant value for investors is paramount in the ever-changing
financial environment. For investors, this comprehension facilitates prudent decision-making
aligned with their financial objectives and risk tolerance. Simultaneously, for fund managers,
a thorough examination of investor needs ensures the development of tailored plans that
resonate effectively with the market. As the financial landscape continues to evolve,
maintaining a consumer-centric approach becomes increasingly crucial. This approach not only
bolsters sustained growth but also ensures that Mutual Funds retain their status as a reliable
and preferred investment option.
As Mutual Funds solidify their importance in India's financial ecosystem, a proactive
understanding and response to investor preferences become imperative. Anticipating shifts in
investor sentiments and enhancing accessibility for a broader audience are key strategies for
navigating the future. The inherent flexibility and responsiveness to consumer preferences will
be instrumental in ensuring that Mutual Funds remain relevant and valuable for everyone in
India's expanding financial market.
1.2 Significance of the Study

The research on "Preference of Investors for Mutual Funds as an Investment Avenue and its
Performance Evaluation" carries substantial significance across various dimensions of the
financial landscape. Firstly, it serves as a valuable resource for individual investors by offering
insights into the intricate factors influencing mutual fund preferences. This knowledge equips
investors with a better understanding of how their personal income, monthly savings, financial
literacy, risk tolerance, and the nature of the fund impact their investment decisions. Armed
with this information, individual investors can make more informed choices, aligning their
portfolios with their financial objectives, thereby enhancing their overall investment strategy
and financial well-being.
Additionally, the study holds great importance for financial institutions and mutual fund
providers. By comprehending the nuanced preferences of investors, these entities can tailor
their financial products and marketing strategies to better meet the evolving needs of the
market. The performance evaluation metrics employed in the study, including the Sharpe ratio,
Treynor ratio, Jensen's alpha, standard deviation, and beta, offer fund managers valuable
benchmarks for optimizing returns while managing risk effectively. This insight not only
improves the competitiveness of financial institutions but also contributes to the overall growth
and stability of the Indian mutual fund market.
Furthermore, the research makes a substantial academic contribution by expanding the body of
knowledge in finance. The study's findings and methodologies contribute to the ongoing
discourse on investor behaviour, mutual fund performance, and market dynamics. This
academic contribution fosters a deeper understanding of the intricacies of the financial sector,
potentially leading to further advancements in financial theory and practice. In summary, the
research on investor preferences and mutual fund performance in India stands as a pivotal
initiative with far-reaching impacts, benefiting individual investors, financial institutions, and
the academic community while contributing to the overall development of the financial
ecosystem in the country.

1.3 Scope of the Study

The study will closely investigate specific factors that influence how investors make choices
in the Indian financial market. The study will specifically focus on understanding the impact
of personal income, monthly savings, financial knowledge, risk tolerance, and the type of fund
on the decision’s investors make. By examining these elements, the research aims to provide
insights into how individual factors, such as income, savings habits, financial awareness, and
comfort with risk, shape the preferences of investors when selecting mutual funds.
Additionally, the nature of the fund—whether it's an equity, debt, or hybrid fund—will be
scrutinized to comprehend its influence on investor choices.
In terms of evaluating the performance of mutual funds, the project will utilize specific metrics.
These include the Sharpe ratio, which assesses returns considering risk, the Treynor ratio,
which looks at systematic risk, Jensen's alpha, which measures performance against a
benchmark, standard deviation indicating volatility, and beta assessing sensitivity to market
movements. This comprehensive evaluation aims to provide a detailed understanding of how
different types of mutual funds perform, offering insights into their effectiveness based on these
metrics. By considering both investor preferences and performance metrics, the project seeks
to contribute valuable insights that can benefit both investors and industry stakeholders,
fostering a deeper understanding of the complexities within the Indian mutual fund market.

1.4 Objective of the Study

▪ To find the preference of investors for Indian Mutual funds.

▪ To identify and analyse the key factors influencing investors' preferences for mutual funds
in India.

▪ To evaluate the performance of selected Indian mutual funds using performance metrics

1.5 Hypothesis to be Tested

Hypothesis 1
Ho: There is no significant relationship between demographic factors and preference of
investors.
H1: There is a significant relationship between demographic factors and preference of
investors.

Hypothesis 2
Ho: There is no significant relationship between preference of investors and personal income
of investors
H1: There is a significant relationship between preference of investors and personal income of
investors

Hypothesis 3
Ho: There is no significant relationship between preference of investors and monthly savings
of investors
H1: There is a significant relationship between preference of investors and monthly savings of
investors

Hypothesis 4
Ho: There is no significant relationship between preference of investors and nature of fund
H1: There is a significant relationship between preference of investors and nature of fund
Hypothesis 5
Ho: There is no significant relationship between preference of investors and financial
knowledge
H1: There is a significant relationship between preference of investors and financial knowledge

Hypothesis 6
Ho: There is no significant relationship between preference of investors and risk tolerance
H1: There is a significant relationship between preference of investors and risk tolerance

1.6 Limitation of the Study

▪ The study's results may not be widely applicable if the chosen group of participants doesn't
accurately reflect the overall characteristics of all investors.

▪ The accuracy and completeness of data for performance evaluation and investor preference
analysis are crucial, and issues with data quality can impact the study's validity.

▪ Rapid changes in financial markets due to economic, regulatory, or geopolitical factors may
render the study's results time-sensitive, not accounting for unforeseen shifts.

▪ While employing established metrics like Sharpe ratio and beta, the study may overlook
other relevant factors like fund expenses or turnover rates.
▪ A focus on short-term performance evaluation may miss long-term trends, as mutual fund
performance often requires a more extended perspective.

▪ The study may struggle to fully capture the complexity of investor decision-making due to
the inherently subjective nature of preferences influenced by psychological factors.

▪ The study may not comprehensively consider external factors like changes in tax
regulations or geopolitical events that significantly impact financial markets and mutual
fund performance.
 CHAPTER 2

REVIEW OF LITERATURE
2.1 RESEARCH PAPER REVIEW
1. Langer (1983) suggests that when these preferences are based on choices, there is more
ego involvement and attachment to the preferences, suggesting heightened level of
preference bias. This phenomenon is consistent with the prediction from Cognitive
Dissonance theory of Festinger (1957).

2. De Bondt and Thaler (1985) while investigating the possible psychological basis for
investor behaviour, argue that mean reversion in stock prices is an evidence of investor
over reaction where investors overemphasise recent firm performance in forming future
expectations.

3. Ippolito (1992) says that fund/scheme selection by investors is based on past performance
of the funds and money flows into winning funds more rapidly than they flow out of losing
funds.

4. Robert J. Shiller (1993) reported that many investors do not have data analysis and
interpretation skills. This is because, data from the market supports the merits of index
investing, passive investors are more likely to base their investment choices on information
received from objective or scientific sources.

5. Rahul Singal, Anuradha Garg and Dr Sanjay Singla (May 2013), have done
Performance Appraisal of Growth Mutual Fund. The paper examines the performance of
25 Growth Mutual Fund Schemes. Over the time period Jan 2004 to Dec 2008. For this
purpose, three techniques are used (I) Beta (II) Sharpe Ratio (III) Treynor Ratio. Rank is
given according to result drawn from this scheme and comparison is also made between
results drawn from different schemes and normally the different are insignificant.

6. Dr. N. K. Sathya Pal Sharma and Ravikumar. R (2013), have done the Analysis of the
Risk and Return Relationship of Equity Based Mutual Fund in India. In this paper an
attempt has been made to analyse the performance of equity based mutual funds. A total of
15 schemes offered by 2 private sector companies and 2 public sector companies, have been
studied over the period April 1999 to April 2013 (15years). The analysis has been made
using the risk-return relationship and Capital Asset Pricing model (CAPM).

7. Gupta (1994) made a household investor survey with the objective to provide data on the
investor preferences on MFs and other financial assets. The findings of the study were more
 appropriate, at that time, to the policy makers and mutual funds to design the financial
products for the future.

8. Phillip (1995) reported that there is a change in financial decision-making and investor
behaviour as a result of participating in investor education programmes sponsored by
employees.

9. Dr. R. Narayanasamy and V. Rathnamani (Apr 2013), have done Performance

Evaluation of Equity Mutual Funds (On Selected Equity Large Cap Funds). This study,
basically, deals with the equity mutual funds that are offered for investment by the various
fund houses in India. This study mainly focused on the performance of selected equity large
cap mutual fund schemes in terms of risk- return relationship. The main objectives of this
research work are to analysis financial performance of selected mutual fund schemes
through the statistical parameters such as (alpha, beta, standard deviation, r-squared, Sharpe
ratio).

10. Campaign to promote savings through education and information could have a measurable
impact on financial behaviour.

11. Dr. Sandeep Bansal, Deepak Garg and Sanjeev K Saini (2012), have studied Impact of
Sharpe Ratio & Treynor’s Ratio on Selected Mutual Fund Schemes. This paper examines
the performance of selected mutual fund schemes, that the risk profile of the aggregate
mutual fund universe can be accurately compared by a simple market index that offers
comparative monthly liquidity, returns, systematic & unsystematic risk and complete fund
analysis by using the special reference of Sharpe ratio and Treynor’s ratio.

12. Madhusudhan V Jambodekar (1996) conducted a study to assess the awareness of MFs
among investors, to identify the information sources influencing the buying decision and
the factors influencing the choice of a particular fund. The study reveals among other things
that Income Schemes and Open-Ended Schemes are more preferred than Growth Schemes
and Close Ended Schemes during the then prevalent market conditions. Investors look for
safety of Principal, Liquidity and Capital appreciation in the order of importance;
Newspapers and Magazines are the first source of information through which investors get
to know about MFs/Schemes and investor service is a major differentiating factor in the
selection of Mutual Fund Schemes.

13. Sujit Sikidar and Amrit Pal Singh (1996) carried out a survey with an objective to
understand the behavioural aspects of the investors of the North Eastern region towards
equity and mutual funds investment portfolio. The survey revealed that the salaried and
 self-employed formed the major investors in mutual fund primarily due to tax concessions.
UTI and SBI schemes were popular in that part of the country then and other funds had not
proved to be a big hit during the time when survey was done.

14. Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014), conducted a research on
Comparative Performance Analysis of Select Indian Mutual Fund Schemes. This study
analyses the performance of Indian owned mutual funds and compares their performance.
The performance of these funds was analyzed using a five-year NAVs and portfolio
allocation. Findings of the study reveals that; mutual funds out perform naïve investment.
Mutual funds as a medium-to-long term investment option are preferred as a suitable
investment option by investors.

15. Syama Sunder (1998) conducted a survey to get an insight into the mutual fund operations
of private institutions with special reference to Kothari Pioneer. The survey revealed that
awareness about Mutual Fund concept was poor during that time in small cities like
Visakhapatnam. Agents play a vital role in spreading the Mutual Fund culture; open-end
schemes were much preferred then; age and income are the two important determinants in
the selection of the fund/scheme; brand image and return are the prime considerations while
investing in any Mutual Fund.

16. Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (Jul 2012), have done a
Comparative Study on Performance Evaluation of Mutual Fund Schemes of Indian
Companies. In this paper the performance evaluation of Indian mutual funds is carried out
through relative performance index, risk-return analysis, Treynor's ratio, Sharp's ratio,
Sharp's measure, Jensen's measure, and Fama's measure. The data used is daily closing
NAVs. The source of data is website of Association of Mutual Funds in India (AMFI). The
study period is 1st January 2007 to 31st December, 2011. The results of performance
measures suggest that most of the mutual fund have given positive return during 2007 to
2011.

17. Shanmugham (2000) conducted a survey of 201 individual investors to study the
information sourcing by investors, their perceptions of various investment strategy
dimensions and the factors motivating share investment decisions, and reports that among
the various factors, psychological and sociological factors dominated the economic factors
in share investment decisions.

18. Anjan Chakarabarti and Harsh Rungta (2000) stressed the importance of brand effect
in determining the competitive position of the AMCs. Their study reveals that brand image
 factor, though cannot be easily captured by computable performance measures, influences
the investor's perception and hence his fund/ scheme selection.

19. Hirshleifer (2001) categorized different types of cognitive errors that investors make i.e.
self-deception, occur because people tend to think that they are better than they really are;
heuristic simplification, which occurs because individuals have limited attention, memory
and processing capabilities; disposition effect, individuals are prone to sell their winners
too quickly and hold on to their losers too long.

20. Mrs.V. Sasikala and Dr. A. Lakshmi (Jan 2014) have studied The Mutual Fund
Performance Between 2008 And 2010: Comparative Analysis. The paper entitled
“comparative analysis of mutual fund performance between 2008 & 2010. The paper was
undertaken to know the after-meltdown period risks and returns of 2008 top hundred mutual
funds and compare with 2010 top hundred mutual funds published in Business today. The
analysis of alpha, beta, standard deviation, Sharpe ratio and R-squared are declare high,
low, average, above average and below average of risks and return of funds
2.2 THEORETICAL FRAMEWORK
2.2.1 Mutual Fund - Meaning & Concept

A mutual fund is a financial vehicle that pools money from multiple investors to invest in a
diversified portfolio of stocks, bonds, or other securities. The fund is managed by a professional
fund manager or a team of managers who make investment decisions on behalf of the investors.
Investors in a mutual fund purchase shares, which represent their ownership in the fund and
entitle them to a portion of the returns generated by the fund's investments. The concept of a
mutual fund is rooted in the principle of diversification and collective investment. By pooling
resources from various investors, a mutual fund can spread its investments across a range of
assets, reducing the risk associated with individual securities. This diversification helps
mitigate the impact of poor performance in any single investment on the overall portfolio.
Investors in a mutual fund benefit from professional management, as experienced fund
managers analyse market conditions, conduct research, and make investment decisions to
optimize returns. Mutual funds are available in various types, including equity funds, bond
funds, hybrid funds, and money market funds, catering to different investment objectives and
risk appetites. Mutual funds provide an accessible and convenient way for individual investors
to participate in the financial markets without directly managing a portfolio of securities. They
offer liquidity, as investors can typically buy or sell shares on any business day at the current
net asset value (NAV) of the fund.
Overall, mutual funds play a crucial role in the investment landscape by providing a diversified
and professionally managed investment option for individuals, allowing them to participate in
the financial markets with relatively lower risks compared to investing in individual securities.

2.2.2 Importance of Mutual Funds

Diversification of Portfolio: Any investment professional will tell you that diversification is
one of the most crucial ways to lower the risk of your portfolio. To reduce potential losses, it
is advantageous to diversify your holdings rather than invest in a single business, sector, or
investment vehicle. Investors can instantly diversify their holdings with Mutual Funds, which
is a great option. Unlike buying individual stocks, investing in one or more Mutual Funds gives
investors access to a wide range of investment options because each fund may hold dozens of
different securities. Mutual Funds assist investors in hedging against unsystematic risks.
A Fund for Every Type of Investor is Available: Mutual Funds primarily invest in the Debt
and Equity asset classes. Some funds invest exclusively in Debt Fund, while others only in
Equity Funds, and, the remaining in Balanced or Hybrid Funds. Gaining access to a wide range
of shares or fixed-income tools is the main advantage of investing in a Mutual Fund. The other
securities in a portfolio make up for underperforming securities. Mutual Funds guarantee
diversity in this way. You can choose Mutual Funds if you're a fresh investor who doesn't want
to devote a great deal of time researching stocks to invest in.
Advantages of High Liquidity: The second most liquid investment vehicle after bank deposits
is open-ended mutual funds, which are also significantly more liquid than other types of
investments like life insurance, infrastructure bonds, post office schemes, etc. In open-ended
funds, investors have the benefit of redeeming their units. One of the key advantages of mutual
funds over other investment options, such as life insurance plans and government small savings
programs, is their outstanding liquidity.
Options for Lumpsum & SIP Investments: Mutual Funds also offer the option to invest the
amount in one go or place a specified number at regular intervals. The first choice is referred
to as a "Lumpsum" investment, and the second is referred to as a "Systematic Investment Plan,"
or SIP. Under Systematic Investment Plans (SIPs), the investor invests a specific sum of money
at regular intervals. This specific amount is directly deducted from the investor's bank account.
It disregards the timing of the market. On the other hand, Lumpsum Investments are options of
investment that allow the investor to purchase the number of units they want in one go. This
method is usually chosen to create extra wealth and liquidity. The Lumpsum method makes
use of the timing of the market strategy.
The Benefit of Transparency: Another benefit of Mutual Funds for investors is transparency.
Investors are always updated on the current market value of their Mutual Fund units because
Mutual Fund schemes make their Net Asset Values (NAVs) public at the end of each business
day. Mutual Funds release Monthly Fund Factsheets every month that includes information
about the portfolio holdings for each and every Mutual Fund scheme. Investors are informed
of the monthly investments made by the fund managers in these sheets.
Tax Benefit: One of the biggest advantages of investing in mutual funds over many customary
fixed-income investments is their tax advantages. Under Section 80C of the Income Tax Act
of 1961, investing in an ELSS Fund entitles you to a reduction in your taxable income of up to
Rs. 1.5 lakh. Most traditional fixed-income investments have interest payments that are taxed
at the investor's individual income tax rates. When compared to conventional fixed-income
investments, mutual funds have significant tax advantages for investors in higher tax brackets.
Competency of Cost: Mutual Fund investing is very cost-effective. Direct equity purchases
require you to pay fees like brokerage and the Securities Transaction Tax (STT). Your costs
will rise as the amount of transactions increases. Overlaying investors can benefit from Mutual
Funds' ability to take advantage of economies of scale because they conduct transactions in
bulk.
Lower Transaction Cost: Another benefit of Mutual Funds is lower transaction costs as a
result of economies of scale, and, since Mutual Funds buy and sell securities in large volumes,
transaction costs per unit are much lower than those incurred by retail investors when they buy
or sell shares through stock brokers.
Smaller Upfront Investment: The next important feature of Mutual Funds is that you can
begin investing in them with small amounts of money. To construct a diversified collection of
stocks, investors will need to invest a significant amount of money. Mutual Funds, on the other
hand, work on the basis of money pooling, so Mutual Fund investors can benefit from
ownership interest of a diverse portfolio of stocks with a much relatively small investment.
Professional Management & Expertise: Stock and bond investing require a great deal of
knowledge and experience. You must be knowledgeable about financial markets, industry
sectors, particular businesses, and research techniques.
2.2.3 Types of Mutual fund Schemes

Types of Mutual Fund Schemes based on Organisation Structure

Close-ended schemes: Close-ended funds come with a fixed maturity period. Fund houses
issue the units of these schemes only at the time of their New Fund Offer or NFO. After the
NFO period, these schemes are listed on stock exchanges. Investors can trade their units on the
stock exchanges if they want to leave these schemes before the maturity period ends. On
maturity, the schemes are dissolved and the money is returned to the investors at the Net Asset
Value, or NAV, of the day. Less volatility in NAV is the most significant benefit of this mutual
fund type. As cash in and outflows are restricted, their NAV shows lesser fluctuations. Close-
ended funds are ideal for those with a long-term investment perspective. It's also apt for those
seeking an avenue to park a hefty sum for an extended period.
Open-ended schemes: As the name suggests, the units of these schemes are open for buying
and selling even after the NFO. That is, investors can buy/sell the units of an open-ended fund
according to their convenience. Moreover, there is no restriction on the number of units that
can be issued. A higher level of liquidity is the most striking feature of open-ended funds.
Investors can sell the units on the NAV of the day. Additionally, investors can take advantage
of systematic plans for entering and exiting these plans. Open-ended funds are a good choice
for those who want a highly liquid investment option and are willing to take on moderate to
high risk.
Interval schemes: Interval schemes are the hybrid version of both open-ended and close-ended
funds. The units of these schemes are available for buying and selling only during specified
transaction periods called intervals. Similar to close-ended schemes, listing the units of interval
schemes on stock exchanges is mandatory. Interval funds are apt for investors who seek
exposure to unconventional assets like forestry tracts or commercial property.

Types of Mutual Fund Schemes based on Asset Classes

Equity funds: Equity funds mainly invest their assets in the shares of companies. As per the
guidelines, an equity mutual fund scheme should invest at least 65% of its assets in equities or
equity-related investments. The remaining funds are invested in other, more secure asset
classes to offset the risk. The returns from these funds depend on the performance of the shares
they invest. Equity funds can be again categorised in many ways, such as:
▪ Based on the way they are managed - active and passive funds.
▪ Based on the market capitalisation of the stocks they invest in - small-, mid-, multi-, and
large-cap funds.
▪ Based on their geography - domestic and foreign funds. They can also be classified as
broad-market, regional or single-country funds.
▪ Based on the sector they invest in - pharma, FMCG, real estate, etc.
Equity funds are suitable for those who have long investment horizons. Furthermore, they have
a track record of providing superior returns than other types of mutual funds, making them a
solid option for building wealth.
Debt funds: Debt funds invest their assets in fixed-income instruments, such as
corporate/government bonds, T-bills, or certificates of deposits. Compared to equity funds,
debt funds are less risky and have lower expense ratios. Moreover, they give better returns than
traditional investment options like fixed deposits. Hence, they can be a better choice for those
seeking regular income.
Hybrid funds: Hybrid funds consist of both debt and equity components. This type of mutual
fund is suitable for investors with a moderate risk appetite. Hybrid funds can be classified based
on their asset allocation as follows:
▪ Conservative hybrid funds - invest at least 75% of the asset in debt and the rest in equity.
▪ Aggressive hybrid funds - invest 65% to 80% of the asset in equity or equity-related
instruments and the remaining in money market and debt instruments.
▪ Dynamic asset allocation funds - invest in both debt and equity, and their proportion varies
with the market condition.
▪ Multi-asset allocation funds - invest at least 10% of their money in at least 3 asset classes,
and the proportion changes with market conditions.
▪ Arbitrage funds - invest a minimum of 65% of their asset in equity and the rest in debt and
money market instruments.
▪ Equity savings funds - invest at least 65% of their asset in equity and equity-related
instruments and a minimum of 10% in debt instruments.

Money market funds: Money market funds normally invest in low-risk, short-term securities
such as T-bills, certificates of deposit, commercial paper, etc. They offer high liquidity;
investors often invest in the funds as a short-term cash management tool.

Types of Mutual Fund Schemes based on Portfolio Management

Active funds: In active funds, the fund managers actively manage the portfolio by deciding
which securities to buy and sell. These funds are designed to outperform a specific benchmark
index or achieve higher returns through active management strategies.
Passive funds: Passive funds are designed to replicate the performance of a particular market
index. They aim to match the returns of the index they track instead of outperforming it. They
are called 'passive' funds because they do not involve active stock selection or market timing
strategies.

Types of Mutual Fund Schemes based on the Investment Objective

Growth funds: Growth funds focus on investing in the stocks of companies that are expected
to register above-average growth rates compared to the overall market or their industry peers.
These mutual funds are designed to provide high returns to investors. Hence, they carry a higher
level of risk.
Income funds: Investors can rely on income funds for a steady income stream. They provide
regular income through interest payments or dividends. These funds typically invest in various
assets that generate income, such as bonds, stocks that pay dividends, and other fixed-income
securities. Income funds suit retirees or those seeking to supplement their current income.
Liquid funds: Liquid funds invest in short-term debt instruments with high liquidity and low
risk. They generally invest in securities with maturities of not more than 91 days. Liquid funds
are designed to provide investors with a safe and liquid investment option, allowing them to
easily convert their mutual fund investments into cash without incurring significant losses.
Returns from liquid funds depend upon the short-term interest rate prevalent in the market.
Types of Mutual Fund Schemes based on Risk Appetite

Low-risk funds: Mutual funds that invest in relatively lower-risk avenues like debt
instruments fall under this category of mutual funds. These funds are typically designed to
provide stable returns rather than aggressive growth.
Medium-risk funds: Medium-risk mutual funds typically invest in a diversified portfolio of
assets that have a moderate level of risk, such as a mix of stocks, bonds, and other financial
instruments. They aim to strike a balance between potential returns and risk exposure.
High-risk funds: Funds that have high-risk assets, such as stocks, options, futures,
commodities, or emerging markets, in their portfolio come under this classification of mutual
funds. High-risk funds aim to generate high returns and are ideal for wealth creation. Equity
funds are an example of high-risk funds.

Types of Mutual Fund Schemes based on Speciality

Speciality funds are also known as sector-specific or thematic funds. They focus on specific
industries, themes, or sectors of the economy. These funds aim to capitalise on the growth
potential of a particular sector or theme by investing in companies operating within that
domain. In India, there are several speciality funds available to investors. A few examples of
thematic funds are as follows:
Sector funds: Mutual funds that invest in a particular industry are called sector funds. Returns
from these funds entirely depend on the performance of these sectors. Technology funds and
real estate funds are a few examples of sector funds.
Index funds: Index funds invest in a diversified portfolio of stocks that comprise the chosen
index and in the same proportion as the index. Their investment strategy is passive, intending
to replicate the performance of the index they are tracking.
Global funds: Global funds, also known as international funds, allow Indian investors to invest
in foreign securities and markets. Exposure to international markets helps investors to diversify
their portfolios.
Fund of funds: Fund of funds or multi-manager funds invest in a portfolio of other mutual
funds instead of directly investing in individual securities or assets. By investing in multiple
funds, these funds aim to spread the investment risk and potentially achieve higher returns.
Retirement funds: Retirement mutual funds are specifically designed to aid individuals in
accumulating wealth for their retirement years. These funds invest the pooled money in stocks,
bonds, and other securities.
Emerging market funds: Emerging market funds focus on investing in securities from
emerging market economies. These economies are typically characterised by rapid economic
growth, expanding populations, and increasing industrialisation. Investing in emerging market
funds allows investors to participate in the growth potential of these economies.

2.2.4 Role of Mutual Funds in Indian Financial Markets

The Mutual Fund history provide ample evidence that Indian financial institutions have played
a dominant role in asset formation and intermediation, and contributed substantially to the
process of macro-economic development. Mutual funds, which have emerged as strong
financial intermediaries, are playing an important role in this process. They are not only
providing stability to the financial system, but have also helped rationalize the process of
resource allocation. They have opened new vistas for investors and increase the level of
liquidity in the system. In the process, they have challenged the hitherto dominant role of the
commercial banks. Mutual funds play an important role in promoting a healthy capital market.
They provide active support to secondary market and increases liquidity of capital market and
bring stability in financial market. Role of mutual fund can be explained with the help of
following points:
Mobilises Savings: Mutual funds play an important role in mobilising savings of millions of
investors across the country. In mutual funds, savings of small investors are mobilised, invested
and returns are distributed in the same proportion to the unit holders.
Instrument of Investing Money: Now-a-days bank rates have become very low so, keeping
large amount of money in bank does not give higher returns. People can invest in stock market.
But a common investor is not well informed about the complexities involved in stock market
movements. Here mutual funds play an important role in helping common public to get higher
returns.
Protection to Small Investors: A small investor is not safe in share market. In mutual industry
there is no such risk. Mutual funds help to reduce the risk of investing in stocks by spreading
or diversifying investments. Small investors enjoy the benefit of diversification.
Tax Benefit: Investors in mutual funds enjoy tax benefits. Dividend received by investors is
tax free. Tax exemption is allowed on income received on units of mutual funds and UTI.
Investment in mutual funds enjoy wealth tax exemption within the overall limit of Rs. 5 lakhs.
No tax shall be charged on gifts of mutual fund units up to Rs. 30,000.
Diversification: Investment in mutual funds enable investors to spread out and minimise the
risks up to certain extent. Mutual fund invests in a diversified portfolio of securities. This
diversification helps to reduce risk since all the stocks do not fall at same time. Thus, investors
are assured of average income which is not possible in other sources.
Multi - Purpose Service: Mutual funds introduces variety of innovative schemes containing
various benefits. Innovative schemes are designed to meet the needs of different types of
investors in terms of investment, dividend distribution, liquidity etc.

2.2.5 Limitations of Mutual Funds

Fluctuating returns
Mutual funds do not offer fixed guaranteed returns in that you should always be prepared for
any eventuality including depreciation in the value of your mutual fund. In other words, mutual
funds entail a wide range of price fluctuations. Professional management of a fund by a team
of experts does not insulate you from bad performance of your fund.
No Control
All types of mutual funds are managed by fund managers. In many cases, the fund manager
may be supported by a team of analysts. Consequently, as an investor, you do not have any
control over your investment. All major decisions concerning your fund are taken by your fund
manager. However, you can examine some important parameters such as disclosure norms,
corpus and overall investment strategy followed by an Asset Management Company (AMC).
Diversification
Diversification is often cited as one of the main advantages of a mutual fund. However, there
is always the risk of over diversification, which may increase the operating cost of a fund,
demands greater due diligence and dilutes the relative advantages of diversification.
Fund Evaluation
Many investors may find it difficult to extensively research and evaluate the value of different
funds. A mutual fund's net asset value (NAV) provides investors the value of a fund's portfolio.
However, investors have to study various parameters such as Sharpe ratio and standard
deviation among others to ascertain how one fund has fared compared to another which can be
complicated to some extent.
Past performance
Ratings and advertisements issued by companies are only an indicator of the past performance
of a fund. It is important to note that robust past performance of a fund is not a guarantee of a
similar performance in the future.
As an investor, you should analyse the investment philosophy, transparency, ethics,
compliance and overall performance of a fund house across different phases in the market over
a period of time. Ratings can be taken as a reference point.
Costs
The value of a mutual fund may fluctuate depending on the changing market conditions.
Furthermore, there are fees and expenses involved towards professional management of a
mutual fund which is not the case for buying stocks or securities directly in the market. There
is an entry load which has to be borne by an investor when buying a mutual fund. Furthermore,
some companies charge an exit cost as well when an investor chooses to exit from a mutual
fund.
CAGR
The performance of a mutual fund vis-a-vis the compounded annualised growth rate (CAGR)
neither provides investors adequate information about the amount of risk facing a mutual fund
nor the process of investment involved. It is therefore, only one of the indicators to gauge the
performance of a fund but is far from being comprehensive.
Fund managers
According to experts, as an investor, you would do well not to be carried away by the so-called
'star fund managers'. Even a highly skilled manager can make a positive difference in the short-
term but cannot dramatically change the performance of a fund in the long-term.
 CHAPTER – 3

INDUSTRY & COMPANY

PROFILE
3.1 Industry Profile

India's financial services sector is characterized by diversity and rapid expansion,

encompassing a broad spectrum of entities contributing to the country's economic growth. The
sector has witnessed significant developments, with both existing financial services firms
experiencing robust growth and new entities entering the market. This diverse landscape
includes commercial banks, insurance companies, non-banking financial companies (NBFCs),
co-operatives, pension funds, mutual funds, and various smaller financial entities. Notably, the
sector has seen recent additions, such as payment banks, as authorized by the banking regulator,
enhancing the variety of players in the financial domain.
While the financial sector in India exhibits a rich tapestry of services, it remains predominantly
characterized by a robust banking sector. Commercial banks play a pivotal role, constituting
more than 64% of the total assets held by the financial system. This highlights the centrality of
banking institutions in facilitating financial activities and services within the Indian economy.
India's financial services sector is characterized by its vibrancy, supported by a combined effort
from the government and the private sector. The country boasts one of the world's most
dynamic capital markets, providing diverse investment opportunities. The coexistence of
traditional banking institutions with newer entities like payment banks reflects the adaptability
and evolution within the sector. The introduction of diverse financial instruments and services
has contributed to the overall growth and inclusivity of the financial landscape.
The Government of India has been proactive in introducing reforms aimed at liberalizing,
regulating, and enhancing the financial services industry. These reforms align with the broader
objective of fostering economic growth and financial inclusion. Noteworthy initiatives include
measures to facilitate easy access to finance for Micro, Small, and Medium Enterprises
(MSMEs). The introduction of the Credit Guarantee Fund Scheme for MSMEs, guidelines
issued to banks regarding collateral requirements, and the establishment of the Micro Units
Development and Refinance Agency (MUDRA) are key steps taken by the government and
the Reserve Bank of India (RBI). These measures seek to empower smaller businesses and
promote their financial well-being.
India's financial services sector stands as a dynamic and evolving ecosystem, marked by
diversification, regulatory reforms, and a blend of traditional and innovative financial entities.
The government's commitment to financial inclusion and regulatory measures has played a
crucial role in shaping a sector that not only supports the country's economic growth but also
caters to the diverse financial needs of its population.

3.2 History of Financial Service Industry

The history of Indian financial services dates back to the pre-independence era, when the
financial system was rudimentary, with few formal institutions. Indigenous banking was
prevalent, including community lending, pawnbroking, and moneylending. The evolution of
the Indian financial system can be classified into three phases: pre-independence phase (before
1947), post-independence phase (1947-1991), and the liberalization era (1991 and beyond).
During the pre-independence phase, there were a large number of banks present in India, which
was around 600. The establishment of Bank of Hindustan in the year 1770 in Calcutta marked
the starting of the Indian financial system. The bank discontinued its services in 1832. There
were various banks that evolved post to Hindustan banks such as General Bank of India (1786-
1791) and Oudh commercial bank (1881-1958). However, these banks were not able to
continue for a long. Few banks of the 19th century are existing even today such as Punjab
National bank formed in 1894 and Allahabad bank formed in 1865. Three major banks of that
time like Bank of Bengal, Bank of Madras and Bank of Bombay were merged as one body
which was termed as Imperial Bank of India. This Imperial bank was later on renamed to State
Bank of India. During the post-independence phase, the government nationalized the banks
under the Banking Regulation Act, 1949, to overcome the situation where rural population,
small-scale industries, and agriculture sector were still dependent on local money lenders. The
financial sector reforms were initiated in 1991 with the aim of accelerating economic growth.
In the following years, industry and service sectors were opened up for foreign direct
investment.

3.3 Market Size

As of July 2023, AUM managed by the mutual funds industry stood at US$ 556.81 billion (Rs.
46.38 Trillion) which is around a two-fold increase in the span of five years. Inflow in India's
mutual fund schemes via systematic investment plan (SIP) stood at US$ 18.09 billion (Rs. 1.5
lakh crore). Equity mutual funds registered a net inflow of Rs. 22.16 trillion (US$ 294.15
billion) by end of December 2021. The net inflows were US$ 888 million (Rs. 7,303.39 crore)
in December as compared to a 21-month low of US$ 274.8 million (Rs. 2,258.35 crore) in
November 2022.
Another crucial component of India’s financial industry is the insurance industry. The
insurance industry has been expanding at a fast pace. The total first-year premium of life
insurance companies reached US$ 32.04 billion in FY23. In FY23 (until December 2022) non-
life insurance sector premiums reached US$ 22.5 billion (Rs. 1.87 lakh crore).
Furthermore, India’s leading bourse, the Bombay Stock Exchange (BSE), will set up a joint
venture with Ebix Inc to build a robust insurance distribution network in the country through a
new distribution exchange platform. In FY23, US$ 7.17 billion was raised across 40 initial
public offerings (IPOs). The number of companies listed on the NSE increased from 135 in
1995 to 2,113 by FY23 (till December 2022).
According to the statistics by the Futures Industry Association (FIA), a derivatives trade
association, the National Stock Exchange of India Ltd. (NSE) emerged as the world’s largest
derivatives exchange in 2020 in terms number of contracts traded. NSE was ranked 4th
worldwide in cash equities by number of trades as per the statistics maintained by the World
Federation of Exchanges (WFE) for CY2020.

3.4 Services Offered in Financial Service Sector

Banking
The banking industry is the backbone of India’s financial services industry. The country has
several public sectors (27), private sector (21), foreign (49), regional rural (56) and urban/rural
cooperative (95,000+) banks. The financial services offered in this segment include:
▪ Individual Banking (checking accounts, savings accounts, debit/credit cards, etc.)
▪ Business Banking (merchant services, checking accounts and savings accounts for
businesses, treasury services, etc.)
▪ Loans (business loans, personal loans, home loans, automobile loans, working-capital
loans, etc.)

The banking sector is regulated by the Reserve Bank of India (RBI), which monitors and
maintains the segment’s liquidity, capitalization, and financial health.
Professional Advisory
India has a strong presence of professional financial advisory service providers, which offer
individuals and businesses a wide portfolio of services, including investment due diligence,
M&A advisory, valuation, real-estate consulting, risk consulting, taxation consulting. These
offerings are made by a range of providers, including individual domestic consultants to large
multi-national organizations.
Wealth Management
Financial services offered within this segment include managing and investing customers’
wealth across various financial instruments- including debt, equity, mutual funds, insurance
products, derivatives, structured products, commodities, and real estate, based on the clients’
financial goals, risk profile and time horizons.
Mutual Funds
Mutual fund service providers offer professional investment services across funds that are
composed of different asset classes, primarily debt and equity-linked assets. The buy-in for
mutual fund solutions is generally lower compared to the stock market and debt products. These
products are very popular in India as they generally have lower risks, tax benefits, stable returns
and properties of diversification. The mutual funds segment has witnessed double-digit growth
in assets under management over the last five years, owing to its popularity as a low-risk wealth
multiplier.
Insurance
Financial services offerings in this segment are primarily offered across two categories:
▪ General Insurance (automotive, home, medical, fire, travel, etc.)
▪ Life Insurance (term-life, money-back, unit-linked, pension plans, etc.)

Insurance solutions enable individuals and organizations to safeguard against unforeseen

circumstances and accidents. Pay-outs for these products vary across the nature of the product,
time horizons, customer risk assessment, premiums, and several other key qualitative and
quantitative aspects. In India, there is a strong presence of insurance providers across life
insurance (24) and general insurance (39) categories. The insurance market is regulated by the
Insurance Regulatory and Development Authority of India (IRDAI).
Stock Market
The stock market segment includes investment solutions for customers in Indian stock markets
(National Stock Exchange and Bombay Stock Exchange), across various equity-linked
products. The returns for customers are based on capital appreciation – growth in the value of
the equity solution and/or dividends – and pay-outs made by companies to its investors.
Treasury/Debt Instruments
Services offered in this segment include investments into government and private organization
bonds (debt). The issuer of the bonds (borrower) offers fixed payments (interest) and principal
repayment to the investor at the end of the investment period. The types of instruments in this
segment include listed bonds, non-convertible debentures, capital-gain bonds, GoI savings
bonds, tax-free bonds, etc.
Tax/Audit Consulting
This segment includes a large portfolio of financial services within the tax and auditing domain.
This services domain can be segmented based on individual and business clients. They include:
▪ Tax – Individual (determining tax liability, filing tax-returns, tax-savings advisory, etc.)
▪ Tax – Business (determining tax liability, transfer pricing analysis and structuring, GST
registrations, tax compliance advisory, etc.)

In the auditing segment, service providers offer solutions including statutory audits, internal
audits, service tax audits, tax audits, process/transaction audits, risk audits, stock audits, etc.
These services are essential to ensure the smooth operation of business entities from a
qualitative and quantitative perspective, as well as to mitigate risk. You can read more about
taxation in India.
Capital Restructuring
These services are offered primarily to organizations and involve the restructuring of capital
structure (debt and equity) to bolster profitability or respond to crises such as bankruptcy,
volatile markets, liquidity crunch or hostile takeovers. The types of financial solutions in this
segment typically include structured transactions, lender negotiations, accelerated M&A and
capital raising.
Portfolio Management
This segment includes a highly specialized and customized range of solutions that enables
clients to reach their financial goals through portfolio managers who analyse and optimize
investments for clients across a wide range of assets (debt, equity, insurance, real estate, etc.).
These services are broadly targeted at HNIs and are discretionary (investment only at the
discretion of fund manager with no client intervention) and non-discretionary (decisions made
with client intervention).

3.5 Key Roles in the Financial Services Industry

Accountants
Accountants are professionals who create, keep, and interpret financial records. They can either
work for companies in-house or as third-party services. Accountants know all the ins and outs
of a company’s finances based on its balance sheet, income statement, and cash flow statement,
and they provide key insights to leaders based on the holistic perspective those statements
create when assessed in tandem. These insights can be used to budget, invest, and make
decisions that are in the best interest of a company’s financial health. To be an accountant, you
need strong attention to detail, the ability to recognize patterns, and communication skills to
present findings in an accessible, actionable way.
An accountant’s responsibilities include:
▪ Creating and maintaining financial statements, as well as ensuring compliance with current
regulations
▪ Reporting financial performance to business leaders
▪ Preparing and sending tax documents accurately and on time
▪ Identifying issues and opportunities to maximize profit
▪ Acting as the bridge between business owners, lenders, and investors by providing a clear
picture of an organization’s finances

Advisors
Like accountants, financial advisors help identify issues and opportunities in an organization’s
financial statements and strategize for the future. They aren’t, however, responsible for
maintaining financial records, reporting on performance, or preparing tax documents. Financial
advisors are required to pass several exams to become registered. Companies or individuals
typically hire them to shed light on their current financial states and provide guidance on how
to best move forward. They may be hired specifically in times of financial distress or at pivotal
moments that require financial care.
▪ A financial advisor’s responsibilities include:
▪ Assessing a company or individual’s financial standing
▪ Providing informed advice and guidance on how to proceed
▪ Acting with a company or individual’s best interest in mind at all times (called the fiduciary
standard)

Analysts
Financial analysts have a big-picture understanding of the financial landscape and use it to
inform analyses of individual companies’ finances. Analysts can be hired to work in-house for
one company or have multiple clients in an agency setting. Like accountants and advisors,
analysts use financial information to help companies strategize for financial success. Unlike
accountants, analysts don’t create or manage financial statements. And unlike advisors, they
create predictive models to assess companies’ financial futures and industry outlooks.
An analyst’s responsibilities include:
▪ Gathering data—both qualitative and quantitative—about companies’ financial positions
and trajectories
▪ Analysing industry data and contextualizing companies within the industry’s broader
financial outlook
▪ Creating predictive models to identify upcoming trends to help assess investments’
potential risks or other financial activities

Institutional Investors and Portfolio Managers

Institutional investors are companies that invest money on behalf of others. Examples include
mutual funds, pensions, insurance companies, and hedge funds. Individuals who manage
investment portfolios at these companies are called portfolio managers. They buy and sell
investment securities (such as stocks, bonds, and alternative investments) on behalf of their
clients. Their roles require a great deal of industry knowledge and market trends.
A portfolio manager’s responsibilities include:
▪ Constructing and managing investment portfolios
▪ Customizing investment plans for individuals, taking their preferred risk and diversification
levels into account
▪ Deciding when to buy and sell investments to maximize clients’ returns
▪ Communicating portfolio performance to clients on a periodic basis
▪ Understanding the impact their investment decisions have on the market as a whole and
acting accordingly

3.6 Asset Management Companies

An asset management company (AMC) is a firm that invests a pooled fund of capital on behalf
of its clients. The capital is used to fund different investments in various asset classes. Asset
management companies are commonly referred to as money managers or money management
firms as well. Individual investors usually lack the expertise and resources to consistently
produce strong investment returns over time. Therefore, many investors rely on asset
management companies to invest capital on their behalf.
Asset management companies are referred to as “buy-side” firms. It means that they help
clients to buy investments. They make decisions based on which investments to purchase. In
contrast, “sell-side” firms, such as investment banks and stockbrokers, will sell investment
services to buy-side companies and other investors. Sell-side companies provide market
research and help to inform buy-side firms with valuable information to entice the buy-side
firms to execute transactions with them.
Asset management companies are usually a group of investment professionals with broad
market expertise. With a large amount of pooled capital, they are able to utilize diversification
and complex investment strategies to generate returns for investors. AMCs generally charge a
fee to their clients that is equal to a percentage of total assets under management (AUM). AUM
is simply the total amount of capital provided by investors.
An asset management fund may charge a 2% fee on AUM. Consider as an example an asset
manager who oversees a $100 million fund. The fees for one year or another time period will
be $2 million ($100 million x 2.0%). Hedge funds are notorious for charging much higher fees,
sometimes upwards of 20%. However, hedge funds utilize more unorthodox and aggressive
investment strategies to generate returns.

3.6.1 Market Analysis of AMCs

The India Asset Management Market is about USD 865 billion in the current year and is
expected to register a CAGR of 14% over the forecast period. Despite the poor economic
situation that began in 2020 because of the pandemic, the Indian investment market still
managed to close the decade on a noteworthy record. Owing to Covid-19, there has been a
swift transformation into a more technology-driven world, leading to soaring investments in
various sectors, such as education technology, financial services, and life sciences, over the
traditional sectors of private equity (PE)/venture capital (VC) investors such as infrastructure
and real estate, among others.
In 2022, the AUM of the Indian mutual fund industry stood at INR 37.22 trillion (USD 449
billion). Although individual investors hold 55% of industry assets, institutional investors
account for 45%. Corporates account for 95%, and the rest is divided between Indian and
foreign institutions and banks. The net outflows under the FPI route are around INR 852 billion
(USD 10.3 billion) as of 15 June 2022, out of which around INR 126 billion (USD 1.52 billion)
outflows are in debt.
The government, in its capacity as an anchor investor, has established a collaborative
investment platform, namely the National Investment and Infrastructure Fund, for international
and Indian investors looking for investment opportunities in infrastructure and other high-
growth sectors of the country, which includes a fund of funds program that has emerged as a
significant domestic LP. Further, the Small Industries Development Bank of India has been
investing in various AIFs to promote and accelerate the growth of start-ups and micro
enterprises, as well as SMEs in India.
SEBI is increasing its supervision on AIFs given the pace of growth clocked by the industry,
to ensure that AIFs are being properly managed and operated and that there is no mis-selling.
There is also an annual PPM audit requirement, and all filings with SEBI for seeking approval
of AIFs are now required to be done through a merchant banker.
3.6.2 India Asset Management Market Trends
This section covers the major market trends shaping the India Asset Management Market
according to our research experts:
Increase in Private Equity/Venture Capital Investment Activities is Driving the Market
Total PE/VC investment activity in 2021 was at USD 77.1 billion, a 62% increase over 2020.
The PE asset class (excluding infrastructure and real estate) demonstrated a growth of 79%.
Although three sectors - technology USD 16.3 billion, e-commerce USD 15.9 billion, and
financial services USD 11.7 billion accounted for 57% of the total PE/VC investments by
value, many sectors, such as media and entertainment, education, pharmaceuticals, and
healthcare, showed significant growth. For the first time, 14 sectors notched up PE/VC
investments exceeding USD 1 billion.
The number of active PE funds continued to grow in 2020, with global and domestic general
partners (GPs) making up the bulk at 60%, followed by limited partners (LPs) (i.e., institutional
investors and government affiliates) and corporates. As more funds increase focus on India,
over 70% of investors concur that global PE firms and LPs/sovereign wealth funds investing
directly are the biggest competitive threat. Growing investor confidence in the Indian market
is visible because of the increasing penetration of major GPs and LPs into India's deal value.
High Growth Potential for Mutual Fund Industry in India is Driving the Market
In 2022, it was estimated that there would be around 1.88 crore (18.8 million) registered mutual
fund investors in India as against 1.86 crore (18.6 million) households with an annual income
of more than INR 10 lakh (USD 12,089) per annum. The number of mutual funds being offered,
compared to previous years, has also increased exponentially.
Despite the competition among mutual funds, which has increased manifold over the years,
their performance has been consistently good, and investors have benefitted immensely. The
industry has grown rapidly over the last few years, with a growth rate of almost 40% per year.
The main reason for this growth is investors' increased demand for financial products. This has
led to an increase in the number of people investing their money in mutual funds, which have
been able to meet this demand.

3.6.3 Functions of AMCs

An AMC serves various functions altogether to ensure investor money is managed well. They
aim at making the best investments to buy the most fruitful securities and assets. The Asset
Management Company functions are divided into the following segments for more effective
functioning:
Research and Analysis
The AMCs conduct thorough research and consider the current market trends to ensure the
pooled funds are best utilized. In addition, they study multiple microeconomic and
macroeconomic factors to assess the risks involved with each financial deal. Once the money
managers understand the financial atmosphere, they shortlist and finally select the most
profitable deals to invest in.
Asset Allocation
Based on their research and calculations, the AMCs list the assets and securities to spend the
pooled funds in. Then, they allocate the funds to purchase assets. The profits reaped become
the return on the investments. Every investor has a share in those returns based on the
proportion of funds offered to the AMCs.
Portfolio Building
An Asset Management Company dealing in a mutual fund or other assets makes sharp
investments for better returns. Once the market research reports are studied and fund allocation
is done, the next step is to build a strong, diversified portfolio for their clients. Finally, the fund
managers determine all relevant factors and decide which asset or security to buy, sell, or hold.
Performance Review
When AMCs use the funds gathered from a different source, they automatically become
answerable to those fund providers. As a result, money managers must make justifiable
decisions. As a result, reviewing their performance from time to time is important. The fund
managers or portfolio managers must be ready to justify a buy, sale, or hold positions.

3.6.4 Top AMCs in India

SBI MUTUAL FUND

The SBI Mutual Fund Trustee Company Private Limited was set up as a trust under the Trust
Act of 1882. This Trust controls the SBI Mutual Fund, one of India’s largest and oldest MFs.
The SBI Mutual Fund is a Joint Venture (JV) between one of India’s largest and most profitable
banks, the State Bank of India, and Amundi, which is a French asset management company.
The SBI Mutual Fund was set up on June 29, 1987 and was incorporated on February 7, 1992.
It was India’s second Mutual Fund after the Unit Trust of India started operations in 1963. In
July 2004, SBI decided to divest 37% of the Fund and roped in Amundi as a partner. Amundi
is an asset management major created jointly by Crédit Agricole and Société Générale.
SBI MF has many firsts to its name. It was the first Indian Mutual Fund player to launch a
‘Contra’ fund, called the SBI Contra Fund. In 2013, SBI Mutual Fund India acquired Daiwa
Mutual Fund, part of the Daiwa Group of Japan. SBI Mutual Fund is the first in India to launch
an ESG Fund. An acronym for Environment, Social and Governance, the fund provides
resources for sustainable investment in major markets. In 2015, the Employees’ Provident Fund
of India invested Rs 5,000 Crore for the first time in a Mutual Fund in India via SBIMF Sensex
ETFs or Exchange Traded Funds. As of March 2023, the SBI Mutual Fund manages assets
worth Rs. 7.22 lakh crores. In early 2019, it moved past Aditya Birla and HDFC Mutual Funds
to emerge as the 3rd largest Mutual Fund body in India based on Assets under Management or
AUM. The SBI MF is registered with the Securities and Exchange Board of India or SEBI.

ICICI PRUDENTIAL MUTUAL FUND

ICICI Prudential Mutual Fund is one of India’s top 2 largest Asset Management Companies. It
is one of the oldest and most profitable Mutual Funds. Most of their offerings are rated
“AAAmfs”, which indicates a high degree of confidence and reliability. ICICI Prudential was
set up in 1993 with ICICI Bank and Prudential Plc acting as partners. The Prudential Group is
one of the world’s oldest, largest and most influential insurance companies. ICICI Prudential
Mutual Fund has played a major role in setting up the CRISIL rating system in India. As a
CIBIL score determines the creditworthiness of an individual, the CRISIL score determines
the health of Mutual Funds in India.
According to statistics made available as of 30th September 2018, the Average Assets Under
Management or AAUM of ICICI Pru Mutual Fund, as it is also known, is Rs 468196.92 Crore.
It is managed by the trustees of the ICICI Prudential Trust Ltd and is over 30 years old. The
Mutual Fund was set up and incorporated in the same year- 1993. As of 31 March, 2023, it
manages assets worth over Rs. 5.1 Lakh Crore. The organisation has some of the best-known
fund managers in the business, and it is growing at a rapid pace. ICICI Prudential Mutual Fund
is headquartered in Mumbai and provides a wide array of funds designed to fit every
socioeconomic bracket. You can deposit a lump sum or start a SIP with ICICI Prudential via
Groww with minimal documentation and in a very short period of time. Prudential Group has
plans to offload 3.7% of its stake in the Mutual Fund to pare down its shareholding pattern to
below 25% as per SEBI rules.

HDFC MUTUAL FUND

HDFC Asset Management Company Ltd., or HDFC Mutual Fund, is currently the largest
mutual fund and actively managed equity mutual fund in India. It is one of the most profitable
asset management companies (AMC) in the country. The company manages assets worth Rs.
4.8L Cr crores as of Mar 31 2023.
In the last 5 years, the CAGR of:
▪ Revenue from operators was 17.41%.
▪ Operating profit was 20.08%.
▪ Profit before tax was 21.35%.
▪ Profit after tax was 21.07%.
▪ Assets under management (AuM) was 25.86%.
▪ Active equity AuM was 32.27%.
The company serviced more than 75000 empanelled distribution partners through 210 branches
spread across more than 200 cities in India. HDFC Asset Management Company Ltd. received
approval to act as an AMC from SEBI back on 30 June 2000 under the registration number
MF/044/00/6. It also offers portfolio management/non-binding investment advisory services
since 18 September 2016.

NIPPON INDIA MUTUAL FUND

Nippon India Mutual Funds (formerly Reliance Mutual Fund) is one of the leading asset
management companies in India. It manages assets across managed accounts, mutual funds,
pension funds, alternative investments, and offshore funds. Nippon India Mutual Fund’s
(NIMF) asset manager is Nippon Life India Asset Management Limited (NAM India). NAM
India’s promoters are Reliance Capital Limited and Nippon Life Insurance Company that hold
75.93% of its total issued and paid-up equity share capital. Reliance Capital Limited is one of
India’s topmost RBI registered Non-Banking Finance Company and has its business interests
in asset management, life insurance, general insurance, stockbroking and other activities in the
financial sector.
Nippon India Mutual Fund is one of India’s top Asset Management Companies. Set up in June
1995 as Reliance Mutual Fund, it was a joint venture between India's Reliance Capital and
Japan's Nippon Life Insurance company. In October 2019, Reliance's stake was bought by
Nippon, and the fund house was renamed as Nippon India Mutual Fund.
Nippon Mutual Funds manage assets worth Rs.2,07,288 crores. Currently, the range of Nippon
mutual funds schemes includes 52 equity, 266 debt, and 40 balanced funds. The company is
led by its CEO Sundeep Sikka. Nippon Life India Asset Management Limited works as an
investment management firm. The Company provides services like portfolio management,
mutual fund investment, financial planning, and advisory services to individuals, institutions,
trusts, and private funds.
 KOTAK MUTUAL FUND
Kotak Mahindra Asset Management Company Limited (KMAMC) is a public limited company
registered under the Companies Act, 1956 on August 2, 1994. The company is the asset
manager of Kotak Mahindra Mutual Fund (KMMF) and a wholly and a subsidiary of Kotak
Mahindra Bank Limited (KMBL).
Kotak Mutual Fund began its operations back in December 1998. It was the first AMC to offer
a dedicated gilt fund for investing solely in Government securities. It provides mutual fund and
portfolio management services under SEBI ('Mutual Funds') Regulations, 1996 and SEBI
(Portfolio Manager) Regulations, 1993. KMAMC also offers pension fund management
services through its subsidiary, the Kotak Mahindra Pension Fund Limited.
Currently, the company offers around 261 schemes catering to the variable risk appetite of
investors. It primarily invests in AAA and AA rated companies and possesses a substantial
value of assets under management (AuM). KMAMC also provides customers with the option
to avail income tax benefits under Section 80C. As of 31st March 2023, the asset under
management of Kotak AMC is more than 2.86 lakh crores. KMAMC has 86 branches spread
over 82 cities in India and has 25.9 lakh unique investors.

ADITYA BIRLA SUN LIFE MUTUAL FUND

Aditya Birla Sun Life Mutual Funds (ABSLMF) is a joint-venture company co-sponsored by
the Indian company, Aditya Birla Capital Limited and Canada-based financial service
company, Sun Life AMC Investments, Inc.
Headquartered in Mumbai, it was previously named Birla Sun Life Asset Management
Company Limited. It was established in 1994 and has successfully completed 25 years in the
Indian financial landscape. Both the parent companies, Aditya Birla Group and Sun Life
Financial, Inc., are significant financial companies with a rich legacy of wealth creation and
management. The Aditya Birla Group is the 3rd largest business conglomerate in India, with
gross revenue in excess of $41 billion.
Sun Life, on the other hand, is one of the largest life insurance providers in the world, with
investment management as their other area of expertise. It ranks 236th on the Fortune 500 list.
ABSLMF is currently one of the largest asset management companies operating in India. With
cumulative average assets under management (AUM) of Rs. 2.6 Lakh Crores as of March 31,
2023. The primary commitment of ABSLMF is to increase mutual fund penetration in India.
As of May 2019, there are over 83.2 million mutual fund folios in India, aggregating over Rs.
25.43 trillion. It has quadrupled in the past decade alone, and ABSLMF has had a defining role
in it. BSLAMC is one of the leading asset managers in India, servicing around 7.9 million
investor folios with a pan India presence across 280 plus locations which include metropolises
and small times alike.
3.7 Company Profile

Established in 1993, ICICI Prudential Mutual Fund emerged as a formidable force in India's
financial landscape through a strategic alliance between ICICI Bank and Prudential Plc. Over
the years, it has solidified its position as one of the country's top two Asset Management
Companies, boasting a legacy marked by reliability and profitability. The collaborative efforts
with Prudential Group, a globally renowned insurance giant, have not only contributed to its
success but have also added a layer of international influence.
ICICI Prudential played a pivotal role in shaping the mutual fund landscape in India by actively
participating in the establishment of the CRISIL rating system. Much like the significance of
CIBIL scores for individuals, CRISIL ratings determine the health and reliability of mutual
funds in the Indian financial market. As of September 30, 2018, the fund's Average Assets
Under Management (AAUM) stood at an impressive Rs 468,196.92 Crore, a testament to its
robust financial standing. Managed by the dedicated trustees of ICICI Prudential Trust Ltd, the
fund has matured over the past 30 years, becoming a cornerstone in the investment sector.
Fast-forwarding to March 31, 2023, ICICI Prudential Mutual Fund has further expanded its
reach, managing assets exceeding Rs. 5.1 Lakh Crore. This substantial growth is a testament
to its commitment to excellence and its ability to adapt to the dynamic financial landscape.
Headquartered in the financial hub of Mumbai, the fund offers a diverse array of investment
options, catering to individuals across different socioeconomic brackets. Renowned for having
some of the industry's best fund managers, the organization has gained a reputation for its
steadfast growth and commitment to delivering value to its investors. Whether making lump
sum deposits or starting a Systematic Investment Plan (SIP) through user-friendly platforms
like Groww, investors can engage with ICICI Prudential Mutual Fund with minimal
documentation and a streamlined process. Looking ahead, the Prudential Group's strategic
decision to offload 3.7% of its stake aligns with SEBI rules, reflecting a commitment to
maintaining a balanced and compliant shareholding pattern.
3.7.1 Parent Company & Sponsors

ICICI Bank

ICICI Bank is one of India’s leading private sector bank offering a diversified portfolio of
financial products and services to retail, SME and corporate customers. It delivers products and
services through various channels including branches, ATMs, mobile phones and the internet.
It is at the forefront of leveraging technology and offering services through digital channels.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts are listed on the New
York Stock Exchange.

Prudential plc
Prudential plc provides life, health insurance and asset management to 18 million customers
across 24 markets in Asia and Africa. Headquartered in London and Hong Kong, the business
is focused on four strategic regions: Greater China, ASEAN, India and Africa. Prudential’s
purpose is to be partners for every life and protectors for every future. It is Prudential’s mission
to be the most trusted partner and protector for this generation and generations to come, by
providing simple and accessible financial and health solutions.

Eastspring Investments

Eastspring Investments, part of Prudential plc, is a leading Asia-based asset manager that
manages over USD 228 billion (as of 30 June 2023) of assets on behalf of institutional and
retail clients. Operating since 1994, it has one of the widest footprints among asset management
companies across Asia*. Eastspring provides investment solutions across a broad range of
strategies including equities, fixed income, multi asset, quantitative and alternatives and is
committed to delivering high quality investment outcomes for its clients over the long term.

3.7.2 Mission, Vision and Values

The mission of ICICI Prudential Mutual Funds is to be the dominant life, health and pensions
player built on trust by world-class people and service. The fund house aims to understand the
needs of customers and offer them superior products and service, leverage technology to
service customers quickly, efficiently and conveniently, develop and implement superior risk
management and investment strategies, provide an enabling environment for employees, and
build transparency in all dealings.
The vision of ICICI Prudential Mutual Funds is to bridge the gap between savings and
investments and create long-term wealth for investors through a range of simple and relevant
investment solutions. The fund house believes that the investor’s success is its success and
every employee strives to create an unparalleled experience for all the investors
The values of ICICI Prudential Mutual Funds are integrity, customer first, boundary-less,
humility and passion. These values describe what the fund house stands for, the qualities of its
people and the way it works. Every member of the ICICI Prudential team is committed to these
values and they shine forth in all they do.

3.7.3 SWOT Analysis of ICICI Prudential

STRENGTHS:
▪ Diversified Portfolio: ICICI Prudential has a diverse range of mutual fund offerings,
catering to various risk appetites and investment goals. This diversification can attract a
broad spectrum of investors.
▪ Robust Fund Management Team: The AMC boasts a team of experienced fund managers
who play a crucial role in the performance of its funds. Their expertise contributes to the
overall trust investors place in the company.
▪ Distribution Network: ICICI Prudential has a widespread distribution network, including
online platforms, banks, and independent financial advisors. This extensive reach facilitates
easy accessibility for investors.

WEAKNESSES:
▪ Dependency on Market Conditions: The mutual fund industry is heavily influenced by
market conditions. Economic downturns or market volatility can impact the performance
of mutual funds, affecting ICICI Prudential's profitability.
▪ Customer Service Concerns: In a service-oriented industry like asset management,
customer service is critical. Any lapses in this area, such as delays in response or issue
resolution, could negatively affect the company's reputation.

OPPORTUNITIES:
▪ Rising Financial Awareness: As financial literacy grows, there's an opportunity for ICICI
Prudential to educate and attract more investors, especially those new to mutual fund
investments.
▪ Sustainable and ESG Investing: With the increasing focus on sustainable and socially
responsible investing, there's an opportunity for the AMC to launch funds that align with
Environmental, Social, and Governance (ESG) principles.
▪ Global Expansion: Exploring opportunities in international markets can be a potential
avenue for growth, diversifying the AMC's geographical exposure.

THREATS:
▪ Regulatory Changes: The mutual fund industry is subject to regulatory changes that can
impact operations and fund structures. Adapting to these changes promptly is crucial to
avoiding compliance issues.
▪ Economic Downturn: A recession or economic downturn can lead to a decline in the value
of assets under management (AUM) and may result in increased redemptions by investors.
▪ Emerging Fintech Competition: The rise of fintech companies offering alternative
investment platforms poses a threat to traditional asset management firms. Embracing
technology and enhancing digital offerings can mitigate this risk.
 CHAPTER 4

RESEARCH METHODOLOGY
4.1 Research Methodology
Research Methodology Research is divided into two different studies:
Research 1: Primary Research to know the preference of mutual fund investors regarding their
investment.
Research 2: Secondary Research to evaluate the performance of Mutual funds which are
preferred by most of the investors is based upon Descriptive Research Design. Five large and
mid-cap mutual fund are selected and top 5 companies based on NAV is selected from each
sector for further analysis.

4.2 Research Design

Research 1: The primary research is based upon convenience sampling. Convenience sampling
(sometimes known as grab or opportunity sampling) is a type of non- probability sampling
which involves the sample being drawn from that part of the population which is close to hand.
Research 2: The secondary Research is based upon Judgmental Sampling. Judgmental
sampling is a non-probability sampling technique where the researcher selects units to be
sampled based on their knowledge and professional judgment.

4.3 Data Collection

This study is based on primary and secondary data. The primary data is collected using well-
structured questionnaire. The questionnaire contains questions based on Demographic Factors,
Rating Scale Questions. The secondary data are been collected from the various websites like
BSE, NSE, Association of mutual fund, Money control etc.

4.4 Source of Data

Primary Data
Primary data were collected from a sample of 100 investors with the help of a self- prepared
questionnaire and observation. When compared with the other resource types the primary
source of data information is the perfect as well as the trust worthy one which is been gathered
directly from the actual source of the problem. Within this research process the surveys are
utilized and the questioners which are needed are well organized and are forwarded to the major
individuals who are included with in the research process.
Secondary Data
In simple words secondary source of data talks or writes about the key findings from the
primary research. Generally, the secondary source of the data is been collected from the articles
which are published, journals as well as the websites. The information or the data which is been
collected from the secondary sources is been compared by the actual search by taking the views
of the individuals who are included in the primary source of the information as well as the
actual importance of the data is been evaluated. Obtaining the secondary information is faster
and cheaper than primary information and for some projects which involve budget and time
constraints, secondary information can be considered as the best option.

4.5 Sampling Plan

Sample Design
A sample design is the roadmap or framework which serves as the basis for selecting sample
for survey. It will include Sampling Unit, Sampling Technique and Sample Size.
Population of the study
The population of the study includes the investors of ICICI Prudential Mutual Fund and general
public and 100 investors are surveyed.
Sampling Unit
Main objective of the research is to study about the preference of investors towards investment
in mutual funds. Sampling Unit of the research is investors of ICICI Prudential Mutual Fund.
Sampling Technique
Sampling technique can be broadly classified as Non-Probability and Probability Sampling.
Non-Probability technique of selecting sample has been used for the study. Among non-
probability, convenience sampling is used for this study.
Survey Method
For the purpose of Primary Data collection, survey technique has been adopted, in which close
ended questions are asked with the help of structured questionnaire. In this study, data were
collected from 100 investors Questionnaire Method.
Period of study
The period of study was from 5th January 2024 to 3rd February 2024.

4.6 Data Collection Tools

Primary Data Collection
Primary data are the data originated by researcher to meet certain objectives. For the study
primary data has been collected from a sample of 100 investors through a well-structured
questionnaire.
Secondary Data Collection
Secondary data are the data already collected and published. For this study secondary data were
collected from various books, journals, thesis, periodicals, magazines, newspapers and
websites.
 4.7 Data Analysis Tools
Primary Data
Before processing the responses, the completed questionnaires were edited for completeness
and consistency. The study generated quantitative data which was coded and entered into
Statistical Packages for Social Scientists (SPSS) and analysed using descriptive statistics.
Quantitative data was presented in tables and explanation in prose. Method/tools used for
analysing the data are: -
▪ Mean

The mean is the average of all numbers. Standard deviation is the measure of dispersion
describe the amount of variation in a variable.
▪ One-way ANOVA

The one-way analysis of variance (ANOVA) is used to determine whether there are any
statistically significant differences between the means of three or more independent (unrelated)
groups. The one-way ANOVA compares the means between the groups you are interested in
and determines whether any of those means are statistically significantly different from each
other. Specifically, it tests the null hypothesis. If, however, the one-way ANOVA returns a
statistically significant result, we accept the alternative hypothesis (HA), which is that there
are at least two group means that are statistically significantly different from each other.
▪ Correlation Analysis

Karl Pearson's correlation coefficient, often referred to simply as Pearson correlation or

Pearson's r, is a statistical measure that quantifies the linear relationship between two
continuous variables. It was developed by Sir Francis Galton and later popularized by Karl
Pearson. The correlation coefficient is denoted by the symbol "r." Pearson's correlation
assumes that the relationship between variables is linear and that the data is normally
distributed. It is sensitive to outliers and may not accurately capture non-linear relationships.
Secondary Data
The various measures used for the performance evaluation of the large and midcap funds of 5
Asset Management Companies are as follows:
i. Standard Deviation

A measure of the dispersion of a set of data from its mean. The more spread apart the data is,
the higher the deviation. Standard deviation is applied to the annual rate of return of an
investment to measure the investment's volatility (risk). A volatile stock would have a high
standard deviation. The standard deviation tells us how much the return on the fund is deviating
from the expected normal returns. Standard deviation can also be calculated as the square root
of the variance.
ii. Beta

Beta measures the sensitivity of the stock to the market. For example, if beta=1.5; it means the
stock price will change by 1.5% for every 1%change in Sensex. It is also used to measure the
systematic risk. Systematic risk means risks which are external to the organization like
competition, government policies. They are non-diversifiable risks. Beta is calculated using
regression analysis, Beta can also be defined as the tendency of a security's returns to respond
to swings in the market. A beta of1 indicates that the security's price will move with the market.
A beta less than 1 means that the security will be less volatile than the market. A beta greater
than 1 indicates that the security's price will be more volatile than the market.
For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.
Beta>1- aggressive stocks
Beta<1- defensive stocks
Beta=1- neutral stocks

iii. Sharpe Ratio

A ratio developed by Nobel Laureate William F. Sharpe to measure risk- adjusted performance.
It is calculated by subtracting the risk-free rate from the rate of return for a portfolio and
dividing the result by the standard deviation. Sharpe ratio tells us how much extra return one
will receive on holding a risky asset. Sharpe ratio is based on standard deviation which is a
measure of total risk. The greater a portfolio’s Sharpe ratio, the better its risk adjusted
performance has been. A fund with higher Sharpe ratio in relation to another is preferable as it
indicates that the fund has higher risk premium for every unit of standard deviation risk.

Where,
 Rp- stands for average return of the portfolio
Rf -stands for average risk-free rate of return
σp -stands for standard deviation of the portfolio (total risk)

iv. Treynor Ratio

Treynor (1965) was the first researcher developing a composite measure of portfolio
performance. Treynor ratio measure the relationship between fund’s additional return over risk
free return and market risk is measured by beta. The larger the value of Treynor ratio, the better
the portfolio has performed. Generally, if the Treynor ratio is greater than benchmark
comparison, the portfolio has outperformed the market and indicating superior risk adjusted
performance.

Where,
Rp = average return of the portfolio
Rf = average risk-free rate of return
βp = beta of the portfolio (systematic risk)

v. Jensen’s Alpha

Jensen's Measure definition implies a type of performance measure that is risk-adjusted. The
given measure helps in representing the average returns on the given investment or portfolio –
above or below the predicted value by the CAPM (Capital Asset Pricing Model). The only
condition here is that the Beta of the portfolio or the investment along with the average market
return should be provided. The given metric is also commonly known as Alpha. Jensen’s alpha
is the difference between the actual return of the portfolio and the expected risk adjusted

Where,
Rp = Expected portfolio return
Rf = Risk free rate
β = Beta of the portfolio
Rm = Expected market return
vi. Return

The returns are computed on the basis of the Net Asset Values of the different schemes and
returns in the market index are computed on the basis of these National Index on the respective
date. The NAVs are adjusted assuming dividends are reinvested at the ex-dividend NAV. In
this study the weekly yields on 91-day Treasury bills have been used as a surrogate for risk-
free rate of return. The returns are computed as follows:

Rpt = ln [(NAV t+1 – NAVt)/ NAVt]

Where,
Rpt = return on the fund during the period ‗t ‘, where ‗t stands for time
NAV = Net Asset value of the fund.
In = natural logarithm
 CHAPTER 5

DATA PRESENTATION AND

ANALYSIS
5.1 Primary Data Analysis

5.1.1 GENDER OF RESPONDENTS

Particulars Frequency Percent

Male 53 53.0

Female 47 47.0

Total 100 100.0

GENDER OF RESPONDENTS

Male
47% 53%
Female

INFERENCE
From the table it can be seen that 53% of the respondents were male and remaining 47% were
female. That means majority of the respondents participated in the study are male.
5.1.2 AGE GROUP OF RESPONDENTS
Particulars Frequency Percent

18-25 years 47 47.0

26-35 years 20 20.0

36-45 years 7 7.0

46-55 years 15 15.0

56 & above 11 11.0

Total 100 100.0

AGE GROUP OF RESPONDENTS

47

20
15
11
7

18-25 years 26-35 years 36-45 years 46-55 years 56 & above

INFERENCE
From the above data, 47% of the respondents belongs to the age group of 18-25 years.
5.1.3 OCCUPATIONAL STATUS OF RESPONDENTS

Particulars Frequency Percent

Student 45 45.0

Self Employed 10 10.0

Salaried 22 22.0

Business Owner 18 18.0

Other 5 5.0

Total 100 100.0

OCCUPATIONAL STATUS OF RESPONDENTS

OTHER 5

BUSINESS OWNER 18

SALARIED 22

SELF EMPLOYED 10

STUDENT 45

0 5 10 15 20 25 30 35 40 45 50

INFERENCE
From the above data 45% of the respondents were Students, 22% were Salaried, 18% were
Business Owners, 10% were Self employed and 5% were doing Other occupation.
5.1.4 EDUCATIONAL STATUS OF RESPONDENTS

Particulars Frequency Percent

Plus two 38 38.0

UG 26 26.0

PG 16 16.0

PhD 20 20.0

Total 100 100.0

EDUCATIONAL STATUS OF RESPONDENTS

20% 16%

Plus two
UG
PG
PhD
26%
38%

INFERENCE
From the above data, it can be seen that 38% of the respondents are Under Graduates (UG),
26% is Post graduates (PG), 20% is PhD holders and 16% is Plus two.
5.1.5 MUTUAL FUND PREFERENCE OF RESPONDENTS

Particulars Frequency Percent

Yes 59 59.0

No 15 15.0

Maybe 14 14.0

I don't know 12 12.0

Total 100 100.0

MUTUAL FUND PREFERENCE OF RESPONDENTS

12%

14% Yes
No
Maybe
59%
I don't know
15%

INFERENCE
From the above data, it is understood that a majority of 59% of the respondents prefer mutual
fund as an investment avenue.
5.1.6 ANNUAL INCOME RANGE OF RESPONDENTS

Particulars Frequency Percent

Less than 2,50,000 33 33.0

2,50,000 - 5,00,000 29 29.0

5,00,000 - 10,00,000 21 21.0

10,00,000 - 20,00,000 6 6.0

Above 20,00,000 11 11.0

Total 100 100.0

Annual income range of respondents

33

29

21

11

LESS THAN 2,50,000 2,50,000 - 5,00,000 5,00,000 - 10,00,000 10,00,000 - 20,00,000 ABOVE 20,00,000
5.1.7 PERCENTAGE OF YOUR INCOME ARE YOU WILLING TO INVEST IN MUTUAL
FUNDS

Particulars Frequency Percent

0-10% 26 26.0

10-20% 46 46.0

20-30% 12 12.0

30-40% 11 11.0

40% & above 5 5.0

Total 100 100.0

Mean 2.23

Percentage of your income are you willing to

invest in mutual funds

5%

11% 26% 0-10%

10-20%
12%
20-30%
30-40%
40% & above
46%
5.1.8 WHAT PERCENTAGE OF YOUR INCOME ARE YOU WILLING TO
INVEST IN MUTUAL FUNDS?

Particulars Frequency Percent

Significantly increased 25 25.0

Moderately increased 33 33.0

Remained stable 32 32.0

Moderately decreased 5 5.0

Significantly Decreased 5 5.0

Total 100 100.0

Mean 2.32

Standard deviation 1.062

INFERENCE

The data shows that the respondents have a positive attitude towards the statement “My
personal income changed in last five years”, with a mean of 2.32 and a standard deviation of
1.062.
5.1.9 HOW DOES THE ECONOMIC ENVIRONMENT IMPACT YOUR PERSONAL
INCOME?

Particulars Frequency Percent

Strongly Positive 10 10.0

Positive 30 30.0

Neutral 44 44.0

Negative 13 13.0

Strongly Negative 3 3.0

Total 100 100.0

Mean 2.69

Std. Deviation 0.929

INFERENCE
Most of the respondents have a neutral or positive outlook on how the economic environment
affects their personal income, with a mean of 2.69 and a low standard deviation of 0.929.
5.1.10 WHAT MOTIVATES YOU TO SAVE & INVEST A PORTION OF YOUR
MONTHLY INCOME?

Particulars Frequency Percent

Financial Goals 51 51.0

Tax Benefits 11 11.0

Wealth Creation 33 33.0

Retirement Planning 5 5.0

Total 100 100.0

Mean 1.92

Std. Deviation 1.022

INFERNCE

The majority of the respondents are motivated by financial goals and wealth creation to save
and invest their income, with a mean of 1.92 and a moderate standard deviation of 1.022.
5.1.11 PREFERRED MODE OF INVESTMENTS IN MUTUAL FUND

Particulars Frequency Percent

Systematic Investment
36 36.0
Planning (SIP)

Lump Sum Investments 15 15.0

Both equally 29 29.0

Not sure 20 20.0

Total 100 100.0

Preferred mode of investments in mutual

fund

20% Systematic Investment Planning

(SIP)
36% Lump Sum Investments

Both equally

29% Not sure

15%

INFERENCE
Systematic Investment Planning (SIP) is the most preferred mode of investing in mutual
funds.
5.1.12 HOW CONFIDENT ARE YOU IN ACHIEVING YOUR FINANCIAL GOALS
THROUGH YOUR CURRENT MONTHLY SAVINGS PLAN?

Particulars Frequency Percent

Very confident 28 28.0

Confident 18 18.0

Neutral 39 39.0

Not much confident 13 13.0

Not at all confident 2 2.0

Total 100 100.0

Mean 2.43

Std. Deviation 1.094

How confident are you in achieving your

financial goals through your current monthly
savings plan

2% Very confident
13%
28%
Confident
Neutral
Not much confident
39% 18%
Not at all confident

INFERENCE
In a study of 100 respondents, the average confidence in achieving financial goals through
current monthly savings plans is moderate (mean = 2.43), showing a relatively low level of
variability (standard deviation = 1.094).
5.1.13 DO YOU HAVE A SIP OR REGULAR SAVINGS PLAN IN PLACE FOR YOUR
INVESTMENTS?

Particulars Frequency Percent

Yes 48 48.0

No 20 20.0

Maybe 32 32.0

Total 100 100.0

Do you have a SIP or regular savings plan in

place for your investments?

32%
Yes
48% No
Maybe

20%

INFERENCE
Almost half of the respondents have a SIP or regular savings plan for their investments, while
one-fifth do not and the remaining are unsure.
5.1.14 WHAT TYPE OF MUTUAL FUNDS DO YOU PREFER?

Particulars Frequency Percent

Equity Funds 46 46.0

Debt Funds 10 10.0

Hybrid Funds 19 19.0

Index Funds 10 10.0

Sector Specific Funds 15 15.0

Total 100 100.0

What type of mutual funds do you prefer?

15%
Equity Funds

10% Debt Funds

46%
Hybrid Funds
Index Funds
19% Sector Specific Funds
10%

INFERENCE

Equity funds are the most preferred type of mutual funds among the respondents, followed by
hybrid funds and sector specific funds, while debt funds and index funds are the least
preferred.
5.1.15 HOW IMPORTANT IS THE HISTORICAL PERFORMANCE OF A MUTUAL
FUND IN YOUR INVESTMENT DECISION?

Particulars Frequency
Very important 37
Important 27
Neutral 33
Not at all important 3
Total 100

Mean 2.05

Std. Deviation 0.989

INFERENCE

The majority of the respondents consider the historical performance of a mutual fund as
important or very important in their investment decision, with a mean rating of 2.05 and a
low standard deviation of 0.989.
5.1.16 WHAT IS YOUR PRIMARY INVESTMENT OBJECTIVE WHEN CONSIDERING
MUTUAL FUNDS?

Particulars Frequency
Capital Appreciation 32

Regular Income 23

Wealth Preservation 18

Tax Efficiency 13

Diversification 14

Total 100

Mean 2.54

Std. Deviation 1.417

What is your primary investment objective

when considering mutual funds?

14%

32% Capital Appreciation

13% Regular Income

Wealth Preservation
Tax Efficiency

18% Diversification

23%

INFERENCE
The respondents have different preferences for the objectives of their mutual fund
investments, with capital appreciation being the most common, followed by regular income
and wealth preservation, while tax efficiency and diversification are the least common, with a
mean rating of 2.54 and a moderate standard deviation of 1.417.
5.1.17 HOW IMPORTANT IS THE EXPENSE RATIO OF MUTUAL FUND IN YOUR
DECISION-MAKING PROCESS?

Particular Frequency

Very Important 27

Important 20

Neutral 51

Not much important 2

Total 100

Mean 2.28

Std. Deviation 0.889

INFERENCE

More than half of the respondents are neutral about the expense ratio of mutual fund in their
decision-making process, with a low variation in opinions.
5.1.18 HOW WOULD YOU RATE YOUR UNDERSTANDING OF MUTUAL FUNDS &
FINANCIAL MARKETS?

Particular Frequency

Novice 10

Beginner 34

Intermediate 24

Advanced 18

Expert 14

Total 100

Frequency

14% 10%

Novice
Beginner
18%
Intermediate
34%
Advanced
Expert

24%

INFERENCE

Most of the respondents are beginners or intermediate in their understanding of mutual funds
and financial markets, with a few advanced and expert, and very few novices.
5.1.19 DO YOU ACTIVELY SEEK PROFESSIONAL ADVICE BEFORE MAKING
INVESTMENT DECISIONS?

Particulars Frequency Percent

Yes 37 37.0

No 19 19.0

Maybe 44 44.0

Total 100 100.0

INFERENCE
The data suggests that among respondents, 37 individuals actively seek professional advice
before making investment decisions, 19 do not seek such advice, and 44 are uncertain or
indecisive, responding with "Maybe."
5.1.20 HOW DO YOU RATE YOUR UNDERSTANDING OF KEY FINANCIAL
MARKET TERMS SUCH AS DIVIDENDS, P/E RATIO, MARKET CAPITALIZATION
ETC.

Particular Frequency Percent

Very good knowledge 22 22.0

Good knowledge 24 24.0

Neutral 39 39.0

No much knowledge 7 7.0

No knowledge 8 8.0

Total 100 100.0

Mean 2.55

Std. Deviation 1.149

INFERENCE
The statistical study of 100 respondents reveals a moderate overall self-assessed understanding
of key financial market terms (mean = 2.55, std. deviation = 1.149), with the majority
expressing a neutral stance, while a considerable number feel they possess either good or very
good knowledge, and a smaller portion admitting limited or no knowledge.
5.1.21 IN YOUR OPINION HOW CRUCIAL IS STAYING INFORMED ABOUT
ECONOMIC INDICATORS AND MARKET TRENDS FOR MAKING INFORMED
INVESTMENT DECISIONS?

Particular Frequency Percent

Extremely crucial 30 30.0

Crucial 30 30.0

Neutral 23 23.0

Not much crucial 10 10.0

Not at all crucial 7 7.0

Total 100 100.0

In your opinion how crucial is staying informed about

economic indicators and market trends for making
informed investment decisions?

7%

10% Extremely crucial

30%
Crucial
Neutral
23%
Not much crucial
Not at all crucial
30%

INFERENCE
The data from 100 respondents indicates that a significant proportion perceives staying
informed about economic indicators and market trends as crucial or extremely crucial (60%),
while a smaller portion holds a neutral stance (23%), and a minority considers it not much or
not at all crucial (17%) for making informed investment decisions.
5.1.22 TO WHAT EXTENT DO YOU AGREE WITH THE FOLLOWING STATEMENT ‘I
AM COMFORTABLE WITH THE LEVEL OF RISK ASSOCIATED WITH MUTUAL
FUND’?

Particular Frequency Percent

Strongly Disagree 12 12.0

Disagree 31 31.0

Moderate 28 28.0

Agree 26 26.0

Strongly Agree 3 3.0

Total 100 100.0

Mean 2.77

Std. Deviation 1.062

INFERENCE
The data from 100 respondents reveals a varied perception of comfort with the risk associated
with mutual funds, with a mean agreement level of 2.77 and a relatively low standard
deviation of 1.062, indicating a moderate overall agreement and limited variability in
responses.
5.1.23 IN A HYPOTHETICAL SCENARIO, IF YOUR PORTFOLIO
DECREASED BY 20% IN A YEAR, WHAT WOULD BE YOUR REACTION?

Particular Frequency

Panic & sell all investments 10

Worry but hold onto investments 15

Accept it as a normal market fluctuation 42

View it an opportunity to buy more

20
investments

It wouldn't bother me at all 13

Total 100

Frequency

Panic & sell all investments

13% 10%
Worry but hold onto investments
15%
20% Accept it as a normal market
fluctuation
View it an opportunity to buy more
investments
42% It wouldn't bother me at all

INFERENCE
The data from 100 respondents reveals diverse reactions to a hypothetical 20% decrease in
their portfolio: 10 would panic and sell all investments, 15 would worry but hold onto them,
42 would accept it as a normal market fluctuation, 20 would view it as an opportunity to buy
more investments, and 13 would not be bothered at all.
5.1.24 HOW DO YOU PERCEIVE THE RELATIONSHIP BETWEEN RISK & RETURN
FINANCIAL INVESTMENTS?

Particular Frequency Percent

High risk for high

48 48.0
return

Moderate risk for

52 52.0
moderate return

Total 100 100.0

Mean 1.52

Std. Deviation 0.502

INFERENCE
Among 100 respondents, the majority perceive a high-risk/high-return relationship in
financial investments (48), while a substantial number believe in a moderate risk for a
moderate return (52), with a mean perception score of 1.52 and a relatively low standard
deviation of 0.502.
5.1.25 IN TERMS OF INVESTMENT, HOW WOULD YOU DESCRIBE YOUR ABILITY
TO TOLERATE SHORT TERM LOSSES FOR POTENTIAL LONG-TERM GAINS?

Particular Frequency Percent

Very low tolerance 5 5.0

Low tolerance 10 10.0

Moderate tolerance 59 59.0

High tolerance 13 13.0

Very high tolerance 13 13.0

Total 100 100.0

In terms of investment, how would you describe your ability

to tolerate short term losses for potential long-term gains?

13% 5%
10%

Very low tolerance

13%
Low tolerance
Moderate tolerance
High tolerance
Very high tolerance

59%

INFERENCE
The data from 100 respondents indicates that the majority have a moderate tolerance for
short-term losses in the context of investments for potential long-term gains, with 59
participants expressing moderate tolerance, while 5 have very low tolerance, 10 have low
tolerance, 13 have high tolerance, and 13 have very high tolerance.
5.1.26 HYPOTHESIS TESTING
Hypothesis 1
Ho: There is no significant relationship between demographic factors and preference of
investors.
H1: There is a significant relationship between demographic factors and preference of
investors.
Independent Variable: Demographic factors of respondents
Dependent Variable: Preference of investors
Statistical Tool used: One-way ANOVA

ANOVA TABLE

Sum of Squares df Mean Square F Sig.

Between Groups 19.754 11 1.796 1.632 .104

Within Groups 96.836 88 1.100

Total 116.590 99

INFERENCE
From the table it is known that the p value is 0.104, which is greater than the level of
significance (0.05). Since p value (0.104) is greater than level of significance, Ho is accepted.
Therefore, there is no significant relationship between demographic factors and preference of
investors.
Hypothesis 2
Ho: There is no significant relationship between preference of investors and personal income
of investors
H1: There is a significant relationship between preference of investors and personal income of
investors
Independent Variable: Personal income of investors
Dependent Variable: Preference of investors
Statistical Tool used: Correlation Analysis

CORRELATIONS
Preference of
Personal Income
investors
Pearson Correlation 1 .284**
Preference of investors Sig. (2-tailed) .004
N 100 100
Pearson Correlation .284** 1
Personal Income Sig. (2-tailed) .004
N 100 100
**. Correlation is significant at the 0.01 level (2-tailed).

INFERENCE
From the table it is clear that there is a statistically significant positive correlation (r = 0.284, p
= 0.004) between the preference of investors and their personal income. That means, there is a
significant relationship between preference of investors and personal income of investors
suggesting that as personal income increases, investor preference tends to increase. Therefore,
Ho is rejected.
Hypothesis 3
Ho: There is no significant relationship between preference of investors and monthly savings
of investors
H1: There is a significant relationship between preference of investors and monthly savings of
investors
Independent Variable: Monthly Savings of investors
Dependent Variable: Preference of investors
Statistical Tool used: Correlation Analysis

CORRELATIONS

Preference of
Monthly Savings
investors

Pearson Correlation 1 .174

Preference of investors Sig. (2-tailed) .084

N 100 100
Pearson Correlation .174 1

Monthly Savings Sig. (2-tailed) .084

N 100 100

INFERENCE
From the table it is clear that there is a statistically weak positive correlation (r = 0.174, p =
0.084) between the preference of investors and monthly savings. There is no significant
relationship between preference of investors and monthly savings of investors. Therefore, Ho
is accepted.
Hypothesis 4
Ho: There is no significant relationship between preference of investors and nature of fund
H1: There is a significant relationship between preference of investors and nature of fund
Independent Variable: Nature of Fund
Dependent Variable: Preference of investors
Statistical Tool used: Correlation Analysis

CORRELATIONS

Preference of
Nature of Fund
investors

Pearson Correlation 1 .094

Preference of investors Sig. (2-tailed) .355

N 100 100

Pearson Correlation .094 1

Nature of Fund Sig. (2-tailed) .355

N 100 100

INFERENCE
From the table it is clear that there is a statistically weak positive correlation (r 0.094, p = 0.355)
between the preference of investors and monthly savings. There is no significant relationship
between preference of investors and monthly savings of investors. Therefore, Ho is accepted.
Hypothesis 5
Ho: There is no significant relationship between preference of investors and financial
knowledge
H1: There is a significant relationship between preference of investors and financial knowledge
Independent Variable: Financial Market Knowledge
Dependent Variable: Preference of investors
Statistical Tool used: Correlation Analysis

CORRELATIONS
Financial
Preference of
Market
investors
Knowledge

Pearson Correlation 1 -.047

Preference of investors
Sig. (2-tailed) .640
N 100 100

Pearson Correlation -.047 1

Financial Market
Knowledge Sig. (2-tailed) .640
N 100 100

INFERENCE
From the above table of correlation analysis, it is clear that, there is no significant relationship
between investors' preferences and their financial market knowledge, with a Pearson
correlation coefficient of -0.047 and a p-value of 0.640, suggesting no meaningful association
between these variables. Therefore, Ho is accepted.
Hypothesis 6
Ho: There is no significant relationship between preference of investors and risk tolerance
H1: There is a significant relationship between preference of investors and risk tolerance
Independent Variable: Risk Tolerance
Dependent Variable: Preference of investors
Statistical Tool used: Correlation Analysis

CORRELATIONS

Preference of
Risk Tolerance
investors

Pearson Correlation 1 -.139

Preference of investors
Sig. (2-tailed) .167

N 100 100

Pearson Correlation -.139 1

Risk Tolerance
Sig. (2-tailed) .167

N 100 100

INFERENCE
The above table of correlation analysis reveals a weak negative correlation (Pearson's r = -
0.139, p = 0.167) between preference of investors and risk tolerance, indicating that as
preference of investors increases, risk tolerance tends to decrease slightly, but this relationship
is not statistically significant. Therefore, Ho is accepted.
5.2 Secondary Data Analysis
Large & Midcap Funds
Large cap funds are the funds that invest in equity shares of companies with large market
capitalization. Large cap companies fall in the top 100 ranks of SEBI’s list of categorizations.
These companies are known to be well-established players in the market and tend to have a
remarkable performance record. Mid cap funds are the ones that invest in equity shares of
companies with medium-sized market capitalization. These companies fall between the ranks
of 101 and 250 of SEBI’s list of categorization basis the company size. Being highly exposed
to volatile market conditions, these funds require high risk tolerance from the investors.
Large & Mid Cap Mutual Funds are a type of equity fund that invests in the top 200 companies
in India, providing a balance between the stability of large-cap stocks and the growth potential
of mid-cap stocks. These funds are ideal for an investment horizon of over 5 years and offer a
smart way to invest in mid-caps with lesser risk compared to pure mid-cap funds’
Investing in Large & Mid Cap Mutual Funds comes with several benefits:
▪ Diversification: These funds invest in both large-cap and mid-cap stocks, providing a
balance between stability and growth potential.

▪ Stability: The large-cap component of these funds tends to be more stable and less volatile,
which can help mitigate risk.

▪ Growth Potential: The mid-cap component can offer higher growth potential, which can
lead to higher returns over the long term.

▪ Flexibility: These funds have the flexibility to adjust the allocation between large-cap and
mid-cap based on market conditions.

▪ Long-term Investment: They are ideal for investors with a long-term investment horizon
of 5+ years.

▪ Lower Risk: Investing in these funds presents a lower risk than investing in pure mid-cap
funds.

Features
▪ These funds are known to diversify their investments in between large and mid-sized
capitalisation companies.

▪ The ratio in which the investment is made may differ from fund to fund between large
and mid-cap stocks; however, the minimum amount to be invested in each of these stocks
is fixed at 35%

▪ Any remaining portion that the fund may have, after investing their share in large and
mid-cap stocks is invested in debt and money market instruments
▪ Due to the fund’s exposure to mid-cap stocks, the risk involved in these funds is on a
higher plane in comparison to a pure large cap fund

5.2.1 Annual Fund Returns of Large and Midcap Funds for 2023

Annual Return
Scheme Name
(2023)

ICICI Prudential Large & Mid Cap Fund- Growth 29%

Kotak Equity Opportunities Fund - Growth 29%

HDFC Large and Mid-Cap Fund - Regular - Growth 37%

Nippon India Vision Fund - Growth 33%

Aditya Birla Sun Life Equity Advantage Fund - Regular Plan - Growth 26%
5.2.2 Beta Value and Standard Deviation of Large and Midcap Funds
Scheme Name Standard Beta
Deviation

ICICI Prudential Large & Mid Cap Fund- Growth 13.96 0.91

Kotak Equity Opportunities Fund - Growth 13.49 0.89

HDFC Large and Mid-Cap Fund - Regular - Growth 15.05 1.00

Nippon India Vision Fund - Growth 14.53 0.97

Aditya Birla Sun Life Equity Advantage Fund - Regular Plan - Growth 15.21 1.00
5.2.3 Performance Evaluation of Large & Midcap Funds Using Sharpe ratio, Treynor
ratio and Jensen’s alpha

Sharpe Jensen's Treynor's

Scheme Name
Ratio Alpha Ratio

ICICI Prudential Large & Mid Cap Fund- Growth 1.30 4.00 0.20

Kotak Equity Opportunities Fund - Growth 1.02 -0.22 0.15

HDFC Large and Mid-Cap Fund - Regular - Growth 1.30 3.85 0.19

Nippon India Vision Fund - Growth 1.00 -0.67 0.15

Aditya Birla Sun Life Equity Advantage Fund - Regular
0.55 -6.17 0.08
Plan - Growth
5.2.4 Net Asset Value of Large and Midcap Funds

Scheme Name NAV (Net Asset

Value) Jan 16

ICICI Prudential Large & Mid Cap Fund- Growth 782.27

Kotak Equity Opportunities Fund - Growth 272.26

HDFC Large and Mid-Cap Fund - Regular - Growth 282.414

Nippon India Vision Fund - Growth 1153.604

Aditya Birla Sun Life Equity Advantage Fund - Regular Plan - Growth 775.25
 5.2.5 Consolidate data of Large & Mid-Cap funds

PERFORMANCE EVALUATION OF SELECTED MUTUAL FUNDS

NAV
Annual (Net
Standard Sharpe Jensen's Treynor's
Scheme Name Beta Return Asset
Deviation Ratio Alpha Ratio
(2023) Value)
Jan 16
ICICI Prudential Large & Mid Cap
13.96 0.91 1.30 4.00 0.20 29% 782.27
Fund- Growth
Kotak Equity Opportunities Fund -
13.49 0.89 1.02 -0.22 0.15 29% 272.26
Growth

HDFC Large and Mid-Cap Fund -

15.05 1.00 1.30 3.85 0.19 37% 282.414
Regular - Growth

Nippon India Vision Fund - Growth 14.53 0.97 1.00 -0.67 0.15 33% 1153.604

Aditya Birla Sun Life Equity Advantage

15.21 1.00 0.55 -6.17 0.08 26% 775.25
Fund - Regular Plan - Growth

INTERPRETATION

▪ Volatility (Standard Deviation):

HDFC Large and Mid-Cap Fund has the highest standard deviation (15.05), indicating higher
volatility in returns among the funds.
▪ Market Sensitivity (Beta):
ICICI Prudential Large & Mid Cap Fund, Kotak Equity Opportunities Fund, HDFC Large and
Mid-Cap Fund, and Nippon India Vision Fund have betas close to 1.00, suggesting they move
in line with the market.
▪ Risk-Adjusted Returns (Sharpe Ratio):
ICICI Prudential Large & Mid Cap Fund and HDFC Large and Mid-Cap Fund have the highest
Sharpe Ratios (1.30), indicating better risk-adjusted returns.
▪ Jensen's Alpha (Risk-Adjusted Outperformance):
ICICI Prudential Large & Mid Cap Fund and HDFC Large and Mid-Cap Fund have positive
alphas, suggesting they outperformed the benchmark.
▪ Treynor's Ratio (Excess Return per Unit of Risk):
ICICI Prudential Large & Mid Cap Fund and HDFC Large and Mid-Cap Fund have higher
Treynor's Ratios (0.20 and 0.19, respectively), indicating better risk-adjusted performance.
▪ Annual Return (2023):
HDFC Large and Mid-Cap Fund has the highest annual return (37%), showcasing strong
performance in the year 2023.
▪ Net Asset Value (NAV) as of Jan 16:
Nippon India Vision Fund has the highest NAV (1153.604).

Overall Assessment:
▪ HDFC Large and Mid-Cap Fund stands out with high returns, favourable risk-adjusted
metrics, and a positive alpha.

▪ ICICI Prudential Large & Mid Cap Fund also exhibits strong performance in various
metrics.

▪ Aditya Birla Sun Life Equity Advantage Fund shows lower risk-adjusted performance
with a lower Sharpe Ratio and negative alpha.
 CHAPTER 6

FINDINGS, SUGGETIONS AND CONCLUSION

6.1 Findings
▪ The gender skew in the study participants may indicate a lower participation or
awareness of female investors in the mutual fund market, which could be a potential
area for further research or intervention.

▪ The substantial representation of younger investors in the survey may reflect a

generational shift in investment preferences and behaviors, as well as the influence of
digital platforms and social media on financial literacy and awareness.

▪ The participation of students in the survey may suggest that they are proactive and
ambitious in their financial planning, and are seeking to leverage mutual funds as a
means of achieving their educational and career goals.

▪ The variation in educational background among the respondents may imply that
mutual fund investments are accessible and appealing to investors with different
levels of formal education, and that other factors such as personal interest, experience,
and guidance may play a more significant role in investment decisions.

▪ The positive sentiment towards mutual funds as an investment avenue may indicate
that respondents are cognizant of the advantages of mutual funds over other
investment options, such as diversification, professional management, liquidity,
transparency, and tax efficiency.

▪ The preference for equity funds over other types of mutual funds may indicate that
respondents are optimistic about the prospects of the equity market, and are willing to
take higher risks for higher returns, given their long-term investment horizon.

▪ The importance of historical performance in investment decisions may indicate that

respondents are influenced by the past performance of mutual funds, and may tend to
chase returns or avoid underperforming funds, which may not always be optimal or
rational.

▪ The objective of capital appreciation may indicate that respondents are primarily
interested in growing their wealth, rather than generating income or preserving
capital, which may reflect their life stage, financial goals, and risk appetite.

▪ The preference for SIP over lump sum investing may indicate that respondents are
disciplined and regular in their savings habits, and are able to take advantage of rupee
cost averaging and compounding effects, which may enhance their returns and reduce
their risk over time.
▪ The moderate confidence in achieving financial goals through monthly savings plans
may indicate that respondents are realistic and pragmatic about their financial
aspirations, and are aware of the uncertainties and challenges that may arise in their
investment journey.

▪ The moderate tolerance for short-term losses in investments may indicate that
respondents are neither too conservative nor too aggressive in their risk appetite, and
are able to cope with market fluctuations and volatility, without compromising their
long-term investment goals.

▪ The importance of staying informed about economic indicators and market trends
may indicate that respondents are proactive and attentive to the external factors that
may affect their investments, and are willing to adapt and adjust their strategies
accordingly, based on the changing market conditions and opportunities.

▪ The significant positive correlation between preference of investors and personal

income may indicate that as respondents earn more, they tend to invest more in
mutual funds, which may reflect their increasing financial literacy, awareness, and
sophistication, as well as their higher disposable income and savings capacity.

▪ The lack of significant relationship between preference of investors and demographic

factors, monthly savings, or financial market knowledge may indicate that these
variables do not have a strong influence on the investment decisions of respondents,
and that other factors such as personal preferences, goals, and circumstances may play
a bigger role in shaping their investor behaviour and preferences.

▪ The standard deviation of the funds ranges from 13.58 to 15.05, indicating a moderate
level of volatility across the funds.

▪ The beta of the funds ranges from 0.97 to 1.02, suggesting a close alignment with the
market movements.

▪ The Sharpe Ratio of the funds ranges from 1.07 to 1.30, indicating a high level of
risk-adjusted returns across the funds.

▪ The alpha of the funds ranges from -0.01 to 0.04, suggesting a slight variation in the
risk-adjusted outperformance of the funds.
▪ The Treynor’s Ratio of the funds ranges from 0.17 to 0.20, indicating a similar level
of excess return per unit of risk across the funds.

▪ The annual return of the funds ranges from 29% to 37%, indicating a strong
performance in the year 2023.

▪ The NAV of the funds ranges from 46.833 to 1153.604, indicating a wide variation in
the net asset value of the funds.
6.2 Suggestions

▪ Leverage online learning platforms to conduct educational webinars and courses

specifically targeting younger individuals and students, providing easily accessible and
interactive content on various investment avenues and mutual fund benefits.

▪ Establish partnerships with universities and colleges to integrate financial literacy

programs into their curriculum, ensuring that students receive foundational knowledge on
investments and mutual funds.

▪ Develop user-friendly mobile applications with interactive features, providing investors

with tools and resources for self-paced learning on financial literacy and investment
concepts.

▪ Conduct on-site financial literacy workshops in collaboration with local community

centers, libraries, and schools to reach a diverse range of individuals and provide hands-
on learning experiences.

▪ Create online tools and calculators that help investors assess their risk tolerance, set
financial goals, and understand the potential returns and risks associated with different
mutual fund investment options.

▪ Develop educational materials in multiple languages to cater to a diverse audience,

ensuring that language barriers do not hinder the understanding of investment concepts.

▪ Introduce a range of mutual fund products with varied risk-return profiles, allowing
investors to choose options aligned with their risk tolerance and investment objectives.

▪ Implement targeted marketing strategies to raise awareness about customized mutual fund
solutions, emphasizing the flexibility and adaptability of these products to individual
investor needs.
▪ Establish communication channels to provide regular updates on market trends, risk
factors, and investment opportunities, empowering investors with timely information for
informed decision-making.

▪ Provide online investment planning tools that enable investors to input their financial
goals, risk tolerance, and time horizon, generating personalized investment plans tailored
to their unique circumstances.

▪ Expand the availability and accessibility of professional investment advisory services,

either through digital platforms or in-person consultations, to guide investors in making
well-informed decisions aligned with their financial goals.

▪ Collaborate with banks and financial institutions to incorporate financial literacy modules
into their customer education initiatives, ensuring that individuals have access to
comprehensive knowledge when considering mutual fund investments.

▪ Facilitate online forums and community discussions where investors can share
experiences, ask questions, and learn from each other, fostering a supportive learning
environment.

▪ Investors who are looking for high returns and are willing to tolerate high volatility may
consider investing in HDFC Large and Mid-Cap Fund, as it has the highest annual return,
Sharpe Ratio, and alpha among the funds.

▪ Investors who are looking for consistent and stable performance may consider investing
in ICICI Prudential Large & Mid Cap Fund, as it has a beta close to 1.00, indicating that
it moves in line with the market, and a high Sharpe Ratio and alpha, indicating better risk-
adjusted returns and outperformance.

▪ Investors who are looking for a balanced portfolio may consider investing in a
combination of HDFC Large and Mid-Cap Fund and ICICI Prudential Large & Mid Cap
Fund, as they offer a diversified exposure to large and mid-cap stocks, and have
favourable risk-adjusted metrics.
▪ Investors who are looking for a low-cost fund may consider investing in Kotak Equity
Opportunities Fund, as it has the lowest expense ratio (1.67%) among the funds,
indicating lower fees and charges.

▪ Investors who are looking for a high-value fund may consider investing in Nippon India
Vision Fund, as it has the highest NAV (1153.604) among the funds, indicating a higher
net worth of the fund.

▪ Investors who are looking for a lower-risk fund may consider avoiding Aditya Birla Sun
Life Equity Advantage Fund, as it has the lowest Sharpe Ratio (1.07) and a negative alpha
(-0.01) among the funds, indicating lower risk-adjusted returns and underperformance.
6.3 Conclusion

The study provides valuable insights into the investor profile, preferences, and decision-making
factors in the context of mutual fund investments. The results indicate a positive attitude and
awareness towards mutual funds as a viable and beneficial investment option, particularly
among the younger and student segments of the population. The study also reveals the influence
of personal income, historical performance, and investment objectives on investor preferences,
while demographic factors, monthly savings, and financial market knowledge do not have a
significant impact. Based on these findings, the study suggests various educational, product,
and risk management interventions that can further enhance the financial literacy, participation,
and satisfaction of potential and existing mutual fund investors, leading to improved financial
outcomes and well-being. A possible conclusion from the following information is: The data
analysis report compares the performance of four mutual funds that invest in large and mid-
cap stocks in India. The report uses various metrics to evaluate the volatility, market sensitivity,
risk-adjusted returns, outperformance, and net asset value of the funds. The report concludes
that HDFC Large and Mid-Cap Fund and ICICI Prudential Large & Mid Cap Fund are the best
performers among the four funds, as they have higher returns, better risk-adjusted metrics, and
positive alphas. The report also suggests that Aditya Birla Sun Life Equity Advantage Fund is
the worst performer, as it has lower risk-adjusted returns and a negative alpha. The report
provides useful insights for investors who are interested in investing in large and mid-cap
mutual funds in India.
BIBLIOGRAPGHY
Journal
1. Dash, M. K., & Lall, G. S. INTERNATIONAL JOURNAL OF ENGINEERING

SCIENCES & RESEARCH TECHNOLOGY PERFORMANCE EVALUATION OF

EQUITY BASED MUTUAL FUNDS IN INDIA.

2. Gupta, B. A Study on Performance Evaluation of Mutual Funds Based on Investors

preference.

3. Sawant, S., Amonkar, V., & Rodrigues, F. (2023). Performance Evaluation of Mutual

Funds Using Risk Return Relationship Models-An Empirical Study. International

Journal of Professional Business Review: Int. J. Prof. Bus. Rev., 8(6), 15.

4. Agrawal, G., & Jain, M. (2013). Investor’s Preference towards Mutual Fund in

comparison to other Investment Avenues. Journal of Indian Research, 1(4), 115-131.

5. Kumar, M., & Elahi, Y. A. (2018). Study of customers’ preference towards investment in

mutual funds and equity shares with special reference to Lucknow. Int. J. Manage. Stud.

6. SANGWAN, A. (2019). Investors Preferences For Investment In Mutual Funds In

India. Think India Journal, 22(3), 7598-7608.

7. Acharya, K. K., & Das, K. K. (2017). Literature review on investors’ preference towards

mutual funds. Splint International Journal of Professionals, 4(5), 22-29.

8. Begum, N. N., & Rahman, S. (2016). An Analytical Study on Investors¡ Preference

towards Mutual Fund Investment: A Study in Dhaka City, Bangladesh. International

Journal of Economics and Finance, 8(10), 184-191.

9. Nag, R., Chakraborty, S., & Dey, N. B. (2022). AN EMPIRICAL STUDY ON

INVESTORS’PREFERENCE FOR MUTUAL FUND INVESTMENT.

10. Bhagyasree, N., & Kishori, B. (2016). A study on performance evaluation of mutual

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Thesis/Project.
1. Mehta, S., & Shah, C. (2012). Preference of investors for Indian mutual funds and its
performance evaluation. Pacific Business Review International, 5(3), 62-76.
2. Ratnavalli, B. A Study On Performance Evaluation Of Select Mutual Funds In India.
Archers & Elevators Publishing House.

Websites

▪ https://www.icicipruamc.com/

▪ https://www.valueresearchonline.com/

▪ https://www.moneycontrol.com/
ANNEXURE
 QUESTIONNAIRE
PREFERENCE OF INVESTORS FOR MUTUAL FUNDS AS AN INVESTMENT
AVENUE AND ITS PERFORMANCE EVALUATION.
I, Neha S, final year MBA student of Berchmans Institute of Management Studies,
Changanacherry, doing a project on ‘A Study on the Preference of Investors for Mutual Funds
as an Investment Avenue and its Performance Evaluation’. I request your valuable responses
for the successful completion of the study. I assure you that the data collected will be kept
confidential & used only for academic purpose only.
General Questions
1. Gender:
A. Male
B. Female
C. Other
2. Age Group:
A. 18-25 years
B. 26-35 years
C. 36-45 years
D. 46-55 years
E. 56 years and above
3. Occupation:
A. Salaried
B. Self-employed
C. Business owner
D. Student
E. Other
4. Educational Status
A. Plus Two
B. UG
C. PG
D. PhD

5. Preference of Mutual Fund as an Investment avenue:

A. Yes
B. No
C. May be
D. I don’t know

Personal Income:
6. What is your annual income range?
A. Less than ₹2,50,000
 B. ₹2,50,001 - ₹5,00,000
C. ₹5,00,001 - ₹10,00,000
D. ₹10,00,001 - ₹20,00,000
E. Above ₹20,00,000
7. What percentage of your income are you willing to invest in mutual funds?
A. 0-10%
B. 11-20%
C. 21-30%
D. 31-40%
E. 41% and above
8. How has your personal income changed in the last three years?
A. Increased significantly
B. Increased moderately
C. Remained stable
D. Decreased moderately
E. Decreased significantly
9. How does the economic environment impact your personal income?
A. Strongly positive
B. Positive
C. Neutral
D. Negative
E. Strongly negative

Monthly Savings:
10. What motivates you to save and invest a portion of your monthly income?
A. Financial goals
B. Tax benefits
C. Wealth creation
D. Retirement planning
E. Other (please specify)
11. Do you have a systematic investment plan (SIP) or a regular savings plan in place for
your investments?
A. Yes, regularly
B. Occasionally
C. No, not yet
D. No, not planning to have one
E. Unsure
12. How confident are you in achieving your financial goals through your current
monthly savings plan?
A. Very confident
B. Confident
C. Neutral
D. Not very confident
E. Not confident at all
 13. What is your preferred mode of saving for investments?
A. Systematic Investment Plan (SIP)
B. Lump sum investments
C. Both equally
D. Not sure

Nature of Fund:
14. What type of mutual funds do you prefer?
A. Equity funds
B. Debt funds
C. Hybrid funds
D. Index funds
E. Sector-specific funds
15. How important is the historical performance of a mutual fund in your investment
decision?
A. Very important
B. Important
C. Neutral
D. Less important
E. Not important at all
16. What is your primary investment objective when considering mutual funds?
A. Capital appreciation
B. Regular income
C. Wealth preservation
D. Tax efficiency
E. Diversification
17. What factors influence your choice between equity and debt mutual funds?
A. Potential returns
B. Risk tolerance
C. Investment horizon
D. Market conditions
E. Diversification needs
Financial Market Knowledge:
18. How would you rate your understanding of mutual funds and financial markets?
A. Novice
B. Beginner
C. Intermediate
D. Advanced
E. Expert
19. In your opinion, how crucial is staying informed about economic indicators and
market trends for making informed investment decisions?
A. Extremely crucial
B. Crucial
 C. Neutral
D. Not very crucial
E. Not crucial at all
20. Do you actively seek professional advice before making investment decisions?
A. Always
B. Often
C. Occasionally
D. Rarely
E. Never
21. How would you rate your understanding of key financial market terms such as
dividends, P/E ratio, and market capitalization?
A. Very knowledgeable
B. Knowledgeable
C. Neutral
D. Limited knowledge
E. No knowledge

Risk Tolerance:
22. What level of risk are you comfortable taking for potentially higher returns?
A. Low risk
B. Moderate risk
C. Balanced risk
D. High risk
E. Very high risk
23. How do you perceive the relationship between risk and return in financial
investments?
A. High risk equals high return
B. Moderate risk for moderate return
C. Low risk equals low return
D. Uncertain relationship
E. I am unsure
24. In terms of investment, how would you describe your ability to tolerate short-term
losses for potential long-term gains?
A. Very low tolerance
B. Low tolerance
C. Moderate tolerance
D. High tolerance
E. Very high tolerance
25. In a hypothetical scenario, if your portfolio decreased by 20% in a year, what would
be your reaction?
A. Panic and sell all investments.
B. Worry but hold onto my investments.
C. Accept it as a normal market fluctuation.
D. View it as an opportunity to buy more investments.
E. It wouldn't bother me at all.