AN STUDY ON MUTUAL FUND IN INDIA

BY
S.KATHIRESAN
17BBA021
 INTRODUCTION
Mutual funds are financial intermediaries which collect the savings of
investors and invest them in a large and well diversified portfolio of securities
such as money market instruments, corporate and Government bonds arid equity
shares of joint stock companies. A mutual fund is a pool of commingle funds
invested by different investors, who have no contact with each other. Mutual
funds are conceived as institutions for providing small investors with avenues of
investment in the capital market. Since small investors generally do not have
adequate time, knowledge, experience and resources for directly accessing the
capital market, they have to rely on an intermediary which undertakes informed
investment decisions and provides the consequential benefits of professional
expertise. The raison dieter of mutual funds is their ability to bring down the
transaction costs. The advantages for the investors are reduction in risk, expert
professional management, diversified portfolios, liquidity of investment and tax
benefits. By pooling their assets through mutual funds, investors achieve
economies of scale. The interests of the investors are protected by the SEBI
which acts as a watch dog. Mutual funds are governed by the SEBI (Mutual
Funds) Regulations, 1993
 Definition of Mutual Fund

“A Mutual fund is a financial service organization that receives money,

from shareholders, invests it, earns return on it, attempts to make it grow
and agrees to pay the shareholders cash on demand for current value of his
investment”
“An investment vehicle that is made up of a pool of funds collected
from many investors for the purpose of investing in securities such as
stocks, bonds, money market instruments and similar assets. Mutual funds
are operated by money mangers, who invest the fund's capital and attempt
to produce capital gains and income for the fund's investors. A mutual
fund's portfolio is structured and maintained to match the investment
objectives stated in its prospectus.”
 OBJECTIVES OF MUTUAL FUNDS
Mutual funds have specific investment objectives, which are stated in
their prospectus.
The main objectives are
Growth: Growth funds strive for large capital gains; In general, growth funds
seem to have the highest risk
Growth-income: while growth-income funds seek both dividend income and
capital gains from the common stocks. Income growth funds and
intermediate risk.
Balanced income: The balanced fund generally holds a portfolio of
diversified common stocks, preferred stocks and bonds with the hope of
realizing capital gains, dividend and interest income, while at the same
time, conserving the principal Income funds concentrate heavily on high
interest and high dividend yielding securities. balanced funds, the lowest
risk
Industry specific funds: The industry specific mutual funds obviously
specialize in selected industries such as chemicals, petroleum or power stocks.
 MUTUAL FUNDS DISTRIBUTION CHANNELS

Investors have varied investment objectives and can be classified as

aggressive, moderate and conservative, depending on their risk profile. For
each of these categories, asset management companies (AMCs) devise
different types of fund schemes, and it is important for investors to buy
those that match their investment goals. Funds are bought and sold through
distribution channels, which play a significant role in explaining to the
investors the various schemes available, their investment style, costs and
expenses. There are two types of distribution channels-direct and indirect.
In case of the former, the investors buy units directly from the fund AMC,
whereas indirect channels include the involvement of agents. Let us
consider these distribution channels in detail.
 Direct channel

This is good for investors who do not need the advisory services of agents

and are well versed with the fundamentals of the fund industry. The channel

provides the benefit of low cost, which significantly enhances the returns in the

long run.

 Indirect channel

This channel is widely prevalent in the fund industry. It involves the use of

agents, who act as intermediaries between the fund and the investor. These agents

are not exclusive for mutual funds and can deal in multiple financial instruments.

They have an in-depth knowledge about the functioning of financial instruments

and are in a position to act as financial advisers. Here are some of the players in the

indirect distribution channels.

Organized distributors: They are the backbone of the indirect distribution channel.
They have the infrastructure and resources for managing administrative paperwork,
purchases and redemptions. These distributors cater to the diverse nature of the
investor community and the vast geographic spread of the country by establishing
offices in rural and semi urban locations.
Banks: They use their network to sell mutual funds. Their existing customer
base serves as a captive prospective investor base for marketing funds. Banks also
handle wealth management for their clients and manage portfolios where mutual
funds are one of the asset classes. The players in the indirect channel assist investors
in buying and redeeming fund units. They try to understand the risk profile of
investors and suggest fund schemes that best suits their objectives. The indirect
channel should be preferred over the direct channel when investors want to seek
expert advice on the risk-return mix or need help in understanding the features of
the financial securities in which the fund invests as well as other important
 OBJECTIVES OF THE STUDY

 To give a brief idea about the benefits available from Mutual Fund

investment.

 To give an idea of the types of schemes available.

 To discuss about the market trends of Mutual Fund investment.

 To study some of the mutual fund schemes.

 To study Mutual Fund Distribution Channels.

 To study Marketing strategies of Mutual Funds.

 Explore the recent developments in the mutual funds in India.

 To give an idea about the regulations of mutual funds.

 LIMITATIONS FOR THE STUDY

 The lack of information sources for the analysis part.

 Though I tried to collect some primary data but they were too inadequate
for the purposes of the study.
 Time and money are critical factors limiting this study.
 The data provided by the prospects may not be 100% correct as they too
have their limitations.
 SCOPE OF THE STUDY

A big boom has been witnessed in Mutual Fund Industry in recent

times. A large number of new players have entered the market and trying to
gain market share in this rapidly improving market. The research was
carried on. I completed my Project work. I surveyed on my Project Topic
“A study of Mutual Fund” on the visiting customers peoples. The study
will help to know the preferences of the customers, which company,
portfolio, mode of investment, option for getting return and so on they
prefer. This project report may help the company to make further planning
and strategy.
 RESEARCH METHODOLOG

On primary as well secondary data, however primary

data collection was given more importance since it is
overhearing factor in attitude studies. One of the most
important users of research methodology is that it helps
in identifying the problem, collecting, analyzing the
required information data and providing an alternative
solution to the problem .It also helps in collecting the
vital information that is required by the top
management to assist them for the better decision
making both day to day decision and critical ones.
 Data sources:

Research is totally based on primary data. Secondary data can be

used only for the reference. Research has been done by primary data
collection, and primary data has been collected by interacting with various
people. The secondary data has been collected through various journals
and websites.
Sampling:
 Sampling procedure:

The sample was selected of them who are the customers/visitors

of Bank if India, irrespective of them being investors or not or availing
the services or not. It was also collected through personal visits to persons,
by formal and informal talks and through filling up the questionnaire
prepared. The data has been analyzed by using mathematical/Statistical
  Sample size:

The sample size of my project is limited to 100 people only. Out of which
only 57% people had invested in Mutual Fund. Other 43%people did not have
invested in Mutual Fund.

 Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs
etc.

 
 
 DATA ANALYSIS & INTERPRETATION

Frequency Percent Valid Cumulative

Percent Percent
20-25 years 21 21.0 21.0 21.0
25-35 years 21 21.0 21.0 42.0
35-45 years 35 35.0 35.0 77.0
45&above 23 23.0 23.0 100.0
Total 100 100.0 100.0

Interpretation :

Here, it is been found that most of the investors i.e,35% of the investors who invest in
Mutual Fund lies in between the age group of 35-45, they are more reluctant as well a
experienced in this field of Mutual Fund. Then the Second highest age group lies in between
the age group of 45&above (23%), they are also aware of the benefits in investing in mutual
fund. The least interested group is the Youth Generations.
 Frequency Percent Valid Percent Cumulative
Percent
School 33 33.0 33.0 33.0
Under Graduate 25 25.0 25.0 58.0
Post graduate 32 32.0 32.0 90.0
Others 10 10.0 10.0 100.0
Total 100 100.0 100.0

Interpretation :

It can be clearly stated from the above Figure that 33% of the investors are in

School. Then second largest 32% of investors are qualified in Post Graduation, the

25% of peoples are graduated in Under Graduation, remaining 10% peoples aren’t

studied but they are invest their money into the Mutual Fund.
 Frequency Percent Valid Percent Cumulative
Percent

Yes 57 57.0 57.0 57.0

No 43 43.0 43.0 100.0
Total 100 100.0 100.0

 Interpretation :

From The total lot of 100 people, 57% people are actually aware of the fact
of Mutual fund and are regular investors of Mutual Funds. 43%People were
there who have just heard the name or rather are just aware of the fact of
existence of the word called Mutual Fund, but doesn’t know anything else
about Mutual Funds.
 Frequency Percent Valid Percent Cumulative
Percent

Yes 57 57.0 57.0 57.0

No 43 43.0 43.0 100.0

Total 100 100.0 100.0

 Interpretation:

Group of the people who is investing their money is very high in

proportion of the people who like to invest their money which is clearly seen in
the Public sector that 58% of the people invest their money where as only 20%
people like to invest their money in Private sector.
 Frequency Percent Valid Cumulative
Percent Percent
Advertisement 22 22.0 22.0 22.0
Peer Group 33 33.0 33.0 55.0
Banks 34 34.0 34.0 89.0

Financial Advisors 11 11.0 11.0 100.0

Total 100 100.0 100.0

 Interpretation :

Here from the Line Graph it can be clearly stated that around 34% of the investors
came to know the benefits of Mutual Fund from Banks. According to the suggestions
given by the Banks, people use to choose Mutual Funds Scheme. Then Secondly,33%
and 22% of the people used to know from Peer group and Advertisment respectively.
Lastly 11% of the investors do invests after being intimated by the Financial Advisor
about the benefits of Mutual Funds.
 Frequency Percent Valid Cumulative
Percent Percent

One time investment 37 37.0 37.0 37.0

Systematic Investment Plan (SIP) 63 63.0 63.0 100.0

Total 100 100.0 100.0

 Interpretation:

Above graph how those out of 100 people 63% have invested their money as
a Systematic investment plan (SIP), 37% people have invested in one time
investment plan
 Frequency Percent Valid Cumulative
Percent Percent
Preservation 25 25.0 25.0 25.0
Current Income 33 33.0 33.0 58.0

Conservative Growth 33 33.0 33.0 91.0

Aggressive Growth 9 9.0 9.0 100.0

Total 100 100.0 100.0

 Interpretation:
Here we see that 25% of the investor’s objectives are to preserve the principal amount,
so that it can be used as a savings for the future period. While 33% investors invest to get
derive their current income through investing in Mutual Funds. While 33% and 9% of the
investors invest to get a conservative as well as aggressive growth.
 Frequency Percent Valid Cumulative
Percent Percent
Not Aware of Mutual Fund 32 32.0 32.0 32.0
Higher Risk 43 43.0 43.0 75.0
Not any specific Reason 25 25.0 25.0 100.0
Total 100 100.0 100.0

 Interpretation :
Here , we find that investors of around 43% aren’t invest their money in
Mutual fund because they considered it was Higher Risk .Second largest is 32% of
peoples of are Not aware of mutual fund and remaining 25% of peoples aren’t Any
specific reason to invest their money in the Mutual fund.
 Frequency Percent Valid Cumulative
Percent Percent
Higher Risk 19 19.0 19.0 19.0
Intermediate Risk 26 26.0 26.0 45.0
Low Risk 55 55.0 55.0 100.0
Total 100 100.0 100.0

 Interpretation:
As it can be clearly Stated from the above Diagram that investors before investing,
the main criteria that they used to give more Preference is Low Risk. According to them, if
a scheme is low risk, it may or may not give a very good return , but still 55% of the
investors choose low risk as the option while investing in Mutual Funds.
 Frequency Percent Valid Cumulative
Percent Percent

Online Trading 34 34.0 34.0 34.0

Traditional Method 66 66.0 66.0 100.0

Total 100 100.0 100.0

 Interpretation:
Group of the people who is investing their money is very high in proportion of
the people who do not like to invest their money through Online Trading, which is
clearly seen in the observation that 66% of the people invest their money in Mutual
fund through Banks where as only 34% people like to invest their money through
Online Trading.
 FINDINGS & SUGGESTIONS

 People who lie under the age group of 35-45 have more experience and are more interested
in investing in Mutual Funds.
 There was a lot of lack of awareness or ignorance, that’s why out of 100 people, 57%
people have invested in Mutual Fund and 43% people is unaware of investing in Mutual
Funds.
 Generally, People employed in Private sectors and Businessman are more likely to invest in
Mutual Funds, than other people working in other professions.
 Generally investors whose monthly income is above Rs.15000-25000 are more likely to
invest their income in Mutual Fund, to preserve their savings of at least more than 20%.
 People generally like to save their savings in Mutual Fund, Fixed Deposits and Savings
Account, Insurance.
 Many people came to know about Mutual Fund from Financial Advisors, Advertisement as
well as from their Peer group , and they generally invest in the Mutual Fund by taking
advices from their Legal Advisors.
 Investors generally like to invest in Large Cap Companies like Reliance, SBI, etc. to
 Conclusion
Mutual funds are funds that pool the money of several
investors to invest in equity or debt markets. Mutual Funds
could be Equity funds, Debt funds or balanced funds. Fund are
selected on quantitative parameters like volatility, risk
adjusted returns, and rolling return coupled with a qualitative
analysis of fund performance and investment styles through
regular interactions with fund managers.
 BIBLIOGRAPHY
Books
INDIAN FINANCIAL SYSTEM
“HR Machiraju”
FINANCIAL INSTITUTIONS AND MARKETS
“LM Bhole”
Websites
 www.google.com
 www.mutualfundsindia.com
 www.bseindia.com
 www.sbimf.com