A

PROJECT REPORT

ON

“​QUANTITATIVE ANALYSIS OF RETAIL INVESTORS

BEHAVIOURS TOWARDS MUTUAL FUND”

For

Stockholding Corporation of India Limited Company

Faculty Guide Company Guide

MR. VARUN KUMAR MR. RAHUL KUMAR

MR. DEEPAK DHIMAN

SUBMITTED BY

SAHIL
 PREFACE
With the respect and pleasure, I have privilege to submit my report to
MR. RAHUL KUMAR. As a student of MBA, I got an opportunity to
understand on training. The training title is

“​QUANTITATIVE ANALYSIS OF RETAIL INVESTORS BEHAVIOURS

TOWARDS MUTUAL FUNDS” in SHCIL

I successfully completed my training report within the specified time. It

was really a thrilling experience for me with senior officials of Industry
and to interact with different members, employees of the organization.
It was an experience of enjoyment through hard work and dedication.
Through this finding of this report, I hope that the Industry in India will
benefit.
 ACKNOWLEDGEMENT
Every individual in professional life is keenly aware of his/ her sense of in debt to
many people who have stimulated and influenced his/her intellectual
development ordinarily. There for it seems only to acknowledge our gratitude
with sense of veneration to the―Almighty God‖ and various people who helped
us during the course of our project during the course of our project in a
systematic and smooth manner.

I have been placed in the India‘s one of the most renowned financial planning
company “Stock Holding Corporation of India Limited” at Solan. I shared the real
financial skills and knowledge from their experience unenthusiastic and cordial
executives without whom I would have not been able to achieve the desired
result.

First I would like to express my thanks to ​Mr. RAHUL KUMAR​​ for permitting me to
do the summer training, sharing valuable experience and suggestions regarding
preparation of project report.

I would like to express my sincere reverence to my faculty project guide ​Mr.

VARUN KUMAR & DEEPAK DHIMAN​​ (Faculty guide) and the entire faculty
member for giving insight of the concept, which is perfect blend of theoretical
understanding and practical aspects at regular interval.

Lastly I would like to express my sincere gratitude to all the staff member, library,
and lab member for helping me to complete my project report. Last but not the
least I cannot forget to express my great-fullness to my parents for providing me
moral support. I have also consulted the works of many authors. I express my
immense debt of gratitude to all of them.
 DECLARATION
I, SAHIL hereby declare that the project report for “Summer Internship project
“entitled “​QUANTITATIVE ANALYSIS OF RETAIL INVESTORS BEHAVIOURS
TOWARDS MUTUAL FUND” ​is a result of my own work and my indebtedness to
other work publications, references, if any, have been duly acknowledged.

DATE: ​15/07/18

SIGNATURE: ​SAHIL

PLACE: ​SOLAN
 ABOUT COMPANY
Stock Holding Corporation of India Limited (SHCIL) is India' s largest
custodian and depository participant, based in Mumbai, Maharashtra. SHCIL was
established in 1986 and was granted a status of a government company as per
section 2(45) of Indian Companies Act, 2013. In 2014. SHCIL is known for its online
trading portal Online Trading Portal]] with investors and traders. It is also
responsible fore-stamping system around India. It is also authorized by Reserve
Bank of India as Agency Bank to distribute and receive Govt. of India savings/relief
bond2003 along with nationalized banks.

Type Government

Industry Stock Market​ & ​Financial

Services

Founded 1986, ​Mumbai

Headquarters Mumbai​, ​Maharashtra​, ​India

Area served Custodial Services

Depository Services
E-stamping

Key people Shri Ramesh NGS

(Chairman)
Shri Rohinton Hirji
Mewawala (Chief Operating
Officer)
Shri Dr. E. Sankara Rao
(Non-Executive Chairman)
Shri L. Viswanathan (Chief
Financial Officer)

Shri Shashikant L. Nayak

(Company Secretary)
Services Central Depository
Services​
Broking​
Derivatives​
Mutual Funds​
Demat Account​
E-Stamping​
Website www.stockholding.com
 EXECUTIVE SUMMARY
This SIP project has given me the opportunity to apply all the theoretical aspects
the practical world. It also helps me to be bold enough to be able to talk to
different people in the corporate world. It also teaches me how my behaviour
should be in formal groups. It helps in developing my personality which gives me a
motivation to step into the corporate world as a smart, confident and dynamic
person.

In today scenario, every company wants to compete with others to remain in the
market. So it is very necessary for the company to know what are the needs and
wants of the customer, what is the preference of customer. It is very important
for a company to know which product is preferred by the customer on which
basis.

My Study is all about this i.e. to study the qualitative behaviour of people among
the stock market and regarding mutual fund for their investments and find out
the steps that a company can adopt to fight the competition.
 CONTENT
SR.NO PARTICULAR PAGE NO.

1 GENERAL INFORMATION

1.1 Industry profile

1.2 History Of Indian Mutual

Fund Industry

1.3 Growth Of The Industry

1.4 Types Of Mutual Fund

Schemes

1.5 Benefits Of Mutual Fund

1.6 Limitations Of Mutual

Fund

1.7 Distribution Network Of

Mutual Fund

2 List of SEBI Registered

Mutual Fund

3 PRIMARY STUDY

3.1 Literature Review

3.2 Problem Statement And

Importance Of The Study

3.3 Objective Of The Study

3.4​ ​Research Methodology

3.5 Data analysis and
interpretation
3.6 Findings
3.7 Recommendation
3.8 Limitation
3.9 Conclusion

4.0 Bibliography

4.1 Annexures
 GENERAL INFORMATION
Definitions of Mutual Fund:

The mutual fund is a common pool of money in which investor place their contributions
to be invested in accordance with stated objectives. The ownership of mutual Fund is
joint and mutual. The fund belongs to all the investors. Ownership is proportionate to
the contribution made by the investors.

A mutual fund may be either an actively managed fund or an indexed mutual fund.
Actively managed funds are on a regular basis by a fund manager in the attempt to
maximize their profitability. The fund manager looks at the market and the sectors a
fund invests in and redistributes the fund accordingly. An indexed fund simply takes one
of the major indexes and buys according to that index. Indexed funds change, much less
frequently than actively managed funds, but in the theory an active fund has more
potential or profit.

The Basics of Mutual Fund:

Mutual funds are often a great way for the average investor to earn better returns and
to gain experience in dealing with money in the stock market. Mutual funds has
different schemes and it is make the life of small investors life difficult to deal with, it is
important for people who are planning to pursue investing in a mutual fund for the first
time better to take help of the AMFI certified distributors before investing their money.

Mutual Funds offer people the chance to combine their money in order to reach a
common goal. In most cases, that goal is to earn a high return on their capital. In fact,
there is usually a person in control of the money wisely into the predetermined stocks,
bonds, or whatever kind of mutual fund the investors have agreed upon. The fund
manager will take the combined money and place it into specified securities, which can
be the listed stocks or bonds. In this way, people who invested in mutual funds are
actually becoming the shareholders, as they are in effect buying into the units of the
fund.

Mutual funds are money-managing institutions set up to professionally invest money

pooled in from the investors. Asset management Companies (AMC) manages these
schemes, which are sponsored by a company.

Each unit of these schemes reflects the share of investor in the respective fund and the
Net Asset Value (NAV) of the scheme judges its appreciation. The NAV is directly linked
to the bullish and bearish trends of the markets as the pooled money is invested either
inequity shares or in debentures or treasury bills.

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned
through this investment and 11 the capital appreciations realized are shared by its unit
holders in proportion to the number of units owned by them. Thus a Mutual fund is the
most suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.

1.1
 Industry Profile

The mutual fund industry is a lot like the film star of the finance business. Though it
is perhaps the smallest segment of the industry, it is also the most glamorous – in
that it is a young industry where there are changes in the rules of the game every
day, and there are constant shifts and upheavals. The mutual fund is structured
around a fairly simple concept, the mitigation of risk through the spreading of
investments across multiple entities, which is achieved by the pooling of a number
of small investments into a large bucket. Yet it has been the subject of perhaps the
most elaborate and prolonged regulatory effort in the history of the country.

The mutual fund industry started in India in a small way with the UTI Act creating
what was effectively a small savings division within the RBI. Over a period of 25
years this grew fairly successfully and gave investors a good return, and therefore in
1989, as the next logical step, public sector banks and financial institutions were
allowed to float mutual funds and their success emboldened the government to
allow the private sector to foray into this area.

The initial years of the industry also saw the emerging years of the Indian equity
market, when a number of mistakes were made and hence the mutual fund
schemes, which invested in lesser-known stocks and at very high levels, became loss
leaders for retail investors. From those days to today the retail investor, for whom
the mutual fund is actually intended, has not yet returned to the industry in a big
way. But to be fair, the industry too has focused on brining in the large investor, so
that it can create a significant base corpus, which can make the retail investor feel
more secure.

1.2
History of Indian Mutual Fund Industry

The Mutual Fund Industry in India started in 1963 with the formation of Unit Trust
of India, at the initiative of the Government of India and Reserve Bank. The history
of mutual funds in India can be broadly divided into four distinct phases.

➢ First Phase – 1964-87:

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by
the Reserve Bank of India and functioned under the Regulations and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit
Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under
management.

➢ Second Phase – 1987-1993 (Entry of Public Sector Funds):

1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund
in June 1989 while GIC had set up its mutual fund in December 1990. At the end of
1993, the mutual fund industry had assets under management of Rs.47, 004 crores.

➢ Third Phase – 1993-2003 (Entry of Private Sector Funds​​)​:

With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families.
Also, 1993 was the year in which the first Mutual Fund Regulations came into being,
under which all mutual funds, except UTI were to be registered and governed. The
erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund)
Regulations were substituted by a more comprehensive and revised Mutual Fund
Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
Regulations 1996.
➢ Fourth Phase – since February 2003:

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit
Trust of India with assets under management of Rs.29, 835 crores as at the end of
January 2003, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by the Government of India and
does not come under the purview of the Mutual Fund Regulations The second is the
UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI
and functions under the Mutual Fund Regulations. With the bifurcation of the
erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI
Mutual Fund Regulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of June 2017, there were 29 funds, which
manage assets of Rs.1675000 crores under several schemes.
1.3 Growth of the Industry

While the Indian mutual fund industry has grown in size by about 320% from March,
1993 (Rs. 470 billion) to December, 2004 (Rs. 1505 billion) in terms of AUM, the
AUM of the sector excluding UTI has grown over 8 times from Rs. 152 billion in
March 1999 to $ 148 billion as at March 2008.

Though India is a minor player in the global mutual fund industry, its AUM as a
proportion of the global AUM has steadily increased and has doubled over its levels
in 1999.The growth rate of Indian mutual fund industry has been increasing for the
last few years. It was approximately 0.12% in the year of 1999 and it is noticed
0.25% in 2004 in terms of AUM as percentage of global AUM. & 0.75% in 2010 of
global AUM.

Some Facts for the Growth of Mutual Funds in India

➢ 75% growth in the last 6 years.

➢ Number of foreign AMC‟s is in the queue to enter the Indian markets.
➢ Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required​.
➢ We have approximately 42 mutual funds which is much less than US having
more than 800. There is a big scope for expansion​.
➢ SEBI allowing the MF's to launch commodity mutual funds.
➢ Emphasis on better corporate governance.
➢ Trying to curb the late trading practices.

Structure of Mutual Fund:

There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:
Unit Holders:

​Unit holders are Investors. Any Individual or Non- individuals who have invest their money in
Mutual Fund; they will get some Units against their Investment according to the NAV of that
fund.

Sponsor:
Sponsor is the promoter of the mutual fund. He himself of with other body corporate
establishes the mutual fund. However to became a sponsor one has to have following
qualifications?

Sponsor should have sound track record and general reputation of fairness and integrity in all
business transactions. He must have carrying business in financial services for a period of not
less than five years. And continuously derives the profit after providing for depreciation,
interest and tax. Sponsor has to contribute at least 40 per cent to the net worth of the AMC​.

Trustee​​:
There are some straight disqualifications provided by the SEBI for a trustee. However
the appointment for a trustee must be take prior approval of SEBI. Trustee is a person
having ability, integrity and has not been found guilty of moral turpitude and also has not
been convicted for any economic offence.
Trustee has to play very critical role in the mutual fund organization. He has work in a
way to continuously protect the interest of the investors are properly taken care of. Any
mutual fund has a minimum of four trustees. Two thirds of the trustees must be an
independent ​person and shall not be associated with sponsor. No officer of employee of an
AMC can became a trustee.

Investors​​:
​MF is a solution for investors who lack the time, and the skills to actively manage their
investment risk in individual securities. They can delegate this role to the MF, while retaining
the right and the obligation to monitor their investments in the scheme having some specific
objects.

1.4 Types of Mutual Fund Schemes:

Mutual fund schemes may be classified on the basis of its structure and its
investment objective.
By Structure

​Open-ended Funds:
​An open-end fund is one that is available for subscription all through the year. These do not
have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (“NAV”)
related prices. The key feature of open-end schemes is liquidity​.

Close-ended Funds:

​A close-end has a stipulated maturity period which generally ranging from 3 to 15 years. The
fund is open for subscription only during a specified period. Investors can invest in the scheme
at the time of the initial public issue and thereafter they can buy or sell the units of the scheme
on the stock exchanges where they are listed. In order to provide as exit route to the investors,
some close-ended funds give an option of selling back the units to the mutual fund through
periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the
two exit routes is provided to the investor.

Interval Funds:
Interval funds combine the features of open-ended and close-ended schemes. They are open
for sale or redemption during pre-determined intervals at NAV related prices.
By Investment objective:

Growth Funds:

​The aim of growth funds is to provide capital appreciation over the medium to long-term.
Such schemes normally invest a majority of their corpus in equities, it has been proven that
returns from socks, have outperformed most other kind of investment held over the long term.
Growth schemes are ideal for investors having a long-term outlook seeking growth over a
period of time.

Income Funds:

​The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and
Government securities. Income Funds are ideal for capital stability and regular income.

Balanced Funds:

​The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the NAV
of these schemes may not normally keep pace, or fall equally when the market falls. These are
ideal for investors looking for a combination of income and moderate growth.

Short Term Plans (STPs):

​Mean for investors with an investment horizon of 3-6 months. These funds primarily
invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers
(CPs). Some portion of the corpus is also invested in corporate debentures.

Money Market Funds:

The aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer short-term instruments such
as treasury bills, certificates of deposit, commercial paper and inter-bank call money.
Returns on these schemes may fluctuate depending upon the interest rates prevailing in
the market. These are ideal for Corporate and individual investors as a means to park
their surplus​ ​funds for short periods​.

Load Funds:

A Load Fund is one that charges a commission for entry or exit. That is, each time you
buy or sell units in the fund, a commission will be payable. Typically entry and exit loads
range from 1% to 2%. It could be worth paying the load, if the fund has a good
performance history. However, from 2009 the entry load is abolished in India​.

No-Load Funds:

A No-Load Fund is one that does not charge a commission for entry or exit. That is, no
commission is payable on purchase or sale of units in the fund. The advantage of a no load fund
is that the entire corpus is put to work​.
Tax Saving Schemes:
These schemes offer tax rebates to the investors under specific provisions of the Indian
Income laws as the Government offers tax incentives for investment in specified
avenues. Investment made in Equity Linked Saving Schemes (ELSS) and Pension
Schemes are allowed as deduction u/s 8oC of the Income Tax Act, 1961. The act also
provides opportunities to investors to save capital gains u/s 54EA and 54EB by
investing in Mutual Funds​.

Industry Specific Schemes:

In the offer documents fund will specify the sectors it will invest namely Tech, FMCG,
and Pharmaceuticals etc.

Index Schemes:

Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50.

Sectorial Schemes:

Sectorial Funds are those, which invest exclusively in a specified industry or a group of
industries or theme based through initial public offerings.

Some Frequently Used Terms:

NAV (Net Asset Value):

Net Asset Value is a market value of the assets of the schemes minus its liabilities. Per
unit NAV is the net asset value of the scheme divided by number of units outstanding on
the valuation date​.

Sale Price:

NAV that charged from a unit-holder while investing in an open-ended scheme is called
sale price. It is also called offer price, which may include sales load.

Purchase Price:

It is the price at which close-ended scheme repurchases its units and it may include
back-end load. This is also called Bid price.
Redemption Price:

NAV at which the units of open-ended schemes are purchase back redeemed to unit
holders that may include exit load is known as redemption price​.

Offer Document:

It contains useful information to be provided to investor for careful reading before investing,
investor should see fund’s investment objective and its portfolio asset allocation strategy.

Benchmark:

It is a frame of reference, a context and a standard that allows checking whether the
performance has been good or bad.
1.5 Benefits of Mutual Funds

✓ Tax Benefits: -
In Mutual fund – if an investor’s stay invested for more than 365 days he need not pay tax
and whatever the profits he got from the investments are tax –free. However if the
investments are withdrawn before 365 days will attract short term capital gain tax and it is
taxed at 15 per cent.

In debt fund if the holding period is more than 3 years you can adjust the cost of inflation
index and pay tax at the rate of 20 per cent. This is great advantage when compared to the
plain fixed deposit. However in India the penetration of debt fund among retail investors
are very poor due to lack of awareness.

✓ Regulations: -
Securities Exchange Board of India (“SEBI), the mutual funds regulator has clearly
defined rules, which govern mutual funds. These rules relate to the information,
administration and management of the mutual funds and also prescribe disclosure
and accounting requirements. Such a high level of regulations seeks to protect the
interest of investors​.

✓ Diversification: -
It simply means that you must spread your investment across different securities (stocks,
bonds, money market, instruments, real estate, fixed deposits etc.) and different sectors
(auto, textile, information technology etc.). This kind of diversification may add to the
stability of your returns, for example during one period of time equities might
underperform but bonds and money market instruments might do well enough to offset of
a slump in the equity markets. Similarly the information technology sector might be faring
poorly but the auto and textile sectors might do well and may protect your principal
investment as well as help you meet your return objectives.

✓ Affordability:​​ -
A mutual fund invests in a portfolio of asset, i.e. bonds, shares, etc. depending upon the
investment objective of the scheme. An investor can buy in to a portfolio of equities,
which would otherwise be extremely expensive. Each unit holder thus gets an exposure
to such portfolios with an investment as modest as Rs.500/. This amount today would
get you less a share of Infosys! Thus it would be affordable for an investor to build a
portfolio of investment through a mutual fund rather than investing directly in the
stock market.
✓ Different Scheme:​​ -
Mutual Funds offer a tremendous variety of schemes. This variety is beneficial in two
ways: first, it offers different types of schemes needs and risk appetites: secondly, it
offers an opportunity to an investor to invest a variety of schemes, both debt and
equity. For example, an investor can invest his money in a Growth Fund (equity
scheme) and Income Fund (debt scheme) depending on his risk appetite and thus
create a balanced portfolio easily or simply just buy a Balanced Scheme.

✓ Professional management: -
Qualified investment professionals who seek to maximize returns and minimize risk
monitor investor’s money. When you buy in to a mutual fund, you are handing your
money to an investment professional that has experience in making investment
decisions. It is the fund Manager’s job to (a) find the best securities for the fund, given
the fund’s stated investment objectives: and (b) keep track of investment and changes
in market conditions and adjust the mix of the portfolio, as and when required.
1.6 Limitations of Mutual Fund
∙ No control over cost​​:​ -

Investors do not directly monitor the fund’s operations; they cannot control the costs
effectively. Regulations therefore usually limit the expenses of mutual funds.

∙ No tailor-made portfolio​​: -
Mutual Fund portfolio are created and marketed by AMCs, in to which investors
invest. They cannot make tailor made portfolio.

∙ No Guarantees​​:​ -
No investment is risk free. If the entire stock market declines in value, the value if
mutual​ ​fund will go down as well, no matter how balanced the portfolio. Investors
encounter fewer risks when they invest in mutual funds than when they buy and
sell stocks on their own.

∙ Fees and commissions:​​ ​-

All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or “loads” to compensate brokers, financial consultants, or financial
planners. Even if you don’t use a broker or other financial adviser, you will pay a sales
commission if you buy shares in a load fund.

∙ Management risk:​​ -

When you invest in mutual fund, you depend on the fund’s manager to make the right
decisions regarding the fund’s portfolio. If the manager does not perform as well as you had
hoped, you might not make as much money on your investment as you expected. Of
course, if you invest in Index funds, you have forgotten management risk, because these
funds mimic the portfolio.
1.7 Distribution Network of Mutual Fund:
Banks as intermediaries

In India the trend is towards universal banking. Increasingly banks will turn towards retailing
other financial services like mutual funds, capital market product, insurance and other debt
products. This movement towards fee-based activities of banks will be propelled by need to
shore up profits due to declining spreads and the forces of disinter mediation where borrowers
and lenders are increasingly circumventing banks.

Mutual funds are now also competing with commercial banks in the race for retail investor’s
savings and corporate float money. The power shift towards mutual funds has become obvious.
The coming years will show that the traditional saving avenues are losing out in the current
scenario. Many investors are realizing that investments in savings accounts are as good as
locking up deposits in a closet. The fund mobilization trend by mutual funds in the current year
indicates that money is going to mutual funds in a big way.

India is at first stage of a revolution that has already peaked in the U.S. The U.S. boasts of
an assets base that is much higher than its bank deposits. In India, mutual fund assets are
not even 10% of the bank deposits, but this trend is beginning to change. This is forcing a
large number of banks to adopt the concept of narrow banking where in the deposits are
kept in Gilts and some other assets, which improves liquidity and reduces risk. This brings
in to focus their need to provide non-banking products like mutual funds, insurance to
boost customer base as well as to increase profits. For the mutual fund organizations, the
banks customer base is like an ocean full of opportunities to direct their products in to the
investor’s home. The bank’s role as intermediaries cannot be ignored. It is just that Mutual
Funds are going to change the way banks do business in the future.
The Broker Network:

Introducing new schemes and product innovation for increasing the asset base
has long been the focus of all mutual fund companies. Product focus continued
for 2-3 years even after the entry of private sector players in 1993. Initially, the
private sector companies introduced the same products available from the public
sector players and promised superior performance. When they realized that they
needed to differentiate on some other parameter as well, they focused on
distribution. As it was difficult and time consuming to replicate the widespread
distribution companies to distribute their products all over India.

But everything is not simple in the world of distributors. Indirect tax authorities
have served notice to them to pay up service tax on the commission income
earned through distributing and marketing mutual fund units. The brokerages that
the AMC pays distributors have come down drastically and as a result, distributor
margins have come down by 75 percent over the past year, as claimed by the
many distributors visited.

The distributors claim that the service tax should ideally be passed on to the
consumers. For debt funds, distributors get margins between 0.2 percent and
0.5 percent and for equity schemes the margins vary between 1 percent and
1.75 percent. Absorbing the service tax will dent their profitability severely.
The Risk-Return Trade-off

The most important relationship to understand is the risk-return trade-off. Higher

the risk greater the returns/loss and lower the risk lesser the returns/loss.
Hence it is up to investor to decide how much risk you are willing to take. In order
to do this you must first be aware of the different types of risks involved with your
investment decision.

Market Risk

There are two types of market risk SYSTEMATIC & UNSYSTEMATIC.

Systematic risk is a macro risk that would impact all the firms & unsystematic risk
is micro that is limit up to the individual firm.

Credit Risk

The debt servicing ability (may it be interest payments or repayment of principal)

of a company through its cash flows determines the Credit Risk faced by you.
This credit risk is measured by independent rating agencies like CRISIL who rate
companies and their paper. An „AAA‟ rating is considered the safest whereas a
‘D’ rating is considered poor credit quality. A well-diversified portfolio might help
mitigate this risk
.
Inflation Risk

Inflation is the loss of purchasing power over time. A lot of times people make
conservative investment decisions to protect their capital but end up with a
sum of money that can buy less than what the principal could at the time of
the investment. This happens when inflation grows faster than the return on
your investment. A well-diversified portfolio with some investment in equities
might help mitigate this risk.
Interest Rate Risk

In a free market economy interest rates are difficult if not impossible to predict. Changes
in interest rates affect the prices of bonds as well as equities. If interest rates rise the
prices of bonds fall and vice versa. Equity might be negatively affected as well in a
rising interest rate environment. A well-diversified portfolio might help mitigate this risk.

Political/Government Policy

Changes in government policy and political decision can change the investment
environment. They can create a favourable environment for investment or vice versa.

Liquidity Risk

Liquidity risk arises when it becomes difficult to sell the securities that one has
purchased. Liquidity Risk can be partly mitigated by diversification, staggering of
maturities as well as internal risk controls that lean towards purchase of liquid
securities​.
2.0 List of SEBI Registered Mutual Fund

✓ Reliance mutual funds

✓ L&T mutual funds
✓ Aditya Birla mutual funds
✓ HDFC small midcap mutual funds
✓ IDBI mutual funds
✓ ICICI prudential mutual funds
 ​PRIMARY STUDY
Introduction of the study

3.1 Literature Review

Review of Literature​​:
The existing “Behavioural Finance” studies are very few and very little information is available
about investor perceptions, preferences, attitudes and behaviour. All efforts in this direction
are fragmented.

​ upta (1994​​) made a household investor survey with the objective to provide Data on the
G
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.

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. Friend, et al., (1962) made an extensive and systematic study of 152 mutual funds
found that mutual fund schemes earned an average annual return of 12.4 percent, while their
composite benchmark earned a return of 12.6 percent. Their alpha was negative with 20 basis
points. Overall results did not suggest widespread inefficiency in the industry. Comparison of
fund returns with turnover and expense categories did not reveal a strong relationship.

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

Ippolito’s (1989​​) results and conclusions were relevant and consistent with the theory of
efficiency of informed investors. He estimated that risk-adjusted return for the mutual fund
industry was greater than zero and attributed positive alpha before load charges and identified
that fund performance was not related to expenses and turnover as predicted by efficiency
arguments.

3.2 Problem statement & importance of the study

Wealth creation over the years has changed its avenues and area of interest
for the investors in India. The prototype investment where the post offices
and typically the scheduled banks through savings and fixed deposits have
changed and with the awareness of finance, Mutual fund has become an
excellent route to create wealth for the public at large. “Mutual fund is a pool
of money is invested in accordance with the common objective stated before
the investment to the investors.”

Generally people are aware about mutual fund but the problem is that they
think that why should we cannot invest directly instead of going for invest in
mutual fund. So our research is to identify the people perception towards
invest in mutual fund.

Here is the concept of mutual fund which is a suitable for the common man
as it offers an opportunity to invest and diversified, professionally managed
basket of securities comparatively at low cost. The investors pool their money
to the fund manager and the fund manager invest the money in the securities
and after generating returns passed back to the investors. The mutual fund
has a structure which is regulated by SEBI and the Association of mutual
funds of India (AMFI) plays an advisory role for the mutual funds. There are
lot of entities involved in between Unit Holders and SEBI which includes
Sponsors, Trustees, Asset Management Company (AMC), mutual fund,
Transfer agent and custodian​.
3.3 Objective of the study
Primary Objectives:
∙ To check perception of Investors regarding Mutual Fund​.

Secondary Objectives​​:

​ ​1) To understand the savings avenue preference among MF investors

2) To identify the features the investors look for in Mutual Fund products

3) To identify the scheme preference of investors

4) To identify the factors that influence the investor’s fund/scheme selection.

5) To identify the information sources influencing the scheme selection.

3.4 Research Methodology
​I have used the ​Descriptive Research Design ​for the purpose of survey, as it will enable
me to describe the characteristics of a particular individual rural customer regarding
investment tools and Mutual Fund.

Sampling Method:​

I have used the sampling method ​simple probability random sampling ​in different, as it
would give better idea about the different investment tools and Mutual Fund.
Data Collection Method​:
Data has been collected both from primary as well as secondary sources as described
below:

Primary sources

Primary data was obtained through questionnaires filled by people and through direct
communication with respondents in the form of Interview.
Secondary sources

The secondary sources of data were taken from the various websites, books, journals
reports, articles etc. This mainly provided information about the mutual fund industry in
India.
Research Instrument:

For us research instrument is the questionnaires. We had prepared a set of questions

and presented it to the customers for their answer. We had prepared the questions in
very flexible manners such that the respondent have wide choice before them the form
of question were mainly close-ended questions which gives all possible outcomes.

Sample Size:

It would be better to have a sample of 100 people to have better idea and
representative of the population being surveyed.
3.5 DATA ANALYSIS AND INTERPRETATION

OCCUPATION:

PARTICULAR FRECQUENCY PERCENTAGE

Service 20 20

Professional 34 34

Business 24 24

Others 22 22

TOTAL 100 100

INTERPRETATION:

We have done survey of 20 service customers, 34 professional customers, 24 business

customers, and 22 other customers​.

AGE GROUP:

PARTICULAR FREQUENCY PERCENTAGE

 18-24 5 5

25-30 8 8

31-45 13 13

46-55 18 18

56-65 27 27

ABOVE 66 29 29

TOTAL 100 100

Interpretation:

We have done survey of 5 customers are 18-24 age, 8 customers are 25-30 age, 13 customers
are 31-45, 18 customers are 46-55 age, 27 customers are 56-65 age, 29 customers are above 65
age.

Annual income:

PARTICULAR FREQUENCY PERCENTAGE

0-100000 19 19

100001-250000 30 30

250001-500000 19 19

Above 500000 32 32

TOTAL 100 100

Interpretation:-

We have done survey of 19 respondent’s income 0-100000, 30 respondents‟ income

100001-250000, 19 respondent’s income 250001-500000, and 32 respondents’ income above
500000.

1) ​What kind of Investment you prefer most?

PARTICULAR FREQUENCY PERCENTAGE

Saving Account 13 13

Fixed deposit 6 6

Insurance 3 3

Mutual fund 40 40

Post office 19 19

Equity 10 10

Debenture 6 6

PPF 3 3

TOTAL 100 100

Interpretation:-

13% of respondents prefer saving account, 6% prefer fixed deposit,3% prefer in insurance, 40% prefer
mutual fund, 19% prefer in post office, 10% prefer in equity, 6% in debenture and remaining 3% in PPF.

2) ​While investing your money, which factor you prefer most?

 PARTICULAR FREQUENCY PERCENTAGE

Liquidity 20 20

Low risk 25 25

High return 35 35

Company reputation 20 20

TOTAL 100 100

Interpretation:-

20% of the respondents prefer to invest in mutual funds considering liquidity, 25% invest due to low risk,
and 25% invest because of high return and 20% the respondents prefer to invest in mutual funds
knowing company Reputation

3) ​Have you ever invested your money in mutual fund?

PARTICULAR FREQUENCY PERCENTAGE

Yes 62 62

No 38 38

TOTAL 100 100

Interpretation:-

62% of Respondents prefer to invest in mutual fund and 38% of respondents prefer not to invest
in mutual fund.
4) ​How do you come to know about Mutual Fund?

PARTICULAR FREQUENCY PERCENTAGE

Advertisement 29 29

Peer group 11 11

bank 9 9

Financial advisor 51 51

TOTAL 100 100

Interpretation:-

29% of Respondents invest in mutual fund by Advertisement, 11% by Peer group, 9% by banks
& remaining 51% through financial advisor​.
5) ​Which Mutual fund scheme have you used?

PARTICULAR FREQUENCY PERCENTAGE

Open ended 70 70

Close ended 30 30

TOTAL 100 100

Interpretation:-

70% of respondents prefer open ended and 30% of respondents prefer close ended.
6) Which mode of Investment will you prefer?

PARTICULAR FREQUENCY PERCENTAGE

Onetime payment 26 26

Systematic investment plan 74 74

TOTAL 100 100

Interpretation:-

74% of the respondents invest in SIP and 26% prefer lum sum investment.
7) ​How would you like to receive the returns every year?

PARTICULAR FREQUENCY PERCENTAGE

DIVIDEND PAYOUT 20 20

DIVIDEND INVESTMENT 36 36

GROWTH AND INVESTMENT 44 44

TOTAL 100 100

Interpretation:-

20% of Respondents prefer Dividend pay-out ratio, 36% prefer Dividend investment and
44% of Respondents prefer Growth and investment.
3.6 FINDINGS

∙​ 51% people came to know about mutual fund by financial advisor and then followed
by the advertisement than peer groups and so on.

∙​ We find that 26% of the respondents invest in mutual fund because of risk
diversification and 25% safe & handsome return.

∙​ 70% of the respondents like to invest up to 10% of their total annual income in mutual
funds.

∙​ 20% of the respondents invest in mutual funds after considering Liquidity, 25% invest
because of low risk, 35% invest because of high return and 20% invest after knowing
company reputation.

∙​ 74% of the respondents invest in SIP and 26% prefer lump sum investment.
3.7 RECOMMENDATION

The performance of the mutual fund depends on market movements and it is

represented by the Net Asset Value of the fund. All schemes are doing well. But
the future is uncertain. So, the ​SHCIL (Stockholding corporation India limited​​)
should take the following steps: -

➢ The people do not want to take risk. The ​SHCIL​​ should launch more
diversified funds so that the risk becomes minimum. This will result into
more and more people to invest in mutual funds.
➢ Mutual funds should concentrate on more come with SIP to bring retail
investors.
➢ ​SHCIL​​ should give continue to incentive to distributors because majority
people came to known about mutual fund through them & they invest
mainly through distributors.
➢ About 70% of respondent want to invest 10% of their annual income to
mutual fund so industry have good opportunity to launch plan with min
Rs1000 lum sum.
➢ Generally people want to block money up to three years in mutual fund so
company should launch flexible plans.
➢ Company past performance is important to decide the new investor
whether invest or not to invest in that mutual fund scheme.
➢ Investor faces difficulty in understanding the different plans so companies
should explain them each & every plans properly through distributors.
3.8 LIMITATION

The limitations of this study can be:

∙ Sample size taken is small and may not be sufficient to predict the results
with 100% accuracy.
∙ The result is based on primary and secondary data that has it‟s own
limitations.
∙ The study covers the existing investors and prospect of mutual funds.The
experience of the existing investors and their bias towards mutual fund will
reflect in the study.
∙ 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 study is limited to selected mutual fund schemes.
3.9 Conclusion:

1. A mutual fund is the ideal investment vehicle for today’s complex and
modern financial scenario.
2. Markets for equity shares, bonds and other fixes income instruments,
real estate, derivatives and other assets have become mature and
information driven.
3. Today each and every person is fully aware of every kind of
investment proposal. Everybody wants to invest money, which entitled
of low risk, high returns and easy redemption.
4. In my opinion before investing in mutual funds, one should be fully
aware of each and everything.
4.1
 BIBLIOGRAPHY
​Website​​: -

www.amfiindia.com

​www.sebi.govt.in

www.mutualfundindia.com

www.financeindiamart.com

www.valueresearchonline.com

​www.moneycontrol.com

www.capitalmarket.com

4.2
 ANNEXURE

Questionnaire for customers

​Dear Respondent,

This survey is to know about your awareness towards mutual

funds as an investment opportunity. We would be grateful if you
give your honest and true opinion regarding the following
question asked. Please note that your opinion would be treated as
confidential and would be used for academic purpose only.

Occupation​​:

▪ Service
▪ Professional
▪ Business
▪ Others

Age:​​ -

I. 18-24
II. 25-30
III. 31-45
IV. 46-55
V. 56-65
VI. Above 65

Income:

▪0-100000
▪100001-250000
▪ 250001- 5000
▪ Above 500000
1 What kind of Investment you prefer most​​?
▪ Saving account
▪ Fixed Deposit
▪ Insurance
▪ Mutual Fund
 ▪ Post office
▪ Equity o Debenture
▪ PPF
2 While investing your money, which factor you prefer most?
∙ Liquidity o
∙ Low risk
∙ High return
∙ Company Reputation
3 Have you ever invested your money in mutual fund?
∙ Yes
∙ No
4 How do you come to know about Mutual Fund?
∙ Advertisement
∙ Peer group
∙ Banks
∙ Financial Advisor
5 Which Mutual fund scheme have you used?
∙ Open ended
∙ Close ended

6 Which mode of Investment will you prefer?

∙ One time Investment

∙ Systematic Investment plan

7 How would you like to receive the returns every year?

∙ Dividend payout
∙ Dividend Investment
∙ Growth and Investment