FINAL PROJECT REPORT

ANALYSIS OF INVESTMENT IN MUTUAL FUNDS

SUBMITTED TO PUNJAB TECHNICAL UNIVERSITY

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE DEGREE
OF
MASTER OF BUSINESS ADMINISTRATION

BY:
SONAL MAHAJAN
ROLL NO.-7065222460
M.B.A.-IV

GIAN JYOTI INSTITUTE OF MANAGEMENT & TECHNOLOGY

PHASE-2, MOHALI
AFFILIATED TO PUNJAB TECHNICAL UNIVERSITY, JALANDHAR
2007-2009

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 DECLARATION

I, the undersigned hereby declare that the final project report

submitted to my college i.e. Gian Jyoti Institute of Management &
Technology in partial fulfilment for the Degree of Master of
Business Administration on “Analysis of Investment In Mutual
Fund” is a result of my own work under continuous guidance and
kind co-operation of our college faculty member, Ms Harpinder
Kaur. I have not submitted this training report to any other
university for the award of degree.

Sonal Mahajan

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 CERTIFICATE OF GUIDE

This is to certify that the project entitled “Analysis of Investment

in Mutual Funds” is submitted as a final project report of the
requirement for the degree of MBA, affiliated to the Punjab
Technical University, Jallandhar is a work carried out by Sonal
Mahajan, Roll. No.7065222460, under my supervision & guidance.

Project Guide

(Ms. Harpinder Kaur)

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 ACKNOWLEDGEMENT

Any accomplishment requires the effort of many people and this

work is not different.
I owe the debt of gratitude to my project guide, Ms. Harpinder
Kaur, Gian Jyoti Institute of Management & Technology, under
whose guidance I was able to complete my project successfully.
Her valuable advice and guidance at various stages of the project
will always be cherished.
My project “Analysis of Investment in India Mutual funds” has
provided me with a great opportunity to get knowledge about the
topic and various related aspects to it in detail. I wish to express
my thanks to all members of Department of Business
Administration in GJIMT for their remarkable guidance and
support and to all those who contributed to this work at every stage
and helped me accomplish the project successfully.

SONAL MAHAJAN

TABLE OF CONTENTS

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Chapter no. Contents Page no.

Acknowledgement
Executive summary
1 Introduction 1-31

2 Review of Literature 32-34

3 Research Methodology 36-37

4 Analysis and Interpretation 38-58

5 Summary and Conclusion 59-60

6 Recommendations 61

Bibliography 62

Annexure

EXECUTIVE SUMMARY

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Project work is a part of our curriculum that gives us the knowledge about

the practical work in any organization and makes are stand in an

organization. This also helps to understand & correlate the theoretical

concepts better which remains uncovered in the classrooms. I have prepared

this report in the process of my postgraduate diploma in business

management.

The topic that has been taken for the project is " ANALYSIS OF

INVSTMENT IN MUTUAL FUNDS ”.

A mutual fund is uniquely a democratic institution. It is an investment

vehicle ideally suited for small and unsophisticated investors. These funds

are financial intermediaries, which bring a wider variety of securities within

the reach of small and medium investors. These investors by subscribing to

mutual fund units can share the capital appreciation in the giant blue chip

companies like MNC stocks. It is essentially a mechanism of pooling togther

the saving of a large number of investors for collective investment portfolio

and expert investment management and advice to a large number of

investors through institutionalized risk pooling mechanism. It ensures a

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reasonable return , liquidity, safety and security to investors besides proving

growth prospects and tax advantage in certain cases.

As the mutual fund industry is at a very progression stage from the last

decade. It needs a through probe to this fast growing industry term of growth

rate, risk and return, portfolio composition etc.

In order to achieve the various stated objectives both primary data and

secondary data available on the subject is used and other necessary

information is collected from mutual fund houses, newspaper , journals,

magazines etc. Data collected is used for knowing the awareness of mutual

funds and sources from which the investors get the information about mutual

funds .

CHAPTER - I

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 INTRODUCTION

Mutual fund is the most suitable investment (or the common man as it
offers an opportunity to invest in a diversified, professionally managed
portfolio relatively at a low cost. Anybody with an inventible surplus of as
little as a few thousand rupees can be invested in mutual funds. Change in the
economic scenario, falling interest rates of bank deposits, volatile nature of
capital market and recent hitter experience of investors in making direct
investment emphasis the increasing importance of the intermediaries like
mutual funds.

Mutual funds help the small and medium size investors to participate in
today's complex and modern financial scenario. Investors can participate in
the mutual fund by buying the units of the fund. The income earned through
these investments and capital appreciation realized by the schemes is shared
by its unit holders in proportion to the number of units owned by them. Mutual
funds play vital role in mobilization of resources and their efficient al1ocation.
These funds played a significant role in financial inter-mediation, development of
capital markets and growth of the financial sector as a whole. The active
involvement of mutual funds in economic development can be seen by their
dominant presence in the money and capital market. In early 19th century, mutual
funds have proved to be an important institutional arrangement of risk pooling.
These institutions have come to assume so much of significance them they now
completely dominate the entire financial market.

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1.1 MUTUAL FUND

Mutual Fund is an investment company that pools money from shareholders

and invests in a variety of securities, such as stocks, bonds and money market
instruments. Most open-end mutual funds stand ready to buy back (redeem) its
shares at their current net asset value, which depends on the total market value of
the fund's investment portfolio at the time of redemption. Most open-end mutual
funds continuously offer new shares to investors.

Also known as an open-end investment company, to differentiate it from a

closed-end investment company. Mutual funds invest pooled cash of many
investors to meet the fund's stated investment objective. Mutual funds stand ready
to sell and redeem their shares at any time at the fund's current net asset value:
total fund assets divided by shares outstanding.

In Simple Words, Mutual fund is a mechanism for pooling the resources by

issuing units to the investors and investing funds in securities in accordance with
objectives as disclosed in offer document.

Investments in securities are spread across a wide cross-section of

industries and sectors and thus the risk is reduced. Diversification reduces the risk
because all stocks may not move in the same direction in the same proportion at
the same time. Mutual fund issues units to the investors in accordance with
quantum of money invested by them. Investors of mutual funds are known as unit
holders.

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 The profits or losses are shared by the investors in proportion to their
investments. The mutual funds normally come out with a number of schemes with
different investment objectives which are launched from time to time. In India , A
mutual fund is required to be registered with Securities and Exchange Board of
India (SEBI) which regulates securities markets before it can collect funds from
the public.

In Short, a mutual fund is a common pool of money in to which investors

with common investment objective place their contributions that are to be invested
in accordance with the stated investment objective of the scheme. The investment
manager would invest the money collected from the investor in to assets that are
defined/ permitted by the stated objective of the scheme. For example, an equity
fund would invest equity and equity related instruments and a debt fund would
invest in bonds, debentures, gilts etc. Mutual Fund is a 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.

1.2 THE CONCEPT OF A MUTUAL FUND:

A mutual fund is a common pool of money into which investors place their
contributions that are to be invested in accordance with a stated objective. The
ownership of the fund is thus joint or “mutual”; the fund belongs to all investors. A
single investor’s ownership of the fund is in the same proportion as the amount of
the contribution made by him or her bears to the6 total amount of the fund.

A mutual fund uses the money collected from investors to buy those assets
which are specifically permitted by its stated investment objective. Thus, an equity
fund would buy mainly equity assets-ordinary shares, preference shares, warrants

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etc. a bond fund would mainly buy debt instruments such as debentures, bonds, or
government securities. It is these assets which are owned by the investors in the
same proportion as their contribution bears to the total contribution of all investors
put together.

When investors subscribes to a mutual fund, he or she buys a part of the

assets or the pool of funds that are outstanding at that time. It is no different from
buying “shares” of a joint stock company, in which case the purchase makes the
investors a part owner of the company and its assets. In fact, in the U.S.A., a
mutual fund is constituted as an investor “buys into the fund”, meaning he buys
the shares of the fund. In India, a mutual fund is constituted as a trust and the
investor subscribes to the “units” issued by the fund, which is where the term Unit
Trust comes from. However, whether the investors get fund shares or units is only
a matter of legal distinction. In any case, a mutual fund shareholder or unit-holder
is a part owner of the fund’s assets. In this project, used the term unit-holder
includes the mutual fund account-holder or close-end fund shareholder. A unit-
holder in unit trust of India US-64scheme is the same as a UTI Master share-
holder or investors in an Alliance or DSP Merrill Lynch or Prudential-ICICI or
Tata or Templeton or SBI or any other fund manager’s open-end or close-end
scheme.

Since each owner is a part owner of a mutual fund, it is necessary to

establish the value of his part. In other words, each share or unit that investors hold
needs to be assigned a value. Since the units held by-an investor’s evidence the
ownership of the fund’s assets the value of the total assets of the fund when
divided by the total number of units issued by the mutual fund gives us the value
of one unit. This is generally called the Net Asset Value (NAV) of one unit or

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share. The value of an investor’s part ownership is thus determined by NAV of the
number of units held number of units held

1.3 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.
The history of mutual funds in India can be broadly divided into four distinct
phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.
It was set up by the Reserve Bank of India and functioned under the Regulatory
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

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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.The number of mutual
fund houses went on increasing, with many foreign mutual funds setting up funds
in India and also the industry has witnessed several mergers and acquisitions. As at
the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,
21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under
management was way ahead of other mutual funds.

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

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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
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 September, 2004, there were 29 funds, which manage
assets of Rs.153108 crores under 421 schemes.

The graph indicates the growth of assets over the years.

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GROWTH IN ASSETS UNDER MANAGEMENT

1.4 OBJECTIVES OF MUTUAL FUNDS

1. Income. Income funds focus on dividends and interest that provide income
to investors. This is a relatively steady source of money, but the fund’s
NAV can still go up and down.

2. Growth. Growth funds focus on increasing the value of the principal or

amount invested through capital gains and net asset values. Growth funds
are usually more risky but offer greater potential return.

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 3. Stability. Stability funds focus on protecting the amount invested from loss
so the
fund’s NAV does not go down. This is the least risky type of fund but may
make the least amount of money.
1.5 TYPES OF MUTUAL FUNDS
A mutual fund may float several schemes which may be classified on the
basis of its structure, its investment objectives and other objectives.

A. Mutual fund schemes by structure

1. Open ended schemes:
Open –ended fund scheme is open for subscription all through year. An
investor can buy or sell the units at “NAV”(net asset value)related price at any
time.

2. Close-Ended funds:
A close-ended fund is open for subscription only during specified period,
generally at the time of initial public issue. The close ended fund scheme is listed
on the some stock exchange where an investor can buy or sell the units of this type
of scheme.

3. Interval fund:
Interval funds combine both the features of open-ended fund and close-
ended funds.

B. Mutual Fund schemes by investment objectives:

1. GROWTH FUNDS:

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 The objective of growth fund scheme is to provide capital appreciation over
the medium to long term. This type of scheme is an ideal scheme for the investors
seeking capital appreciation for long period.

2. INCOME FUNDS:

The income fund schemes objective is to provide regular and steady income
to investors.

3. BALANCED FUNDS:
The objective of balanced fund schemes is to provide both growth and
regular income to investors.

4. MONEY MARKET FUNDS:

The objective of money market funds is to provide easy liquidity, regular
income and preservation of income.

C. GEOGRAPHICAL CLASSIFICATION:

1. DOMESTIC FUNDS:
Funds which mobilize resources from a particular geographical locality like
a country or a region are domestic funds. The market is limited and confined to the
boundaries of a nation in which the fund operates. They can invest only in the
securities, which are issued and traded in the domestic financial market.

2. OFFSHORE FUNDS;
Offshore funds attract foreign capital for investment in the country of the
issuing company. They facilities cross-border fund flow which leads to an increase
in foreign currency and foreign exchange reserves. Such mutual funds can invest
in securities of foreign companies. They open domestic capital market to

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international investors. Many mutual funds in India have launched a number of
offshore funds, either independently or jointly with foreign investment
management companies. The first offshore fund, the India fund, was launched by
unit trust of India in July 1986 in collaboration with the US fund manager, Merril
Lynch.

D. OTHER FUNDS:
1. TAX SAVING SCHEMES:
The objective of Tax Saving Schemes is to offer tax rebates to the investors
under specific provisions of the Indian Income Tax Laws. Investment made under
some schemes is allowed as deduction u/s 88 of the Income Tax Act.

2. INDUSTRY SPECIFIC SCHEMES:

Industry specific schemes invest only in the industries specific in the offer
document of the schemes.

3. SECTORAL SCHEMES:
The schemes invest particularly in specific industries or initial public
offering.

4. INDEX SCHEMES:
Such schemes link with the performance of BSE sensex or NSE.

5. LOAD FUNDS:
A loan fund charges a commission each time when you buy or sale units in
the fund.

6. NO-LOAD FUNDS:

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 A No-Loan fund does not charge a commission on purchase or sale of the
unit in the fund.

7. EQUITY-LINKED SAVING SCHEME(ELSS):

In order to encourage investor to invest in equity market, the government

has given tax-concessions through special schemes. Investment in these schemes
entitles the investor to claim an income tax rebate, but these schemes carry a lock
in period before the end of which funds cannot be withdrawn.

1.6 ADVANTAGES OF MUTUAL FUNDS

If mutual funds are emerging as the favorite investment vehicle, it is because of

the many advantages they have over other forms and avenues of investing,
particularly for the investor who has limited resources available in terms of capital
and ability to carry out detailed research and market monitoring. The following are
the major advantages offered by mutual funds to all investors:

1) Portfolio Diversification:
Mutual funds normally invest in a well-diversification portfolio or
securities. Each investor in a fund is a part owner of all of the fund’s assets. This
enables him to hold a diversified investment portfolio even with a small amount of
investment that would otherwise require big capital.
2) Professional Management :
Even if an investor has a big amount of capital available to him, he benefits
from the professional management skills brought in by the management of the
investor’s portfolio. The investment management skills, along with the needed
research into available investment option, ensure a much better return than what n

19
investor can manage on his own. Few investors have the skills and resources of
there own to succeed in today’s fast-moving, global and sophisticated markets.

3) Reduction/Diversification Of Risk :
An investor in a mutual fund acquires a diversified portfolio, no matter how
small his investment. Diversification reduces the risk of loss, as compared to
investing directly in one or two share or debentures or other investments. When an
investor invests directly, all the risk of potential loss is his own. A fund investor
also reduces his risk in another way. While investing in the pool of funds with
other investors, any loss on one-two securities is also shared with other investor.
This risk reduction is one of the most important benefits of a collective investment
vehicle like the mutual fund.

4) Reduction Of Transaction Costs :

What is true of risk is also true of the transaction costs. A direct investor
bears all the costs of investing such as brokerage or custody of securities. When
going through a fund, he has the benefits of economies of scale: the fund pays
lesser costs because of larger volumes, a benefit passed on to its investors.
5) Liquidity:
Often, investors hold shares or bonds they cannot directly, easily and
quickly sell. Investment in a mutual fund, on the other hand, is more liquid. An
investor can liquidate the investment, by selling the units to the fund if open-end,
or selling them in the market if the fund is close-end and collect funds at the end of
a period specified by the mutual fund or the stock market.

6) Convenience And Flexibility:

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 Mutual fund management companies offer many investor services that a
direct market investor cannot get. Investors can easily transfer their holding from
one scheme to the other, get updated market information, and so on.

1.7 DISADVANTAGES OF MUTUAL FUNDS

While the benefits of investing through mutual funds far outweigh the
disadvantages, an investors and his advisor will do well to be aware few
shortcomings of using the mutual funds as investment vehicles.

1. No Control Over Costs:

An investor in a mutual fund has no control over the overall cost of
investing. He pays investment management fees as long as he remains with the
fund, albeit in return for the professional management and research. Fees are
usually payable as a percentage of the value of his investment, whether the fund
value is rising or declining. A mutual fund investor also pays fund distribution
costs, which he would not incur in direct investing. However, this shortcoming
only means that there is a cost to obtain the benefits of mutual fund services.
However, this cost is often less then the cost of direct investing by the investors.

2. No Tailor-Made Portfolios:
Investors who invest on their own can build their own portfolios of shares,
bonds and other securities. Investing through funds means he delegates this
decision to the fund managers. The very high-net-worth individuals or large
corporate investors may find this to be a constraint in achieving their objectives
their objectives. However, most mutual fund help investors overcome this
constraint by offering families of schemes- a large number of different schemes-

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within the same fund. An investor can choose from different investment plans and
construct a portfolio of his choice.

3. Managing A Portfolio of Funds:

Availability of a large number of funds can actually mean too much choice
for the investor. He may again need advice on how to select a fund to achieve his
objectives, quite similar to the situation when he has to select individual shares or
bonds to invest in.

3. Risk Factors:
Mutual fund and securities investments are subject to market risk and
there is no assurance or guarantee that the objective of the schemes will be
achieved. As with any security investment, he Net Asset Value (NAV) of the units
issued under the schemes can go up or down depending on the factors affecting the
capital market. Past performance of the sponsors, the Asset Management
Company/ Fund does not indicate the future performance of the fund.

4. Net Asset Value (NAV):

It is the common practice for the mutual fund to compute the share of each
investor on the basis of the value of net asset per share/unit, commonly known as
the Net Asset Value. It is the market value of the assets minus the liabilities on the
day of valuation. In other words it is the amount which the shareholder will
collectively get if the fund is dissolved or liquidation.

NAV= {Market price of securities + other assets – Total liabilities}/Units

outstanding at the NAV date.

NAV={Net asset of the scheme + Number of units outstanding, Market value of

investment + Receivables + Other accrued income + other assets –Accrued

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expenses-other payable liabilities}/Number of units outstanding at the date of
NAV.

1.8 ORGANISATION OF MUTUAL FUNDS

A mutual fund in India is constituted in the form of trust under public trust
act, 1882. The key players namely sponsors, mutual fund trust, and Asset
Management Company (AMC) are involved in setting up a mutual fund. They are
assisted by other independent administrative entities like banks, registrars, transfer
agents, and custodians (Depository participants).

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

 Trustees

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The trust of mutual finds may be managed by a board of trustees, or a trust
company, corporate body. Most of the funds in India are managed by Board of
Trustees.

 Sponsor

Sponsor is the person who acting alone or in combination with another body
corporate establishes a mutual fund. Sponsor must contribute atleast 40% of the
networth of the Investment Manged and meet the eligibility criteria prescribed
under the Securities and Exchange Board of India (Mutual Funds) Regulations,
1996.The Sponsor is not responsible or liable for any loss or shortfall resulting
from the operation of the Schemes beyond the initial contribution made by it
towards setting up of the Mutual Fund.

 Asset management Company

The trustees appoint the AMC with the prior approval of SEBI. The AMC is a
company formed and registered under the companies act,1956 to manage the
affairs of the mutual fund and operate the schemes of such mutual funds. It charges
a fee for the services it renders to the mutual fund trust.

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar

and Transfer Agent to the Mutual Fund. The Registrar processes the
application form, redemption requests and dispatches account

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 statements to the unit holders. The Registrar and Transfer agent also
handles communications with investors and updates investors records

1.9 REGULATIONS OF MUTUAL FUNDS IN INDIA

In India SEBI and RBI act as regulators of mutual fund.

 SEBI (Mutual Fund) REGULATIONS,1996

The provisions of this regulations pertaining to AMC are:

• All the schemes to be launched by the Asset Management Company(AMC)

need to be approved by the trustees and copies of offer document of such
schemes are to be filed with SEBI.
• The offer document shall contain adequate disclosure to enables the investor
to make informed decision.
• Advertisement in respect of schemes should be in conformity with the SEBI
prescribed advertisement code, and discloses the method and periodicity of the
valuation of investment sales and repurchase in addition to the investment
objectives.
• The listing of close ended schemes is mandatory and every close ended
scheme should be listed on a recognized stock exchange with in six months
from the closure of subscription. However, listing is not mandatory in case the
scheme provides for monthly income or caters to the special classes of persons
like senior citizen, women, children, and physically handicapped. If the
scheme discloses detail of repurchase in the offer document: if the schemes
opens for repurchase with in six months of closure of subscription.

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• Units of a close ended scheme can be opened for sale or redemption at a
predetermined fixed interval if the minimum and maximum amount of sale,
redemption, and periodicity is disclosed in the offer document.
• Units of a close ended scheme can also be converted into an open ended
scheme with the consent of majority of the unit holder and disclosure is made
in the offer document about the option and period of conversion.
• Units of a close ended scheme may be rolled over by passing resolution by a
majority of the shareholders.
• No scheme other than unit linked schemes can be opened for more than 45
days.
• The AMC must specify in the offer document about the minimum subscription
and the extent of over subscription, which is intended to be retained. In the
case of over subscription, all applicants applying up to 500 units must be
given full allotment subjected to over subscription.
• The AMC must refund the application money if minimum subscription is not
received and also the excess over subscription with in the six weeks of closure
of subscription.
• Guaranteed returns can be provided in a scheme if such returns are fully
guaranteed by the AMC or sponsor. In such cases, there should be a statement
indicating the name of the person, and the manner in which the guarantee is to
be made must be stated in the offer document.
• A close ended scheme shall be wound up on redemption date, unless it is
rolled over, or if 75% of the unit holders of a scheme pass a resolution of
winding up of the scheme : if the trustee on happening of any event, requires
the scheme to be wound up: or if SEBI, so directed in the interest of investors.

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1.10 PROFILE OF MUTUAL FUNDS
Mutual funds now represent perhaps the most appropriate investment
opportunity for the most investors. As financial markets become more
sophisticated and complex, investors need a financial intermediary who provides
the required knowledge and professional expertise on successful investing. It is no
wonder then that in the birthplace of mutual fund-the U.S.A. - the fund industry
has already overtaken the banking industry, more funds being under mutual fund
management than deposited with banks.

The Indian mutual fund industry has already started opening up many of the
exciting investment opportunities to Indian investors. We have started witnessing
the phenomenon of more saving now being entrusted to the funds than to the
banks. Despite the expected continuing growth in the industry, mutual funds are
still a new financial intermediary in India. Hence, it is important that the investors,
the mutual fund agents/distributors the investment advisors and even fund
employees acquire better knowledge of what mutual funds are, what they can do
for investors and what they cannot, and how they function differently from other
intermediaries such as the banks.

1.11 PLACE OF MUTUAL FUND IN FINANCIAL MARKETS:

Indian household started allocating more of their saving to the capital

markets in 1980s, with investments flowing into equity and debt instruments,
besides the conventional mode of bank deposits.

27
 Until1992 primary market investors were effectively assured good return as
the issue price of new equity issue was controlled and low. After introduction of
free pricing of shares, new issue prices were higher and with greater volatility in
the stock markets, many investors who bought highly priced shares lost money,
and withdraw money from the market altogether. Even those investors, who
continued as direct investors in stock markets, realized that the key to successful
investing in the capital markets lay in building a diversified portfolio, which in
turn required substantial capital. Besides, selecting securities with growth and
income potential from the capital market involved careful research and monitoring
of the market, which was not possible for all investors. Under similar
circumstances in other countries, mutual funds had emerged as professional
intermediaries. Besides providing the expertise in stock market investing these
fund allow investing in small amounts and yet holding a diversified portfolio to
limit risk, while providing the potential for income and growth that is associated
with the debt and equity instruments. In India, Unit Trust of India occupied this
place as the only capital markets intermediary from 1964 until late 1987, when the
government started allowing other sponsors also to set up mutual funds. With
some ups and downs, this new class of intermediary institution has emerged, in
India as elsewhere, as a good alternative to direct investing in capital markets.

Mutual fund serves as a link between the saving public and the capital
market, as they mobilize savings from investor and bring them to borrowers in the
capital markets. By the very nature of their activities, and by virtue of being
knowledgeable and informed investors, they influence the stock markets and play
an active role in promoting good corporate governance, investor protection and the
health of capital market. Mutual funds have imparted much needed liquidity into

28
the financial system and challenged the hitherto dominant role of banking and
financial institution in the capital markets.

When you invest in a mutual fund, your money is pooled with other
investors’ money in the fund you receive units, or shares, in the fund
in exchange for the money you invest.

The fund uses the money received from investors to buy investors to buy
investments, which are held in trust on behalf of the investors by a custodian the
custodian must be either a Canadian chartered bank or a large trust company.

29
Each mutual fund is managed by a professional manager. The fund manager
invests the money in a variety of investments, and charges the fee for providing
this service
1.12 STRUCTURE OF MUTUAL FUND INDUSTRY IN INDIA
Mutual Fund Industry

SEBI Association of mutual fund

MF’s

SponsorBoard of Trustees AMC Custodian Investors

Public sector Private sector

UTI Bank sponsored FI sponsored

Schemes

Domestic Off shore

Growth Income Income& Sectoral Special Tax saving Others

Growth Purpose

Equity Bonds Metals Real estate Money Market Security Price Others
Indices

30
1.13 HOW TO INVEST IN MUTUAL FUND

In Mutual Funds, Assured Return Schemes are those schemes that assure a
specific return to the unit holders irrespective of performance of the scheme. A
scheme cannot promise returns unless such returns are fully guaranteed by the
sponsor or AMC and this is required to be disclosed in the offer document.
Investors should carefully read the offer document whether return is assured for
the entire period of the scheme or only for a certain period. Some schemes assure
returns one year at a time and they review and change it at the beginning of the
next year.

HOW TO FILL MUTUAL FUND APPLICATION FORM

An investor must mention clearly his name, address, number of units applied for
and such other information as required in the application form. He must give his
bank account number so as to avoid any fraudulent encashment of any
cheque/draft issued by the mutual fund at a later date for the purpose of dividend
or repurchase. Any changes in the address, bank account number, etc at a later date
should be informed to the mutual fund immediately.

MUTUAL FUND OFFER DOCUMENT

An abridged offer document, which contains very useful information, is required

to be given to the prospective investor by the mutual fund. The application form
for subscription to a Mutual Fund is an integral part of the offer document. SEBI
has prescribed minimum disclosures in the offer document. An investor, before

31
investing in a Mutual Fund scheme, should carefully read the offer document. Due
care must be given to portions relating to main features of the Mutual Fund, risk
factors, initial issue expenses and recurring expenses to be charged to the Mutual
Fund entry or exit loads, sponsor’s track record, educational qualification and
work experience of key personnel including fund managers, performance of other
Mutual Fund schemes launched by the mutual fund in the past, pending litigations
and penalties imposed, etc.

CAN MUTUAL FUND CHANGE SCHEME

Yes. They Can However, no change in the nature or terms of the scheme, known
as fundamental attributes of the Mutual Fund e.g. structure, investment pattern,
etc. can be carried out unless a written communication is sent to each unit holder
and an advertisement is given in one English daily having nationwide circulation
and in a newspaper published in the language of the region where the head office
of the mutual fund is situated. The unit holders have the right to exit the Mutual
Fund at the prevailing NAV without any exit load if they do not want to continue
with the scheme. The mutual funds are also required to follow similar procedure
while converting the scheme form close-ended to open-ended scheme and in case
of change in sponsor.

The mutual funds are required to inform any material changes to their unit holders.
Apart from it, many mutual funds send quarterly newsletters to their investors.

At present, offer documents are required to be revised and updated at least once in
two years. In the meantime, new investors are informed about the material changes

32
by way of addendum to the offer document till the time offer document is revised
and reprinted.

1.14 MUTUAL FUNDS PERFORMANCE

The performance of a Mutual Fund is reflected in its net asset value (NAV) which
is disclosed on daily basis in case of open-ended schemes and on weekly basis in
case of close-ended schemes. The NAVs of mutual funds are required to be
published in newspapers. The NAVs are also available on the web sites of mutual
funds. All mutual funds are also required to put their NAVs on the web site of
Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the
investors can access NAVs of all mutual funds at one place

The mutual funds are also required to publish their performance in the form of
half-yearly results which also include their returns/yields over a period of time i.e.
last six months, 1 year, 3 years, 5 years and since inception of schemes. Investors
can also look into other details like percentage of expenses of total assets as these
have an affect on the yield and other useful information in the same half-yearly
format.

The mutual funds are also required to send annual report or abridged annual report
to the unit holders at the end of the year.

Various studies on mutual fund schemes including yields of different schemes are
being published by the financial newspapers on a weekly basis. Apart from these,
many research agencies also publish research reports on performance of mutual
funds including the ranking of various schemes in terms of their performance.

33
Investors should study these reports and keep themselves informed about the
performance of various schemes of different mutual funds.

Investors can compare the performance of their schemes with those of other
mutual funds under the same category. They can also compare the performance of
equity oriented schemes with the benchmarks like BSE Sensitive Index, S&P CNX
Nifty, etc.

On the basis of performance of the mutual funds, the investors should decide when
to enter or exit from a mutual fund scheme

WHERE DOES MUTUAL FUNDS INVEST

The mutual funds are required to disclose full portfolios of all of their schemes on
half-yearly basis which are published in the newspapers. Some mutual funds send
the portfolios to their unit holders. The scheme portfolio shows investment made
in each security i.e. equity, debentures, money market instruments, government
securities, etc. and their quantity, market value and % to NAV. These portfolio
statements also required to disclose illiquid securities in the portfolio, investment
made in rated and unrated debt securities, non-performing assets (NPAs), etc.
Some of the mutual funds send newsletters to the unit holders on quarterly basis
which also contain portfolios of the schemes.

34
Where can an investor look out for information on mutual funds?

Almost all the mutual funds have their own web sites. Investors can also access the
NAVs, half-yearly results and portfolios of all mutual funds at the web site of
Association of mutual funds in India (AMFI) www.amfiindia.com. AMFI has also
published useful literature for the investors.

Investors can log on to the web site of SEBI www.sebi.gov.in and go to "Mutual Funds"
section for information on SEBI regulations and guidelines, data on mutual funds, draft
offer documents filed by mutual funds, addresses of mutual funds, etc. Also, in the annual
reports of SEBI available on the web site, a lot of information on mutual funds is given.
There are a number of other web sites which give a lot of information of various schemes
of mutual funds including yields over a period of time. Many newspapers also publish
useful information on mutual funds on daily and weekly basis. Investors may approach
their agents and distributors to guide them in this regard.

IMPORTANCE OF THE STUDY

As mutual funds are instrumental in bringing out the household savings in
circulation in the market, therefore there is a great need for indepth analysis to
ascertain whether the investors are aware about the mutual fund schemes or not
and weather these schemes are performing according to the expectations of the
ordinary investors of not. During recent years, this important institution has
shown poor performance. Its position has been made dismissal by sudden collapse
of US-64 fund of Unit Trust of India. This decelerating performance calls for a
research to study how any investors have made the investments in these schemes
and the key persons for the same.
So far not much research has been conducted on the mutual fund

35
predominance in India. This research is important and unique in the sense that it
analyses the predominance of the market vis-à-vis the performance of the mutual
fund industry. This study take into account the various schemes started by almost
all the players in the Indian market in order to know whether they are better than
the market or not, whether the mutual fund managers are able to minimize and
diversify the various kinds of risk through planning their respective portfolios
with the expertise and talent they have.

SOME IMPORTANT TERMS

Net Asset Value (NAV)

The performance of a particular scheme of a mutual fund is denoted by Net Asset

Value (NAV).Mutual funds invest the money collected from the investors in
securities markets. In simple words, Net Asset Value is the market value of the
securities held by the scheme. Since market value of securities changes every
day, NA V of a scheme also varies on day to day basis. The NA V per unit is the
market value of securities of a scheme divided by the total number of units of the
scheme on any particular date. For example, if the market value of securities of a
mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs
units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20.
NA V is required to be disclosed by the mutual funds on a regular basis - daily or
weekly depending on the type of scheme.

Sales or repurchase/redemption price

The price or NA V a unit holder is charged while investing in an open
ended scheme is called sales price. It may include sales load, if applicable.

36
Repurchase or redemption price is the price or NA V at which an open-ended
scheme purchases or redeems its units from the unit holders. It may include exit
load, if applicable.
Load or no-load Fund
A Load Fund is one that charges a percentage of NA V for entry or exit.
That is, each time one buys or sells units in the fund, a charge will be payable.
This charge is used by -the mutual fund for marketing and distribution expenses.
Suppose the NA V per unit is Rs.l'p. If the entry as well as exit load charged is 1 0 /0 ,
then the investors who buy would be required to pay Rs.0.1 0 and those who offer
their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The
investors should take the loads into consideration while making investment as
these affect their yields/returns. However, the investors should also consider the
performance track record and service standards of the mutual fund which are more
important. Efficient funds may give higher returns in spite of loads.
A no-load fund is one that does not charge for entry or exit. It means the investors
can enter the fund/scheme at NA V and no additional charges are payable on
purchase or sale of units.

Sales Load
It is a charge collected by a scheme when it sells the units? It is also called 'Front-
end' Load.

Repurchase or 'Back-end' Load

It is a charge collected by a scheme when it buys back the units from the unit
holders. Mutual funds cannot increase the load beyond the level mentioned in the
offer document. Any change in the load will be applicable only to prospective

37
investments and not to the original investments. In case of imposition of fresh
loads or increase in existing loads, the mutual funds are required to amend their
offer document so that the new investors are aware of loads at the time of
investment.

38
 CHAPTER - II

REVIEW OF LITERATURE
A. Kumar Vijay

Mutual Funds have opened salutary avenues for development of capital

market and mobilizing savings. For their orderly growth, it is pertinent that he
investors interest should be protected. After investment, services of a high order
and quality should be guaranteed. The encouraging public response to the Mutual
Funds reveals the potential of mobilizing the savings of the masses for industrial
finance. The securities scam and the subsequent fall in the share prices have made
the public reluctant to invest their savings in the stock market and Mutual Funds
can make use of this opportunity to mobilize the savings of the economy.
The managers of the mutual funds have to accept the challenge to analyse
the needs and investment preference of the investors and device schemes to suit
their needs. Indeed, with the entry of private sector mutual funds, this industry is
posed for a tremendous growth. No doubt, mutual funds will have a major role in
mobilizing the savings of the household sector, in the years to come.

Dua Monika
The mutual fund industry in India is at the stage of infancy but is slowly
and steadily progressing towards the stage of growth. And from the passage from
growth to popularity it will be obvious to the investor in India that the industry has
maximum potential and benefits to the investor. This combined with the ever-

39
increasing players in the MF market promises to make it one of most exciting
areas in the field of finance.
However, in the fact of intensive competition success will come only to
those MF’s who prove their mettle in the market. This will include:
- Reliability of investment performance
- Understanding Investor needs while designing investment schemes.
- Quality of post sale service given to clients.
Singh Paramjit
The encouraging public response to the mutual funds reveals the potential
of mobilizing the savings of the masses for industrial finance. The mutual fund
need amendments and modifications with respect to have a uniform rules and
regulations for governing mutual funds, disclosure of information, listing of
mutual funds in stock exchanges, disallowing private sector in entering mutual
fund business, removing urban biasness, limit of investment of a mutual fund
company should be lowered.

Nayak Mahesh
The typical equity investor in India is a seasonal investor, who tends to rush
into a bull market and gets carried away with the good returns from diversified
schemes,” says Hemant Rustagi, CEO, Wiseinvest Advisors. This is a perfect
description. And when the market gets volatile, like now, or when it slides, the
retail investor, trapped without an exit route, pulls out of equity altogether, opting
to go with small savings, debt instruments and other assured return, low-risk
avenues.
Is there no middle path? For the conservative investor who would like to start
flirting with equity, there are index funds. However, this option has been largely

40
out of favour with Indian investors. And for obvious reasons. Returns generated by
diversified funds have consistently beaten those by index funds. In the past year,
diversified funds have given an average return of 49 per cent compared to 37 per
cent by index funds.
Kirkire Sandesh
Over the last few years, the Indian financial system has undergone sea
changes. The most remarkable of them is the evolution of investor preference in
favour of market-linked investment vehicles, as compared to conventional
assured return instruments. The same is evident from the fact that the asset under
management with mutual funds (excluding UTI) have grown from about
Rs.35,000 crore in March 2000 to over Rs.2,07,000 crore in January 2007.

41
 CHAPTER - III

RESEARCH METHODOLOGY
CHAPTER – III

3.1 RESEARCH PROBLEM

The purpose of this project was “ Analysis of investments in Mutual funds”.

3.2 OBJECTIVES OF THE STUDY

The present research problem is taken to study the “Analysis of Investments in
mutual funds” with the following objectives:-
1. To study the investor’s knowledge and awareness about various Mutual
Fund schemes present in the market.
2. To know about sources from where investors get information about mutual
funds.

3.3 RESEARCH METHODOLOGY

Research Methodology is a systematic way of conducting a project. It is a
series of steps, which are undertaken in order to reach at the final decision.

42
 3.4 RESEARCH DESIGN
A research design is an arrangement of conditions for collection and analysis
of data in a manner that aims to combine relevance to the research to the
research purpose with economy in procedure. A good research design has the
characterstics viz problem definition, specific method of data collection
analysis.

3.5 POPULATION
The population consists of investors in Chandigarh.

3.6 SAMPLE PLAN

For present study a sample of 100 investors were taken. Convenience
sampling technique was used to select the sample units.

3.7 DATA COLLECTION

The collection, of data regarding the awareness was both from primary and
secondary source of information. For meeting first two objectives primary data is
used and to meet third objective secondary data is used.
Primary data:-
Primary data was collected by using the interview method and
questionnaire method for investors.
Secondary data:-
Secondary data was collected from newspapers- The Economic Times; Business
Today, Journal of Finance, pamphlets and booklets,mutual funds website.The
questions included were open-ended and multiple choice.

43
3.8 ANALYSIS OF DATA

For analyzing the data collected firstly a master table was prepared to note down
the responses in a tabular form.The statistical techniques used include tally marks,
mean score, percentage method and rank method and Z-test

3.9 LIMITATIONS OF REPORT

An analysis has been done as per the objectives and attempt has been done to
study each and every parameter to make it more useful and to the mark. effort has
been done so that information collected is correct for the subject studied but there
are some limitations which are as follow.

• Study has been undertaken only on 100 investors of Chandigarh which

cannot provide the information of general public.
• Data collected is from different sources. Mainly secondary data which
might have changed or fluctuated.
• Analysis in done on 100 investors only. So the same cannot be imposed on
whole population.
• The time constraint was one of the major problem.
• The lack of information sources for analysis part.

44
 CHAPTER-IV
ANALYSIS AND INTERPRETATION
The present chapter includes the analysis of the primary data collected from the
investors through the questionnaires.
A total of 100 investors were taken and were personally interviewed with the help
of structured questionnaire to get the information regarding the awareness level of
Mutual Fund schemes.
4.1 According to the first objective, "To study the investor knowledge and
awareness about various mutual fund schemes present in the market",
the following results are:
Table 4.1(a) : No. of investors who are investing in Mutual Fund schemes
present in India
OPTIONS NO. OF INVESTORS

YES 72%

NO 28%

NO. OF INVESTORS

NO
28%

YES
72%

45
From the above pie chart, it is clear that 72%of the investors invest in Mutual Fund
schemes present in India and 28% investors are not aware about Mutual Fund
schemes. This shows that more than half of the investors are aware about Mutual
Fund schemes.
Table 4.1 (b): Factors which are considered by investor while selecting the
scheme for investment

RANK GIVEN
Factor
considered for
1 2 3 4
investment

Tax benefit 31 31 10 0
Return 29 13 21 9
Liquidity 8 14 14 36
Saving 3 16 25 28

The following chart shows the pictorial view of the above statistical data:
Chart showing Factors Considered by the Investor for Investment
factor considered while investment in mutual fund

40
35
no of respndents

30
Tax benefit
25
Return
20
Liquidity
15
Saving
10
5
0
1 2 3 4
ranks

46
 ➢ More of the people consider tax benefit as most important criteria for
investment.As we can see that 31 people has ranked it as 1st and another 31 ranked
it as 2nd.
➢ People while making an investment also take return into account. But
return has relatively less important as compared to Tax Benefit.
A SME person is also considered about liquidity. But here we see that
liquidity is not given more importance.

Table 4.1(c) : Occupation of the investors who are investing in mutual funds

OCCUPATION NO. OF INVESTORS

Businessman 14
Salaried 80
Any other 6

From the above table, it is clear that occupation of investors also influence there
investment decision 14% of investors belong to business class, 80% of investors
are salaried and 6% of investors are from' other class like Pensioners, Retired. So,
it is clear that the no. of salaried class people is greater than the other class people.
It's also clear that they have keen interest especially in investing in mutual fund
schemes so as to avail various benefits

47
 NO. OF INVESTORS

80

60

40

20 NO. OF INVESTORS

0
Busines Any
Salaried
sman other
NO. OF 14 80 6
INVESTORS

Provided under these schemes such as regular income which is more important for
salaried class people and other benefits like tax benefits, for saving purpose etc.

Table:4.1 (d) Schemes which the investors prefer while making investment in
mutual fund

SCHEMES NO. OF INVESTORS

Open-ended Scheme 40
Close-ended Scheme 2
Balanced Fund 21
Money Market Mutual Fund 9
Leverage Funds NIL

From the above table, it is clear that 40 out of 72 investors prefer open ended
schemes i.e 55% of investors are preferring Open-ended scheme, 29% of
investors are preferring Balanced Fund schemes, 3% of investors Close-ended
schemes, 13% of investors money market mutual fund scheme and no investor is

48
 preferring leverage funds. It also shows that the open-ended schemes suit to the
investors approximately two times more than the balanced fund schemes whereas
the money market mutual fund schemes suit to the investors seven times more
than the closed fund schemes. It reflects that investors prefer open-ended
schemes more because they want to sustain the regular income along with
liquidity as these funds can be sold at any time.

Schemes suit to the investors

60%

No. of 40%
Investors
20%
NO. OF INVESTORS
0%
Ope Clo Bal Mon Lev
NO. OF 55% 3% 28% 14% 0%
INVESTORS
Scheme

Table 4.1(e) :Information, which is required by the investor for selection of

mutual fund scheme to invest in:-

49
Attributes No. of Investors
Rate of Return/Yield 28
Maturity Period 18
Risk Attached 22
Profitability 27
Any Other 5

information about attributes affecting investment

decision in mutual fund

30
25
percentage

20
15 No. of Investors
10
5
0
Profitability

Any Other
Return/Yield

Attached
Maturity
Period

Risk
Rate of

attributes

From the above table, it is clear that 28% of investors required the rate; of
return/yield information, another 18% investors required the information related to
maturity period, still another 27% investors required profitability information, 22%

50
investors required risk attached information and 5% investors required other
information like liquidity or investment portfolio etc. This shows that the investors
are greatly concerned with the information regarding rate of return and
profitability. To some extent, investors are also concerned with the risk attached
factor also and then with the maturity period. Investors are least concerned with the
other factors such as market conditions, liquidity, investment portfolio, investment
strategy and company profile etc.

Table 4.1(f) Reason due to which respondents are reluctant for making
investment in mutual fund
Reason No. of respondents % of
respondents
Bitter past 2 7.14%
experience
Lack of knowledge 14 50%
7 25%
Lack of confidence
Difficult scheme 2
selection 7.14 %
Inefficient advisor 3 10.7%
Total 28 100

The following pie chart shows the pictorial view of the above statistical data:
Chart showing reasons for not investing in Mutual Funds.

11% 7% Bitter past experience

7%
Lack of knowledge
Lack of confidence
Difficult scheme selection
25% 50%
Inefficient advisor

51
Most of the people donot invest in Mutual Funds because of lack of knowledge
(50%) and lack of confidence (25%).
➢ Some investors have difficulty in selection of schemes.
➢ Some of them are not getting proper guidance from their advisers.
Few no. of investors has bitter past experience so they decided that they do not
invest in Mutual Funds .

Table 4.1(g) Satisfaction level of investors investing in mutual funds in

relation to returns, liquidity, flexibility, safety, diversification.

Highly Satisfied Indifferent Dissatisfied High

satisfied dissatisfied

52
 - Returns 19 33 8 7 5

- Liquidity 17 36 11 5 3

- Flexibility 15 29 12 9 7

- Safety 16 31 18 4 3

Returns:-

X F fx fx2 Percentage

5 19 95 475 26.3

4 33 132 528 45.8

3 8 24 72 11.11

2 7 14 28 9.72

1 5 5 5 6.94

∑f = 72 ∑fx ∑fx2 =1108

Total =270

Population mean = 4
Sample mean = ∑fx = 3.75
∑f

Assumption: Investors are satisfied by investing their money in mutual funds w.r.t
Returns as reported by majority of investors i.e 46%. To test whether this factor is
applicable to all the investors.

1. It is parametric in nature.
2. Sample Size n = 100 , n> 30 .Therefore Z test is applicable
3. Standard deviation ,σ = 1.148
4. Standard error = 0.11
5. Level of significance = 5 %

53
6. Level of confidence = 95%
7. Two tail test is applicable

8. Hypothesis Setting

HO = XS= XP where Xs sample mean and Xp is population mean

Ha = XS ≠ XP

9. Zc = | Xs –Xp |

Standard Error

= | 3.75 – 4 |

0.11

= 2.27 > Zt =1.96

Null hypothesis is rejected which means alternate hypothesis is accepted

Inference :- The difference in two means is significant. We can genaralise the result
to all investors who are investing in mutual funds to earn satisfactory returns

54
 % age of investors satisfied by returns
From investment in mutual funds

7%
10% 26%

highly satisfied
11% satisfied
indifferent
dissatisfied
highly dissatisfied

46%

The above graph shows that nearly 70% of investors are satisfied by returns
they get by investment in mutual fund. Only 17% of investors are
dissatisfied.thus mutual funds is useful tool for earning the satisfactory
returns.

LIQUIDITY:

X F fx fx2 percentage

5 17 85 425 23.6

4 36 144 576 50

3 11 33 99 15.3

2 5 10 20 6.94

1 3 3 3 4.16

∑f = 72 ∑fx ∑fx2 =1123

Total =275

55
Population mean = 4

Sample mean = ∑fx = 3.81

∑f

Assumption: Investors are satisfied by investing their money in mutual funds w.r.t
liquidity as reported by majority of investors i.e 50%. To test whether this factor is
applicable to all the investors.

1. It is parametric in nature.
2. Sample Size n = 100 , n> 30 .Therefore Z test is applicable
3. Standard deviation ,σ = 1.036
4. Standard error = 0.103
5. Level of significance = 5 %
6. Level of confidence = 95%
7. Two tail test is applicable

8. Hypothesis Setting

HO = XS= XP where Xs sample mean and Xp is population mean

Ha = XS ≠ XP

9. Zc = | Xs –Xp |

Standard Error

= | 3.81 – 4 |

0.103

= 1.84 < Zt =1.96

So null hypothesis is accepted

Alternate hypothesis is rejected.

Inference :- The difference in two means is insignificant. We can generalise the result
to all investors investing in mutual fund.

56
 %age of investors satisfied by investment in mutual
funds for liquidity reason

4%
7%
24%
HIGHLY SATISFIED
15%
SATISFIED
INDIFFERENT
DISSATISFIED
HIGHLY DISSATISFIED

50%

The above graph shows more than 50% of investors are satisfied with
investment in mutual funds as far as liquidity is considered. Thus most of
investors consider mutual funds as important tool for investment so as to have
liquidity in investment .15% of investors are indifferent and remaining 11%
are dissatisfied w.r.t liquidity provided by investment in mutual fund

FLEXIBILITY:-

57
 X F fx fx2 percentage

5 15 75 375 20.83

4 29 116 464 40.27

3 12 36 108 16.7

2 9 18 36 12.5

1 7 7 7 9.72

∑f = 72 ∑fx ∑fx2 =990

Total =252

Population mean = 4
Sample mean = ∑fx = 3.5
∑f

Assumption: Investors are satisfied by investing their money in mutual funds w.r.t
liquidity as reported by majority of investors i.e 50%. To test whether this factor is
applicable to all the investors.

1 .It is parametric in nature.

2 .Sample Size n = 100 , n> 30 .Therefore Z test is applicable

3. Standard deviation ,σ = 1.224

4. Standard error = .122

5. Level of significance = 5 %
6. Level of confidence = 95%
7. Two tail test is applicable

8. Hypothesis Setting

HO = XS= XP where Xs sample mean and Xp is population mean

58
 Ha = XS ≠ XP

9. Zc = | Xs –Xp |

Standard Error

= | 3.5 – 4 |

0.122

= 4.09 >Zt =1.96

So null hypothesis is REJECTED

Alternate hypothesis is ACCEPTED

Inference :- The difference in two means is significant. We can generalise the result to
all investors investing in mutual fund.

% OF INVESTORS SATISFIED BY FLEXIBILITY

PROVIDED BY MUTUAL FUNDS

10%
21%
12% HIGHLY SATISFIED
SATISFIED
INDIFFERENT

17% DISSATISFIED
HIGHLY DISSATISFIED

40%

59
The pie chart shows that only 21% of investors are highly satisfied by
investing in mutual funds for the purpose of flexibility and 40% of investors
are satisfied by investing in mutual fund for achieving flexibility. 17% of
investors have indifferent attitude. And nearly 22% of investors are
dissatisfied w.r.t flexibility provided by mutual funds.

SAFETY:-

X F fx fx2 percentage

5 16 80 400 22.2

4 31 124 496 43.05

3 18 54 162 25

2 4 8 16 5.56

1 3 3 3 4.16

∑f = 72 ∑fx ∑fx2 =1077

Total =269

Population mean = 4

Sample mean = ∑fx = 3.73

∑f

Assumption: Investors are satisfied by investing their money in mutual funds w.r.t
liquidity as reported by majority of investors i.e 50%. To test whether this factor is
applicable to all the investors.

1.It is parametric in nature.

2.Sample Size n = 100 , n> 30 .Therefore Z test is applicable

3.Standard deviation ,σ = 1

4.Standard error = .1

60
5.Level of significance = 5 %

6. Level of confidence = 95%

7. Two tail test is applicable

8. Hypothesis Setting

HO = XS= XP where Xs sample mean and Xp is population mean

Ha = XS ≠ XP

9. Zc = | Xs –Xp |

Standard Error

= | 3.73 – 4 |

0.1

= 2.7 >Zt =1.96

So null hypothesis is REJECTED

Alternate hypothesis is ACCEPTED

Inference :- The difference in two means is significant. We can generalise the result to
all investors investing in mutual fund.

percentage of investors satisfied by safety provided by

investment in mutual funds

6% 4% 22% HIGHLY SATISFIED

25% SATISFIED
INDIFFERENT
DISSATISFIED
HIGHLY DISSATISFIED
43%
61
The above chart shows that more than 60% of investors consider mutual fund
as safe option to invest. 25% have indifferent attitude and only 10% are
dissatisfied by investment in mutual funds for safety. Thus most of the
investors consider mutual funds as safe investment.

Table 4.1 (h) Mutual funds as an option for investment in future

Now a days Mutual funds are becoming an investment option for people. When I
told about benefits of Mutual Fund to respondents and ask them will they consider
Mutual Fund as an investment option in future? Following table shows result of
that question.

no. of respondents Percentage

Yes 91 91%
No 9 9%
Total 100 100%

9%

yes
no

91%
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The above chart shows that almost all the investors want to invest in mutual funds
in future if they assure tax benefits, high returns, liquidity, less risk and
diversification. Provided proper knowledge about various mutual fund schemes
suiting there needs, more investors would like to invest in near future.

4.2 According to the second objective, "To know about sources where
respondents get information about mutual funds", the following results are:
Table 4.2 (a): Sources for providing information to investors.

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OPTIONS NO. OF INVESTORS
Advertisement 38
Friends 10
Sales person 4
Broker 18
Any other 2

The chart showing above information is as:-

sources of information for investment in mutual fund

40
no. of respondents

35
30
25
20 Series1
15
10
5
0
r
t

er
s

he
en

on
nd

ok

ot
em

rs
ie

Br
pe

y
Fr
s

An
rt i

s
ve

le
Sa
Ad

sources

From the above chart, it is clear that out of 72 investors who have invested in
Mutual Fund schemes, 5 2 % of investors are satisfied that the advertisement
provides them the proper information and 25% investors get knowledge from
brokers. Friends and salesperson have little contribution in motivating them for
investment So it shows that investors who are satisfied with the advertisement are
twice than other investors. This results that the advertisement is an effective media
for providing the information to the investors while making the investment

64
decision and advertisement is the only media which helps in providing the
complete information to the investors regarding the schemes.

CHAPTER - V

65
 SUMMARY & CONCLUSION
Summary of findings

Today almost every investor is aware about mutual funds and its schemes.
As per report and analysis most of the investor want to make investment in mutual
funds
Salaried class people are keener investor in mutual fund than other to earn
regular income through different schemes.

Investor preferences as per scheme.

• Open ended scheme to earn regular income and for liquidity purpose.
• Close ended to get capital appreciation by investing in these funds.
• Balanced funds are also been popular to diversify risk and reward.
• Investors need tax benefits and returns, so they invest in mutual fund.
• Mutual funds are more preferred than other investments.
• Mutual funds provide more profit then any other investment.
• It helps in diversification of risk and can be more rewarding.
• Investor are earning high profits and increasing there investments in mutual
funds
• Investor gets information through different media such as TV, Radio, and
Magazines & Journals and helps them in taking decision of what to
purchase.
• Some investors are reluctant to invest in mutual funds due to lack of
knowledge and lack of confidence.

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• Advertisement in newspaper, magazine & pamphlets provide a make an
effective media to take decision among customers.

67
 CHAPTER VI

SUGGESTIONS

• Mutual funds are still an urban phenomenon. Trust build up over time.
Today still, there is a lack of awareness about mutual fund. People have
heard the name of mutual fund , but they actually do not know the various
schemes of mutual fund. So one of prime challenges in front of mutual fund
is lack of awareness.
• Media can provide more information by giving proper advertisement of
schemes.
• Other categories than salaried class should be motivated to purchase mutual
funds for investments.
• To attract more investor’s mutual fund company should provide motive and
objective of scheme in advertisements.
• Some innovativeness is required in industry. It is imperative to
be innovative ahead of market trends.
• There is a need to educate investors about various schemes and
benefits by investing in mutual fund.

CHAPTER- VII
BIBLIOGRAPHY

68
 1. Dua Monika “ Mutual funds In India : A study of investment management”

2.Gupta S.K "Financial Management" Kalyani Publications,2nd edition,

2003
3.Kothari C.R. "Research Methodology" Vishwa Prakashan, 2nd
edition, 2003
4. Kumar Vijay “ Mutual funds Investment In Emerging Markets : An Overview.”

5.Nayek Mahesh “ Mutual Funds In India: marketing strategies and investment”.

6.Paramjit Singh “ Management of Mutual Funds: emerging issues”

7. Pandey, I.M."Financial Management" Vikas Publishers, 8th edition

WEBSITES
• www.amfiindia.com
• www.investors.sebi.gov.in
• www.mutualfundindia.com
• www.ohioline.osu.edu
• www.personalfn.com
• www.scribd.com
• www.investopedia.com

69
QUESTIONNAIRE

(a) Name :
(b) Age :
(c) Occupation :
(d) Gender : Male
Female

1. Do you invest in Mutual Funds?

Yes

No

If answer to question 1 is “yes” answer the following;-

2. In which Mutual fund scheme have you currently invested?

(a) Open ended scheme

(b) Close ended scheme

(c) Balanced fund

(d) Money marked mutual fund

(e) Leverage funds

3. You primarily invest in mutual fund for (Rank according to your preference)

[ ] Tax Benefits

[ ] Returns

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 [ ] Liquidity

[ ] Savings

[ ] Any other (Please specify)

4. You come to know about mutual fund schemes from

(a) Advertisement

(b) Friends

(c) Sales person

(d) Broker

(e) Other...............

5.. Are you satisfied with your investment in mutual funds?

Highly Satisfied Indifferent Dissatisfied High

satisfied dissatisfied

- Returns

- Liquidity

- Flexibility

- Safety

- Diversification

If answer to question 1 is “no” then answer the following:-

71
6. Your company does not invest in Mutual Fund because of
i. Bitter past experience [ ] Yes [ ] No [ ] May be
ii. Lack of Knowledge [ ] Yes [ ] No [ ] Maybe
iii. Lack of confidence in service being provided [ ] Yes [ ] No [ ] Maybe
iv. Difficulty in selection of schemes [ ] Yes [ ] No [ ] Maybe
v. In-efficient investment advisors [ ] Yes [ ] No [ ] May be

7. If Mutual Fund offer you Steady Returns, Tax Benefits, Liquidity,

Diversification of Portfolio, Lesser Risk would consider it as an investment option
in the future ?
[ ] Yes
[ ] No
[ ] May be
8. Would you be interested to know more about Mutual Funds?
[ ] Yes
[ ] No.

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