Investment Avenues: A comparative analysis of

Business class and Service class people

With a special reference to Mutual fund

- A Final Project Report -

Submitted in partial fulfilment of requirements

For the award of the degree of
Master of Business Administration
To

PUNJAB TECHNICAL UNIVERSITY,

JALANDHAR

BY:
RAJ KUMAR
University Roll No.: 80701317142
(2008-10)
 ACKNOWLEDGEMENT

This humble endeavour bears the imprints of many-a-person who were closely or
remotely associated with its successful completion. It gives me immense pleasure in
acknowledging the valuable assistance and co-operation I received from various people
around me in this regard.

First and foremost, I thank the almighty for bestowing me with favourable circumstances
and keeping me in high spirits.
I am thankful to Dr. Janardhanan K.P. our Director, whose untiring efforts helped me get
the opportunity to undergo my Final Project at HDFC Asset Management Co. Ltd. I also
thank Mr. Guninderjit Singh Jawandha, Our College Dean for his critical evaluation,
guidance and direction at every step, which enabled the completion of my project on
time.
I would be failing in my task, if I do not acknowledge the constant moral support and co-
operation extended by my family (especially my mother) and the backing of my friends,
without which this project would not have seen the light of the day.

Thanks to all those people, who spared their valuable time to fill-up the questionnaires
and who furnished vital information and gave suggestions, which
Proved to be very useful in the course of the project work.

21st MARCH 2010

SANGRUR (RAJ KUMAR)
 UNIT - I
INDUSTRY PROFILE
 THE CONCEPT OF MUTUAL FUND

The basic concept of Mutual Funds can be explained with the help of a simple flowchart:

INVESTORS

INVEST/POOL
THEIR MONEY

MUTUAL FUND CO.

(POOL OF MONEY)
PROFITS/LOSSES
DISTRIBUTED TO
INVESTORS IN THEIR
PROPORTIONAL
INVESTS FURTHUR IN A INVESTMENT AMOUNT
NUMBER OF
STOCKS/BONDS

MARKET
FLUCTUATIONS

PROFIT/LOSS FROM
INDIVISUAL INVESTMENTS

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 further invests
the money collected from the investor into 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. The
income earned through these investments and the capital appreciation realised 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.

Advantages of Mutual Funds

• Diversification: The best mutual funds design their portfolios so individual

investments will react differently to the same economic conditions. For example,
economic conditions like a rise in interest rates may cause certain securities in a
diversified portfolio to decrease in value. Other securities in the portfolio will
respond to the same economic conditions by increasing in value. When a
portfolio is balanced in this way, the value of the overall portfolio should
gradually increase over time, even if some securities lose value.
• Professional Management: Mutual Funds provide the services of experienced
and skilled professionals, backed by a dedicated investment research team that
analyses the performance and prospects of companies and selects suitable
investments to achieve the objectives of the scheme.
• Regulatory oversight: Mutual funds are subject to many government regulations
that protect investors from fraud.
• Liquidity: In open-end schemes, the investor gets the money back promptly at
net asset value related prices from the Mutual Fund. In closed-end schemes, the
units can be sold on a stock exchange at the prevailing market price or the
investor can avail of the facility of direct repurchase at NAV related prices by the
Mutual Fund.
• Convenience: You can usually buy mutual fund shares by mail, phone, or over
the Internet.
• Low cost: Mutual Funds are a relatively less expensive way to invest compared
to directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.
Investors individually may lack sufficient funds to invest in high-grade stocks. A
 mutual fund because of its large corpus allows even a small investor to take the
benefit of its investment strategy.
• Transparency: You get regular information on the value of your investment in
addition to disclosure on the specific investments made by your scheme, the
proportion invested in each class of assets and the fund manager's investment
strategy and outlook.
• Flexibility: Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can systematically invest
or withdraw funds according to your needs and convenience. One can also easily
transfer his/her investment to other schemes of the same Mutual Fund company
either at no cost or at a very nominal cost.
• Choice of schemes: Mutual Funds offer a family of schemes to suit your varying
needs over a lifetime.
• Well regulated: All Mutual Funds are registered with SEBI and they function
within the provisions of strict regulations designed to protect the interests of
investors. The operations of Mutual Funds are regularly monitored by SEBI.
• Tax Benefits: Some Mutual Fund schemes are also accompanied by tax
benefits in the form of deductions.

Drawbacks of Mutual Funds

• No Guarantees: No investment is risk free. If the entire stock market declines in

value, the value of mutual fund shares will go down as well, no matter how
balanced the portfolio. Investors encounter fewer risks when they invest in
mutual funds than when they buy and sell stocks on their own. However, anyone
who invests through a mutual fund runs the risk of losing money.
• Management risk: When you invest in a 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
forego management risk, because these funds do not employ managers.
 GROWTH IN ASSETS UNDER MANAGEMENT

Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of
India effective from February 2003. The Assets under management of the Specified Undertaking of the
Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from
February 2003 onwards.
 Types of Mutual Funds Schemes in India

A wide variety of Mutual Fund Schemes exist to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an overview
into the existing types of schemes in the Industry.

TYPES OF MUTUAL FUND SCHEMES

• By Structure
 Open - Ended Schemes
 Close - Ended Schemes
 Interval Schemes

Open-end 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.

Closed-end Funds
A closed-end fund 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 an 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 Schemes
 Income Schemes
 Balanced Schemes
 Money Market Schemes

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 proved
that returns from stocks, have outperformed most other kind of investments 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.

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.

• Other Schemes
o Tax Saving Schemes
o Special Schemes
 Industry Specific Schemes
 Index Schemes
 Sector Specific Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in specified
avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension
Schemes are allowed as deduction u/s 88 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.

Special Schemes
Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer document.
The investment of these funds is limited to specific industries like Infotech, FMCG,
Pharmaceuticals etc.

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

Sector Specific Schemes

Sector Specific Schemes or Sectoral Funds are those which invest exclusively in a
specified sector. This could be an industry or a group of industries or various segments
such as 'A' Group shares or initial public offerings or funds being invested only in
FMCG companies or only in Oils and Natural gas companies.
Mutual Funds: Frequently Used Terms

New Fund Offer (NFO)

NFO is the offer of sale of a particular scheme of mutual fund in the open market for the
very first time. This term is akin to the term Initial Public Offer (IPO) which is used in
case of securities.

Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its liabilities. The
‘per unit NAV’ is the net asset value of the scheme divided by the number of units
outstanding on the Valuation Date.

⇒ Net asset Value = Market Value of assets - Liabilities

Units Outstanding

It is actually the realisable value of one unit of the Fund.

Sale Price
It is the price you pay when you invest in a scheme. They are also called Offer Price. It
may include a sales load.

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

Sales Load / Front-End Load / Entry Load

It is a charge collected by a scheme when it sells the units. They are also called ‘Front-
end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.

Repurchase / Back-End Load / Exit Load

It is a charge collected by a scheme when it buys back the units from the unit holders.

Redemption Price
It is the price at which open-ended schemes repurchase their units and close-ended
schemes redeem their units on maturity. Such prices are NAV related.
Mutual Fund Companies in India

Major Mutual Fund Companies in India:

ABN AMRO Mutual Fund

Birla Sun Life Mutual Fund
Bank of Baroda Mutual Fund (BOB Mutual Fund)
HDFC Mutual Fund
HSBC Mutual Fund
ING Vysya Mutual Fund
Prudential ICICI Mutual Fund
Sahara Mutual Fund
State Bank of India Mutual Fund
Tata Mutual Fund
Kotak Mahindra Mutual Fund
Unit Trust of India Mutual Fund
Reliance Mutual Fund
Standard Chartered Mutual Fund
Franklin Templeton India Mutual Fund
Morgan Stanley Mutual Fund India
Escorts Mutual Fund
Alliance Capital Mutual Fund
Benchmark Mutual Fund
Canbank Mutual Fund
Chola Mutual Fund
LIC Mutual Fund
GIC Mutual Fund
 UNIT - II
COMPANY PROFILE
 HISTORICAL BACKGROUND

HDFC was incorporated in 1977 with two primary objectives - to enhance housing stock
in the country through housing finance systematically and professionally and promote
home ownership. Today HDFC is the largest residential mortgage finance institution in
India. It also aims to increase the flow of resources to the housing sector by integrating
the housing finance sector with the overall domestic financial markets.

Over a span of 25 years, HDFC has become the pioneer in housing finance in India and
made it possible for over two million families to own their homes, through housing loans
worth over Rs. 42,000 crores.

HDFC has turned the concept of housing finance for the growing middle class in India
into a profitable, professionally managed, world class enterprise. It has also co-promoted
financial intermediaries in various fields such as banking, realty services, asset
management, securities trading, life Insurance as well as general Insurance, call centre
and BPO services.

HDFC has demonstrated the viability of market oriented housing finance in a developing
country. The World Bank considers HDFC a model private sector housing finance
company in developing countries and a provider of technical assistance for new and
existing institutions, in India and abroad.

It’s re-engineering has always centered around the customer in retail markets on both
sides of the balance sheet, i.e. loans are given to individuals and deposits are accepted
from individuals. A positive personalized approach towards its customers' needs has
been HDFC's goal and motto.

HDFC is also the largest mobiliser of retail deposits in the private sector outside the
banking circle. Its deposits have been awarded the highest safety credit rating 'FAAA' &
'MAAA' by CRISIL and ICRA respectively for eight consecutive years.

Today, its deposit base is over 10,000 crores - a depositor base of over 13 lacs and a
network of over 50000 deposit agents. A wide geographical spread of activities in India,
through its branch network of over 130 offices, over 80 outreach locations and the HDFC
BANK branch network enables us to offer loans and deposit services to individuals in
over 2400 towns and cities across the country. It also has an international office in
Dubai, U.A.E. and service associates in Kuwait, Oman, Qatar, Saudi Arabia and Bahrain
to service Non-Resident Indians.

While being a household name in India and the undisputed market leader in the field of
housing finance, its social responsibilities have remained in focus. It continues to make
consistent efforts towards economic and social up-liftment of the marginalized sections
of society by offering customized financial assistance. This is done through strong
associations and partnerships with several NGO’s, voluntary agencies and other
development institutions ensuring effective implementation of projects and improved
sustainability at community levels.

HDFC has been voted the second 'Best Managed Company in India' after Infosys in a
poll conducted by Asia money for the year 2000. The book, Global Cases in
Benchmarking by Robert Camp includes a case study on HDFC.
Group Companies

HDFC Limited
HDFC was incorporated in 1977 with the primary objective of meeting a social need -
that of promoting home ownership by providing long-term finance to households for
their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.

HDFC Bank Limited

The Housing Development Finance Corporation Limited (HDFC) was amongst the first
to receive approval from the Reserve Bank of India to set up a bank in the private sector.
The bank was incorporated in August 1994 in the name of HDFC Bank Limited, with its
registered office in Mumbai.

HDFC Securities Limited

HDFC Securities Ltd was promoted by the HDFC Bank & HDFC with the objective of
providing the diverse customer base of the HDFC Group and other investors, a capability
to transact in the Stock Exchanges & other financial market transactions. HDFC
securities provides you with the necessary tools to allocate, select and manage your
investments wisely, and also support it with the highest standards of service,
convenience and hassle-free trading tools.

HDFC Asset Management Company Limited

HDFC Fund is a dominant player in the Indian mutual fund space, recognized for its high
levels of ethical and professional conduct and a commitment towards enhancing investor
interests.

HDFC Realty Limited

HDFC Realty is a new, organized marketplace for properties. HDFC Realty provides the
entire gamut of real estate services, bringing together the "clicks world" and the "bricks
world" in a revolutionary and user-friendly way, making available the best guidance and
the most professional, transparent, efficient service to the real estate customer.

HDFC Standard Life Insurance

HDFC and Standard Life first came together for a possible joint venture, to enter the
Indian Life Insurance market, in January 1995.
Business Objectives

The primary objectives of HDFC are to:

 Enhance residential housing stock in the country through the provision of housing
finance in a systematic and professional manner
 To promote home ownership
 To increase the flow of resources to the housing sector by integrating the housing
finance sector with the overall domestic financial markets

Organizational Goals

The goals of HDFC are:

 Develop close relationships with individual households.

 Maintain its position as the premier housing finance institution in the country.
 Transform ideas into viable and creative solutions.
 Provide consistently high returns to shareholders.
 To grow through diversification by leveraging off the existing client base.
 HDFC ASSET MANAGEMENT COMPANY LIMITED

VISION
To be a dominant player in the Indian mutual fund space, recognized for its high levels
of ethical and professional conduct and a commitment towards enhancing investor
interests.

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

Sponsors

Housing Development Finance Corporation Limited (HDFC)

HDFC was incorporated in 1977 as the first specialised housing finance institution in
India. HDFC provides financial assistance to individuals, corporates and developers for
the purchase or construction of residential housing. It also provides property related
services (e.g. property identification, sales services and valuation), training and
consultancy. Of these activities, housing finance remains the dominant activity. HDFC
currently has a client base of over 8,00,000 borrowers, 12,00,000 depositors, 92,000
shareholders and 50,000 deposit agents. HDFC raises funds from international agencies
such as the World Bank, IFC (Washington), USAID, CDC, ADB and KFW, domestic
term loans from banks and insurance companies, bonds and deposits. HDFC has received
the highest rating for its bonds and deposits program for the ninth year in succession.
HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first life
insurance company in the private sector to be granted a Certificate of Registration (on
October 23, 2000) by the Insurance Regulatory and Development Authority to transact
life insurance business in India.

Standard Life Investments Limited

The Standard Life Assurance Company was established in 1825 and has considerable
experience in global financial markets. In 1998, Standard Life Investments Limited
became the dedicated investment management company of the Standard Life Group and
is owned 100% by The Standard Life Assurance Company. With global assets under
management of approximately US$126 billion as at May 15, 2003, Standard Life
Investments Limited is one of the world's major investment companies and is responsible
for investing money on behalf of five million retail and institutional clients worldwide.
With its headquarters in Edinburgh, Standard Life Investments Limited has an extensive
and developing global presence with operations in the United Kingdom, Ireland, Canada,
USA, China, Korea and Hong Kong. In order to meet the different needs and risk
profiles of its clients, Standard Life Investments Limited manages a diverse portfolio
covering all of the major markets world-wide, which includes a range of private and
public equities, government and company bonds, property investments and various
derivative instruments. The company's current holdings in UK equities account for
approximately 2% of the market capitalization of the London Stock Exchange.

Housing Development Finance Corporation Limited Registered Office:

Ramon House, 3rd Floor, H.T. Parekh Marg,
169, Backbay Reclamation, Churchgate,
Mumbai 400020
Telephone: 56316300
Fax: 22821144
Website: www.hdfcfund.com

Standard Life Investments Limited Registered Office:

Standard Life Investments Ltd.,
1, George Street, Edinburgh, EH2 2LL
United Kingdom
HDFC Mutual Fund: Prominent Schemes

 HDFC Growth Fund

 HDFC Equity Fund
 HDFC Top 200 Fund
 HDFC Core & Satellite Fund
 HDFC Tax Saver

Systematic Investment Plan

Talking of Mutual Funds, Systematic Investment Plan or SIP as it is popularly known,

deserves a special mention.
This scheme was introduced to encourage small investors to invest in Mutual Funds.
Under this scheme the minimum investment to be made is Rs 6,000 payable in 6 equal
monthly or bi-monthly instalments.

The investors have the convenience to make the payment in the following two ways:
Post-dated-cheques: An investor can make the payment by issuing post-dated cheques
in advance to the AMC. Investment money is withdrawn by the AMC from the bank
account of the investor on the stipulated dates.
Auto-debit-facility: It is a very convenient method of making payment under SIP. An
investor makes the payment for first instalment through a cheque/demand draft and all
the payments for subsequent instalments are automatically debited from his/her bank
account which is possible as a result of prior arrangement between the AMC and various
banks (HDFC has this arrangement with almost all the banks who issue cheques with a
MICR number).
 UNIT - III
RESEARCH PROJECT
 INTRODUCTION TO INVESTMENT

Meaning of Investment

In a layman’s language, investment is said to be made when a person buys a non-

consumption commodity. For instance, when a person foregoes his consumption, saves a
part of his money and uses that money to create a bank deposit or to buy some shares in a
company, or a plot of land etc., he is said to be investing. But in economic analysis,
investment does not have this meaning.. In a real sense, investment means a net increase
in the capital of the commodity capital.

According to JM Keynes, “Investment refers to the increment of capital

equipment”.

Criteria for Investment

While choosing a particular investment scheme, one should always take the following
factors into consideration:

Safety and Reliability

One should check the genuineness and reliability of the scheme by as many means as
possible. e.g. by consulting financial experts, relatives/friends or by taking in account the
financial background and performance the institution floating that scheme.

Liquidity
Liquidity means, how quickly and promptly one can withdraw the money from the
investment avenue or how fast the invested money be converted back into liquid form.

Return
Those investment proposals should be chosen which are expected to give good returns
vis-à-vis money invested, risk involved and time factor.

Tax Benefits
Many investment proposal come with some tax-benefits such as rebates or deduction in
income for computation of income tax.

Procedural Formalities
Procedural Formalities are the formal paper work or any other procedure that is required
to make an investment. e.g. filling up and signing of forms, making cheques, furnishing
proofs of genuineness of personal details and income, getting legal sanctions etc.

A person making investment in any investment avenue should always try to strike a
balance between all these factors.

Investment Avenues: A Glace

Today there are numerous investment avenues available to investors. Each come up with
different set of features in terms of risk involved, liquidity of money, returns, tax-
benefits and implications etc. The various available prominent investment avenues in
India are discussed below briefly:

Equities
Investing in equities (shares) is a popular way of investing money. Private and public
companies bring out their public issues which are later also traded in the open market.
They collect huge sums of monies in this way, which they use to expand and diversify
their business. Dividend is declared by these companies (as per the discretion of its board
of directors). The shareholders of these shares are the real owners of the company as
these shares carry voting rights. But the dividend on these shares is not certain. There is
also a risk of sinking of the money invested if the rate of the share drops.

Debt
A debt is an acknowledgement of money borrowed by a concern, which carries a fixed
rate of interest. Debenture and bonds is a form of debt. Money invested with local
companies comes under the definition of debt. They have a fixed maturity time and carry
a fixed rate of interest which is to be paid irrespective of whether the concern, to which
the money has been endorsed, earns profits or incurs losses.
Real Estate
Real Estate refers to investment in permanent, fixed immoveable property like a land,
house, building, complex etc. This investment avenue generally involves huge sums of
money and there is relatively less liquidity in it as a lot of legal formalities need to be
fulfilled.

Gold/Jewellery/Precious Stones
This is yet another investment avenue. The rate of gold, silver and other precious stones
and metals keep on fluctuating. People invest in them when they expect a rise in their
price in future. The biggest advantage of this investment avenue is that it is possible to
buy and sell these easily across political boundaries. These also involve huge sums of
monies. People invest in gold, silver, diamonds, platinum, emerald, turquoise, jade,
pearls etc.

Post office Schemes

Government also offers many investment avenues to the public. These are usually sold
through the post-offices located across the country. There are some long term investment
avenues like the Kisan Vikas Patra’s, National Saving Certificates, Public Provident
Fund etc. There are also some short term schemes like the Monthly Income Scheme,
Saving Account, Recurring deposits etc. All these investment avenues are considered
extremely safe despite low rates of interest, as the chances of sinking of the invested
money is almost negligible. They are also good for small investors, who cannot afford to
invest large sums of money and whose risk taking capacity is very less. They also
involve very less amount of procedural formalities.

Mutual Fund
Mutual Funds as an investment option have been discussed in detail in earlier part of
this project report.

Bank Deposits
Investing in various investment schemes offered by banks is a very old and a very
popular avenue, which ha lately come of age. Banks provide avenues such as saving
account (for individuals), current account (for corporates), recurring deposits, Fixed
Deposits etc. Now a lot of private banks have also come into the foray which also give
custom based services and a variety of Value Added Services.

Insurance
Insurance is the money paid to an insurance (called premium) which covers the risk for
the insured person either on his life, or on the life of this family or any of his assets.
Insurance industry is growing by leaps and bounds these days. The premium paid
depends upon the amount of the policy and for the number of years the policy has been
drawn for. The premium is paid at regular intervals for a stipulated period of time. At the
end of a pre-disclosed time period, the entire money is returned to the interest along with
the interest thereon. Different companies come up with different schemes. Owing to a
large number of players in this sector, there are schemes galore in the market which have
different target customers. Most of these schemes come with tax-benefits.
 REVIEW OF LITERATURE

Mutual Funds have been introduced in India in order to facilitate both the small and large
investors. The capital market universally has a tendency to fluctuate and its efficient
management is a matter of concern for the managers, administrators and the policy
makers. The research workers are equally interested in watching the working and results
of the mutual funds. In this chapter, the work done by various researchers in the area of
mutual funds and allied activities have been reviewed to understand the problem in its
entirety and to know some appropriate analytical techniques as used by them. Thus,
some of the earlier studies conducted on the performance of mutual funds are reviewed
below:

The Securities and Exchange Commission (1971) in its institutional investors study
report, as a part of its institutional investor’s study, found that the mutual funds
performed very poorly in the market. The least volatile funds for five years were
compared with the most volatile funds for the same period in their empirical study.
Based on the findings it opined that the more the volatility, the more profit yielding is the
fund scheme. It was concluded that the volatile funds performed better.

Batra (1991) in his article, ‘Growth and Performance of Mutual Funds in India’,
concluded that the encouraging public response to the mutual fund revealed the potential
of mobilizing the savings of the masses for the industrial finance. The mutual funds need
amendments and modifications with a view to having a uniform rules and regulations for
governing themselves. Rules should also be framed for disclosure of information, listing
of mutual funds on stock exchanges, disallowing private corporate sector in entering
mutual funds business and removing urban biasness. Limit of investment of a mutual
fund company should also be lowered. He suggested that the managers of the funds have
to accept the challenges to analyse the needs and investment preferences of the small
investors and devise schemes to suit their needs.

Fischer and Jorden (1993), in their book, ‘Security Analysis & Portfolio Management’,
examined a number of alternative types of managed portfolios available to the investor.
These have included closed-end investment companies, open-end investment companies
or mutual funds, dual funds, index funds, pension funds, ERISA, Trust Agreements and
professional investments council. They discussed the characteristics of these alternative
investment opportunities as well as advantages of such professionally managed
portfolios. They analysed a number of alternative measures of performance evaluation
including the Sharpe’s, Treynor’s and Jenson’s approaches.

Dhakshayani (1995), in his study ‘Market Boosters’, studied the performance in capital
markets of public and private sector mutual funds. He discovered that most of the mutual
fund schemes were quoted at an average discount of 35 percent to their Net Asset Value
(NAV). The investors in India preferred individual scripts rather than a basket of scripts
and that the market was driven by lack of knowledge. There had been no uniform
practice in terms of valuation of assets or provision for doubtful assets by various mutual
funds.

Mathur (1996), in her work, ‘Trying to Fight the Mutual Trust’, conducted a study of
Mutual Funds, and estimated, that at least 60 percent of the funds were quoted below
their par value. And on a total corpus of Rs. 2840 crores private mutual funds posted a
net loss of Rs 276 crores, in the first half of 1995-96. The BSE 200 index comprising 95
percent of the largest listed companies, which accounts for the 50 percent of the total
market capitalization, has given a return of over 21.7 percent per annum from January
1991 to 1996.

Carhart (1997), in his study ‘Persistence in Mutual Funds Performance’, demonstrated

that common factor in stock returns and investment expense almost completely explained
persistence in equity based mutual fund-mean and risk adjusted return. The individual
funds did not earn higher returns from following the momentum strategy in stocks. The
only significant persistence not explained was concentrated in strong under performance
by the worst return mutual funds. The results did not support the existence of skilled or
informed mutual fund portfolio managers.

Pritpal et al. (1998), in their paper on ‘Determinants of Mutual Funds of Performance:

A Factor Analysis Approach’, attempted to identify the factors affecting the performance
of mutual funds for the period 1990 – 1996 by selecting the sample using stratified
random sampling with proportional representation to each strata of the population. They
used correlation matrix analysis and calculated correlation coefficients for various
variables measuring annual performance of different categories of mutual funds. It
indicated that the dividend was highly positively correlated with income, unit capital,
and total assets as well. Correlation between NAV and Market Price was remarkably
high. The factor loadings were extracted by using Principal Axes Method and then
rotated using Varymax rotation. They based their study on four factors, viz.,
Fundamental factor, Market Performance factor, Profitability factor, Growth factor and
found that four factors jointly accounted for 53 percent to 97 percent of variation in all
variables under consideration for the years under study. It was further concluded that
variation amongst the variables over different mutual funds could adequately be
described uniformly over time with the help of four factors.

Heaton et al (2004) in their research paper titled ‘Heterogeneity and Portfolio Choice:
Theory and Evidence’, summarized and added to the evidence on the large and
systematic differences in portfolio compositions across individuals with varying
characteristics, and evaluated some of the theories that have been proposed in terms of
their ability to account for these differences. Variation in background risk exposure -
from sources such as labour and entrepreneurial income or real estate holding, and from
factors such as transactions cost, borrowing constraints, restricted pension investments
and life cycles considerations appeared necessary to explain the lack of stock market
participation by young and less affluent households. Remaining challenges for
quantitative theories include the apparent lack of diversification in some unconstrained
individual portfolios, and non-participation in the stock by some households with
significant financial wealth.

Roper (2006) of in her survey commissioned by Consumer Federation of America

observed that investors’ mutual fund purchase practices bear little resemblance to those
recommended by investor educators.
Rajni (2008) in her study on mutual fund has found that people are investing more in
mutual fund to get a diversified investment
It has been observed from the foregoing studies that the mutual funds have shown a
dismal performance during the years in which the studies were undertaken. They had not
delivered the benefits as expected by the investors and others interested in them. But
some studies have suggested that mutual funds were beneficial for income-tax planning,
wealth-tax planning and other similar gains. These are a powerful tool to mobilize the
household savings which is a major source of capital in a developing country. They are
instrumental in bringing out and subsequently channelising the small savings the
ordinary and small investors which is beneficial for the growth and development of a
developing economy like India. Some of the research workers have employed very
useful and sound analytical tools and techniques to arrive at the conclusions. Some of
these techniques have been used for the purpose of this study as well.
 OBJECTIVES

The present research is guided by the following three objectives:

1. To find out the factors that guide the choice of investment avenues of people.

2. To study the perception of people regarding mutual funds as an investment option.

3. To check the basic awareness level of people regarding mutual funds as an

investment option.
 RESEARCH METHODOLOGY

Research Design
The research design is the conceptual structure within which research is conducted; it
constitutes the blueprint for the collection, measurement and analysis of data. The
present research is a descriptive research.

Sample Selection
Primary data was used to find various facts needed for the research. First-hand
information was collected from the concerned individuals. Secondary data was also used
from varied sources such as books, magazines, journals, websites etc.

Data Collection Method

The Primary data was collected by way of a structured questionnaire which contained
both open and close-ended questions.

Sampling Plan
Sampling is an effective step in the collection of Primary data and has a great influence
on the quality of results. The sampling plan includes universe, population, sampling unit
and sample size.

• Universe: All the residents of Ludhiana city.

• Population: All the residents of Ludhiana city who either run their own
business or serve in any organization.
• Sampling unit: A single resident individual of Ludhiana city who either
runs his/her own business or serves in any organization.

Sampling Technique
Convenience sampling method was used to identify the individuals who provided
primary data needed for this research.
Sample Size
The Sample size consisted of 100 resident individuals of Ludhiana city out of which:
 50 were entrepreneurs, and
 50 were serving in an organization

Data Analysis
For the purpose of analysing, the raw primary data that was collected by way of a
structured questionnaire was analysed question by question. For closed-ended questions,
data was first converted into percentages and then those figures were converted into
tables. From those tables, graphs/pie charts were prepared (wherever felt necessary) for
greater clarity and for better and quicker comparisons. For open-ended questions,
responses of similar nature (according to pre-decided criteria) were clubbed together and
the percentages were found.
 LIMITATIONS OF THE RESEARCH

No work is perfect and there is always a room for improvement. This research work, too,
has its own set of limitations.

1. Due to time constraints, a small sample size was taken to conduct the
research.

2. Convenience sampling was used to identify the respondents. These few

respondents may or may not represent the entire population of the
research. So the findings and the conclusions may not be true for the
entire population.

3. Inability on the part of the respondents to understand the questions

may have led them to leave some questions un-answered or answer some
questions wrongly.

4. Some respondents might have answered a few questions incorrectly either

out of sheer ignorance, casual approach, personal biasness or due to
unwillingness on their part to divulge correct information.

5. Although, a lot of care has been taken in compilation of facts and figures,
still, since this research is a human work, some human errors might
have crept in.
 ANALYSIS AND INTERPRETATION

This chapter attempts to analyse the questions posed to the respondents through a
structured questionnaire. The questionnaire was prepared in line with the objective of the
research and it contained both open-ended and close-ended questions.

The analyses and interpretation of the questions is supported by graphs/diagrams/ pie-

charts etc., wherever felt necessary, in order to facilitate better clarity and quicker
comparisons.
 • People making Investments:

Business Class Service Class

Class of respondents  (n1=50) (n2=50)
No. of people who make investments 48 42
No. of people who do not make investments 2 8
Table 1

(in percentage)
Class of respondents  Business class Service class
% of people who make investments 96 84
% of people who do not make investments 4 16
Table 2

120
100
80
Percentage

60
40
20
0
% of people who make % of people who do not make
investments investments

Business class Service class

Graph 1: People making Investments

 96% of respondents from business class and 84% from service class make
investments in various available investment avenues. The remaining respondents from
both the class do not make any investments.
• Frequency of making investments:

Class of Respondents  Business Class (n1 = 48) Service Class (n2 = 42)
Monthly 0 8
Regular Basis

Quarterly 0 8
Bi-Annually 8 4
Annually 4 4
After more than a year 0 0
Irregular basis 36 18
Table 3

(in percentage)
Class of Respondents  Business Class Service Class
Monthly 0 16
Regular Basis

Quarterly 0 16
Bi-Annually 16 8
Annually 8 8
After more than a year 0 0
Irregular basis 72 36
Table 4

80
70
60
50
Percent

40
30
20
10
0
Business Class Service Class

Monthly Quarterly
Bi-Annually Annually
After more than a year Irregular basis

Graph 2: Frequency of making investments

 72% of respondents from business class make their investments on an

irregular basis. While 36% of respondents from service class also make their investments
on an irregular basis, another 36% make their investments on a regular basis, half of
them on a monthly basis and another half of them on quarterly basis.
• Factors/people influencing choice of investment avenue:

Factors/People Business Class (n1=50) Service Class (n2=50)

Parents 4 6
Spouse 2 8
Children 2 0
Relatives / Friends 8 6
Future Needs 6 16
Money Available 24 10
Any other factor 2 0
“No Answer” 2 0
Table 5

(in percentage)
Factors/People Business Class Service Class
Parents 8 12
Spouse 4 16
Children 4 0
Relatives / Friends 16 12
Future Needs 12 32
Money Available 48 20
Any other factor 4 0
“No Answer” 4 0
Table 6

60
50
40
Percent

30
20
10
0
Business Class Service Class

Parents Spouse Children

Relatives / Friends Future Needs Money Available
Any other factor “No Answer”

Graph 3: Factors/people influencing choice of investment avenue

 In case of 48% of business class respondents, the money available for

investment makes maximum influence on their choice of the investment avenue. And for
32% of the respondents from service class, their future needs make influence on the
investment avenue the most. Relatives/friends influence 16% of business class and 12%
of service class respondents in this regard.
• Awareness level towards various investment avenues:

Business Class Service Class

Investment Avenue
No. of responses No. of Responses
Real Estate 44 38
Post Office Schemes 45 44
Equites (Share Market) 46 47
Gold/Jewellery etc. 44 42
Mutual Fund 36 44
Banks 44 44
Insurance 42 44
Any other 0 2
“No Answer” 0 2
Table 7

(in percentage)
Investment Avenue Business class Service Class
Real Estate 88 76
Post Office Schemes 90 88
Equites (Share Market) 92 94
Gold/Jewellery etc. 88 84
Mutual Fund 72 88
Banks 88 88
Insurance 84 88
Any other 0 4
“No Answer” 0 4
Table 8

100
80
Percent

60
40
20
0
Business class Service Class

Real Estate Post Office Schemes

Equites (Share Market) Gold/Jewellery etc.
Mutual Fund Banks
Insurance Any other

Graph 4: Awareness level towards various investment avenues

 91% of respondents from business class and 94% of respondents from service
class are aware of Equities as an invest avenue.
• Most important factor that guides/would guide the choice of investment
avenue:

Business Class Service Class

Factors (n1=50) (n2=50)
Liquidity 2 4
Safety 26 24
Return 16 14
Tax Benefits / Implications 2 6
Procedural formalities 0 0
“All factors equally important” 2 2
“No Answer” 2 0
Table 9

(in percentage)
Factors Business Class Service Class
Liquidity 4 8
Safety 52 48
Return 32 28
Tax Benefits / Implications 4 12
Procedural formalities 0 0
“All factors equally important” 4 4
“No Answer” 4 0
Table 10

60
50
40
Percent

30
20
10
0
Business Class Service Class

Liquidity Safety
Return Tax Benefits / Implications
Procedural formalitie s “All factors e qually important”
“No Answer”

Graph 5: Most important factor that guides/would be the choice of

investment avenue for investors
 For 52% of respondents from business class people and for 48% from service
class people, safety of their invested money was/would be the most important factor,
before they made a choice for their investment avenue. For, 32% of the respondents from
business class and 28% from service class, the return on their invested money was most
important.
• Least important factor that guides/would guide the choice of
investment avenue:

Business Class Service Class

Factors (n1=50) (n2=50)
Liquidity 2 10
Safety 0 0
Return 0 0
Tax Benefits / Implications 8 16
Procedural formalities 36 22
“No Answer” 2 4
Table11

(in percentage)
Factors Business Class Service Class
Liquidity 4 20
Safety 0 0
Return 0 0
Tax Benefits / Implications 16 32
Procedural formalities 72 44
“No Answer” 4 8
Table12

80
70
60
50
Percent

40
30
20
10
0
Business Class Service Class

Liquidity Safety
Return Tax Benefits / Implications
Procedural formalities “No Answer”

Graph 6: Least important factor that guides/would guide the choice of

investment avenue
 Procedural formalities involved while making and investment was/would be
the least important to 72 % of the respondents of business class and 44% of that of
service class people.
 • People investing in Mutual Fund:

Class of respondents  Business Class (n1 = 48) Service Class (n2 = 42)
Investing in Mutual Fund(s) 20 26
Not Investing in Mutual fund(s) 28 22
No Answer 2 2
Table 13

(in percentage)
Class of respondents  Business Class Service Class
Investing in Mutual Fund(s) 40 52
Not Investing in Mutual fund(s) 56 44
No Answer 4 4
Table 14

Business Class

Investing in Mutual
Fund(s)
Not Investing in
Mutual fund(s)
No Answer

Pie-diagram 1: Percentage of business class people investing

in Mutual Fund
Service Class

Investing in Mutual
Fund(s)
Not Investing in
Mutual fund(s)
No Answer
 Pie-diagram 2: Percentage of service class people investing
in Mutual Funds

 The above table and pie-diagrams reveal that, while 56% of Respondents from
business class invest in mutual funds, only 44% of respondents from service class do so.
 • Recall of names Mutual Funds:

Business Class (n1 Service Class

Class of respondents  (n2 = 26)
= 20)
Able to recall 18 24
Not able to recall 2 2
Table 15

(in percentage)
Class of respondents  Business Class Service Class
Able to recall 90 92.69
Not able to recall 10 7.31
Table 16

100
90
80
70
60
Percent

50
40
30
20
10
0
Able to remember Not able to remember

Business Class Service Class

Graph 7: Recall of names of Mutual Funds

 Out of the respondents who do invest their money in Mutual Fund, 90% from
business class and 92.69% from service class were able to recall the name of the mutual
fund they had invest in. Rest of them, from both the classes were not able to recall the
name of the mutual fund they had invested in.
• Responses of people when asked to tell that where the money invested in
Mutual Funds is further invested:

BUSINESS CLASS
Investment Avenues Percentage of respondents
Equity only 4
Equity & Debt 24
Equity, Debt & Post office schemes 4
Equity, Debt & Bank Deposit 4
Real Estate, Gold, Post office schemes &
4
Bank deposits
Equity & Real Estate 4
“No idea” 56
Table 17

SERVICE CLASS
Investment Avenues Percentage of respondents
Equity only 40
Equity & Debt 16
Equity, Debt & Bank deposits 12
Equity, Debt, Real Estate & Bank deposits 4
Equity, Debt & Real Estate 4
“No idea” 24
Table 18

 The above tables show the combinations of various investment avenues that
the respondents of both business class and service class people marked, when asked to
tell that where the money invested in Mutual Funds is further invested. From the
respondents of business class, 56% had no idea in this regard, while 24% thought that
money invested in mutual funds was further invested in equities and debt. Similarly, 40%
of service class.
Respondents thought that the money invested in mutual funds is further invested only in
equities. 24% of them had no idea in this regard.
• Recall of names of ANY 5 Mutual Funds:

Business Class Service Class

No. of schemes (n1=50) (n2=50)
None 38 34
Only one 4 6
2-3 6 2
More than 3 4 8
Table 19

(in percentage)
No. of schemes Business class Service class
None 76 68
Only one 8 12
2-3 12 4
More than 3 8 16
Table 20

80
70
60
50
Percent

40
30
20
10
0
None Only one 3-Feb More than 3

Business class Service class

Graph 8: Recall of names of ANY 5 Mutual Funds

 76% of business class and 68% of respondents from service class people were
not able to recall the name a single scheme of mutual fund. 8% of the respondents of
business class and 16% of that of service class people were able to name more than 3
schemes of mutual fund.
• Identification of Mutual Funds:

No. of schemes Business Class Service Class

 (n1=36) (n2=44)
None 4 2
1-5 10 14
5-10 18 16
10-15 4 12
Table 21

(in percentage)
No. of schemes Business class Service class
None 12 4
1-5 28 32
5-10 48 36
10-15 12 28
Table 22

60

50

40
Percent

30

20

10

0
None 1--5 5--10 10--15

Business class Service class

Graph 9: Identification of Mutual Funds

 48% of business class and 36 % of service class respondents were able to

identify 5-10 mutual funds, when presented with a list of 15 mutual funds running in the
Indian financial market. 28% and 32% respondents, respectively, of business class and
service class were able to identify 1-5 mutual funds. Only 12% of business class and
28% of respondents of service class were able to identify the entire list of 15 mutual
funds.
• Awareness towards common terms:

Business Service
Terms
class class
Entry Load / Sale Load / Front-End Load 11 15

Exit Load / Repurchase Load / Back-End Load 11 15

New Fund offer 7 4
Net Asset Value 8 10
Systematic Investment Plan (SIP) 8 13
Fund Manager / Portfolio Manager 10 11
All of the above 2 5
Neither of the above 12 7
Table 23
(in percentage)
Terms Business class Service class
Entry Load / Sale Load / Front-End Load 44 60

Exit Load / Repurchase Load / Back-End Load 44 60

New Fund offer 28 16
Net Asset Value 32 40
Systematic Investment Plan (SIP) 32 52
Fund Manager / Portfolio Manager 40 44
All of the above 8 20
Neither of the above 48 28
Table 24

Entry Load / Sale

70
Load / Front-End
60 Load
Exit Load /
50 Repurchase Load /
Back-End Load
40
Percent

New Fund offer

30

20 Net Asset Value

10

0 Systematic
Investment Plan (SIP)
Business class Service class

Fund Manager /
Portfolio Manager

Graph 10: Awareness towards common terms

 Only 44% and 60% respectively of business class and service class
respondents were found to be aware of the common terms like Entry load and Exit load,
(in context to mutual funds), according to Table13 and Graph 10. Also, a majority of
respondents from service class said they were aware of the term ‘Systematic Investment
Plan’ (SIP).
• Awareness regarding availability of tax-benefits:

Business Class Service Class

Response regarding tax-benefits (n1=36) (n2=44)
Yes 9 14
No 6 4
Not sure 17 19
On some schemes 4 7
Table 25

(in percentage)
Response regarding tax-benefits Business class Service class
Yes 24 32
No 0 8
Not sure 48 44
On some schemes 12 16
Table 26

60

50

40 Yes
Percent

No
30
Not sure
20 On some schemes

10

0
Business class Service class

Graph 11: Awareness regarding availability of tax-benefits

 48% and 44% of the respondents from business and service class respectively
are not sure of availability of tax-benefits which arise on investment in mutual fund.
Around a quarter from business class and a third of respondents from service class give a
positive reply in this regard.
• Perception, as regards Liquidity:

Business Class Service Class

Level of Liquidity (n1=36) (n2=44)
Very High 4 2
High 14 15
Moderate 7 23
Low 2 2
Very Low 2 0
“No-idea” 7 2
Table 27

(in percentage)
Level of Liquidity Business class Service class
Very High 12 4
High 40 36
Moderate 20 52
Low 4 4
Very Low 4 0
“No-idea” 20 4
Table 28

60

50
Very High
40 High
Percent

Moderate
30
Low
20 Very Low
“No-idea”
10

0
Business class Service class

Graph 12: Perception, as regards Liquidity

 40% of respondents from business class and 36% from service class perceive
‘High’ liquidity of money invested in mutual fund. But more than half of the respondents
from service class believe that there exists just a ‘moderate’ degree of liquidity of money
invested in mutual funds.
• Perception regarding Risk involved:

Business Class Service Class

Risk level (n1=36) (n2=44)
Highly risky 3 0
Risky 2 7
Moderate 11 19
Safe 11 16
Highly safe 2 0
“No-idea” 7 2
Table 29

(in percentage)
Risk level Business Class Service Class
Highly risky 8 0
Risky 4 16
Moderate 32 44
Safe 32 36
Highly safe 4 0
“No-idea” 20 4
Table 30

50
45
40
Highly risky
35
Risky
30
Percent

Moderate
25
Safe
20
Highly safe
15
“No-idea”
10
5
0
Business Class Service Class

Graph 13: Perception regarding Risk involved

 Around a quarter of respondents from business think that mutual fund is a
‘safe’ investment avenue and an equal no. of respondents say that they are just
‘moderately’ safe. As far as service class people are concerned, 44% of the respondents
perceive investment in mutual fund as ‘moderately’ safe.
• Perception regarding Procedural Formalities:

Business Class Service Class

Nature of procedural formalities (n1=36) (n2=44)
Elaborate 0 2
Moderate 10 19
Not many 14 19
“No-idea” 12 4
Table 31

(in percentage)
Nature of procedural formalities Business class Service class
Elaborate 0 4
Moderate 28 44
Not many 40 44
“No-idea” 32 8
Table 32

50
45
40
35
Elaborate
30
Percent

Moderate
25
Not many
20
“No-idea”
15
10
5
0
Business class Service class

Graph 14: Perception regarding Procedural Formalities

 The above table and graph disclose that 40% of the respondents from business
class think that ‘not many’ procedural formalities are involves while investing money in
mutual fund. A quarter of respondents from this class does not have any idea in this
regard. In case of respondents from service class, 44% each think that a ‘moderate’
degree and ‘not many’ procedural formalities are involved while making investment in
mutual fund.
 FINDINGS AND CONCLUSION

In this chapter, the interpreted results from the analysis of data have been generalised on
the entire population of the research. As a result of the interpretation of the data collected
through the questionnaire, the answers to pre-decided objectives have been arrived at.
General inferences on the entire population have been drawn, as regards their awareness
and perception towards mutual fund as an invest option as well as the factors that guide
the choice of people before they choose a particular investment avenue(s).

Findings

1. A good majority of both business class and service class people invest in various
available investment avenues. There are just a handful of people who do not make any
investments.

2. Most of the business class people make their investments on an irregular basis.
However, the no. of people with this attribute is far less (half) in service class.

3. A majority of people of service class make investments on a regular basis- either

monthly, quarterly, bi-annually or on annual basis. This nature of this class can be
attributed to the fact that this class has a regular source of income, unlike the business
class, the income of which is either partially or fully dependent upon trade cycles of
boom, depression, recession etc. Just a quarter of the business class people make
investments on regular basis.

4. As far as various investment avenues are concerned, maximum awareness was found
for equity and debt (for both the class). A good majority of both these classes was aware
of almost all the investment avenues. However, relatively less awareness was found for
Mutual Fund, in case of business class people and for Real Estate in case of service class
people.
5. For a little less than half of the business class people, money available for investment
affects their choice of investment avenue. Around a third of them are influenced by their
immediate family, relatives and friends.
6. Around a third of the service class people take into account their future needs before
making a choice of their investment decision. For one-fifth of them, money available for
investment is the most important consideration.
These factors (discussed in point no. 5 & 6 are concerned / related to the person,
who is making the investment, i.e. the investor.

7. Safety of the invested money was the most important concern of people from both the
classes. However, a good no. of people were also concered about the return on the
invested money. Here, both the classes did not exhibit much difference in their attributes.
But, in case of service class people, more people are found to be bothered about tax
benefits and implication which arise as a result of making investments.

8. For most of the business class people, procedural formalities involved while making
investments was the least important issue. For the service class, both procedural
formalities and tax benefits and implications were quite un-important; the former being a
little more un-important. Surprisingly, for a fifth of the service class people, liquidity of
their invested money was least important.
These two factors (discussed in point no. 7 & 8) are related to the investment
avenues available.

9. As far as investment in mutual fund is concered, both the classes gave opposite
responses. While a majority of business class did not invest in mutual funds, a majority
of service class did invest in mutual fund.

10. From those who had invested in mutual fund, around a tenth could not recall the
name of the mutual fund they had invested in. This figure was slightly more in case of
business class people than in service class.

11. A variety of responses were received from both the classes, when asked, where the
money invested in mutual fund is further invested. Although a majority of business class
admitted that they did not have any idea in this regard, a quarter of them rightly believed
that the money invested in mutual funds was further invested in Equities and Debt.
12. Service class gave more varied responses to this question (discussed in point no.11).
While two-fifths of them believed that it was ‘Equity’, a quarter of them admitted that
they did not have any idea of the same. Others, (from both the classes), gave
combination of different investment avenues as possible avenues for the money invested
in mutual fund.

13. When asked to write the names of any five mutual fund schemes running in the
Indian financial market, a majority of both the classes could not recall a single name; the
response of business class being worse than the service class in this regard. Many of the
investors just gave the names of Mutual Funds which they had heard of, whereas they
had been asked to name specific schemes. The no. of respondents who could name 5
schemes of mutual fund were extremely few in both the classes of people.

14. Next, the respondents of both the classes were presented with the list of 15 mutual
funds presently running in the Indian financial market. Here, both the classes were found
to be a little more aware. A majority of them were able to recognise 5-10 names of
mutual funds. And here too, the service class was found to be more aware then the
business class.

15. The respondents were also presented with a list of five commonly used terms in
context to mutual funds and they were asked to identify these terms. Here too, service
class gave more satisfactory responses. A majority of them said that they were aware of
the terms like Entry load, Exit load and Systematic Investment Plan. ‘New Fund Offer’
was the term for which the least no. of people were aware in this class. There was no
such term, of which more than half of the business class was aware. A majority of
people, from both the sections said that they aware of the terms ‘Entry Load’, ‘Exit
Load’ and ‘Fund Manager’.

16. A majority of service class people were aware of the term ‘Systematic Investment
Plan’ (SIP). A close analysis of questionnaires also disclosed that those people who were
aware of the term ‘Entry Load’ were also aware of the term ‘Exit Load’.
17. A little less than half of the business class and 44% of service class did not know
whether tax-benefits exist on investment in mutual fund or not. A quarter of people from
both the classes said that tax benefits do exist on investment in mutual fund.

18. When asked about their perception about Liquidity of the money invested in mutual
funds, once again business class did not present a very clear picture. While 40% of them
perceive high liquidity for the money invested in mutual fund; a fifth of them perceive it
to be moderately liquid and another fifth of them say that they did not have any idea in
this regard. But as far as the service class is concerned, more than half of them say that
money invested in mutual funds has moderate liquidity. More than one-third of them say
that it is highly liquid.

19. As far as Risk involved in investment in mutual fund is concerned, business class
people had varied perception. While, about a third of them perceive them to be safe,
another third of them perceive them to be moderately safe. One fifth of them said they
had no ideal about it. A majority of service class people believe them to be moderately
safe.

20. Two-fifth of business class people believe that “not many” Procedural Formalities
are involved while making investment in mutual fund. But one-third of this class does
not have any idea in this regard. An equal no. of people from service class (44% each)
believe that a “moderate” degree of procedural formalities and “not-many” procedural
formalities, respectively, are involved while making investment in mutual fund.

Conclusion

Mutual Fund is a relatively new found investment avenue as compared to other

investment avenues. The mutual fund industry is still a growing industry in India; it is far
from the level of achieving maturity. A lot of awareness still needs to be created in about
this investment avenue.
As far as the present research is concerned, by and large, the Service class people of
Ludhiana were found to an aware lot; at least more aware than the business class people.
No wonder, then, the no. of people investing in mutual fund are more from the service
class than from the business class. There is great need to create awareness among the
people about Mutual Funds. Many people, from both the classes were found to be
holding misconceptions about the working of mutual funds, which need to be removed.
 UNIT - IV
ANNEXURE
 BIBLIOGRAPHY

http://www.hdfcindia.com

http://www.hdfcfund.com

http://www.indiacapital.com

http://www.moneycontrol.com

Investment Analysis and Portfolio Management by Prasanna Chandra.

(Tata McGraw Hill)

Research Methodology by C.R. Kothari (New Age International Publishers)

 QUESTIONNAIRE

1. Do you invest your money in various investment avenues?

 Yes
 No

2. How often do you make investments?

 Regular Basis
o Monthly
o Quarterly
o Bi-annually
o Annually
o After more than one year
 Irregular Basis

3. Which of these investment avenues are you aware of?

 Real Estate
 Post office schemes
 Share market
 Gold/Jewellery/Precious stones
 Mutual Funds
 Bank Deposits (FD’s etc.)
 Insurance
 Any Other (please specify)______________________

4. Who/What influences your investment decision(s) the most?

 Parents
 Spouse
 Children
 Relatives/Friends
 Your future needs
 Money available for investment
 Any other (please specify) ______________________

5. Which of these factors is most important for you while choosing an

investment avenue?

 Liquidity
 Safety
 Return
 Tax benefits/implications
 Procedural Formalities involved
 Any other (please specify) _______________
6. Which of these factors is least important for you before you choose an
investment avenue?

 Liquidity
 Safety
 Return
 Tax benefits/implications
 Procedural formalities involved
 Any other (please specify) ________________

7. Have you ever invested your money in Mutual Funds?

 Yes
 No

If YES, then which Mutual Fund(s) did you invest in?

i) __________________________________________
ii) __________________________________________
iii) __________________________________________
iv) __________________________________________

8. Where do you think the money invested in Mutual Funds is further

invested? (You can tick more than one option).

 Equities
 Debt (debentures etc.)
 Real Estate
 Gold/Jewellery/Precious stones etc.
 Post office schemes (MIS, KVP’s etc.)
 Bank Deposits (FD’s etc.)
 Any other (please specify)_____________________
 “No idea”

9. How do you rate the risk level associated with investment in Mutual
Funds?

 Highly risky
 Risky
 Moderate
 Safe
 Extremely safe
 “Don’t know”
10. According to you, how much is the liquidity in investment in Mutual
Funds?

 Very high
 High
 Moderate
 Low
 Very low
 “Don’t know”

11. According to you, do tax benefits exist on investment in Mutual

Funds?

 Yes
 No
 Not sure
 On some schemes

12. According to you, how much procedural formalities are involved

when one invests money in Mutual Funds?

 Elaborate formalities
 Moderate
 Not many
 “Don’t know”

13. List the names of any 5 prominent schemes of Mutual Funds that you
can recall. (Those presently running in the Indian market).

i) ______________________________
ii) ______________________________
iii) ______________________________
iv) ______________________________
v) _______________________________

14. Which of the following Mutual Funds are you aware of?

 Prudential ICICI Mutual Fund

 HDFC Mutual Fund
 Franklin Templeton India Mutual Fund
 Reliance Mutual Fund
 Birla Sunlife Mutual Fund
  Fidelity India Mutual Fund
 UTI Mutual Fund
 SBI Mutual Fund
 LIC Mutual Fund
 ING Vyasa Mutual Fund
 HSBC Mutual Fund
 Sundaram Mutual Fund
 Cholamandalam Mutual Fund
 Escort Mutual Fund
 Tata Mutual Fund
 Kotak Mahindra Mutual Fund
 Morgan Stanley Mutual Fund India

Personal Information:

Name: _____________________________________

Age: ______ Contact No.: ____________________

Occupation:
 Business
 Service

Organization: _______________________________

Designation: ________________________________

Thank you for sparing your valuable time.