In the early commercial history, Egyptians and Phoenicians sold shares in vessels and caravans in order to spread the risk of their venture. On the same lines the idea of mutual fund has its formal origin in Belgium, here the idea was used in transportation of ships. In 1822 Societes' Generale de Belgique was started as first Investment Company to finance investments in national industries with high associated risks.
Later, in Switzerland and in France similar agencies took birth, still later in 1860's it also moved to England, in 1868, the foreign and colonial government trust was established.
In USA, the idea took root in the beginning of the 20 Century and there was little activity up-till 1924, in 1924 three investment companies were organized
' Massacheusells Investment Corporation
' State Stree Investment Corporation
' US and foreign securities corporation
All these institutions are still operating. Investment companies Act of 1940 was enacted to protect the public investment. There are over 5000 mutual fund schemes with total assets of over US $1million will prefer to mutual fund route to investing in equity instead of direct participation in share market. Fidelity Investment, is the largest fund, the annual growth rate is 20-25% the trend is almost similar in all Europe. In 1920, it entered Canada, Canadian Investment Fund in 1932, was the first mutual fund in Canada, later on it spread to almost all countries of the world.
In U.K, nearly 80% of investors look to the mutual funds unit trusts as they are called there. The unit trust is leading bank deposits.
Mutual funds in the U.K. are divided into two, namely,
1. Unit trusts are essentially Open-ended funds
2. Investment trusts are Close ended funds
Japanese Trusts are of two kinds:
1. Unity type investment centers
2. Open type investment centers
In Japan investment trusts were set up under the securities investment law, 1951. The unique characteristic difference between Japanese investment trusts and American mutual funds is the fact tat the mutual fund industries in America evolved in response to market needs, whereas the development of the Japanese investment trusts has been in response to Government Policy. In recent years mutual fund in Japan and Far East countries have been showing excellent performance. Mauritius and Netherlands are emerging as tax heavens for off shore mutual funds.
HISTORY OF MUTUAL FUNDS IN INDIA
Mutual funds entered Indian Market in 1963. Unit trust of India was set up under the UTI Act, 1963. It operates both as a Financial Institution and as an Investment Trust.
Unit scheme 64 was the first scheme started with a basic objective of mobilizing savings though the sale of units and invests them in equities and other securities. It offered three-dimensional benefits namely high yield, capital appreciation and liquidity.
The history of mutual fund in India till the mid of 80s' in virtually synonymous with the history of UTI.In 1986, the UTI launched first growth scheme. Master shares which was listed and treated in stock exchanges. The monopoly of the UTI was broken in 1987. Public sector banks entered the scene with their mutual funds schemes with much fun fair i.e. in 1987, five banks
' State Bank of India
' Canara Bank
' Bank of India
' Indian Bank
' Punjab National Bank
' Along with LIC and GIC came out with their mutual funds.
Mutual funds sponsored by the banks and other public sector financial institutions became popular on account of
' Wide network of collection centers of the bank and other sponsoring organizations
' Guaranteed returns
' Trust in the ability and reliability of the sponsors
' Accessibility and familiarity with the sponsor bank/ organizations
Till 1992, the scene was well as the stock market was in a boom and share prices were rising quite sharply. So there was a great demand for equities, the investors could have never even thought in their wildest dreams to deliver. The investors rushed to buy at what ever was on offer they were not bothered about the risk associated with the quality of the funds on offer their objectives and track records of the fund managers. This irrational action on the part of the investors cost them heavily, when the bubble of Securities Scam burst in 1992, as the rise in the prices of the stock were not because of the business performance but because of handiwork of few brokers it was destined to meet its logical tragic end. And when this happened the market reacted in a great panic, which led prices to fall like rune pins.
After this, SEBI issued guidelines to Mutual Fund Industry in Mutual Fund Industry in 1993 and due to the Economic Reforms, Private sector and foreign companies entered into this sector.
The reasons for private mutual fund to enter maybe-
1. Poor servicing, in ordinate delays in the receipt of unit certificates and divided warranties
2. Indifferent performance of most of the mutual fund schemes, which under performed the market thus denying the investor, reasonable returns
3. Absence of adequate disclosure norms
4. Lack of an investor friendly approach in general
Kothari pioneer was the first privates company to launch its mutual fund in 1993 and Morgan Stanley was the first foreign company to enter into the Indian market which is one of the world's largest mutual funds.
Briefly the categories of players can be divided into four types, viz
' Public sector banks
' Insurance companies / All India financial institutions
' Private sector- inclusive of foreign companies and joint ventures
Private sector funds are performing well in the market. A fund mobilized by private sector is more than UTI and public sector.
RESOURCES MOBILISED BY MUTUAL FUNDS
Private Sector MF's Public Sector MF's UTI Grand Total
Open end Close end Total Open end Close end Total Open end Close end Total
of Funds 7769.59 76.91 7846.5 364.1 1307.1 1671.3 6820.23 6372.66 13192.9 22710.7
Amount 1101.93 36.73 1138.66 291.85 404.16 696.01 9773.41 546.26 10319.67 12154.34
Redem-ption Amount 5180.98 74.16 5255.14 0.27 639.90 640.17 0.00 5610.75 5610.75 11506.06
Net In/Outflow of Fund 1486.77 -33.98 1452.70 72.03 263.13 335.16 -2953.18 215.65 -2737.53 -949.67
According to data available on provisional basis, the mutual funds mobilized Rs.22710.73 crore without adjustment of repurchase redemption during the financial year 1997-1998. However, it is important to note that in case of Open-ended schemes, there was a continuous sale and repurchase of mutual funds, and there was redemption of some of the schemes as specially of unit 64 scheme of UTI. Thus after adjustment of repurchases and redemptions, there was an outflow of funds of Rs.949.67 crore during 1998-1999. Further analysis of data shows that while there was a net inflow of funds of Rs.1452.70 crore and Rs.315.16 crore in case of private sector mutual funds and public sector mutual funds, respectively, there was a net outflow of Rs.2737.53crore in case of the UTI the largest mutual fund. Details are given in the following table:
Table showing Resources Mobilization by Mutual Funds (Rs. In crore)
CLASSIFICATION OF MUTUAL FUNDS
Based on advantages and services offered to various sections of the society, mutual funds can be classified into three broad categories. Viz.,
' Functional Classification
' Portfolio Classification
' Geographical classification
It is based on the basis characteristics of the mutual fund schemes opened for the public subscription; it can be classified as;
(A) OPEN ENDED MUTUAL FUNDS:
It is a scheme in which a investor can buy and sell units on daily basis, where in the scheme have perpetual existence and a flexible ever changing corpus. Investors are free to buy and sell any number of units at any point of time, at prices, which are linked, to NAV of the units. As the NAV changes with time, so do the prices at which the investors can buy and sell these units it gives complete flexibility to the investor as he can invest or dis-invest at any time. The fund is not listed in the stock market.
The investor can buy and sell these units form and to the mutual fund. In accordance with the recent changes, the fund manager has the option to list the fund in the stock market in addition to repurchase and resale.
(B) CLOSE ENDED MUTUAL FUND:
It is a fund where in it has a fixed corpus and operates for fixed duration at the end of which the entire corpus is disinvested and proceeds are distributed to the various unit holders in proportion of their holdings. The fund can also make interim payments if it so decides. Thus it ceases to exist after final distribution. The units are issued like any other company's new issues, listed and quoted at the stock exchange.
The units of close-ended funds are not always redeemable at their NAV. Market prices are determined by demand and supply and not solely by NAV. If the fund manager so chooses, he can offer repurchase facility. So also he can resume resale to the extent of repurchase. All the schemes discussed below are either open ended or close ended.
Mutual funds differ with reference to the type of instruments in which the money can be invested. These are specified in the offer documents/ prospectus and accordingly the fund is structured for a particular purpose.
(A) BOND FUNDS:
They provide fixed returns for those who desire safety and steady income. The Fund is invested in Government securities and Bonds. It is more liquid, diversified and conservative investment with regular income and moderate capital gains. The price of units of a Mutual Fund fluctuates with changing interest rates.
(B) STOCK FUNDS:
They are mainly those who are willing to accept risk in the hope of a high Return. These are called Common Stock Fund. They are of two types ' Growth Funds and Go-Go Funds. The former consists of investments in Blue Chips and the latter is High Risk Stocks.
(C) INCOME FUNDS:
They are mainly to maximize the current income of investors. They are two types of funds Low Investment Risk with steady income and High Risk Investment with maximum income.
Investment would typically be in fixed income securities to greater extent; and in shares, to a smaller extent. Capital appreciation in such schemes may be limited. It is ideal for retired people and others with a need for capital stability and regular income, and investors who need some income to supplement their earnings. As most of Investors prefer income Funds, the sales of this fund had dominated the other types of funds.
(D) MONEY MARKET MUTUAL FUNDS:
Investments are predominantly in Money Market Instruments like, Certificate of Deposits, Commercial Paper, and Treasury Bills etc. They are short term in tenure, highly liquid with high safety. This fund is an alternative to saving account of high bracket savers. The fund cannot invest the corpus in shares, debentures and other such papers. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market.
(E) SPECIALISED FUNDS:
These funds invest in securities of certain industries/specific set of or specific income producing securities. They carry more risk due to lack of diversification.
(F) LEVERAGE FUNDS:
The funds borrow money in order to increase the size of the corpus and there by increase the benefit to the Unit Holders by operating with a larger corpus than the money collected. Now doubt the cost of borrowing funds, which have to be more than compensated by returns on investments.
(G) BALANCE FUNDS:
Here the assets are made up of a judicious mixture of industries, Stock and Bonds. To secure reasonable rate of return, the funds are employed in high-grade common stock and conservative fixed income securities like debentures, bonds and preference shares. In a rising stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls. It is ideal for investor's looking for a combination of income and moderate growth.
(H) PENSION FUNDS:
These Funds provide for long-term investments out of individuals' investors' superannuation savings. They take advantage of tax rate available for such investors.
(I) INDEX FUNDS:
Investments are made in the index scripts with the same proportion and weight age as that of index. The performance of fund will be in the line with the index.
(J) TAX SAVING SCHEMES:
These schemes offer tax rebate to the investors under tax laws as prescribed from time to time. This is made possible because the government offer tax incentives for investment in specific avenues. Recent amendments to the Income Tax Act provide further opportunities to investors to save capital gains by investing in Mutual Funds. This scheme is ideal for investors seeking tax rebate.
MUTUAL FUND ' FRAME WORK
' Approval by SEBI
' Sound track record
' Experience in Financial Services
' Professional Competence, Financial Soundness, Reputation, etc
' Contribution to AMC Capital 40% minimum
' Names to be approved by SEBI
' Legally responsible for administering the Trust and Compliance
' Norms for Trustees
' Experience in Financial Services
' Minimum 4 members on the board and 50% of the members not to be connected with the sponsor
ASSET MANAGEMENT COMPANY (AMC)
' Launching schemes
' Managing funds for schemes
' Performing Accounting Function
' All day-to-day affairs of the Mutual Funds
Income of an AMC/ AM fee
' 1.25% of weekly average NAV (Net asset value) of each scheme up to Rs 1000 crore of assets managed
' 1.00% greater than 100 crore
' Infrastructure expenses to be borne by the AMC
' Safe keeping of the assets held by the Fund
' Receives and Delivers Securities for payment
' Follow up on Corporate benefits
' Provide an independent means of control
' Issue of Account Statements to Investors
' Arranges payment to Investors when they redeem
' Takes care of non-commercial transactions like change of address, loss of account statement etc
The registrar maintains the investment account of the Unit holders and also handles the complaints and grievances from the investors relating to dividend, purchase and sale of units.
REGULATION OF MUTUAL FUNDS
The Mutual Funds operating in India was governed by a number of Regulations and guidelines issued by various Agencies viz., UTI Act 1963 and UTI Guidelines, the Indian Trust Act 1882, Income Tax Act 1961 etc. Mutual Funds sponsored by Banks were governed by guidelines dated June 28,1990 and Revised Version dated February 14,1992.
The Ministry of Finance and Government of India realized the need for a set of common rules governing entire Mutual Fund Industry, appointing a Committee under the Chairmanship of Dr.S.A.Dave, who was the Chairman of UTI. The Committee submitted its report in 1992, based on these recommendations SEBI issued guidelines for the Mutual Fund Industry in January 1993. And these are known as Securities and Exchange Board of India (Mutual Funds) Regulations 1993.
After the issue of these guidelines by SEBI, Mutual Fund Industry was opened for private sector to enter the field. And all the Mutual Funds controlled by SEBI except UTI.
Brief details of the SEBI Guidelines are: -
' Mutual Funds are to be established in the form of Trust under the Indian Trust Act
' Funds and assets are to be managed by an Asset Management Company
ASSET MANAGEMENT COMPANY
' AMC shall have minimum net worth of Rs.10 Crores. AMC and Trustee of Mutual Funds are two separate legal entities
' AMC should furnish SEBI their respective Memorandum and Articles of association for approval
' AMC or its affiliate can undertake activities like management and advertising services to Pension Funds, Provident Funds, Venture Capital Funds, Financial Consultancy and Research, but should not act as manager for any other Fund
' All schemes floated by Mutual Funds are to be registered with SEBI
' A standard format of Scheme's prospectus has to be introduced
' All the investors up to 5,000 Units will be given full allotment in case of over subscription
' Mutual funds dealing with money market instruments are to be regulated by SEBI
' Other Mutual Funds Schemes, which invest partly in money market and partly in Capital market, are regulated by SEBI
' No Mutual Funds, under all its schemes should own more than 10% of any company's paid up capital carrying voting rights
' Mutual Funds may invest in another scheme managed by the same AMC or others to the extent of 5% of the NAV
' Mutual Funds can invest only transferable securities in Money Market or Capital Market
' Investment in debt instrument should generally be in those rated an investment grade and above
All Mutual Funds must distribute 90% of their profits every year among their investors.
MARKETING OF MUTUAL FUNDS
Marketing is the big challenge in business especially of marketing of Mutual Fund. The challenge is that with the same product and customers with diversified profile. Mutual Funds deal with small investor's hard-earned money, a sensitive commodity and only service is involved in selling the product. Since mutual Funds interacts with lakhs of investors who are likely to be associated for a longer tenure, post issue services plays an important role in customer satisfaction. Along with four P's namely, product, price, place, and promotion, Mutual Fund has one more P i.e., Portfolio.
The marketing division has to design the product according to the needs of the investors and place it in right market, in right manner, targeted to the right segment. Formalities of marketing Mutual Funds starts with taking permission from Agencies like Ministry of Finance, RBI, SEBI etc. Gazette Notification of Schemes is then done.
Marketing division has to evaluate the strengths, potentials, opportunities and weakness of the market. According to the market condition it has to design the products i.e., the Scheme. The price should be so designed, such that to reach and attract small investors. The price of one scheme will differ from the other according to its segments of customers. Various techniques are used to reach the unaware pocket of investors like direct mailers to full-fledged marketing campaigns, the Fund will spend lakhs of rupees to mobilize investments and consequently marketing cost will increase. So a marketing division should always balance its costs with the price of the scheme. The expenses of the fund should not increase the income from the fund.
A Mutual Fund is an investment vehicle for those who want to spread their risks and seek returns, which are than those available from Bank deposits or other investment avenues. Such investors from should be educated to avoid facing situations of loss of faith in investments or heavy off-loading in the huge discount of NAV.
Positioning of Mutual Fund is very important. Mr. G.D.Shenai, Managing Director, Canara bank Mutual Fund states that ' Most funds have targeted the wrong segment of customers, he feels mutual offer a solution to those people who do not have access to the Stock Market, due to lack of time or because of geographical spreads limitations. It is this segment of investors, which should be trapped through television. Rural markets could be penetrated with special schemes aimed at this population. Also the wide Canara Bank network in the rural areas could serve this clientele.
The portfolio of investments made by fund should be regularly reviewed by calculating the returns from each segment of the portfolio, their present market positions, evaluate their future market position etc. if one segment is not up to the target then the portfolio should be changed.
The portfolio should be so designed which satisfies the Scheme's need. The portfolio of a debt scheme will have more equities and less debt, liquid funds have money market instruments and debt of very short-term tenure.
Marketing of Mutual Fund is not deal based, but it is relationship based. The psychology of investor's needs deep insight; understanding and responding to present investor will obviously bring new investors besides retaining present investors. Thus data based marketing should be emphasized for open-ended schemes.
PRICING OF MUTUAL FUND UNITS
Pricing is a very concept of marketing mix. Pricing of financial products is a complicated issue. Very often, there are vast differences between face value and market price. There are some legal restrictions on pricing of units.
SEBI Experts Committee on pricing units:
An Expert Committee was set up by SEBI under the Chairmanship of Mr.L.C.Gupta. The Committee has suggested two options namely:
1. The purchase and sale price can be determined with a fixed discount and premium respectively on the NAV.
2. The AMC should have the discretion to fix the repurchase and sale prices as long as they are anchored to the NAV i.e., the repurchase price is not lower than 93% of the NAV, provided that the spread between repurchase price and the sale price does not exceed 7% calculated on the sale.
Thus the Committee has opined the repurchase and sale prices in the case open-ended schemes should be nearer to NAV after suitable adjustments for expenses in connection with entry and exit to or from the scheme as the case may be.
SOME TERMS RELATING TO PRICE
1. Entry load or front end load ' A sales fee charged at the time of purchase.
2. Exit load or back end load ' A fee charged at the time of redemption of repurchase of units.
3. Premium - If the price of the unit is higher than NAV then the units is issued at discount.
4. Discount - If the NAV is higher than the price of the unit then the unit is issued at discount.
5. Managed Fees ' The percentage changed for portfolio management. This expense will be stated in Fund's prospectus. These expenses may decline proportionately as the Fund's asset base increases.
6. Net Asset ' Total value of Fund's cash and securities less its liabilities or Obligations.
7. Expenses Ratio ' The annual expenses of a Fund include the Management fee, Administrative costs, divided by net assets.
8. Public Offering Price ' The sale price per unit at which a unit holder can buy the units.
POP = NAV / 1 ' Sales Load
1. Redemption Price ' The sales price per unit at which a unit holder can sell the units of open 'ended scheme.
REDEMPTION PRICE = NAV / 1 + Exit Load
2. Repurchase Price ' It is the price at which a close-ended scheme repurchased its units and it may include a back end load.
Benefits of Mutual Funds
1. Professional Management:
Availing of the services of experienced and skill professionals who are backed by a dedicated investment research team which analyses the performance and prospectus of Companies and select suitable investments to achieve the objectives of the Scheme.
Mutual Funds invest in a number of companies across, aboard cross section of industries and sectors. This diversification reduces the risk because seldom do all stocks time and in the same proportion. Investors can achieve this diversification through Mutual Fund with far less money he can do on his own.
3. Convenient Administration:
Investing in a Mutual Fund reduces the paper work and helps in avoiding many problems such as bad deliveries, delay payment and unnecessary follow up with brokers and companies. Mutual; Fund save time and make investing easy and convenient.
4. Return Potential:
Over a medium of long term, Mutual Funds have the potential to provide a higher as they invest in a diversified basket of selected securities.
5. Low Cost:
Mutual Funds are a relatively less expensive way to invest, compared to directly investing in the Capital Market, because the benefits of scale in brokerage, custodian and other fees translate into lower costs for investors.
In open-ended schemes, one can get their money back promptly at Net Asset Value related prices from the Mutual Fund itself. Close-ended schemes units can be sold in a Stock Exchange at the prevailing market price or avail the facility of direct repurchase at NAV related prices, which some close ended and interval schemes offer.
Investor can get regular income information on the value of their investment in addition to disclosure on the specific investment made by the scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook.
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans one can systematically invest or withdraw according to their needs and convenience.
8. Choice of Scheme:
Mutual Funds offer a family of schemes to suit the varying needs of different types of investors.
9. Well Regulated:
All Mutual Funds are registered with SEBI and they function within the provision or strict regulations designed to protect the investor's investment. The operations of Mutual Funds are regularly monitored by SEBI.
While risk cannot be eliminated, skillful management can minimize risk. Mutual funds help to reduce risk through diversification and professional management. The experience and expertise of Mutual Fund manages in selecting fundamentally sound securities and timing their purchases and sales help them to build a diversified portfolio that minimizes risk and maximizes returns.
10. Tax Benefit:
At present investment in mutual fund schemes enjoy the following tax benefits '
1. Since, April 1, 2003, all dividends declared by debt-based mutual funds are tax-free in the hands of the investor. A dividend distribution tax of 12.5% (including surcharge) is be paid by the mutual fund on the dividends declared by the fund.
2. Investors in ELSS (equity-linked savings schemes) can avail rebate under Section 88 of the Income Tax Act, 1961 on investment up to Rs 10,000 subject to the various conditions laid down in the said Section.
3. Under Section 10(38) of the Act, long-term capital gains arising from transfer of a unit of mutual fund is exempt from tax if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid to the appropriate authority.
4. Under Section 111A of the Act, short-term capital gains arising from transfer of a unit of mutual fund is chargeable to tax @ 10% (plus applicable surcharge) if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid.
However, such securities transaction tax will be allowed as rebate under Section 88E of the Act if the transaction constitutes business income.
' Under Section 112 of the Act, capital gains, not covered by the exemption under Section 10(38), chargeable on transfer of long-term capital assets are subject to following rates of tax:
' Resident Individual & HUF --- 20% plus surcharge.
' Partnership Firms & Indian Companies --- 20% plus surcharge.
' Foreign Companies --- 20% (no surcharge).
Capital gains will be computed after taking into account cost of acquisition as adjusted by Cost Inflation Index notified by the central government.
Under Section 115AB of the Income Tax Act, 1961, long-term capital gains in respect of units purchased in foreign currency by an overseas financial organization held for a period of more than 12 months will be chargeable at the rate of 10%. Such gains will be calculated without indexation of cost of acquisition. No surcharge is applicable for taxes under section 115AB, in respect of corporate.
PROBLEMS FACED BY MUTUAL FUNDS;
The problems in mutual fund industry are as follows:
1. Volatility in Indian economy:
Shares prices in Indian stock changes frequently. Thus a fund manager has to change the portfolio according to the changes of share prices.
2. Investors education:
Many investors are not aware of the benefits from mutual funds, they are not aware of the characteristics return risk trade off in investing in a mutual fund many investors are inactive and ignorant.
3. Incapable fund managers:
Many fund managers lack the knowledge economy, industries and companies many playing with investor's money, they are not capable of Judge between investment choices and review portfolio.
4. Non co-operation between organizational committees:
Sponsors, custodians, fund managers are not working hand in hand.
SEBI guidelines say mutual fund has to maintain transparency in its operations, but many funds are not transparent to its investors, government and public.
6. After sales service:
Mutual funds are not providing after sales services to investors like give details for reference, NAV disclosure etc.,
7. Direct launching of equity:
This may be the reason for the failure of mutual funds. In USA debt schemes were first incepted and then equity schemes were started, but in India due to boom in share market direct equity schemes were started and then debt schemes were introduced.
8. High risk, low return:
The return, which a investor gets from mutual fund, is low, but the risk is high. Return earned from fund has to be distributed among the unit holders only after deduction for maintenance of the fund, thus the return will be low.
New trends in mutual fund industry
a) Systematic investment plan (SIP):
Unit holders can benefit by investing specified rupee accounts at regular intervals for a continuous periods, for purchasing additional units of the schemes at NAV based prices. By this unit holder can take advantage of the benefits of rupee cost averaging.
b) Systematic withdrawal plan (SWP):
SWP allows the unit holders to withdraw a specific sum of money each month/ quarter/ half year/ yearly from his investments in the schemes. The amount thus withdrawn by redemption will be converted into units at applicable NAV based prices and the numbers of units so arrived at will be subtracted from the units balance to the credit of the unit holder.
c) Switching options:
Unit holders under one scheme can switch or all of their holdings in the schemes to another, which is available for investment at that time.
d) Dividend at short intervals:
Dividends from liquid funds are now coming thick and fast, with funds promising fortnightly and even weekly, pay-outs, liquid funds mainly targets companies and high net worth individuals.
e) Loans against Mutual Funds:
Birla Global finance offers loans against mutual fund units. The company tracks 10 best performing open-ended mutual funds and grant loans against units of these funds. Investors have to pledge their units at interest rate of 17.5%. the company will disburse loan up to 60% of the value of equity fund up to 85-90% of the debt fund units. Term of the loan is a minimum of 15 days up to a maximum of a year.
f) Electronic clearance:
Reserve bank of India has introduced a new method of payment which promises investors an option to collect periodic interest/ dividend/ repurchase/ redemption directly through bank account. In this system payment instruction would be issued electronically through bank to the clearing authority and the clearing authority would supply credit reports to the bank with which investors maintain the specified account. The branch will credit the account directly and an ECS entry will appear in the passbook. A payment advice will also be send to investors. This facility will help kin avoiding cases of pilferage, fraudulent encashment etc.,
TITLE OF THE STUDY
'INVESTERS' PERCEPTION TOWARDS MUTUAL FUNDS'
STATEMENT OF THE PROBLEM
The topic is selected assuming that the mind of every common man investing in mutual funds is a very risky affair, if not the riskiest. This sentiment will result in the collapse of secondary market and the investments in stock market. The wrong feeling from general customers mind there is a need to study the perception towards Mutual Funds in Bangalore and to see if there is dependency of income level over investment in Mutual Funds and some efforts have been made to know about existing investors opinion about Mutual Funds and their performances.
OBJECTIVES OF THE RESEARCH
' To know customers awareness about Mutual Funds.
' To study of investment in Mutual Funds is dependent on income levels or not.
' To study investors willingness to take market risk.
' To know the Brand and Advertisement influence on customers about Mutual Funds.
' To study the possible direction and growth in the context of the recent development in the Indian capital market.
' To study the age of people who are most interested to invest in Mutual Funds.
SCOPE OF THE STUDY
The scope of the study is extended to investors' perception towards the mutual fund schemes, which is based on the conducted by the research Bangalore during the period of 2013 & 2014.
LIMITATIONS OF THE STUDY
Efforts were made to see that the data has been collected and analyzed as accurate as possible. In spite of all precautions was taken, and certain limitations of the study can be observed, they are as follows:-
' The sample size taken for research may not give exact figure or may not cover the entire population artificially or that the respondent may be biased.
' The second constrain was that the respondent may skip some questions. Also they may not respond every question correctly.
' The third and important constrain is the time limit.
' Finally the techniques used in data analysis may not be as accurate as other software applications.
The study methodologies are as follows.
' Direct interview with some mutual funds holders
' Discussion with persons who have some knowledge about mutual funds
' Discussion with some mutual funds brokers
' The study of various books of mutual funds, magazines, and newspapers
TOOLS USED IN DATA COLLECTION
Primary data: - It has been collected by
' Discussion with some persons who have knowledge about this subject
Secondary data: - It has been obtained from
' Magazines, journals and newspapers
It includes investors investing in mutual fund and money market.
The sample size of 50 respondents and method of sampling is random sampling.
Global trends in Mutual Funds
Mutual funds have emerged as the chief vehicle of individual savings and investments the world over. In the U.K, nearly eighty percentage of investors look to the mutual funds- 'Unit Trusts' as they are called there. In the U.S an individual with even $1 million of investable funds takes the mutual fund route to investing in equity, instead of resorting to direct participation. This is so even though he has access to a mass of information like Standard and Poor's 500 and Dow Jones Index to guide him in taking his own investment decisions. Presently in the U.S there are nearly 5000 mutual fund schemes with asset of $1.6 trillion invested by 75 million unit-holders. By the turn of the century, the total assets are likely to touch $4 trillion. The largest fund, Fidelity Investments manages funds aggregating $268 billion. This has to be appraised in the context of total market capitalization of all the stocks listed in Bombay Stock Exchange standing at a mere $115 billion.
In the U.S the mutual fund business is growing at an annual rate of twenty to twenty-five per cent. According to a review conducted by Gold man Sachs, a leading U.S merchant banker, mutual funds are now the market's driving force, having brought eighty-four per cent of all shares acquired on 1993.
The great diversity if mutual fund schemes in the U.S is illustrated by the Amana funds, the first and apparently the only U.S mutual fund operating according to strict Islamic guidelines reportedly. Since Islamic law prohibits a guaranteed return on investment, the fund holds no bond or preferred stock, and keeps its cash in checking accounts, which pay no interest. Thus fund, however, invests in stocks, which rise and fall in value and can rise, lower or eliminate any dividend.
In all of Europe, too, the trend is similar. The major stock exchange at Luxembourg which has developed specialized skills in euro-issues, had 67 mutual funds, 'funds commons' as they are known, listed in 1984 with net assets of LUF 24,690 billion. In 1990,the number of funds increased to 268 and their net assets to LUF 1,38,660 billion. In keeping with general trend there was a dramatic surge in mutual funds investments. Obviously with such a large choice, the western investors has a wide variety of options and doesn't have to rely on the same stereotyped schemes popularly known as 'plain vanilla' schemes.
Mutual Funds in India
Mutual funds first made their entry in India in 1964 with the Unit Scheme 64 launched by the Unit Trust of India (UTI). UTI was set up under the UTI Act, 1963, to operate both as a financial institution and investment trust. Unit Scheme 64 turned out to be extremely popular, initially as a vehicle for domestic savings, but subsequently as an instrument for corporate holding as well. By 1964, the investable funds in this scheme had crossed Rs. 12,000 crores.
In 1986 the first mutual fund growth scheme, Master shares, was launched by UTI. This was successfully listed and traded in the stock exchange. Encouraged by this venture, other players emerged. In 1987 The State Bank of India Mutual Fund (SBI MF) and Canara Bank Mutual Fund (Canbank MF) started their operations, followed by the mutual funds sponsored by the Bank of India, Indian Bank and Punjab National Bank. Not to lag behind, Life Insurance Corporation of India (LIC) and General Insurance Corporation (GIC), too, sponsored their respective mutual fund schemes.
Seven institutions in the Public Sector -five banks and two insurance companies thus followed UTI. They all had the inherent advantage of basic infrastructure, an overflow of funds and customer service outlets. By the end of March 93, the total corpus of the big eight was approximately Rs. 50,000 crores. With UTI alone, accounting for Rs. 40,000 crores.
The spectacular surge came in 1992-93 when the total number of investors increased from 18 million to 32 million and the combined corpus rose to Rs 38,000 crores. Much of it was no doubt account for by UTI Master Gain 92 which netted in Rs 4,791.79crore winning for itself a place in Guinness book of records. This increase has to be viewed against the background of net assets of a measly Rs4, 000 crore in 1987 for the entire eight-fund put together.
Phase of development of mutual funds in India
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 ' 1963-1986
An Act of Parliament established Unit Trust of India (UTI) in 1963. 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 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. By the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India withRs.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 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.
GROWTH IN ASSETS UNDER MANAGEMENT The graph indicates the growth of assets over the years:-
Private mutual funds
However, the monopoly of the big eight was ended by the new economic policy spearheaded by Dr. Manmohan Singh from 1991. The process of liberalization threw the doors open to players in the private sector to provide the
much-needed competitive edge and a wider scope of options to the investors. The existing mutual funds, it was felt, had failed to live up to the expectations of common investors due to:
(a) Poor servicing, inordinate delays in the receipt of unit certificates and dividend warrants;
(b) Indifferent performance of most of the mutual fund schemes which under-performed the market thus denying the investors a reasonable return;
(c) Absence of adequate disclosure norms; and
(d) Lack of an investor-friendly approach in general.
Hence the securities and Exchange Board of India (SEBI) accorded approval to a number of players in the private sector to sponsor mutual funds. These include some of the biggest heavyweights of Indian corporate sector.
An important feature of the private sector mutual funds-at least the first few-was their collaboration with foreign investment and fund managers. Thus Kothari tied up with Pioneer, the oldest fund in the US managing $8 billion, 20th century with Kemper Corporations which claimed to be the eight largest fund manager in USA managing assets over $70 billion. Credit capital asset managers' inc. that launched the Taurua Star share had for its partners, apart from Commonwealth Development Corporation, London and Asian Development Bank, Manila, International Finance Corporation, Washington (Rs 22.50 crore), and Edinburgh Fund Managers, U.K (Rs 24 crores).
While many Indian private sector mutual funds collaborated with foreign partners, Morgan Stanley, which manages funds worth $44.2 billion, chose to go it alone. Its issue was a runaway success. There was serious controversy and the apex court had to intervene. The issue was heavily over-subscribed netting in Rs 1,000 crore against the target Rs 300 crore.
The vital aspect of a strong research capability of foreign collaborators had been recognized and the public sector GIC Mutual Fund, too, reacted to the winds of change and tied up with he U.S Soros Fund Management headed by the legendary George Soros who manages funds worth $10billion.
ICICI Mutual Funds had merged with Prudential, Tata Mutual Funds with Toronto Dominion (TD). Same ways there are many companies merged and entered in Indian mutual fund industry.
Important Domestic Mutual Fund Players
(I) SBI Mutual Fund
SBI Mutual Fund draws strength from India's premier and largest bank; the State Bank of India. Set up on July 1, 1955, the State Bank of India is the largest banking operation in the country. SBI Mutual Fund has grown tremendously in terms of corpus as well as number of investors. Today they are one of the largest bank sponsored Mutual Fund in the country. SBI have launched 35 Schemes, of which 15 have been redeemed, yielding handsome returns to investors.
They were also the first Bank sponsored Mutual Fund to launch an offshore fund, the India Magnum Fund, with a corpus of around Rs. 225 Crores.. Today, the fund manages over Rs. 16500 crores of assets and has a diverse profile of investors actively parking their investments across 30 active schemes. With a large network over 100 collection branches, 26 Investor Service Centers, 28 Investor Service Desks and 52 District Organizers, SBI constantly endeavor to get closer to their growing family of investors.
SBI gives the investors the following options:
(1) Open ended schemes
Magnum equity fund
Magnum tax gain
Magnum Index Fund
Magnum Sector Funds Umbrella
Magnum Multiplier Plus Scheme
Magnum Global Fund
Magnum NRI Investment Fund
Magnum Income Plus Fund
Magnum Income Fund
Magnum Children's Benefit Plan
Magnum Monthly Income Plan
Magnum Gilt Fund
(2) Closed schemes
Magnum Equity Linked Saving Scheme 94
Magnum Equity Linked Saving Scheme 95
Magnum Equity Linked Saving Scheme 96
II) Birla Sun Life
Birla Sun Life Financial Services offers a range of financial services for resident Indians and Non Resident Indians. Brought together by two large, powerful and reputed business houses, the Aditya Birla Group and Sun Life Financial, the aim is to offer diverse and top quality financial services to customers. The Mutual Fund and Insurance companies provide wealth management and protection products to customers while the Distribution and Securities companies provide brokerage and trading services for investment in equities, debt securities, fixed deposits, etc.
Birla Sun Life Asset Management Company Limited
Birla Sun Life Mutual Fund follows a conservative long-term approach to investment, which is based on identifying companies that have good credit-worthiness and are fundamentally strong. It places a lot of emphasis on quality of management and risk control. This is done through extensive analysis that includes factory visits and field research. It has one of the largest team of research analysts in the industry.
' Equity Schemes
' Debt Schemes
' Balanced Schemes
' Offshore Schemes
III) Reliance Mutual Fund
Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settlor/Sponsor and Reliance Capital Trustee Co. Limited (RCTCL),as the trustee . RMF has been registered with the Securities & Exchange Board of India (SEBI). The name of Reliance Capital Mutual Fund has been changed to Reliance Mutual Fund effective 11th. March 2004. Reliance Mutual Fund was formed to launch various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.
Reliance Mutual Fund (RMF) is one of India's leading Mutual Funds, with Assets Under Management (AUM) of Rs. 39019 crore (AUM as on 31st Jan 2007) and an investor base of over 3.1 million. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 115 cities across the country.
OPTIONS AVAILABLE TO AN INVESTOR
' Reliance Monthly Income Plan
' Reliance Income Fund
' Reliance Medium Term Fund
' Reliance Liquid Fund
' Reliance Short Term Fund
' Reliance Gilt Securities Fund
' Reliance Fixed Term Scheme
' Reliance Floating Rate Fund
' Reliance Growth Fund
' Reliance Vision Fund
SECTOR SPECIFIC SCHEMES
' Reliance Banking Fund
' Reliance Diversified Power Sector Fund
' Reliance Pharma Fund
(IV) ICICI PRUDENTIAL MUTUAL FUNDS
Prudential ICICI Asset Management Company, (55%:45%) a joint venture between Prudential Plc, UK's leading insurance company and ICICI Bank Ltd, India's premier financial institution. The joint venture was formed with the key objective of providing the Indian investor mutual fund products to suit a variety of investment needs. The AMC has already launched a range of products to suit different risk and maturity profiles.
Prudential ICICI Asset Management Company Limited with asset over Rs.37906.24 crore as on march 31, 2008. Both Prudential and ICICI Bank Ltd have a strategic long-term commitment to the rapidly expanding financial services sector in India.
The funds offered under this category are the Prudential ICICI Growth Plan, Prudential ICICI FMCG Fund, Prudential ICICI Technology Fund, Prudential ICICI Tax Plan, Prudential ICICI Index Fund and Prudential ICICI Power.
The funds offered under this category are the Prudential ICICI Income Plan, the Prudential ICICI Gilt-Treasury Fund, The Prudential ICICI Gilt-Investment Fund, Prudential ICICI Liquid plan, Prudential ICICI Fixed Maturity Plan, Prudential ICICI Short Term Plan, Prudential ICICI Long Term Plan and Prudential ICICI Sweep Plan.
The funds offered under this category are the Prudential ICICI Balanced Fund and Prudential ICICI Child Care Plan.
V) TATA MUTUAL FUNDS
Tata Asset Management Limited is one of India's fastest growing fund management companies with more than Rs. 12562.65(31st august 2006) crores of assets, from about 0.3 million investors. The Tata Group is one of India's best-known conglomerate in the private sector with a turnover of around US $ 11.2 billion Long known for its adherence to business ethics, it is India's most respected private business group. With 210,443 employees across 93 companies, it is also India's largest employer in the private sector.
The Group has always believed in returning wealth to the society which it serves. Thus, nearly two-thirds of the equity of Tata Sons, the Group's promoter company, is held by philanthropic trusts which have created a host of national institutions in natural sciences, medical care, energy and the arts, and which give substantial annual grants and endowments to deserving individuals and institutions in the areas of education, healthcare and social upliftment.
Investment Process Every aspect of this process is tightly controlled and monitored to optimize returns for the investors. The investment process is built around four key principles:
The investment and risk control process concentrates on Fundamentals, Exposure, Liquidity and Tenure. Products
Equity Products Balanced Products Debt Products
Tata Pure Equity Fund
Tata Balanced Fund
Tata Liquid Fund
Tata Tax Saving Fund
Tata Young Citizens' Fund
Tata Short Term Bond Fund
Tata Select Equity Fund
Tata Gilt Securities Fund
Tata Life Sciences & Technology Fund
Tata Income Fund
Tata Equity Opportunities Fund
Tata Income Plus Fund
Tata Index Fund
Tata Fixed Horizon Fund
Tata Growth Fund
Tata Monthly Income Fund
Vi) KOTAK MAHINDRA MUTUAL FUND
Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates
Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). The group has a net worth of around Rs.2,900 crore and employs around 8,800 employees across its various businesses servicing around 2 million customer accounts through a distribution network of branches, franchisees, representative offices and satellite offices across 282 cities and towns in India and offices in New York, London, Dubai and Mauritius. KMMF offers schemes catering to investors with varying risk- return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities.
' Kotak Bond
' Kotak Dynamic Income
' Kotak Floater Short Term
' Kotak Floater Long Term
' Kotak Gilt
' Kotak Income Plus
' Kotak Balance
' Kotak Equity FOF
' Kotak Global India
TABLE NO: 1
Table shows that the Age Profile of the Respondents
Age No. Of Respondents Percentage
18-25 07 14
26-30 09 18
31-35 24 48
36 & Above 10 20
Total 50 100
This table shows the Age Profile of the Respondents. 48% of respondents are in 31-35 age groups. 20% of the respondents are in the age of 36 & above. 18% of the respondents are in the age of 26-30. The remaining 14% of the respondents are in the age of 18-25.
From the age of the respondents, it is clear that the people are investing once they earn a regular income. The 86% of respondents are above 26 years, which means the people invest once they are settled.
Graph shows that the Age Profile of the Respondents
TABLE No: 2
Table shows that the occupation profile of the respondents
Occupation No. Of respondents Percentage
Business 5.5 11
Profession 17.5 35
Housewife 07 14
Service 16.5 33
Others 3.5 07
Total 50 100
In the occupation profile there are five groups, which are namely business, profession, housewife, services and others. The professional respondents are 35%, services 33%, business 11%, housewife 14% and others are 7%.
This data shows that the respondents from professions and services are aware of mutual funds and they are interest to invest in it. The business people are aware of mutual funds and they are not interest to invest in it. Whereas in the case of other and housewife is interest to invest is lesser.
Graph shows that the occupation profile of the respondents
TABLE NO: 3
Table shows that the Number of family dependents of the respondents
SL NO. SIZE No Of respondents Percentage
1 0-2 09 18
2 3-4 24 48
3 5 & Above 17 34
In the table, 48% of the respondents are family dependents. And in the range of 3-4,34%of the respondents are 5 and above of family dependents, and 18% of the respondents are family dependents in the range of 0-2.
In the table most of the respondents are having their dependents in range of 3-4 and 5 & above they are more serious in investing their savings for future of their dependents.
Graph shows that the Number of Family Dependents of the respondents
TABLE No: 4
Table shows that the income profile of the respondents
Income No. Of respondents Percentage
Below 5000 00 00
6000 to 15000 05 10
16000 to 25000 21 42
26000 to 35000 15 30
36000 and above 09 18
Total 50 100
In the table 42% of investors falls in the income bracket of 16000-25000. 30% of the respondents have income of 26000-35000,where as 18% of the investors are the income of 36000 and above, the remaining 10% of the investors falls in the income bracket of 6000-15000.
In the table 90% of the respondents earn Rs.16000/ or more every month. The more they earn the more they can invest and vice versa. The People who earning less can invest in small amounts, whereas the people earning more can go for higher investments and take higher risks for the higher returns.
GRAPH No: 4
Graph shows that the Income profile of the respondents
TABLE No: 5
Table shows that the Awareness of investment options among respondents
Investment Option No. Of respondents aware Percentage
Insurance 45 90
Bonds 40 80
Real Estate 20 40
Stock 42 84
Mutual Fund 43 86
In the table it is found that the 90% of the respondents are aware of the insurance, 80% are the aware of the bonds, 40% of the respondents are aware of real estate, 84% on stocks and 86% of the respondents are aware of mutual funds.
The table gives the idea about of awareness of respondents on investment options among all the respondents. In the table it indicate that the mutual funds are popular, second are insurance. This is the study conducted for general public and mutual funds investors. The mutual funds are not as old as insurance in India.
GRAPH No: 5
Graph shows that the Awareness of Investment options among the respondents
TABLE No: 6
Table shows that the Investment profile of the respondents
Investment Option No. Of the respondents Percentage
Insurance 25 50
Bonds 15 30
Real Estate 05 10
Stock 25 50
Mutual Funds 33 66
In the table 66% of the respondents are mutual funds investors and rest of the respondents are not interest to invest in mutual funds. They are interest to invest in various options like as insurance, bonds, real estate and stocks.
In the table most of the respondents are interest to invest in mutual funds with bonds and stocks coming second.
GRAPH No: 6
Graph shows that the Investment profile of the respondents
Table shows that the reason for not investing in mutual funds
SLNO REASON NO of respondents %
1 Don't know about mutual funds 10 15
2 They are risky 26 39
3 Don't have enough money 0 0
4 Happy with present investments 30 46
In the table 46% of the respondents are satisfied with their investments, 39% of the respondents thinks that the mutual funds are risky, and 15% of the respondents are says that they don't know about the mutual funds.
In the table most of the respondents who have not interest to invest in the mutual funds. Some of the respondents are think that the mutual funds involve risk.
Graph shows that the reason for not investing in mutual funds
Table shows that the annual investment of the respondents
SLNO ANNUAL INVESTMENT NO %
1 Less than 5,000 07 14
2 5,000-10,000 22 44
3 10,000-20,000 10 20
4 Above 20,000 11 22
In the table most of the respondents are invest/save between 5000 to 10000 is 44%. 22% of the respondents' save/invest above 20000, 20% of the respondents 'save/invest between 10000 to 20000 and 14% of invest less than 5000.
In the table many respondents income lie below 100000 p.a. they are possible to save/invest only for about five to ten thousand p.a.
Graph shows that the annual investment of the respondents
TABLE No: 9
Table shows that the popular mutual funds products among the respondents
Mutual Fund Products No.of respondents Percentage
Prudential ICICI 29 88
Kotak Mahindra 15 45
HDFC Mutual Fund 19 57
Birla Sun life 17 51
SBI Mutual Fund 09 27
LIC Mutual Fund 08 24
Can bank Mutual Fund 08 24
Franklin Templeton M.F 21 63
In the table most of popular mutual funds among of the respondents are, prudential ICICI with 88%, franklin Templeton mutual funds with 63%, HDFC mutual funds 57%, Birla sun Life 51%, Kotak Mahindra mutual funds 45%, and rest of them are with average of around 24% and 27%.
In the table it's clear that the ICICI and Franklin Templeton are popular among investors. They are because of the aggressive of the advertisements they employ.
GRAPH No: 9
Graph shows that the popular mutual funds products among the respondents
TABLE No: 10
Table shows that the ranking of factors for investment
Factors Simple average Ranks
Assured Return 7 02
Risk Cover 4 05
Government Guarantee 5 04
High Return 7 01
Voting right 2 06
Liquidity 5 03
In the table, it is designed to study of most important factors for interest to invest in the various investment options.
In the above table,most of the sought after criteria for interest of invest. The investors are not worried about the risk involved. They are high-risk areas with high returns. The people are ready to take more risks for more returns.
GRAPH No: 10
Graph shows that the ranking of factors for investment
Table No: 11
Table shows that the investment opinion of respondents if the returns between 15% to 25% and above
Opinion No. Of the respondents Percentage
Consider 12 71
Ignore 05 29
Total 17 100
In the table, it is constructed to know the opinion of the respondent if the returns are between15% to 25%. These are the respondents not in interest to invest in mutual funds.
In the table, this also it is clear that investors care primarily about one things only return.
Graph No: 11
Graph shows that the investment opinion of respondent if the returns between 15% to 25% and above
Table No: 12
Table shows that the Investing option among the respondents between risk and return
Returns No. Of the respondents Percentage
15% to 20% return with moderate risk 04 33
20% to 30% with high risk 06 50
30% to 40% with very high risk 02 17
Total 12 100
In the table that shows the expectations of investor on the returns, the data shows that 33% are interest to invest in 15% to 20% returns with moderate the risk. In the case of 50% says 20% to 30% with high risk and finally 17% respondents want to 30% to 40% with high risk.
In the table of a high risk is okay for the respondents, as 50% is suggested. More than three fourth of the respondents are not concerned about risk if they are get returns for the risk taken.
Graph No 12
Graph shows that the investing option among the respondents between risk and return
Graph No: 13
Table shows that the Awareness of mutual funds advertisements among the respondents
Awareness No. Of the respondents Percentage
Yes 39 78
No 11 22
Total 50 100
In the table, data analysis says that 78% are aware of mutual funds is advertisements and 22% says that they are not aware.
In the table, the awareness about the product is very important for financial service marketing, in particular, to succeed in modern competitive world.
Graph No: 13
Graph shows that the Awareness of mutual funds advertisements among the respondents
Table No: 14
Table shows that the most common mutual funds company advertisement
Mutual Fund Company No. Of the respondents Percentage
ICICI Prudential 28 72
Kotak Mahindra 09 23
HDFC Mutual Fund 07 18
Birla Sun life 19 49
SBI Mutual Fund 18 46
LIC Mutual Fund 06 15
Can bank Mutual Fund 04 10
Franklin Templeton M.F 26 67
In the table, 72% of the respondent has voted prudential ICICI advertisement as the most popular closely followed by Templeton. And Birla and SBI, with can bank getting the least percentage.
In the table, it is designed to study the most common advertisement of Mutual Fund companies of the respondents. Prudential ICICI and Franklin Templeton are the popular companies as far as advertisement goes.
Graph No: 14
Graph shows that the most common mutual funds company advertisement
Table No: 15
Table shows that the influence of brand among respondent while investing in mutual funds
Influence No. Of respondents Percentage
Yes 44 88
No 06 12
Total 50 100
In the table, it is designed to study of the influence of brand name while investing. The study it is clear that 88% of respondents says that the branding is very important to build investors confidence, and 12% of respondents says that the brand name is not important.
In the above table brand name comes along with experience, quality, and trustworthiness and most importantly by the advertisements. A company acquiring all the above features will have a good brand name. In Mutual funds, investors look for the brand before investing as 88%.
Graph No: 15
Graph shows that the influence of brand name among respondents while investing in mutual funds
Table No: 16
Table shows that the opinion of respondents on returns on returns in mutual funds compared to shares/derivatives
Opinion No. Of the respondents Percentage
Yes 31 62
No 19 38
Total 50 100
In the table, it's shows that 62% of the respondents says that mutual funds returns are better than share or derivatives. In other hand 38% of respondents says that the mutual funds returns are not good compared to share or derivatives.
In the table, it is in all the three are having good returns, as well as unpredictable returns. But Mutual funds seem to have an impression in the respondents mind as they think its unpredictability is less compared to the other two.
Graph No: 16
Graph shows that the opinion of respondents on return of mutual funds compared to shares/derivatives
Table No: 17
Table shows that the investment firm's transparency in recent times
Transparency No. Of the respondents Percentage
Yes 36 72
No 14 28
Total 50 100
In the table, it is as far as transparency is concerned the survey says that the 72% of the respondent says that firms are transparency presently and 28% says that firms are not transparent as compared as to earlier times.
In the table, people now a day went everything to be revealed. It is hidden agenda makes them conspicuous.
Graph No: 17
Graph shows that the investment firms' transparency in recent times
Table No: 18
Table shows that the performance of funds according to respondents
Funds No. Of the respondents Percentage
Equity 16 32
Debt 33 66
Balanced 23 46
Gilt 29 58
Index and Industry 12 24
In the table, this data analysis says that which fund is performing better at the present. It is the response that the debt and gilt funds are performing better, where as index and industry and equity schemes are less popular.
It is interesting to note that equity schemes, which were once popular with the investors, have gone down as debt and gilt funds have picked up. Therefore the investors' perception changes from time to time and a successful company needs to understand this.
Graph No: 18
Graph shows that the performance of funds according to respondents
' The main findings' of the study is that, there is no dependency of income level over the investment in the Mutual Funds. Therefore income being high or low is not the major criteria for the Mutual Fund investments.
' The awareness towards Mutual Fund is good, but it is not excellent. For the study of the collected sample size was 50. Out of them 33 are mutual funds investors.
' Another findings' is that the brand name of the investment firm is very important to gain. Out of 50-sample size 44 respondents said that brand name is required. Only 6 respondents said that brand name is not required.
' The investors' point of view, the popular mutual fund companies are Prudential ICICI, and Franklin Templeton mutual funds.
' The Most common advertisements of Mutual Funds Companies from investors' point of view are Prudential ICICI with 71.79% and Franklin Templeton with 66.66%.
' Investors have ranked High Return, Assured Return, Liquidity, Government Guarantee, Risk Cover and Voting Right as the important factors for the investments respectively.
' The transparency is the order of the day. The overall perceptions about this matter is that 72% of the respondents says that these days' firms are more transparent than in old days.
' The Private sectors of Mutual Funds are on a rampage. The market share of the private sector mutual funds is increased.
' From the existing mutual funds investors, it is found that the debt funds and gilt funds are performing better than last years.
' Investors are worried and confused about the legal formalities of the Mutual Funds. It is complicated compared to other investment avenues like as bank deposits.
' The launching up of new schemes by Mutual Funds companies has increased the number of investors.
' Mutual Funds have become the buzzword currently. The numbers of people are investing in Mutual Funds lately. Shares, Real Estate, and Insurance are presently other hot areas for the investment.
SUGGESTIONS / RECOMMENDATIONS
' Mutual Funds Company should be more the transparent while declaring their dividends, Net Asset Value, administration charges and their accounting norms.
' Brand name of the investment firms is very important to gain or attract customers. Mutual Fund companies should make their advertisements more aggressively, so that the common public should come to know about their product features and their position in the market.
' It is the perception of investors that the Mutual funds will not give any surety on returns. This perception should be removed from their mind. Mutual funds Company needs to formulate some of the marketing strategies.
' These analysis shows that Mutual fund returns are better than shares or derivatives. So the existing investors are satisfied with their returns, so the mutual funds company should makes efforts to retain the existing investors.
' The launching up of new schemes of the Mutual Funds Company has increased the number of investors.
' Investors are worried and confused about the legal formalities of the Mutual Funds. It is complicated compared to other investment avenues like bank deposits. Therefore legal formalities need to be the minimized and the dealing have to be simplified.
' Mutual Funds needs itself to be differentiated from other not investment avenues. Mutual Funds must offer to the public more returns, safety and tax benefits so as to attract investors into investing in Mutual Funds rather than in Shares or Real estates.
' Increased deregulation of the financial markets in the country coupled with the introduction of derivative products will offer tremendous scope for the industry to design and sell innovative schemes to suit individual customer needs, which helps the Mutual Fund industries.
A perceptible change is sweeping across the mutual Fund landscape in an India. Factors such as changing investors' needs and their appetite for risk, emergence of Internet as a powerful platform, and above all the growing commoditization of mutual funds products are acting as major catalysts putting pressure on the industry player to formulate strategies to stay the course.
Building and sustaining a powerful brand is also becoming an issue of paramount importance. With the investor today having a range of products to choose from, effective communication is required to reach a wider audience. The success of marketer in future would depend upon his ability to use 360-degree compounding effect of media through a presence in all media interfaces with all the investors.
Increased deregulation of the financial markets in the country coupled with the introduction of derivative products offers tremendous scope for the industry to design and sell innovative schemes to suit individual customers need. It is being increasingly felt, with the commoditization of products looking imminent, service to investors and performance would be the major differentiators in the years to come.
' Evaluating Mutual Fund Performance -------- S.P Kothari.&
' Mastering in Mutual Funds ---------- K. S. Murthy
' Investment Analysis and ---------- Prasanna Chandra
' Capital Market
' Business World
' Business Week
' Business Today
1) Name: ------------------------------------
2) Age: 1) 18 to 25 2) 26 to 30
3) 31 to 35 4) 36 and above
3) Occupation: 1) Business 2) Profession
3) House wife 4) Service
4) No. Of family dependents:
5) Income: 1) Below 5000 2) 6000 to 15000
3) 16000 to 25000 4) 26000 to 35000
5) 36000 to above
6) What type of investment options are you aware of?
1) Insurance 2) Bonds 3) Real Estate 4) Stock
5) Mutual Funds
7) In which of this type have you invested?
1) Insurance 2) Bonds
3) Real Estate 4) Stocks
5) Mutual Funds
8) Why have you not invested in Mutual Funds?
Don't know about Mutual Funds Risky
Don't have enough money Happy with present investments
9) What % of your income do you invest annually?
Less than 5000 5000 ' 10000
10000 ' 15000 Above 15000
10) What are the factors' you will consider while investing in Ranking method?
1) Assured return
2) Risk cover
3) Government guarantee
4) High return
5) Voting right
11) Can you name any Mutual Fund products?
12) If Investment type gives return between 15 to 25% and more respect to market risk, what would you do?
1) Consider 2) Ignore
13) If consider investing, how?
1) 15 % to 20 % return with moderate risk
2) 20 % to 30 % with high risk
3) 30 % to 40 % with very high risk
14) Have you come across any Mutual Fund Advertisements'?
1) Yes 2) No
15) If yes Name the company
16) Do you consider that Brand name is required while investing in any Mutual Funds?
1) Yes 2) No
17) Do you think Mutual Fund return is better than Shares/Derivatives?
1) Yes 2) No
18) After UTI scam (US-64) Mutual Fund, do you think that present day investment firms are more transparent than earlier?
1) Yes 2) No
19) Which Funds (Allocation) are performing better this year?
1) Equity Funds
2) Debt Funds
3) Balanced Funds
4) Gilt Funds
5) Index and Industry Funds
Source: Essay UK - http://turkiyegoz.com/free-essays/finance/mutual-funds.php
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