EXECUTIVE SUMMARYThe Indian Mutual fund industry has witnessed considerablegrowth since its inception in 1963. The impressive growth in the Indian Mutualfund industry in recent years can largely be attributed to various factors suchas rising household savings, comprehensive regulatory framework, favourable taxpolicies, and introduction of several new products, investor education campaignand role of distributors. The driving force of mutual fund is the safety of principalguaranteed, plus the added advantage of capital appreciation together with theincome earned in the form of interest or dividend people prefer mutual funds tobank deposits , life insurance, chit funds and even bonds, because with littlemoney they can get into the investment game. One can own a string of blue chipslike ITC, TISCO, and Reliance etc. through mutual funds. Thus mutual funds actas a gateway to enter into big companies hitherto inaccessible to an ordinaryinvestor with his small investment. In financial markets, “expectations” of the investors play avital role. They influence the price of the securities; the volume traded anddetermines quite a lot of things in actual practice.
These ‘expectations’ ofthe investors are influenced by their “perception” and humans generally relateperception to action. We find ample proof for the wide prevalence of such apsychological state among Mutual Fund (MF) investors in India. It is widelybelieved that MF is a retail product designed to target small investors,salaried people and others who are intimidated by the stock market but,nevertheless, like to reap the benefits of stock market investing. At theretail level, investors are unique and are a highly heterogeneous group.
Manyproducts are offered in the mutual fund industry .This heightens the consumerconfusion in his selection of the product. He is confused as to how to sift thegrain from the chaff? Unless the MF schemes are tailored to his changing needs,and unless the AMCs understand the fund selection/switching behaviour of theinvestors, survival of funds will be difficult in future.
To understand investor’s perception and preference a surveyhas been conducted among 200 mutual fund investors from two different cities.This paper will highlight the factors influencing the fund/scheme selection behaviourof Retail Investors. It will also help the mutual fund company to adopt new andinnovative marketing techniques. The findings of the study will help the mutual fundcompanies to improve upon their weak areas regarding the factors that influenceinvestor’s decision making as regard to choice of a mutual fund, the facilitiesor options they expect from a mutual fund.
ABSTRACTMutual Funds provide a platform for a common investor toparticipate in the Indian capital market with professional fund managementirrespective of the amount invested. The Indian mutual fund industry is growingrapidly and this is reflected in the increase in Assets under management ofvarious fund houses. Mutual fund investment is less risky than directlyinvesting in stocks and is therefore a safer option for risk averse investors.This project aims at finding out the factors affecting investment decision onmutual funds and its preference over retail investors. This project also aimsat finding about the factors that prevent the people to invest in mutual funds.The findings will help mutual fund companies to identify the areas required forimprovement and can also improve their marketing strategies.
It will help theMF companies to create new and innovative product according to the orientationof investors INTRODUCTIONThe mainmotive of investment is to earn profit which is also known as the return ofinvestment. There are a large number of investment vehicles available to theinvestors. These investment vehicles perform different tasks.
The mutualfund is mainly used to provide risk cover to the individual’s investments whichare usually for long term gains. Government securities are used mainly forsecure returns on investments while equity investment and mutual funds are usedfor wealth creation as they give very high returns. Mutual fundis a professionally managed collective investment scheme where a number ofinvestors pool their money and this money is turn invested in differentinstruments including equity, government bonds, commodities, debt market etc. MutualFunds have a tiered structure with a sponsor, who is the promoter of the fund,on top and the custodian who is the guardian of the funds and assets of theinvestors.
Mutualfunds can be classified based on structure, investment objectives and the typesof schemes. They may be classified as open ended or close ended, equity funds,debt funds, balanced funds or money market funds, or based on schemes as ELSS,Fixed Term Plan or SIP etc.Thoughthese instruments give very good returns to the investors the risk associatedwith these instruments is also higher. As a result it is likely that theinvestors also lose their money while investing in these instrumentsThe presentscenario is a good time to study what the investors are expecting from theirinvestments and how aware they are about the different modes of investmentsthat are available to them. With the recovery of the stock markets theinvestors are also looking to get back to investing.
The time is very good formarketing of various investment instruments as the investors want to put theiridle money to some productive use.In this time the role of systematic investment in mutualfund are considered a good investment plan to pull money of investors safelystarting from very less amount of money. SIP serve as a great financial tool tocounter inflation. LITERATURE REVIEWA large number of studies have been conducted in India andabroad covering different aspects of Mutual fund. J.Lilly and Dr.Anasuyapublished a research paper “An empirical study of performance evaluation ofselected ELSS mutual fund schemes” published on International journal ofscientific research (2014) which examined the performance of 49 selected taxsaving elss schemes by applying Sharpe ratio, Treynor ratio, Sortino ratio andJensen’s alpha measure and found out LIC NOMURA MF GROWTH and dividend schemeshas the highest return and are risk borne when compared to other schemesLonnie L. Bryant,Hao-Chen liu published a research paper”Mutual fund industry management structure, risk and the impacts toshareholders” published on Global finance journal(2011) investigates theeffects of a multiple fund management structure on the risk volatility of thefunds managed with the help of Sharpe ratio .
They found out the impacts thatmutual fund management structure has in fund risk volatility using a sample of1480 funds managed by 407 managers.They also found out that the multiple fundmanagement structure appears to be motivated by the need to achieve economiesof scale and reduce cost of the shareholders, fund managers which are driven bystrategic reason.Shanmugham (2000) conducted a survey of individual investorswith the objective to find out what information source investor depends on. Theresults explained that they are economical, sociological and psychologicalfactors which control investment decisions.Madhusudhan V Jambodekar (1996) conducted his study tosize-up the direction of mutual funds in investors and to identify factors thatinfluence mutual fund investment decision. The study tells that open-endedscheme is most favoured among other things and that income schemes andopen-ended schemes are preferred over closed- ended and growth schemes.
Newspapers are used as information source, safety of principal amount andinvestor services are priority points for investing in mutual funds. STATEMENT OF THE PROBLEMMany schemes have been offered by the mutual fund sectorwhich provides various benefits. This project aims at analysing the factorsthat influence the investment decisions with regards to mutual funds and theretail investor’s perception and awareness towards Mutual fund.OBJECTIVE OF THE STUDYØ Toanalyse the factors influencing investments decisions of retail investors inMutual funds.Ø Tostudy the investors perception and preference towards Mutual funds.Ø Toidentify the factors which prevent the investors from investing in mutualfunds?Ø Tofind out the motivating factors which encourages the investors to invest inmutual fund industry.SCOPE OF THE STUDYThis project is limited to thestudy of certain selected factors and its effect on retail investors in theirinvestment on mutual funds, analyzing retail investor’s motive towards themutual fund industry .