Report Fiib

REPORT ON Consumer Behavior Towards Mutual Fund

PRESENTED BY:-

SANDEEP KESARWANI (327)

K.R.MANGALAM INSTITUTE OF MANAGEMENT

N-Block, Greater Kailash Part I New Delhi Pin-110048

ACKNOWLEDGEMENT

KGIM, New Delhi

At the outset, I would like to express my sincere thanks to Mr. Manish Tandon, Branch Manager HDFC Bank Allahabad, who provided me his valuable guidance and support. It was a memorable and enchanting experience to work in the light of his experience. My sincere thanks to all the employees of the HDFC Bank who supported me a lot in gathering information for this project and for giving guidance in completion of this project in time. I would like to pay sincere thanks to Mr. Kunal and Ms Anjana Kalsi who gave me guidance and Mr. Deepak Trivedi Placement Officer, FIIB, New Delhi for giving me an opportunity to do my summer project in HDFC Bank. Last but not the least, I take this platform to convey my heartful gratitude to everyone whose cooperation, suggestion and support helped me to accomplish the project work, successfully.

CONTENT Serial No.

KGIM, New Delhi

Topic

Page(s) No.

1.

Executive Summary

I

2.

Methodology

II

3.

Literature Review

III

4.

Chapter 1 - Introduction

1–3

5.

Chapter 2 - About HDFC

4–5

6.

Bank Chapter 3 – Mutual Funds

6

7.

Origin of Mutual Funds

7–9

8.

Understanding Mutual

9 – 11

9.

Funds Current scenario of Mutual

10.

Funds Types of Mutual Funds

12 – 15

11.

Chapter 4 – Analysis of

16 – 33

12.

questionnaire Benefits of Mutual Fund

28 – 29

13.

Disadvantages of Mutual

29

11

Funds 14.

Conclusion

30

15.

Major Findings

31

16.

Recommendations

32

17.

Bibliography

33

18.

Annexure 1

A1 – A5

19.

Annexure 2

A6 – A20

Executive Summary

KGIM, New Delhi

There are many different sources of customer value in each industry. Price seems the most significant factor to influence the buying behavior of a person. As many economists believe that price can affect human behavior most. According to H.Oh, price has been found to be an important source of customer value that influences humans purchasing decision. ‘The analysis of whether or not customers react differently to perceived gains compared to perceived losses is mixed, but is supportive of asymmetric reference price effects’. Nevertheless, some scholars also doubts that price may not be the most important factor to affect buying behavior. Customers are willing to pay high price if they perceive significant value. Value also has to do with the perceived benefits of purchasing from a specific store or buying a specific product. Benefits may include the reputation of the company, the brand name, extra services and reliability of the product and so on. The quality of product also is a main factor-affecting people’s buying behavior. Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. It is good for those who want to invest in the growing markets, but do not have time and knowledge to invest. Mutual funds give some exclusive benefits like Professional management of portfolio, diversification etc. Here I have done my project in HDFC Bank on the consumers behavior towards mutual fund and there I came to know about different types of mutual funds in which it deals and how it work. I also prepared questionnaire to get into close contact with the customers and analyse their preferences regarding the various financial instruments. After analyzing the different aspects of the mutual funds and other financial instruments I found that consumer behaviour in financial product is very complicated. Different characteristics of people would have different options; moreover different periods of time also have different results.Therefore it is really very difficult for me to exactly conclude about the consumers behaviour regarding the mutual funds taking into consideration the up’s and downs which are prevailing in the market.

KGIM, New Delhi

METHODOLOGY Objective To offer investors a suitable portfolio of financial instruments and studying the investors’ perception towards them. . Scope The scope of this project would be mainly extended to the aspects of usage of various financial instruments by customers of HDFC bank in the city of Allahabad. It would cover:•

Basic understanding of various financial instruments.

•

Use of mutual funds.

•

Customer perception towards mutual funds.

Research Method The research done during this project would be primary in nature. A questionnaire was formulated by me a copy of which is attached in annexures. The research carried out will be quantitative in nature with a database of 76 respondents. Limitations of the study The study is only limited to Allahabad so the conclusion drawn from the analysis may not be applicable to other parts of the country. Some of the limitations are as follows: •

The respondent base is very small.

•

The time required to study this project effectively was pretty less which may have affected the quality of this project.

•

The data required from the companies was not forthcoming easily.

Assumptions: •

Investors are rational i.e. they always take informed decisions.

•

Information is easily available.

•

There is a trade-off between risk and return.

•

People want maximization of their wealth.

KGIM, New Delhi

•

People invest as per their needs and requirements.

Literature Review The significant outcome of the government policy of liberalization in industrial and financial sector has been the development of new financial instruments. These new instruments are expected to impart greater competitiveness, flexibility and efficiency to the financial sector. Growth and development of various mutual fund products in Indian capital market has proved to be one of the most catalytic instruments in generating momentous investment growth in the capital market. There is a substantial growth in the mutual fund market due to a high level of precision in the design and marketing of variety of mutual fund products by banks and other financial institution providing growth, liquidity and return. In this context, prioritization, preference building and close monitoring of mutual funds are essentials for fund managers to make this the strongest and most preferred instrument in Indian capital market for the coming years. With the decline in the bank interest rates, frequent fluctuations in the secondary market and the inherent attitude of Indian small investors to avoid risk, it is important on the part of fund managers and mutual fund product designers to combine various elements of liquidity, return and security in making mutual fund products the best possible alternative for the small investors in Indian market. Researchers have attempted to study various need expectations of small investors from different types of mutual funds available in Indian market and identify the risk return perception with the purchase of mutual funds. Various sophisticated multivariate techniques are applied to identify important characteristics being considered by the Indian investors in the purchase decision The paper also suggests a product design of an optimum mutual fund and track the positioning gap available in Indian mutual fund market. The main findings were:

KGIM, New Delhi

People keep money with bank deposits, PPF and post office savings because of the increased interest. Mostly investment is done for tax saving purpose. They wish both growth and safety at the same time.

INTRODUCTION Investment is a function of saving and in India saving is a part of life. Unlike in western countries where people live for today and believe in spending, the Indian people always kept a very good balance between their consumption and saving. Indian culture and traditions always promoted this habit since way back e.g. saving for the marriage of their daughter, education of children etc. In the ancient time moneylenders dominated Indian monetary system and were the monopolists in the field. At that time people looked only for the safety of their wealth. Thanks to the advent of banking system in India, people started to think from another point of view i.e. return. Exactly 201 years back, India got its first modern bank, the bank of Calcutta, which was meant to cater to the business interests of the company that slowly took over India, the English East India Company. Three years later in 1809 it was renamed the Bank of Bengal and this started the formal banking system in India. Then the need for protection from some unforeseen events aroused which Life Insurance Corporation of India capitalized and protection of Government of India has done a good favour. After the independence, Income tax act came into existence in 1961 and sooner or later public realized the importance of Tax planning. Today investments is done keeping in mind return as well as tax benefits. After the opening up of Indian economy in 1991 Indian stock market started showing good results. In 1993 Mutual Fund industry was opened for private players. Kothari Pioneer was the first private mutual fund player industry that was merged with Franklin Templeton India a US based AMC. At present there are 28 AMC’s working in India with 2116 different scheme across different categories. The same happened with insurance sector that was opened in 1998 for private players. This was the

KGIM, New Delhi

end of the monopoly of LIC. Today, there are 13 other players from private sector in the industry and slowly but steadily they are getting hold onto the market. Today market is filled with so many financial instruments that the general public find it very difficult to design a suitable portfolio. The varied demographic structure of India has made this task difficult even for financial planners. India the second most populous country of the world has a very low level participation in many investment options like insurance, mutual funds, stock etc. Thanks to ups and downs in stock market which upto a certain extent has received attraction of Indian retail investors but this has taken its toll in another form. It has reduced the charm of other investment plans like NSC, PPF, etc. Another thing is that in the search of higher returns Indian people has ignored the need and importance of Insurance policies. Even today major part of investment in financial instruments is done for future growth, safety and tax planning purpose.. The thumb rule of investment is “Do not pull all your eggs in a single basket”. Therefore under these circumstances this is the responsibility of the financial advisor to design a suitable portfolio for an investor taking his/her needs, responsibilities, future requirements, financial strengths, inflation, tax planning etc. under consideration. One person should invest keeping following objectives in mind: •

To earn return on your resources,

•

To generate attain specified sum of money for a specified goal in life,

•

To make a provision for an uncertain future.

One of the important reasons why one needs to invest wisely is to meet the cost of inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past. Remember to look at an investment’s ‘real’ rate of return, which is the return after inflation. The aim of investments should be to provide a return above the inflation rate to ensure that the investment does not decrease in value. For example, if the annual inflation rate is 6%, then the investment will need to

KGIM, New Delhi

earn more than 6% to ensure it increases in value. If the after-tax return on one’s investment is less than the inflation rate, then his/her assets have actually decreased in value; that is , one wont buy as much today as they did last year. Past result is not the guarantee of future performance. Therefore this is supreme beneficial to the investors to take informed decisions at the time of making investments. If necessary they must sought the help of financial consultants or advisors in order to reduce their risk and for a superior returns. There is no dearth of quality financial instruments in the market. Coupled with rising per capita income and growing confidence in Indian economy and Indian market is bringing floodgates of opportunities for financial service providers and advisors. There is a need to grow up investors’ confidence with care and educate them to participate in different financial instruments.

CHAPTER - 2 HDFC BANK Housing Development Finance Corporation Limited (HDFC Bank) is one amongst the firsts of the new generation, commercial banks of India, was incorporated in August 1994, after the Reserve Bank of India allowed setting up of Banks in the private sector. The Bank was promoted by the Housing Development Finance Corporation Limited, a premier housing finance company (set up in 1977) of India. The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled KGIM, New Delhi

Commercial Bank in January 1995. Currently HDFC Bank has 758 branches, 1,716 ATMs, in 325 cities in India, and all branches of the bank are linked on an online realtime basis. HDFC currently has a client base of over 10,00,000 borrowers,14,00,000 depositors, 95,000 shareholders and 54,000 deposit agents. The bank provides financial assistance to individuals, corporate 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. The bank offers many innovative products & services to individuals, corporate, trusts, governments, partnerships, financial institutions, mutual funds, insurance companies. HDFC raises funds from international agencies such as World Bank, IFC (Washington), domestic term loans from banks and insurance companies, bonds and deposits. 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 Insurance Regulatory and development Authority to transact life insurance business in India. In 2007 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1,000. Net Profit for the year ended March 31, 2006 was Rs. 1,141 crores. Results of the latest quarter ended June 2007, indicate that the bank continues to grow in a steady manner Mission Our mission is to be “a World Class Indian Bank”, benchmarking ourselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank’s risk appetite. We are committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. Mutual Fund schemes of HDFC Bank:

KGIM, New Delhi

HDFC bank deals in lots and lots of mutual fund scheme, It is not possible to name all of them but below are the few schemes of the bank:•

HDFC Growth Fund (Growth Scheme)

•

HDFC Growth Fund (Dividend Scheme)

•

HDFC Tax saver Fund (Dividend Plan)

•

HDFC Tax saver Fund (Growth Plan)

•

HDFC Index Fund Sensex Plan (Growth Plan)

•

HDFC Equity Fund (Dividend Option)

•

HDFC Monthly Income Plan Short Term Plan (Growth Option)

•

HDFC Income Fund (Dividend Option) etc.

HDFC Asset Management Company HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated June 30, 2000. In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crore.

CHAPTER - 3 Mutual Funds Mutual Fund is a common pool of money into which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor into assets that are defined/permitted by the stated objective of the scheme. It is that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. KGIM, New Delhi

For example: An equity fund would invest an equity and equity related instruments and debt fund would invest in bonds, debentures etc. The income earned through these investments and the capital appreciation thus realized, are shared by its unit holders in proportion to the number of units owned by them. Thus, a mutual fund is the most suitable investment for the common person as it offers an opportunity to invest in a diversified, professionally-managed basket of securities at a relatively low cost.

Chart -1 Source – www.amfiindia.com

Origin of Mutual Fund industry in India:The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase, the Assets Under Management (AUM) was Rs. 67bn. The private sector entry to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, KGIM, New Delhi

it reached the height of 1,540 bn. Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry. The main reason of its poor growth is that the mutual fund industry in India is new in the country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund companies, to market the product correctly abreast of selling. The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management. Second Phase -1987-1993 (Entry of Public Sector Funds) Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canbank 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 in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets under management. 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

KGIM, New Delhi

Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003 This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January 2003). 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 AUM 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.

Understanding Mutual Funds :

KGIM, New Delhi

Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and invest the money thus collected into asset classes that match the stated investment objectives of the scheme. Since the stated investment objectives of a mutual fund scheme generally forms the basis for an investor's decision to contribute money to the pool, a mutual fund can not deviate from its stated objectives at any point of time. Every Mutual Fund is managed by a fund manager, who using his investment management skills and necessary research works ensures much better return than what an investor can manage on his own. The capital appreciation and other incomes earned from these investments are passed on to the investors (also known as unit holders) in proportion of the number of units they own.

Chart 2

Source: appuonline.com

KGIM, New Delhi

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors. For example: A. If the market value of the assets of a fund is Rs. 100,000 B. The total number of units issued to the investors is equal to 10,000. C. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00 D. Now if an investor 'X' owns 5 units of this scheme E. Then his total contribution to the fund is Rs. 50 (i.e. Number of units held multiplied by the NAV of the scheme) Net Asset Value(NAV’s):- A mutual fund’s share price, computed by subtracting total liabilities from total assets and dividing by the number of shares outstanding. Systematic Investment Plan (SIP):- HDFC MF SIP is similar to a Recurring Deposit. Every month on a specified date an amount you choose is invested in a mutual fund scheme of your choice. The dates currently available for SIPs are the 1st, 5th, 10th, 15th, 20th and the 25th of a month.

Current scenario of Mutual Funds The Indian mutual industry has seen the launch of various new and innovative schemes over the last few years. There were 400 plus new fund offers (NFO’s) in financial year 2006-2007 as against previous year. Funds worth Rs. 1.4 trillion were raised through NFOs, as against Rs. 705.83 bn in the previous financial year. Investments in equity KGIM, New Delhi

schemes shot up by 47%, reflecting the buoyancy in the Indian stock markets. Retail penetration increased and investor base is now expected to be over 2.5 crores. MFs attracted people in the upper income range with 40% of such investors earning between Rs. 2 lakhs to Rs. 5 lakhs annually. 77% of investments in MFs come from super metros & class 1 towns. Middle class income group invest more in MFs as compared to higher income and low income group.

TYPES OF MUTUAL FUND SCHEMES On the basis of Structure:1) Open-ended funds Funds that can sell and purchase units at any point in time are classified as Open-end Funds. The fund size (corpus) of an open-end fund is variable (keeps changing) because of continuous selling (to investors) and repurchases (from the investors) by the fund. An open-end fund is not required to keep selling new units to the investors at all times but is required to always repurchase, when an investor wants to sell his units. The NAV of an open-end fund is calculated every day. 2) Closed-end Funds Funds that can sell a fixed number of units only during the New Fund Offer (NFO) period are known as Closed-end Funds. The corpus of a Closed-end Fund remains unchanged at all times. After the closure of the offer, buying and redemption of units by

KGIM, New Delhi

the investors directly from the Funds is not allowed. However, to protect the interests of the investors, SEBI provides investors with two avenues to liquidate their positions: 1. Closed-end Funds are listed on the stock exchanges where investors can buy/sell units from/to each other. The trading is generally done at a discount to the NAV of the scheme. The NAV of a closed-end fund is computed on a weekly basis (updated every Thursday). 2. Closed-end Funds may also offer "buy-back of units" to the unit holders. In this case, the corpus of the Fund and its outstanding units do get changed.

On the basis of Investment:1) Equity Funds Equity funds are considered to be the more risky funds as compared to other fund types, but they also provide higher returns than other funds. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. for 3 years or more. There are different types of equity funds each falling into different risk bracket. In the order of decreasing risk level, there are some of those types of equity funds: a) Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future. Without entirely adopting speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future. b) Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies whose share prices fluctuate comparatively lesser KGIM, New Delhi

than other companies' share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as compared to other equity funds. 2) Debt / Income Funds Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors (like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. In order to ensure regular income to investors, debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are generally less risky than equities, they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of "Investment Grade". Debt funds that target high returns are more risky. Based on different investment objectives, there can be following types of debt funds: a) Diversified Debt Funds - Debt funds that invest in all securities issued by entities belonging to all sectors of the market are known as diversified debt funds. The best feature of diversified debt funds is that investments are properly diversified into all sectors which results in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared by all investors which further reduces risk for an individual investor. b) High Yield Debt funds - As we now understand that risk of default is present in all debt funds, and therefore, debt funds generally try to minimize the risk of default by investing in securities issued by only those borrowers who are considered to be of "investment grade". But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those issuers who are considered to be of "below investment grade". The motive behind adopting this sort of risky strategy is to earn higher interest returns from these issuers. These funds are more volatile and bear higher default risk, although they may earn at times higher returns for investors.

KGIM, New Delhi

c) Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end schemes having short term maturity period (of less than one year) that offer a series of plans and issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed term plan series usually invest in debt / income schemes and target short-term investors. The objective of fixed term plan schemes is to gratify investors by generating some expected returns in a short period. 3) Money Market / Liquid Funds Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments. These securities are highly liquid and provide safety of investment, thus making money market / liquid funds the safest investment option when compared with other mutual fund types. However, even money market / liquid funds are exposed to the interest rate risk. The typical investment options for liquid funds include Treasury Bills (issued by governments), Commercial papers (issued by companies) and Certificates of Deposit (issued by banks). On the basis of Schemes:1) Commodity Funds Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund and bears less risk than a specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common examples of commodity funds. 2) Real Estate Funds Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies, are known as Specialized

KGIM, New Delhi

Real Estate Funds. The objective of these funds may be to generate regular income for investors or capital appreciation.

CHAPTER – 4 Analysis of Questionnaire Now after the introduction of the mutual funds and the HDFC Bank below is the analysis of the responses which I get from the customers of the HDFC Bank about the mutual funds and different other financial instruments. Analysis of the responses of the consumers:-

Investm ent in Mutual fund

No 13%

Yes 87%

Fig. 1(refer to annexure 2 table 1)

KGIM, New Delhi

According to the survey which I did taking 76 people as the sample size approximately 86% of people have invested in mutual fund and only 13% did not ever invested in mutual funds. continuing investm ent in m utual fund

22%

No Yes

78%

Fig. 2(refer to annexure 2 table 2) As far as continuation of the investment in mutual fund is concerned around 78% people continued investing in mutual funds and the rest 22% people did not showed any kind of interest in mutual funds.

Awareness of various financial instruments

N SC ov tb on Eq ds ui ty sh ar M es ut ua lf un ds In su ra nc D e er iv at iv C es om m od iti es G ol d/ S ilv R er ea le st at e G

Po st

Ba nk

de po of si fi c ts e sa vi ng s

size of people

78 76 74 72 70 68 66 64 62 60

instrum ents nam e

Fig. 3(refer to annexure 2 table 3 to 13)

KGIM, New Delhi

As far as the awareness of various financial commodities is concerned more or less people knew about all the instrument which I took but there were 3 instruments which all the people know were the bank deposits, insurance and gold and silver. The least known commodities were mutual funds, derivatives and commodities.

Size of people

Instruments in which people invest 80 70 60 50 40 30 20 10 0 Shares

Bonds

Post office savings

NSC

Bank fixed Public Any other deposits provident fund

Financial Instrum ents

Fig. 4(refer to annexure 2 table 14 to 19) If we talk about the various financial instruments in which people like to invest the most popular is the bank deposits and then post office savings , provident funds and NSC and shares. Very less people like to invest in any kind of bonds beside there are also some other kind of instruments like gold/silver and real estate in which people like to invest.

Annual saving for Investment

16% <50000

38%

17% zzz

50000-100000 100001-200000 >200000

29%

KGIM, New Delhi

Fig. 5(refer to annexure 2 table 20) If we look at the savings of the people for further investment about 16% -17% of the people save less than 50000 annually or upto 1 lakh. On the other hand around 29% people save upto 2 lakh Rs. Annually for further investment in other instruments and the maximum people who invest in financial instruments save above Rs 2 lakh. Savings tow ards Mutual Funds

41%-60% 13%

61%-80% 7% <25% 48%

26%-40% 32%

Fig. 6(refer to annexure 2 table 21) As far as the consumers behavior towards mutual funds is concerned out of the 78% people who like to invest in mutual funds out of the total sample around 48% people say that they save less than 25% of their saving towards mutual funds and 32% people save between 26%-40%. Very less percent of people are there who believe in investing maximum of their saving towards mutual funds.

KGIM, New Delhi

Size of people

Preference of Funds 60 50 40 30 20 10 0 Balanced fund

Grow th fund

Debt fund Tax saving fund

Sectoral fund

Income fund

Any other

Funds nam e

Fig. 7(refer to annexure 2 table 22 to 28) Now, if look at the preference of people towards various funds, most of the people like to invest in the tax-saving fund and after that second preference is given to the growth funds. Only few people like to invest in balanced fund and any other fund.

Motive of Investm ent

Regular interest 20%

Tax benefits 17% Lucrative Return 14%

Grow th 28%

Safety 21%

Fig. 8(refer to annexure 2 table 29 to 33) As far as the motive of the people behind the investment in Mutual Funds is concerned about 50% of people invest in these because of the future growth and investment, 20% people invest because of the regular interest which is very popular among the retired people. Around 17% people are interested because of the tax benefit in their income and the 14% for lucrative return they get with less risk.

KGIM, New Delhi

Size of people

Source of Inform ation 70 60 50 40 30 20 10 0 Business paper New s channel

Experts advice Relatives advice

Others

Sources

Fig. 9(refer to annexure 2 table 34 to 38) The information regarding how much and in which mutual fund to invest is made mostly by taking the experts advice and after that most of the investments are done by collecting right information from business paper and the news channel. Very less people invest by the opinion of their relatives and other sources.

Size of people

Monitor the performance 35 30 25 20 15 10 5 0 <1 month

1-3 times a month

once a w eek

2-3 times a w eek

4-5 times a w eek

Daily

Period

Fig. 10(refer to annexure 2 table 39) Most of the people watch the performance of their fund mostly 1 to 3 times a month or once in a month. Around 25% of people watch the performance weekly or daily.

KGIM, New Delhi

Preference to Mutual fund as Investm ent

Most preferred 41% Least preferred 59%

Fig. 11(refer to annexure 2 table 40) As far as the preference to mutual fund is considered for making investments only 41 % of people like to invest in mutual funds and rest 59% like to invest in other financial instruments or have discontinued investment in mutual funds. This shows that mutual fund is not very popular among the public.

Open-ended MF are very liquid

Disagreed 29%

Agreed 63%

Neither agreed nor disagreed 8%

Fig .12(refer to annexure 2 table 41) We all know that there are 2 types of mutual fund open ended and closed ended funds. As far as the liquidity of the open ended mutual funds are concerned about 63% of the

KGIM, New Delhi

people are agreed that open ended mutual funds are more liquid than closed ended, 29 % of people disagree with this statement and 8% people are unable to say anything. Mutual funds are safer than investing in equity.

Disagreed 29%

Agreed 62%

Neither agreed nor disagreed 9%

Fig .13(refer to annexure 2 table 42) Maximum number of people are agreed with the statement that mutual funds are safer than that of investing in equity funds is as 62% of people supported this statement and 0nly 29% people disagree with this statement and around 9% people say that they are not clear about this.

Tax savings mutual funds give higher return than other instruments like PPF, NSC etc

Disagreed 42% Agreed 50% Neither agreed nor disagreed 8%

Fig .14(refer to annexure 2 table 43) As far as tax-saving mutual funds are concerned about 50% people agree that the tax saving mutual funds give higher return than that of other financial instruments like public

KGIM, New Delhi

provident fund and NSC but 42% are also against this statement and 8% people are not in the position to say anything. Performance of mutual funds depends upon the capability of fund manager

Disagreed 20%

Agreed 56%

Neither agreed nor disagreed 24%

Fig. 15(refer to annexure 2 table 44) When people invest in the mutual funds there is a mediator who is known as the fund manager who manages the funds and 56% people agree that his capability is very much required in the performance of the mutual funds. 20% of people do not agree with this and 24% of people even don’t know about the fund managers role for their funds.

Some of the people discontinued investing in mutual funds due to various reasons. Below are the few reasons behind their disinvestment. Objectives of the funds are not understood properly

Agreed 28%

Disagreed 54% Neither agreed nor disagreed 18%

KGIM, New Delhi

Fig. 16(refer to annexure 2 table 45) Around 28% of the people say that they are unable to understand the objective of the mutual funds and how it is worked by the manager but 54 % of the people are against this and their reason behind disinvestment was other than this.

Real estate giving better return at low risk

Disagreed 26%

Agreed 66%

Neither agreed nor disagreed 8%

Fig. 17(refer to annexure 2 table 46) Around 66% of the people are of the opinion that real estate is providing them much better return than the mutual funds and though at the lesser risk and that is why they prefer to make their maximum investment in that sector only. On the other hand 26% people are not in favor of this and this is not the reason behind their disinvestment. Around 8% people neither agreed nor disagreed regarding this cause.

KGIM, New Delhi

Returns from m utual fund not up to the satisfaction

Disagreed 11% Neither agreed nor disagreed 16% Agreed 73%

Fig .18(refer to annexure 2 table 47) Around 73% people say that they are not satisfied with the return they get on mutual funds and there are other things which provide them higher return than mutual funds. 11% people do not take this reason as the cause of their disinvestment and 16% are not in the position to say anything. Personal needs m ade m e w ithdraw from the fund

Agreed 26%

Neither agreed nor disagreed 9%

Disagreed 65%

Fig. 19(refer to annexure 2 table 48) Around 26% people say that their personal reasons made them withdraw from the mutual funds but 65% peoples have different reasons behind their disinvestment and 9% people can’t say anything.

KGIM, New Delhi

The analysis of the expert on m utual fund on TV and other m edia made m e w ithdraw from the fund

Agreed 37%

Disagreed 63%

Fig. 20(refer to annexure 2 table 49)

Some people give reason that the analysis of the expert on mutual fund on TV and other media made them withdraw from the mutual fund but maximum number of people disagree with this statement. The stock market burst made us feel insecure

Disagreed 29%

Agreed 60%

Neither agreed nor disagreed 11%

Fig. 21(refer to annexure 2 table 50) Large number of people say that mutual funds deal in stock market and its burst made me feel insecure therefore they tried other options for the investment of their money.

KGIM, New Delhi

Around half of them give other reasons and 11% people are not aware of its impact on their funds. Increase in the interest rate on fix deposits by bank and other equally safe instrum ents

Disagreed 29%

Agreed 62%

Neither agreed nor disagreed 9%

Fig. 22(refer to annexure 2 table 51) About 62% of the people give the reason that the increase in the interest rate on the fix deposits by the bank drew their attention as they are more safer options with good return but 29% people give different reason and 9% people are not aware of the reason behind their decision. Transferred the m oney from the mutual fund to the rising equity m arket

Disagreed 42%

Agreed 47%

Neither agreed nor disagreed 11%

Fig. 23(refer to annexure 2 table 52)

KGIM, New Delhi

Around 47% of people say that they invested their amount on equity shares as they provide more return than the mutual funds but 42% people say that this is not the reason behind their disinvestment and 11% people can’t say anything about this. I applied factor analysis to know the reason behind why people discontinued the investment in mutual fund and found that the people were not satisfied with the return, fluctuation in the stock market ,good return in real estate and increased interest rate in bank deposit are the main factors.

Benefits of the Mutual Funds 1) Professional Management:- Mutual Funds are those investment which provides the professional management of the funds invested by the person. The thing which is very good about mutual funds is that the when you invest in a good mutual fund you get the advantage of skilled professionals who make it properly taking into consideration the risk and return factor. 2) Diversification:- One of the best protections against risk which mutual funds provide is the diversification. This is because mutual funds are invested by the companies in different securities and with this the risk reduces because it rarely happens that the price of all the securities fall at the same time and in that proportion only. As against to other investments this feature of the mutual fund makes it less risky.

KGIM, New Delhi

3) Convenience:- Most mutual fund companies go out of their way to make it easy to do business with them. Mutual funds are very convenient to deal with as it reduces the paper work to the people and the tension of where and how much to invest also it is managed by the professional experts who handle it more efficiently than one himself can. You can usually buy mutual fund shares by mail, phone, or over the Internet 4) Quick and Easy of Money. Generally, fund shares can be bought or sold on any regular business day. Of course, some funds may have redemption fees and other provisions but their transactions are very easy. In some cases (i.e., money in certain retirement plans, when gains have been realized, etc.) there may be taxes and/or penalties imposed. 5) Low Minimum Investments: The investment in Mutual funds does not cost much because of the less brokerage cost and other fees which the investor has to pay. The investor does not have to pay much including all kind of fees to be given. 6) Choice of schemes:- Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options 7) Transparency:- Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator. 8) Liquidity:-

It's easy to get your money out of a mutual fund. Write a check, make a

call, and you've got the cash.

Disadvantages of Mutual Funds 1) Cost control not in the hands of the investor:- Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units), irrespective of the performance of the fund.

KGIM, New Delhi

2) No customized portfolios:- The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors have no right to interfere in the decision making process of a fund manager, which some investors find as a constraint in achieving their financial objectives. 3) Difficulty in selecting a suitable fund scheme:- Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.

Conclusion It can be concluded from the above discussion that the retail investors are hardly conscious of MF investments leaving the scope to conclude that to some extent a good number of retail investors have not preferred, but rather were induced to invest in MFs. If at all the investors' decision was a preferred choice it was without complete awareness to the investor about the MF as an investment instrument and its relative features like risk, return, and load. Important inducing factors are aggressive marketing of AMCs, abnormal returns in the recent times, misperception of MF as an equal substitute with more returns, tax benefits, and liquidity of the investment. Growth of bank deposits could not equate the pace of increase in demand for credit as the retail investor's savings are attracted by MFs. With this transformation, the MF industry is growing steadily and reaching new heights from year to year. Though an increase in AUM is a good sign, the retail investors have to be very cautious as most of the AMCs are not transparent. Before investing in MFs, which is a non-conventional investment source, the retail investor should invest in himself by putting efforts on

KGIM, New Delhi

educating himself making his investments translucent and more productive, following the prerequisites and investment principles before investing in MFs thereby making qualitative investment leading to wealth accumulation. While regulating AMCs to bring more transparency, it is the responsibility of Sebi to create awareness about MFs to the retail investor and safeguard their interest. With the launch of new funds like derivative funds, real estate fund, etc., the future of MFs in India is looking bright and may still continue to divert the flow of savings to MFs and grow further in terms of AUM. In order to grow and attain market leadership, it is also the responsibility of the MF companies to understand the investor's needs or objectives and reach him effectively with more transparency making MF investment a preferred choice. With the structural liberalization policies no doubt Indian economy is likely to return to a high grow path in few years. Hence mutual fund organizations are needed to upgrade their skills and technology. Major Findings My findings regarding the consumers behavior towards mutual funds on the basis of my survey in HDFC bank was that : •

Around 70% of people know about the mutual funds among the various financial instruments but only 40% people like to invest in it.

•

Maximum people like to invest in bank deposits, PPF and post office savings and the basic reason behind this fact is the growth, safety and the tax benefit which the people get on these instruments.

•

The basic source of information to the people for these funds is the experts advice and the advertisements through business papers and news channels.

•

As far as those people are concerned who invest in mutual funds according tothem mutual funds are more safer than investing in equity. Only 50% agree with this that tax saving mutual funds give higher return than other instruments like PPF, NSC etc. and the performance of mutual fund depends on the funds managers capability.

KGIM, New Delhi

•

Some people discontinued the investment in mutual funds because they mostly prefer to invest in real estate, many also say that they are not satisfied with the returns in mutual funds, large proportion of people also agree that increase in bank deposits rate and moreover their safety and the stock market burst made them to invest in other financial instruments and discontinued investment in mutual funds.

Recommendations As mutual fund has entered into the Indian Capital market, growing profitable enough to attract competitors into this cherished territory encouraging competition among all the mutual fund operators, there is need to take some strategy to bring more confidence among investors for which mutual fund would be able to project the image successfully. The followings are some of the suggestions: •

As there is no comprehensive law to regulate the mutual fund in India, uniform coordinated regulations by a single agency would be formed which would provide the shelter to the investors.

•

As the investors are not willing to invest in mutual fund unless a minimum return is assured, it is very essential to create in the mind of the investors that mutual funds are market instruments and associated with market risk hence mutual fund could not offer guaranteed income.

KGIM, New Delhi

•

Most of the mutual funds are operated in the public sector hence private sector may be allowed to float mutual funds, intensifying competition in this industry.

•

As there is no distinction between trustees, sponsors and fund managers, it is necessary to regulate frame work for a clear demarcation between the role of constituents, such as shelter, trustee and fund manager to protect the interest of the small investors.

•

Steps should be taken for funds to make fair and truthful disclosures of information to the investors, so that subscribers know what risk they are taking by investing in fund.

BIBLIOGRAPHY •

http://finance.indiamart.com/india_business_information/mutual_funds_indus try.html

•

http://www.personalfn.com/detail.asp?date=9/11/2006&story=1

•

http://www.finweb.com/investing/the-basics-of-mutual-funds-pt2.html

•

http://www.fundsavvy.com/mutual_funds_articles/mutual-funds.htm

•

http://moneycontrol.com/india/mutualfunds/mfinfo/08/33/amcsnap/HD

•

http://www.personalfn.com/research-it/mutual-funds/fundarena/amcreport.asp? hcode=00037

•

http://www.iloveindia.com/finance/indian-mutual-funds/hdfc.html

•

http://www.domain-b.com/industry/housing_finance/20071009_increases.html

KGIM, New Delhi

•

http://www.nodebtnosweat.com/benefits_of_mutual_funds.htm

•

http://business.mapsofindia.com/investment-industry/benefits-of-mutualfunds.html

•

http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0,413 2,P379,00.html

•

http://finance.indiamart.com/india_business_information/types_of_schemes_mut ual_funds.html

•

http://www.appuonline.com/mf/knowledge/concept.html

•

http://www.wealthpositive.com/hdfc_mutual_fund_schemes.shtml

Annexure 1 1. QUESTIONNAIRE ON SURVEY OF MUTUAL FUNDS IN INDIA Kindly tick (√)/ cross (X)/ darken

1.

2.

the relevant option in the questions that follow

Have you ever invested in mutual fund? a)

Yes

b)

No

Are you continuing investment in mutual fund presently? a)

KGIM, New Delhi

Yes

b) 3.

Are you aware of the following investment tools? a) b) c) d) e) f) g) h) i) j) k)

4.

5.

No

Scheme Name Bank deposits Post office savings N.S.C Govt. bonds/debentures Equity shares/IPO’s Mutual funds Insurance Derivatives Commodities Gold/Silver Real estate

Awareness

Besides mutual funds, in which of the following instruments do you invest? Select as many as applicable. a)

Shares

b)

Bonds

c)

Post-office savings

d)

NSC

e)

Bank deposits

f)

Public provident fund

g)

Any other, pl. specify

fixed

How much is your annual saving?

KGIM, New Delhi

a)

Less than Rs.50,000

b)

Rs.50,001 to Rs.1,00,000

6.

7.

8.

Rs.1,00,001 to Rs.2,00,000

d)

Above Rs.2,00,000

How much of your saving goes in for investment in mutual funds? a)

Less than 25%

b)

26% to 40%

c)

41% to 60%

d)

61% to 80%

e)

Above 80%

List out two most important funds which are preferred by you? a)

Balanced fund

b)

Growth funds

c)

Debt funds

d)

Tax saving funds

e)

Sectoral funds

f)

Income fund

g)

Any other (pl. specify)

What are the motives for investment in mutual funds?

a) b) c) d) e) 9.

c)

Growth Safety Lucrative Return Tax benefits Regular interest

What is your source of information for the purchase of mutual funds?

a) Business paper b) News channel c) Experts advice

KGIM, New Delhi

d) Recommendation of friends and family members e) Others 10.

How often do you monitor the performance of your mutual fund? a.

Less than once a month

b.

One to three times a month

c.

Once a week

d.

Two to three times a week

e.

Four to five times a week

f.

Daily

11. Please indicate in the box below the degree of preference (1-11) you assign to mutual funds as a means of investment. 1

2

3

4

5

6

Least Preferred

12.

7

8

9

10

11 Most Preferred

Please indicate your degree of agreement/disagreement for the following statements on a 7-point scale as indicated below. SD D SWD NDNA SWA A SA

KGIM, New Delhi

= = = = = = =

Strongly disagree, Disagree, Somewhat disagree, Neither disagree nor agree, Somewhat agree Agree, & Strongly Agree

No.

Statement

a.

Returns on mutual funds are higher than safe instruments like bank deposits, PPF, government securities etc.

b.

Open-ended MF are very liquid.

SD

D

SW D

ND NA

SW A

A

SA

Mutual funds are safer than investing in equity. Tax savings mutual funds give higher return than other instruments like PPF, NSC etc. Performance of mutual funds depends upon the capability of fund manager.

c. d. e.

(To be filled up by those investors who were earlier investing in mutual funds but have now discontinued.) 13.

Please indicate your degree of agreement/disagreement for the following statements on a 7-point scale as indicated below. SD D SWD NDNA SWA A SA No.

= = = = = = =

Strongly disagree, Disagree, Somewhat disagree, Neither disagree nor agree, Somewhat agree Agree, & Strongly Agree Statement

a Objectives of the funds are not )B understood properly

b Real estate giving better return at ) low risk C c Returns from mutual fund not up )d to the satisfaction d Personal needs made me withdraw )e from the fund

KGIM, New Delhi

SD

D

SWD

NDNA

SWA

A

SA

The analysis of the expert on e mutual fund on TV and other )f media made me withdraw from the fund. f The stock market burst made us )g feel insecure g Increase in the interest rate on fix )h deposits by bank and other equally safe instruments h Transferred the money from the ) mutual fund to the rising equity i market

Demographic: Name: Age Less than 25 years 25 to 35 years 36 to 50 years More than 50 years Sex Male Female

KGIM, New Delhi

Annexure 2 Table 1

Invested

Valid

no

Frequency 10

Percent 13.2

Valid Percent 13.2

Cumulative Percent 13.2 100.0

yes

66

86.8

86.8

Total

76

100.0

100.0

Table 2 Continuing investment

Valid

Frequency 17

Percent 22.4

Valid Percent 22.4

Cumulative Percent 22.4

yes

59

77.6

77.6

100.0

Total

76

100.0

100.0

no

Table 3 Bank deposits

Valid

yes

Frequency 76

Percent 100.0

Valid Percent 100.0

Cumulative Percent 100.0

Valid Percent 3.9

Cumulative Percent 3.9 100.0

Table 4 Post office savings

Valid

no

Frequency 3

Percent 3.9

yes

73

96.1

96.1

Total

76

100.0

100.0

Table 5 NSC

Valid

no

Frequency 4

KGIM, New Delhi

Percent 5.3

Valid Percent 5.3

Cumulative Percent 5.3

yes

72

94.7

94.7

Total

76

100.0

100.0

Table 6

Govt bonds

Valid

no

Frequency 4

Cumulative Percent 5.3 100.0

72

94.7

94.7

76

100.0

100.0

Table 7

Frequency 5

Percent 6.6

Valid Percent 6.6

Cumulative Percent 6.6

yes

71

93.4

93.4

100.0

Total

76

100.0

100.0

no

Table 8

no

Frequency 9

Percent 11.8

Valid Percent 11.8

Cumulative Percent 11.8 100.0

yes

67

88.2

88.2

Total

76

100.0

100.0

Table 9

Insurance

Valid

Valid Percent 5.3

Total

Mutual fund

Valid

Percent 5.3

yes

Equity shares

Valid

100.0

yes

Frequency 76

Percent 100.0

Valid Percent 100.0

Cumulative Percent 100.0

Table 10 Derivatives

Valid

Frequency 10

Percent 13.2

Valid Percent 13.2

Cumulative Percent 13.2

yes

66

86.8

86.8

100.0

Total

76

100.0

100.0

no

KGIM, New Delhi

Table 11

commodities

Valid

no

Frequency 10

Percent 13.2

Valid Percent 13.2

Cumulative Percent 13.2 100.0

yes

66

86.8

86.8

Total

76

100.0

100.0

Table 12 Gold/silver

Valid

yes

Frequency 76

no

Valid Percent 100.0

Cumulative Percent 100.0

Valid Percent 2.6

Cumulative Percent 2.6 100.0

Table 13

Real estate

Valid

Percent 100.0

Frequency 2

Percent 2.6

yes

74

97.4

97.4

Total

76

100.0

100.0

Table 14 Shares

Valid

no

Frequency 14

Valid Percent 18.4

Cumulative Percent 18.4 100.0

yes

62

81.6

81.6

Total

76

100.0

100.0

Table 15

Bonds

Valid

Percent 18.4

no

Frequency 36

Percent 47.4

Valid Percent 47.4

Cumulative Percent 47.4 100.0

yes

40

52.6

52.6

Total

76

100.0

100.0

KGIM, New Delhi

Table 16

Post office savings

Valid

no

Frequency 14

Percent 18.4

Valid Percent 18.4

Cumulative Percent 18.4 100.0

yes

62

81.6

81.6

Total

76

100.0

100.0

Table 17 NSC

Valid

no

Frequency 14

Cumulative Percent 18.4 100.0

62

81.6

81.6

Total

76

100.0

100.0

Table 18

no

Frequency 7

Percent 9.2

Valid Percent 9.2

Cumulative Percent 9.2 100.0

yes

69

90.8

90.8

Total

76

100.0

100.0

Table 19

PPF

Valid

Valid Percent 18.4

yes

Bank deposits

Valid

Percent 18.4

no

Frequency 11

Percent 14.5

Valid Percent 14.5

Cumulative Percent 14.5 100.0

yes

65

85.5

85.5

Total

76

100.0

100.0

Table 20 Annual Saving

Valid

<50000 50000 to 100000 100001 to

KGIM, New Delhi

Frequency 12

Percent 15.8

Valid Percent 15.8

Cumulative Percent 15.8

13

17.1

17.1

32.9

22

28.9

28.9

61.8

200000 above 200000 Total

<25%

38.2

38.2

76

100.0

100.0

Frequency 37

Percent 48.7

Valid Percent 48.7

Cumulative Percent 48.7

24

31.6

31.6

80.3

10

13.2

13.2

93.4

5

6.6

6.6

100.0

76

100.0

100.0

26% to 40% 41% to 60% 61% to 80% Total

Table 22 Balance fund

Valid

Frequency 51

Percent 67.1

Valid Percent 67.1

Cumulative Percent 67.1

yes

25

32.9

32.9

100.0

Total

76

100.0

100.0

no

Table 23

Growth fund

Valid

no

Frequency 28

Percent 36.8

Valid Percent 36.8

Cumulative Percent 36.8 100.0

yes

48

63.2

63.2

Total

76

100.0

100.0

Table 24 Debt fund

Valid

no

Frequency 69

yes Total

KGIM, New Delhi

100.0

Table 21

Savings for mutual fund

Valid

29

Percent 90.8

Valid Percent 90.8

Cumulative Percent 90.8 100.0

7

9.2

9.2

76

100.0

100.0

Table 25 Tax saving fund

Valid

no

Frequency 24

Valid Percent 31.6

Cumulative Percent 31.6 100.0

yes

52

68.4

68.4

Total

76

100.0

100.0

Table 26

Sectoral fund

Valid

Percent 31.6

no

Frequency 66

Percent 86.8

Valid Percent 86.8

Cumulative Percent 86.8 100.0

yes

10

13.2

13.2

Total

76

100.0

100.0

Table 27 Income fund

Valid

no

Frequency 67

yes Total

Valid Percent 88.2

Cumulative Percent 88.2 100.0

9

11.8

11.8

76

100.0

100.0

Table 28

Any other

Valid

Percent 88.2

no

Frequency 76

Percent 100.0

Valid Percent 100.0

Cumulative Percent 100.0

Valid Percent 18.4

Cumulative Percent 18.4 100.0

Table 29 Growth

Valid

no

Frequency 14

Percent 18.4

yes

62

81.6

81.6

Total

76

100.0

100.0

KGIM, New Delhi

Table 30

Safety

Valid

no

Frequency 31

Percent 40.8

Valid Percent 40.8

Cumulative Percent 40.8 100.0

yes

45

59.2

59.2

Total

76

100.0

100.0

Table 31 lucrative return

Valid

Frequency 45

Percent 59.2

Valid Percent 59.2

Cumulative Percent 59.2

yes

31

40.8

40.8

100.0

Total

76

100.0

100.0

no

Table 32

Tax benefits

Valid

Frequency 39

Percent 51.3

Valid Percent 51.3

Cumulative Percent 51.3

yes

37

48.7

48.7

100.0

Total

76

100.0

100.0

no

Table 33 Regular interest

Valid

no

Frequency 33

Valid Percent 43.4

Cumulative Percent 43.4 100.0

yes

43

56.6

56.6

Total

76

100.0

100.0

Table 34

Business paper

Valid

Percent 43.4

no

Frequency 28

Percent 36.8

Valid Percent 36.8

Cumulative Percent 36.8

48

63.2

63.2

100.0

yes

KGIM, New Delhi

Total

76

100.0

Table 35

News channel

Valid

100.0

Frequency 27

Percent 35.5

Valid Percent 35.5

Cumulative Percent 35.5

yes

49

64.5

64.5

100.0

Total

76

100.0

100.0

no

Table 36 Experts advice

Valid

Frequency 18

Percent 23.7

Valid Percent 23.7

Cumulative Percent 23.7

yes

58

76.3

76.3

100.0

Total

76

100.0

100.0

no

Table 37 Recommendation of friends

Valid

no

Frequency 56

Cumulative Percent 73.7 100.0

20

26.3

26.3

Total

76

100.0

100.0

Table 38

no

Frequency 65

Percent 85.5

Valid Percent 85.5

Cumulative Percent 85.5 100.0

yes

11

14.5

14.5

Total

76

100.0

100.0

Table monitor the performance

Valid

Valid Percent 73.7

yes

Ohers

Valid

Percent 73.7

<1 month

KGIM, New Delhi

Table 39

Frequency 13

Percent 17.1

Valid Percent 17.1

Cumulative Percent 17.1

1 to 3 times a month once a week 2 to 3 times a week 4 to 5 times a week daily Total

30

39.5

39.5

56.6

11

14.5

14.5

71.1

6

7.9

7.9

78.9

12

15.8

15.8

94.7 100.0

4

5.3

5.3

76

100.0

100.0

Table 40 Degree of preference

Valid

3

Frequency 10

Percent 13.2

Valid Percent 13.2

Cumulative Percent 13.2

4

7

9.2

9.2

22.4

5

28

36.8

36.8

59.2

6

6

7.9

7.9

67.1

7

18

23.7

23.7

90.8

9

7

9.2

9.2

100.0

76

100.0

100.0

Total

Table 41 Open ended funds are more liquid

Valid

disagree

Frequency 10

Percent 13.2

Valid Percent 13.2

Cumulative Percent 13.2

12

15.8

15.8

28.9

6

7.9

7.9

36.8

15

19.7

19.7

56.6

somewhat disagree neither disagree nor agree somewhat agree agree

19

25.0

25.0

81.6

strongly agree

14

18.4

18.4

100.0

Total

76

100.0

100.0

Percent 5.3

Valid Percent 5.3

Table 42 Mutual funds are safer than equity

Valid

strongly disagree

KGIM, New Delhi

Frequency 4

Cumulative Percent 5.3

disagree somewhat disagree neither disagree nor agree somewhat agree agree

6

7.9

7.9

13.2

12

15.8

15.8

28.9

7

9.2

9.2

38.2

13

17.1

17.1

55.3

13

17.1

17.1

72.4 100.0

strongly agree

21

27.6

27.6

Total

76

100.0

100.0

Table 43

Tax saving funds give more return

Frequency Valid

strongly disagree disagree somewhat disagree neither disagree nor agree somewhat agree agree

Percent

Valid Percent

Cumulative Percent

9

11.8

11.8

11.8

8

10.5

10.5

22.4

15

19.7

19.7

42.1

6

7.9

7.9

50.0

9

11.8

11.8

61.8

17

22.4

22.4

84.2 100.0

strongly agree

12

15.8

15.8

Total

76

100.0

100.0

Table 44 Performance of fund depends on managers capability

Frequency Valid

strongly disagree disagree neither disagree nor agree somewhat agree agree strongly agree Total

KGIM, New Delhi

Percent

Valid Percent

Cumulative Percent

6

7.9

7.9

7.9

9

11.8

11.8

19.7

18

23.7

23.7

43.4

16

21.1

21.1

64.5

8

10.5

10.5

75.0

19

25.0

25.0

100.0

76

100.0

100.0

Objectives not understood

Valid

disagree somewhat disagree neither disagree nor agree agree

Frequency 27

Percent 35.5

Valid Percent 35.5

Cumulative Percent 35.5

14

18.4

18.4

53.9

14

18.4

18.4

72.4

9

11.8

11.8

84.2

strongly agree

12

15.8

15.8

100.0

Total

76

100.0

100.0

Frequency 7

Percent 9.2

Valid Percent 9.2

Cumulative Percent 9.2

13

17.1

17.1

26.3

6

7.9

7.9

34.2

25

32.9

32.9

67.1

10

13.2

13.2

80.3 100.0

Real estate giving better return

Valid

Table 45

disagree somewhat disagree neither disagree nor agree somewhat agree agree

Table 46

strongly agree

15

19.7

19.7

Total

76

100.0

100.0

Table 47 Returns not satisfactory

Frequency Valid

somewhat disagree neither disagree nor agree somewhat agree agree

Percent

Valid Percent

Cumulative Percent

8

10.5

10.5

10.5

12

15.8

15.8

26.3

11

14.5

14.5

40.8

29

38.2

38.2

78.9

strongly agree

16

21.1

21.1

100.0

Total

76

100.0

100.0

KGIM, New Delhi

Personal needs made me withdraw

Table 48

Frequency Valid

strongly disagree disagree somewhat disagree neither disagree nor agree somewhat agree agree Total

Percent

Valid Percent

Cumulative Percent

19

25.0

25.0

25.0

22

28.9

28.9

53.9

8

10.5

10.5

64.5

7

9.2

9.2

73.7

11

14.5

14.5

88.2 100.0

9

11.8

11.8

76

100.0

100.0

Table 49 Analysis of expert made me withdraw

Frequency Valid

strongly disagree disagree somewhat disagree somewhat agree agree strongly agree

somewhat disagree neither disagree nor agree somewhat agree agree

KGIM, New Delhi

Cumulative Percent

9

11.8

11.8

11.8

27

35.5

35.5

47.4

12

15.8

15.8

63.2

13

17.1

17.1

80.3

11

14.5

14.5

94.7 100.0

4

5.3

5.3

100.0

100.0

Frequency 8

Percent 10.5

Valid Percent 10.5

Cumulative Percent 10.5

14

18.4

18.4

28.9

8

10.5

10.5

39.5

15

19.7

19.7

59.2

18

23.7

23.7

82.9

Stock market burst made me insecure

disagree

Valid Percent

76

Total

Valid

Percent

Table 50

strongly agree

13

17.1

17.1

Total

76

100.0

100.0

Frequency 11

Percent 14.5

Valid Percent 14.5

Cumulative Percent 14.5

11

14.5

14.5

28.9

7

9.2

9.2

38.2

14

18.4

18.4

56.6

21

27.6

27.6

84.2 100.0

Increased interest rate on deposits

Valid

disagree somewhat disagree neither disagree nor agree somewhat agree agree

100.0

Table 51

strongly agree

12

15.8

15.8

Total

76

100.0

100.0

Table 52 Transferred the funds to equity

Frequency Valid

strongly disagree disagree somewhat disagree neither disagree nor agree somewhat agree agree strongly agree Total

Factor Analysis Table 53 Communalities

KGIM, New Delhi

Percent

Valid Percent

Cumulative Percent

12

15.8

15.8

15.8

9

11.8

11.8

27.6

11

14.5

14.5

42.1

8

10.5

10.5

52.6

10

13.2

13.2

65.8

18

23.7

23.7

89.5

8

10.5

10.5

100.0

76

100.0

100.0

Initial

Extraction

handling mutual funds is not upto the mark

1.000

.866

objectives not understood

1.000

.752

real estate giving better return

1.000

.923

returns not satisfactory

1.000

.808

personal needs made me withdraw

1.000

.851

analysis of expert made me withdraw

1.000

.443

stock market burst made me insecure

1.000

.905

increased interest rate on deposits

1.000

.666

transferred the funds to equity

1.000

.829

Extraction Method: Principal Component Analysis. Table 54

Total Variance Explained Initial Eigenvalues Component 1 2

Extraction Sums of Squared Loadings

Rotation Su

Total 3.573 1.908

% of Variance 39.703 21.197

Cumulative % 39.703 60.900

Total 3.573 1.908

% of Variance 39.703 21.197

Cumulative % 39.703 60.900

Total 3.116 2.068

3

1.562

17.361

78.261

1.562

17.361

78.261

1.859

4

.941

10.454

88.715

5

.359

3.989

92.704

6

.325

3.614

96.318

7

.150

1.667

97.985

8

.114

1.271

99.256

9

.067 .744 Extraction Method: Principal Component Analysis. Component Matrix(a)

100.000

Table 55

Component objectives not understood real estate giving better return returns not satisfactory personal needs made me withdraw

KGIM, New Delhi

1 -.551

2

3 .410

.529

.438

.750

-.411

.689

.101

.568

-.349

.530

.669

%

analysis of expert made me withdraw

-.631

.207

-.044

stock market burst made me insecure

.921

.124

-.206

increased interest rate on deposits

.672

.429

.173

transferred the funds to equity

.854

-.085

.306

Extraction Method: Principal Component Analysis. a 3 components extracted. Table 56 Rotated Component Matrix(a) Component objectives not understood real estate giving better return

1 -.190

2

3 .846

.003

.281

-.118

.911

returns not satisfactory

.881

.153

-.094

personal needs made me withdraw

.067

.918

.065

-.550

.360

.104

stock market burst made me insecure

.727

-.506

.347

increased interest rate on deposits

.721

.039

.380

transferred the funds to equity

.881

-.208

-.097

analysis of expert made me withdraw

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a Rotation converged in 4 iterations. Table 57 Component Transformation Matrix Component 1 2

1

3

.878 .117

2 -.455 .508

3 .150 .853

.465 .731 -.499 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

KGIM, New Delhi

KGIM, New Delhi