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Table of contents

s.no particulars

page no

list of tables 2

list of figures 3

1 Abstract

4

2 Introduction

5

3 Objectives

10

4 Description of the problem

10

5 Company profile

11

6 Review of literature

13

7 Methodology

15

8 Analysis and interpretation

18

9 Findings

36

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10 Suggestions

37

11 Conclusion

38

12 References

39

List of tables

Table 1 showing gender of investors in page 19

Table 2 showing occupation of investors in page 21

Table 3 showing monthly household income of investors in page 23

Table 4 showing investments of the respondents in page 25

Table 5 showing market that gives more return in page 27

Table 6 showing the influencing factors of the respondents in making the

investments in page 29

Table7 showing the factors that respondents consider before investing in page 31

Table 8 showing the type of investment preferred by the respondents in page 33

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List of figures;

Chart Showing Gender Classification in page 20

Chart Showing the profession of the respondents in page 22

Chart showing the income levels of the respondents in page 24

Chart showing the investments of the respondents in page 26

Chart showing the market that gives more returns in page 28

Chart showing the market that gives more returns in page 30

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Chart showing the factors that respondents consider before investing in page 32

Chart showing the type of investment preferred by the respondents in page 34

Abstract

Share market is gaining significant grounds with the onset of booming Indian Economy. The

management thesis involved a comparative study of share market and mutual funds.

During the post 1990 period, service sector in most of the Asian economies witnessed growthfueled by significant changes in their financial sector. India is now being ranked as one of thefastest growing economy of the world.

During last one decade or so, role of Indian stock market and mutual fund industry as significantfinancial service in financial market has really been noteworthy. In fact since 1992, a number of

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research studies have underlined the importance of these two in the Indian capital marketenvironment as important investment vehicles. But the existing Behavioral Finance studies onfactors influencing selection of mutual fund and stock market schemes are very few and verylittle information is available about investor perceptions, preferences, attitudes and behavior. Yetagain, perhaps no efforts are made to analyze and compare the selection behavior of Indian retail

investors towards mutual funds and stock market particularly in post-liberalization period. Withthis background this paper makes an earnest attempt to study the behavior of the investors in theselection of these two investment vehicles in an Indian perspective by making a comparativestudy.

INTRODUCTION

Economic success and sound financial system is intertwined in both literature and practice.Economic reform process of 1991 had a great impact on redefining the financial system of India

leading to overall economic development of the country. Today, Indias financial system isconsidered to be sound and stable as compared to many other Asian countries where the financialmarket is facing many crises.

India is now being ranked as one of the fastest growing economy of the world. As the eleventhfive-year plan has already in progress, India is targeting a GDP growth rate of around 9%. Thesavings of the country is now around 29%. Foreign investors are finding Indian market with highpotential. Indias forex reserve is around $185 billion. Inflation is around 7% which is considered

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good for a developing economy. Sensex is more than 20000 points in Bombay Stock Exchange.Some experts have opined that the share of the US in world GDP is expected to fall (from 21 percent to 18 per cent) and that of India to rise (from 6 per cent to 11 per cent) by 2025, and Indiawill emerge as the third pole in the global economy after the US and China. All these favorablethings could have not been possible without the sound financial market.

The role of Indian mutual fund and stock market as significant financial services in financialmarket has really been noteworthy during last one decade or so. In fact, both of these productshave emerged as an important segment of financial market of India, especially in channelizingthe savings of millions of individuals into the investment in equity and debt instruments.

From retail investors point of view, keeping large amount of money in bank is not wise ascurrently bank rate has fallen down below the inflation rate. As in real terms the value of moneydecreases over a period of time, the options available for them is to invest their money in stockmarket and mutual funds.

MUTUAL FUNDS

Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is invested by the fund manager in

different types of securities depending upon the objective of the scheme

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TYPES OF MUTUAL FUND SCHEME

Mutual fund schemes may be classified on the basis of its structure and its investment objective.

BY STRUCTURE

1. Open-end Funds

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An open-end fund is one that is available for subscription all through the year. These do

not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value

("NAV") related prices. The key feature of\open-end schemes is liquidity.

2. Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15

years. The fund is open for subscription only during a specified period. Investors can invest in

the scheme at the time of the initial public issue and thereafter they can buy or sell the units of

the scheme on the stock exchanges where they are listed. In order to provide an exit route to the

investors, some close-ended funds give an option of selling back the units to the Mutual Fund

through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one

of the two exit routes is provided to the investor.

3. Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are

open for sale or redemption during pre-determined intervals at NAV related prices.

ADVANTAGES OF MUTUAL FUNDS

Mutual funds make saving and investing simple, accessible, and affordable. The advantages

of mutual funds include professional management, diversification, variety, liquidity,

affordability, convenience, and ease of recordkeepingas well as strict government regulation

and full disclosure.

Diversification:

The best mutual funds design their portfolios so individual investments will react

differently to the same economic conditions. For example, economic conditions like a rise in

interest rates may cause certain securities in a diversified portfolio to decrease in value. Other

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securities in the portfolio will respond to the same economic conditions by increasing in

value. When a portfolio is balanced in this way, the value of the overall portfolio should

gradually increase over time, even if some securities lose value.

Professional Management:

Most mutual funds pay topflight professionals to manage their investments. These managers

decide what securities the fund will buy and sell.

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.

Convenience:

You can usually buy mutual fund shares by mail, phone, or over the Internet.

Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment.

Expenses for Index Funds are less than that, because index funds are not actively managed.

Instead, they automatically buy stock in companies that are listed on a specific index

SHARE MARKET

Share or stock is a document issued by a company, which entitles its holder to be one of

the owners of the company. A share is issued by a company or can be purchased from the stock

market.

Shares in the Share Market are either traded through :

(a) Stock Exchange These are organized market places where stocks, bonds are other

equivalents are traded between the buyers and sellers where exchange acts as a counter - party to

both the participants in case of any default.

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(b) Over-the -Counter (OTC) These are not centralized exchanges and the trade takes place

through a network of dealers.

Basically, Share Market can be divided into two parts :-

1 Primary Market It is the market where new issues of securities are offered to the investors.

2 Secondary Market An investor of a secondary market buys a security from another participant

of the same and not from any issuing corporation .

WHY SHARES;

1) Easy Liquidity

2) Dividend Income

3) Tax Advantages

OBJECTIVES

To analyze mutual funds and equity market.

To study investors behavior on mutual funds and equity market.

Find out the facilities provided by mutual funds and stock market and what will

the benefits in future.

To identify the objective of investment plan of an Indian individual investor.

To know the preferred investment avenues of the Indian individual investor

To know the risk tolerance level of the individual investor and suggest a suitable

portfolio

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DEFINING THE PROBLEM;

A stock is a investment in a particular company where mutual fund is a bundle of

investments. A single stock is risky where as mutual funds allow us to diversify

investments, but give up control of specific investments. In this context the present study

aims to undertake a comparative study on mutual funds and stock market. Then Particular

the various advantages and disadvantages of investing in share market and mutual funds

from investors perspective will be examined and an attempt is made to identify the better

choice for the investor.

COMPANY PROFILE

KARVY is a premier integrated financial services provider and ranked among the top five in thecountry in all its business segments. It services over 16 million individual investors in various

capacities and provides investor services to over 300 corporate, comprising who is who ofCorporate India.

It is a member of all three:-

National Stock Exchange (NSE)

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Bombay Stock Exchange (BSE)

Hyderabad Stock Exchange (HSE)

Karvy utilized its experience and superlative expertise to capitalize on its strengths andbetter its service, innovate and provide new ones. It diversified in the process and thus evolved asIndias premier integrated financial service enterprise.

Karvy has been a customer centric company since its inception. It offers a single platformservicing multiple financial instruments in its bid to offer complete financial solutions to thevarying needs of both corporate and retail investors, where an extensive range of services are

provided with great volume-management capability.

KARVY covers the entire spectrum of financial services such as Stock broking, DepositoryParticipants, Distribution of financial products - mutual funds, bonds, fixed deposit, equities,Insurance Broking, Commodities Broking, Personal Finance Advisory Services, MerchantBanking & Corporate Finance placement of equity, IPOs, among others. Karvy has aprofessional management team and ranks among the best in technology, operations and researchof various industrial segments.

BACKGROUND

The flagship company, Karvy Consultants Limited was found with the vision and enterprise of agroup of practicing Chartered Accountants on a modest scale in 1981 in Hyderabad, where itnow has 13 branches. It initiated with just one activity and later carved roads into fields ofregistry and share accounting as well. From then there was no stopping at all.

A decade of commitment, professional integrity and vision helped Karvy achieve a leadershipposition in its field. It is known to handle the largest number of issues ever in the history of theIndian stock market in a particular year. Thereafter, Karvy made inroads into a host of capitalmarket services, corporate and retail which proved to be a sound business synergy.

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Today Karvy has access to millions of Indian shareholders, besides companies, banks, financialinstitutions and regulatory agencies. Over the past one and half decades, Karvy has involved as averitable link between industry, finance and people. In January 1998, Karvy became the firstDepository Participant in Andhra Pradesh.

An ISO 9002 company, Karvys commitment to quality and retail reach has made it an integratedfinancial services company. A SEBI category 1 registrar, so far Karvy has handled over 675issues as Registrars to public issues, processed over 52 million applications and is servicing over16 million investors from various locations spread over 205 cities.

KARVY MILESTONES:

Karvy has travelled a success route over the past 20 years and positioned itself as anemerging financial service giant in which embeds the confidence and support of enviable patronsacross the financial world. Patrons are also of diversified fields which includes over 16 millionindividual investors in various capacities and 300 corporates comprising the best out of thewhole lot .Years of experience of holistic financial services and expertise in this industry hashelped it gain the status it enjoys and cherishes today

Review of literature

Alexei P. Goriaev

A closely related literature examines the dynamic strategies of mutual fund managers. There, thefocus is on the strategic changes of the factor loadings in response to the fund-specificcharacteristics such as its past performance. A number of studies examine the so-called

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tournament hypothesis, which states that funds performing badly during the first part of the yearhave an incentive to increase risk in the second part of the year in order to try to catch up withmid-year winners at the end of the year. Among others, Brown, Harlow, and Starks (1996) findevidence supporting the tournament hypothesis using a contingency table methodology appliedto monthly data. However, Busse (2001) finds no such evidence using the contingency table

methodology applied to daily data. He explains this divergence in the results by the presence ofthe auto- and cross-correlation in fund returns, which was not accounted for in the standardstatistical tests used in the previous studies.

Debjiban Mukherjee

The study pertains to comparative analysis of the Indian Stock Market with respect to variousinternational counterparts. Exchanges are now crossing national boundaries to extend theirservice areas and this has led to cross-border integration. Also, exchanges have begun to offercross-border trading to facilitate overseas investment options for investors. This not only

increased the appeal of the exchange for investors but also attracts more volume. Exchangesregularly solicit companies outside their home territory and encourage them to list on theirexchange and global competition has put pressure on corporations to seek capital outside theirhome country. The objective of the whole research was to try and compare the various stockexchanges based on certain parameters in order to understand the impact of integration of thefinancial world on the various entities within it especially in the context of globalization andincreased interest in the capital markets fuelled by surging growth.

The various research papers that have been studied traced the gradual coming of age of theIndian stock market over the past decade without actually arriving at any conclusive evidence onthe comparative position of our stock exchange with that of other global ones. The studies

mainly looked at various aspects of efficiency in the stock market on a stand alone basis andtried to draw conclusion regarding the state of our maturity. However, we have tried to use thecomparison method to benchmark the performance of our stock market with that of a selection ofglobal stock exchanges on the basis of their diversity with respect to geo-sociopolitico- economy.

Irwin, Brown, FE (1965) analyzed issues relating to investment policy, portfolio turnoverrate, performance of mutual funds and its impact on the stock markets. The schoolwork

identified that mutual funds had a significant impact on the price movement in the stock market.The cram concludes that, on an average, funds did not perform better than the composite marketsand there was no persistent relationship between portfolio turnover and fund performance.

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Methodology / Analytical Procedures

Sample size

Sample size is about 100

Hypothesis.

H0; Investors decision is not influenced by the type of investment

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H1; Investors decision is influenced by the type of investment

Statistical Tools to be Applied

Simple percentages

Pearson's Chi square

Pearson's chi-square is used to assess two types of comparison: tests of goodness of fit

and tests of independence. A test of goodness of fit establishes whether or not an

observed frequency distribution differs from a theoretical distribution. A test of

independence assesses whether paired observations on two variables, expressed in

a contingency table, are independent of each other for example, whether people from

different regions differ in the frequency with which they report that they support a

political candidate.

The first step in the chi-square test is to calculate the chi-square statistic. In order to avoid

ambiguity, the value of the test-statistic is denoted by 2 rather than 2 (i.e.

uppercase chi instead of lowercase); this also serves as a reminder that the distribution of

the test statistic is not exactly that of a chi-square random variable. However some

authors do use the 2 notation for the test statistic. An exact test which does not rely on

using the approximate 2 distribution is Fisher's exact test: this is significantly more

accurate in evaluating the significance level of the test, especially with small numbers ofobservation.

The chi-square statistic is calculated by finding the difference between each observed and

theoretical frequency for each possible outcome, squaring them, dividing each by the

theoretical frequency, and taking the sum of the results. A second important part of

determining the test statistic is to define the degrees of freedom of the test: this is

essentially the number of observed frequencies adjusted for the effect of using some of

those observations to define the "theoretical frequencies".

DATABASE

Specification of target population

16

http://en.wikipedia.org/wiki/Frequency_distributionhttp://en.wikipedia.org/wiki/Contingency_tablehttp://en.wikipedia.org/wiki/Statistichttp://en.wikipedia.org/wiki/Chi_(letter)http://en.wikipedia.org/wiki/Fisher's_exact_testhttp://en.wikipedia.org/wiki/Degrees_of_freedom_(statistics)http://en.wikipedia.org/wiki/Frequency_distributionhttp://en.wikipedia.org/wiki/Contingency_tablehttp://en.wikipedia.org/wiki/Statistichttp://en.wikipedia.org/wiki/Chi_(letter)http://en.wikipedia.org/wiki/Fisher's_exact_testhttp://en.wikipedia.org/wiki/Degrees_of_freedom_(statistics)

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All customers who visit the karvy stock broking Ltd

Sampling Unit

This study is done on karvy stock broking Ltd customers

Sample Design

Sample designs are basically of two types viz., non-probability sampling and

probability sampling.

Non-probability sampling

Types ofData

The primary data are those which are collected afresh and for the first time, and

thus happen to be original in character.

The secondary data, on the other hand, are those which have already been

collected by someone else and which have already been passed through the

statistical process.

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Data collection methods

Questionnaire:

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Data Analysis & Inferences

Table & Chart 1

Question : Gender

Male

Female

Table 1 Showing Gender Classification:

male 70 70%

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Female 30 30%

Chart Showing Gender Classification:

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Inference

From the total of 100 sample elements 70 were found to be male and the

rest of 30 elements are female. This classification shows that major

portion of the investors are male who are involved in investments in

various sectors.

Table & Chart 2

Question:

Occupation

a) Government Employeeb) Private Employeec) Self Employedd) Student

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Table 2 showing the profession of the respondents:

govt employee 21 21%

private employee 36 36%

Selfemployed 33 33%

Student 10 10%

Chart 2 Showing the profession of the respondents:

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Inference:

Private Employees and Self Employed are the most who prefer to invest

with 33% and 36% respectively. This shows that other two categories

like Govt Employees & Students are not much involved in to the

investments due to their income levels and less awareness.

Table & Chart 3

Question:

Your monthly household income

a) Less than 15000b) 15001-25000c)25001 and above

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Table Showing income levels of the respondents:

< Rs 15000 15 15%

Rs 15000 -

Rs 25000 62 62%

> Rs 25000 23

23%

Chart showing the income levels of the respondents:

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Inference:

People with the Income levels that are in between Rs 15000 - > Rs 25000

are greater in number then the people with the income level les then Rs

15000.

Table & Chart 4

Question:

Where do you invest your savings?

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i. Mutual fundsii. Equity

Table showing the investments of the respondents:

mutualfunds 39 39%

Sharemarket 61 61%

Chart showing the investments of the respondents:

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Inference:

Share Market is the platform where major proportion of the respondents

investments goes in. Above chart shows that the share market with a 61%

of share is chosen widely by the respondents for the investments and

followed by mutual funds with a 39% of respondents preferring to invest

in.

Table & Chart 5

Question:

Which sectors give more return?

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i. Share marketii. Mutual Funds

Table showing the market that gives more returns:

mutualfunds 42 42%

Sharemarket 58

58%

Chart showing the market that gives more returns:

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Inference:

As inferred from the chart 4 that share market is widely chosen by the

respondents, chart 5 gives the reason for them to chose this. 58% of

respondents have answered that share market give them the more returns

on their investments and that makes them to chose this sector. Mutual

funds follow with a percentage of 42%, respectively.

Table & Chart 6

Question:

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Your investment decisions are influenced by

i. Oneselfii. Brokeriv. Market Research

v. Friends/Relatives

Table showing the influencing factors of the respondents in making the

investments:

Oneself 25 25%

Broker 42 42%

market research 19 19%

friends/relatives 14 14%

Chart showing the influencing factors of the respondents in making the

investments:

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Inference:

Brokers occupy the first place in influencing the respondents in investing.

This shows that the expertise of the brokers in investments realm satisfies

and convinces the customers to go for the investments. 25% of therespondents said that they are aware of te investments and chose to

invest without being influenced by any other source.

Table & Chart 7

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Question:

What are the factors which you considered before investing?

1. Current Market Position2 Goodwill of the companies3 Returns4 Risk

Table showing the factors that respondents consider before investing:

Current market 33 33%

goodwill of companies 12 12%

Returns 40 40%

Risk 15 15%

Chart showing the factors that respondents consider before investing:

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Inference:

Returns always attract and pull the customers for investment. This is

proved to be true from the above chart. 40% of the respondents said they

invest only to by looking at the returns that companies gave in the past.

33% of the investors say that the current market condition also plays a

significant role in choosing the investment. Whereas 15% & 12% of the

people say that low risk and good will of the company drives them toinvest respectively.

Table & Chart 8

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Question:

what type of investments would you prefer

1 Long term

2 Short term

Table showing the type of investment preferred by the respondents:

Long Term 67 67%

Short Term 3333%

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Chart showing the type of investment preferred by the respondents:

Inference:

67% of the respondents are willing to invest in the long term plans and

the rest of 33% chose the short term schemes.

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Chi square analysis;

To test the null hypothesis;

Chi square test of independence between the categoril variables ,viz investors decision and

type of investment is conducted the pearson`s chi square statistic value is obtained as 1.0926

with a p value of 0.77which clearly shows that the null hypothesis cannot rejected. Therefore we

concluded that there is no relation between investors decision and type of investments.

Findings

From table and chart 1 the major portion of the investors are male who are involved in

investments in various sectors.

From table and chart 2 government Employees & Students are not much involved in tothe investments due to their income levels and less awareness but private employees andself employed are investing more because they were aware of various available

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investments.The investors have a wide difference with respect to their profession andalso the different investment patterns vary widely.

From the table and chart 3 people who are earning above 15000/- and below 25000/- are

involving in investment activities.

From the table and chart 4 people are more investing their savings in share market only

because more risk will gives more return.

From the table and chart 5 share market will give more return compared to mutual funds

and major people opinion is that share market will give more return even it involves in

more risk.

From the table and chart 6 most of the investors decisions are influenced by broker

because psychologically broker will prepare the customer to invest in various available

investments and own decisions of customers in order to earn more can also influence to

invest in available investments.

From the table and chart 7 investors will considered the returns and next current market

position for investing in various available investments.

From the table and chart 8 , even though investors are expecting more returns they are

ready to go for long term investments for security and risk is low in long term

investments.

This study concluded that there is no relation between investors decision and type of

investments through chi square test.

Suggestions

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In the modern world females also started investing but necessary awareness should be

provided to them for involving them in more investment activities.

Government employees may involve in investment activities as they have many sources

of income but creating awareness about stock market and private sector mutual funds

schemes and provide security to their investments may help in encouraging them more.

As students have less sources of income they can also involve in less investing activities

where risk is less.

People with low level income groups can also invest in available investment activities

where they is low risk and more return and decisions should be taken by throw study of

market.

Since mutual funds are also giving more returns but people are investing more in share

market only. So mutual fund offer companies may take necessary steps in providing

more returns with in less time.

Brokers always thought to increase the companies share in market by involving more

customers in investing activities but security for the customer investments may not given

by them. So always take decision of investment activities by through study of market and

growth rate in the market.

As a investor, returns is the main considering factor for investing but along with that

market position and goodwill of the company should also take in to consideration for

investment.

Short term gains are not permanent but long term gains give certain output which helps a

lot in long run. So investing in long run is more preferable.

CONCLUSION

The strategy adopted by me in completion of this project help me a lot till now in making

comparison between share market and mutual funds. From the analysis we can say that if there is

more risk there is more return and we can say that share market is totally dependent on the risk

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taken by the investors in investing in shares. And in mutual funds there is less risk as the money

of investors invested in different sectors so it can divide the risk in different portfolio adopted by

mutual funds companies.

At last I can say that money invested in this rise and fall market it is better to invest in

mutual funds for those investors who are risk adverse and for those who are risk taker it is better

for them to invest in share market.

We can also say that in share market customers is decision maker while in mutual funds

investors is totally dependent on assets management company, investors do not have active

control on money invested by him/her.

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