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A STUDY ON “CONSUMER PREFERANCE TOWARDS MUTUAL FUNDS AS
AN INVESTMENT “ HDFC BANK
A Project report submitted to Gitam University, Visakhapatnam in
Partial fulfillment for the award of the Degree of
Bachelor of Business Management (BBM)
By
Sharmila ReddyRegd.No:1214110142
Under the guidance ofDr. K Manjusree Naidu
Gitam Institute of ManagementGitam University
Visakhapatnam, Andhra Pradesh
DECLARATION
I hereby declare that the project work titled A study on “CONSUMER
PREFERANCE TOWARDS MUTUAL FUNDS AS AN INVESTMENT” submitted
by me under the guidance of Dr.K Manjusree Naidu is the work done by me and
has not been submitted to any other university or institution for the award of any
certificate or degree or diploma.
Sharmila Reddy 1214110142
1
CERTIFICATE
This is to certify that the project report titled ‘A STUDY ONCONSUMER
PREFERANCE TOWARDS MUTUAL FUNDS AS AN INVESTMENT’ at HDFC
Bank submitted by Sharmila Reddy in the partial fulfillment for the award of the
degree Bachelor of Business Management to Gitam Institute of Management, Gitam
University. It is a bona-fide work carried out by her under my guidance and
supervision.
Date: Dr. K Manjusree NaiduVisakhapatnam Program Coordinator
(BBM)
2
ACKNOWLWDGEMENT
I like to express my profound gratitude to Prof. K. Siva Rama Krishna, Dean &
Principal, GIM, GITAM UNIVERSITY for giving me the opportunity to do this
project work.
I extend my heartfelt thanks to Prof. P. Sheela, Vice-Principal GIM, GITAM
UNIVERSITY who has been a strong pillar of support to do our project.
I take this opportunity to acknowledge my sincere thanks to Dr. K.Manjusree Naidu,
Programme Coordinator of BBM & also my project guide with whose cooperation
and valuable guidance I am successful to complete my project work.
I express my deep sense of gratitude the management of HDFC Bank for giving me
this opportunity to study in their esteemed organisation.
Sharmila Reddy
1214110142
3
CONTENTS
Chapter Title Page
Chapter 1 Theoretical Framework of
HDFC Bank
Introduction
Chapter 2
Methodology
Need of the study
Objectives of the study
Scope
Limitations
Research Design
Data Collection Method
Chapter 3 Industry & Company
Profile
Chapter 4 Analysis
Chapter 5 Findings & Suggestions
Chapter 6 Bibliography
Chapter 7 Annexure
Questionnaire
4
CHAPTER-1
THEORETICAL FRAMEWORK
5
A. Introduction
Indian GDP growth is surging, Markets are at record high, huge surge in FII
and FDI inflows, a great budget with focus on rural development and no alteration in
savings and consumption pattern. All these aspects have resulted in savers looking for
capital markets as an investment option and the better way of investing in this option
of investing is through Mutual Funds.
In the last 5-8 years the Mutual Fund industry has perceived dramatic changes
in terms of the structure of the industry, players in the market, acceptance by the
investors by a sharp increase in the investor base, by a huge surge in asset base
handled by the mutual fund industry, advent of financial planning & asset allocation
as a concept and number of individuals, banks, retail advisors and corporate adding
mutual fund to their client portfolio.
This has led to a sharp rise in the number of new schemes offered by different
Mutual Funds and the amount raised by this offers are unimaginable. In the month of
Jan – Feb 2006 alone there were about 16 New Fund Offers from various Asset
Management Companies and a mopping up a whopping
12000 crs. Of equity money. All of these have to be deployed in the market to gain
returns and pass it on to the investors. In this stiffening of competition in the industry
with 29 players and more number of players set to hit the market soon, there is a huge
pressure on the fund managers to out beat the competitor and its benchmark.
6
Managing this kind of huge amount is a very difficult task for a fund manager. So
there role as the primary managers of the fund is very important and this importance
is growing everyday. They cannot afford to make any mistakes in this respect.
B.Concepts
A Mutual Fund is a form of collective investments that pools money from
many investors and invest s there money in stocks, bonds, short-term money market
instruments, and/or other securities. In a mutual fund, the fund manager, who is also
known as the portfolio manager, trades the fund’s underlying securities, realizing
capital gains or losses, and collects the dividend or interest income. The investment
proceeds are then passed along to the individual investors. The value of a share of the
mutual fund, known as the net asset value per share (NAV), is calculated daily based
on the total value of the fund divided by the number of the shares currently issued and
outstanding.
Types of Mutual Funds
Open Mutual Fund - A fund sponsor, usually a mutual fund company, establishes
open mutual funds. The sponsor has promised in the documents of the fund that it will
issue and refund or units of the fund at the fund unit value
The fund company or an outside valuation agent values this type of fund. This means
that the investments of the fund are valued at "fair market" value, which is the closing
market value for listed public securities. Essentially, the fund company prices all of
the fund's holdings at the market close and adds up their value; it then subtracts
amounts owing and adds amounts to be received by the fund; and finally it divides
this net amount by the number of units outstanding to "strike" the unit value for that
7
day. Any participants withdrawing funds from the fund that day receive this unit value
for their funds withdrawn. Any new purchases are made at the same unit value. Open
mutual funds keep some portion of their assets in short-term and money market
securities to provide available funds for redemptions. A large portion of most open
mutual funds is invested in highly "liquid securities", which means that the fund can
raise money by selling securities at prices very close to those used for valuations.
Funds also have the ability to borrow money for short periods of time to fund
redemptions. The documents of open mutual funds usually provide for the suspension
of unit redemptions in "extraordinary conditions" such as major interruptions to the
financial markets or total demands for redemptions forming a substantial portion of
the fund assets in a short period of time. These clauses were invoked in October,
1987, when the stock market crashed 30% in a few days and the volume of stock
transactions caused trading activity to be hours out date.
Government regulators restrict illiquid investments, those not actively traded on
the public markets, because they are difficult to dispose of in a short period of time. A
fund holding an illiquid investment might not be able to sell it in a short period of
time or would have to take a significant discount to the valuation level the fund was
using. In Canada, most open real estate mutual funds suspended redemptions during
the real estate debacle of the early 1990s. Fund participants did not obtain redeemed
funds until these funds were restructured into closed-end funds in the mid 1990s and
they could sell their units on the stock market.
The valuation of investments that are less liquid and trade infrequently is an important
issue for mutual funds.
Closed Mutual Funds
8
Closed mutual funds are really financial securities that are traded on the stock
market. A sponsor, a mutual fund company or investment dealer, will create a "trust
fund" that raises funds through an underwriting to be invested in a specific fashion.
The fund retains an investment manager to manage the fund assets in the manner
specified. A good example of this type of fund is the "country funds" that were
underwritten during the international investment euphoria of the early 1990s. An
investment dealer would decide that a "Germany" or "Portugal" or "Emerging
Country" fund would sell given the popular consensus that these were "no lose"
investments.
It would then retain a well-respected investment advisor to manage the fund assets for
a fee and underwrite a public issue that it would sell through retail stockbrokers to
individual investors. It is interesting to note that many of these funds were caught in
the sell-off of the stock market of 1994 and have languished ever since. This has led
to the phrase "submerging country" replacing "emerging market" for many of these
funds. This is wry proof of the fickleness of investor fashion!
Once underwritten, closed mutual funds trade on stock exchanges like stocks or
bonds. Their value is what investors will pay for them. Usually closed mutual funds
trade at discounts to their underlying asset value. For example, if the price of the fund
assets less liabilities divided by the outstanding units is $10, the fund might trade on
the stock market at $9. This fund would be said to be trading at a "10% discount to its
net asset value". The reason for this discount is debated by academics, but is due in
large part to the lack of liquidity of the fund units and the presence of the management
fee.
Time Horizon - Your time horizon is the expected number of months, years, or
decades you will be investing to achieve a particular financial goal. An investor with a
9
longer time horizon may feel more comfortable taking on a riskier, or more volatile,
investment because he or she can wait out slow economic cycles and the inevitable
ups and downs of our markets.
By contrast, an investor saving up for a teenager's college education would likely take
on less risk because he or she has a shorter Time Horizon.
Risk Tolerance - Risk tolerance is your ability and willingness to lose some or all of
your original investment in exchange for greater potential returns. An aggressive
investor, or one with a high-risk tolerance, is more likely to risk losing money in order
to get better results. A conservative investor, or one with a low-risk tolerance, tends to
favor investments that will preserve his or her original investment. In the words of the
famous saying, conservative investors keep a "bird in the hand," while aggressive
investors seek "two in the bush."
A vast array of investment products exists - including stocks and stock mutual funds,
corporate and municipal bonds, bond mutual funds, lifecycle funds, exchange-traded
funds, money market funds, and Treasury securities. For many financial goals,
investing in a mix of stocks, bonds, and cash can be a good strategy. Let's take a
closer look at the characteristics of the three major asset categories.
Stocks - Stocks have historically had the greatest risk and highest returns among the
three major asset categories. As an asset category, stocks are a portfolio's "heavy
hitter," offering the greatest potential for growth. Stocks hit home runs, but also strike
out. The volatility of stocks makes them a very risky investment in the short term.
Large company stocks as a group, for example, have lost money on average about one
out of every three years.
10
And sometimes the losses have been quite dramatic. But investors that have been
willing to ride out the volatile returns of stocks over long periods of time generally
have been rewarded with strong positive returns.
Bonds - Bonds are generally less volatile than stocks but offer more modest returns.
As a result, an investor approaching a financial goal might increase his or her bond
holdings relative to his or her stock holdings because the reduced risk of holding more
bonds would be attractive to the investor despite their lower potential for growth. You
should keep in mind that certain categories of bonds offer high returns similar to
stocks. But these bonds, known as high-yield or junk bonds, also carry higher risk.
Cash - Cash and cash equivalents - such as savings deposits, certificates of deposit,
treasury bills, money market deposit accounts, and money market funds - are the
safest investments, but offer the lowest return of the three major asset categories. The
chances of losing money on an investment in this asset category are generally
extremely low. The federal government guarantees many investments in cash
equivalents. Investment losses in non-guaranteed cash equivalents do occur, but
infrequently. The principal concern for investors investing in cash equivalents is
inflation risk. This is the risk that inflation will outpace and erode investment returns
over time
Stocks, bonds, and cash are the most common asset categories. These are the asset
categories you would likely choose from when investing in a retirement savings
program or a college savings plan.
But other asset categories - including real estate, precious metals and other
commodities, and private equity - also exist, and some investors may include these
asset categories within a portfolio. Investments in these asset categories typically have
11
category-specific risks. Before you make any investment, you should understand the
risks of the investment and make sure the risks are appropriate for you.
Consumer Behavior
Consumer behavior is the study of how people buy, what they buy, when
they buy and why they buy. It blends elements from psychology, sociology, socio
psychology, anthropology and economics. It attempts to understand the buyer
decision making process, both individually and in groups. It studies characteristics of
individual consumers such as demographics, psychographics, and behavioral variables
in an attempt to understand people's wants. It also tries to assess influences on the
consumer from groups such as family, friends, reference groups, and society in
general.
Consumer behaviour is comparatively a new field of study which evolved just after
the Second World War. The sellers market has disappeared and buyers market has
come up. This led to paradigm shift of the manufacturer’s attention from product to
consumer and specially focused on the consumer behaviour. The evaluation of
marketing concept from mere selling concept to consumer oriented marketing has
resulted in buyer behaviour becoming an independent discipline. The growth of
consumerism and consumer legislation emphasizes the importance that is given to the
consumer.
One of the important ways in which the financial sector influences economic growth
is through the formation of domestic savings. The latter depends largely on the extent
12
of financial deepening in the economy. The steady growth of domestic savings has
been possible in India due to financial deepening, and India is among the few
countries in the world to have achieved a consistently high rate of growth in domestic
savings. According to the RBI, “The Indian savings experience during the period
1970-71 to 1998-99 was marked by a simultaneous secular increase in the rate of
Gross Domestic Savings (GDS as percentage of GDP at current market prices).
During the nineties, household financial savings has emerged as the single most
important contributor to GDS by contributing over 70 to GDS.
13
Chapter-2
Research Methodology
14
A. Need for the study
“Expectations” of investors play a vital role in the financial markets.
They influence the price of the securities, the volume traded and various other
financial operations in actual practice. These “expectations” of investors are
influenced by their “perception” and humans generally relate perception to
action. The beliefs and actions of many investors are influenced by the
dissonance effect and endowment effect.
Hence, with this background, this study evaluates the behavioral
aspects of Asset Allocation techniques of individual investors and also to assess
the conceptual awareness of Mutual Funds during the period, May.2007 to July
2007.
B. Objectives of the study
The study has the following general objectives:
To assess the savings objectives among individual investors
To identify the preferred savings avenue among individual investors.
15
To assess mutual fund conceptual awareness among present investors
To understand the fund sponsor qualities influencing the selection of
mutual funds/schemes
To identify the information sources influencing the scheme selection
decision of investors
To evaluate investor related services that would affect the selection of
mutual funds
C . Scope for further study
The MF operational environment is becoming more competitive. Hence, the
impact of emerging competition on investor behavior/behavioral changes needs to
be studied further. Developments in technology influence the behavior of investors.
Hence, the impact of technology on financial behavior is another potential area for
close study .Since the industry is still struggling to win the investors’ confidence, an
in-depth analysis into investor’s expectations from MF products, its performance,
management, service and other related area could be done.
A study is required to examine the trading behavior of MF investors.
Further, research can be done to identify whether MF investors chase past returns or
16
employ a current performance momentum to pick up their funds i.e. whether they
are active or passive trend chasers.
This study reveals that MF investors feel that currently the two major benefits,
which MFs purpose to offer, namely, diversification benefits and professional
management are not satisfactorily delivered. In spite of this, MF industry is
growing and the study attributes this to investor behavior and other macroeconomic
factors.
D. Research Methodology
Research involves scientific and inductive thinking and promotes the development
of logical habits of thinking and organization. Research also makes its own
contribution to the existing stock of knowledge, enabling its advancement.
Research Design:
A research design is the specification of the methods and procedures for
acquiring the information needed to structure or solve problems. Its overall
operational pattern or frame work of the project that stipulates what information is
to be collected, which sources and with what procedures. The researcher used
descriptive research design for the research study.
17
Descriptive information often provides a sound basis for the solution of marketing
problems, even though it does not explain the nature of relationship involved.
Descriptive research is marked by the prior formulation of specific research
questions. The investigator already knows a substantial amount about the research
problem. Thus the investigator should be able to define clearly what it is that he
or she wants to measure and setup appropriate and specific means for measuring
it.
Sampling Design:
The researcher adopted the convenient sampling method for the research
study. Convenient sampling refers to setting up the sampling size according to the
convenience of the researcher. The sampling unit consisted of mutual fund
investors of HDFC Bank. The sample size is One Hundred and Two (N=102).
Data Collection:
The task of data collection begins after a research problem has been defined
and research design/plan chalked out. While deciding about the method of data
collection to be used for the study the researcher should keep in mind 2 types of
data viz, primary and secondary. In this study the researcher has used the primary
data to carry out the research work. Primary data are those, which are collected
18
afresh and for the first time, and thus happen to be original in character. Primary
data have been collected through the structured questionnaires.
Questionnaire Design:
According to Bogardus, “a questionnaire is a list of questions sent to a
number of persons for their answers and which obtains standardized results that
can be tabulated and treated statistically”. It is treated as the ‘heart of the survey
operation’.
The researcher used structured questionnaire and is in a multiple-choice format.
E. Limitations of the study
Sample size is limited to 102 individual investors in the city of Hyderabad.
The sample size may not adequately represent the national market.
The duration of the study for two months is constraint to get accurate
results..
This study has not been conducted over an extended period of time having
both ups and downs of stock market conditions which has a significant
influence on investor’s buying pattern and preferences.
19
CHAPTER-3
PROFILE OF HDFC BANK
20
A.PROFILE OF THE MUTUAL FUND INDUSTRY
Indian Mutual Fund Industry
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, 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,
21
it is the prime responsibility of all mutual fund companies, to market the product .
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
22
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 Pioneer (now merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993.
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.
23
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. As of February 2006
the assets managed by Indian Mutual Fund industry stands at Rs.2, 17,471 crores.
B. PROFILE OF HDFC BANK
COMPANY PROFILE:
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
liberalization of the Indian Banking Industry in 1994. The bank was incorporated in
August 1994 in the name of 'HDFC Bank Limited', w i t h i t s r eg i s t e r ed o f f i c e
i n Mumba i , I nd i a . HDFC Bank commenced ope r a t i ons a s a
Scheduled Commercial Bank in January 1995.HDFC is India’s premier housing
finance company and enjoys an impeccable track recording
India as well as in international markets. Since its inception in 1977, the Corporation
24
has maintained a Consistent and healthy growth in its operations to remain the market
leader inmortgages. Its outstanding loan portfolio covers well over a million dwelling
units. HDFC has developed significant expertise in retail mortgage loans to
different market segments and also has a large corporate client base for its
housing related credit facilities. With its experience in the financial markets, a strong
market reputation, large shareholder base and unique consumer franchise, HDFC was
ideally positioned to promote a bank in the Indian environment .HDFC Bank began
operations in 1995 with a simple mission to be a “World Class Indian
B a n k . ” I t r e a l i z e d t h a t o n l y a s i n g l e m i n d e d f o c u s o n
p r o d u c t q u a l i t y a n d s e r v i c e excellence would help us get there.
Today, the Bank is proud to say that it is well on its way towards that goal
THE VARIOUS SERVICE S PROVIDED BY HDFC
1.mobile banking
2.phone banking
3.atms
4.Net banking
5 email statements
6 .Demat account
7.Money transfer from one ac to another or from one bank to another 8.online banking
9.money deposit
10.nri services
11. Savings Accounts
12.Salary Accounts
13.Current Accounts
25
14.Deposits
15.Safe Deposit Locker
16.Rural Accounts
17.Credit Cards
18.Debit Cards
19.Prepaid Cards
20.Credit Card Rewards Program
HDFC bank l t d p rov ide s va r i ous f i nanc i a l p roduc t s and s e rv i ce s .
I t ope ra t e s i n t h r ee segments: Retail Banking, Wholesale Banking, and Treasury.
The Retail banking segment provides various deposit products, including
savings Accounts, current accounts, fixed deposits, and demat accounts. It
also offers Auto, personal, commercial vehicle, home,gold, and educational
loans; loans Against securities and property and health care finance Working capital
finance, construction equipment finance, and warehouse Receipt loans, as we l l a s
c r e d i t c a r d s , deb i t c a r d s , depo s i t o ry , i nv es t men t Adv i so ry , b i l l
pay men t s , and transactional services. In addition, this segment Sells third party
financial products, such as mutual funds and insurance, as Well as distributes
life and general insurance products t h rough i t s t i e -ups w i th i n su rance
compan i e s and mu tua l f und house s . The who le sa l e banking Segment
provides loans, non-fund facilit ies, and transaction services to
large Corporate, emerging corporate, small and medium enterprise, supply
chain, Public sector
undertaking, central and state government departments, and
Institutional customers. It offers deposit and transaction banking products,
26
Supply chain financing, working CapitaLand term finance, agricultural loans, and
funded non-funded treasury, and foreign exchange products. This segment’s
services include trade services, cash management, and money M a r k e t ,
c u s t o d i a l , t a x c o l l e c t i o n , a n d e l e c t r o n i c b a n k i n g . I n
a d d i t i o n , i t p r o v i d e s co r r e sponden t bank s e rv i ce s t o co -
ope ra t i ve banks , p r i va t e banks , f o r e ign banks , and regional rural
banks. The Treasury Services segment operates primarily in areas, such
as foreign exchange, money market, interest rate trading, and Equities. As of March
31, 2009HDFC bank had a network of 1,142 branches And 3,295 automated teller
machines in 528cities in India. The company was founded in 1994 and is based in
Mumbai, India.
ORGANISATION STRUCTURE OF HDFC Bank:
27
S.M. - State Manager
Every manager has a 8 members under him. Hdfc has a tall organization
structure. Tall organization structure characterized by more hierarchical level and
narrow span of control. This type of organization provides closer supervision and
narrow span of control. This type of organization facilitates relations between
supervisors and subordinates. However some times too close supervision also may
some time strain the relations.
Customers:
It is important for the customers to understand that according to the typical
stage of the life, which they are currently and based upon that their financial needs
may differ. Therefore it is vital for the customer to know about their commitment and
S.M.
LOCALMANAGER
RELATIONSHIPMANAGER
ASST. RELATIONSHIPMANAGER
BRANCH HEAD
28
long term financial need before choosing a product. HDFC is one of growing bank in
the market.
At HDFC they classify their customers on the basis of following;
The Financial needs
The Age group
The Financial status
SWOT Analysis of HDFC Bank :
Strengths:
o In depth knowledge about prospective customers
o In depth knowledge about the rural and semi-urban areas
o Presence in most prospective cities in the form of branches
o Experienced board and executive management team
Weakness:
o Lack of a banking arm to complete the broker depository chain
o Lack of technology and equipment
o Insignificant presence in institutional segment.
29
Opportunities:
o Changing demographics with higher disposable income and
increasingly complex
o Financial instruments will drive demand for investment advisory
services.
o Rapid penetrations of internet and computer means that technology
enabled financial services will gain market.
Threats:
o There is a big threat to the company from its competitors like
karvy ,religare, and way2wealth.
o As the competitors is growing day by day, all the leading companies
like way2wealth, religare, and karvy etc. there is a cut throat
competitors to capture the 12 lakh population of vizag.
30
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
31
4.1 AGE GROUP OF THE RESPONDENTS
Age No of respondents Percentage
Between 18-25 17 16.7
Between 25-50 57 55.9
More than 50 28 27.5
Total 102 100
Table 4.1
Graph 4.1
32
Interpretation:
It is inferred that majority of respondents are of the age 25-50 (55.9%) and more
than 50 years old (27.5%). This is because there are very few among the age group of 18-
25 who are job holders and do not think of immediately investing. Where as in the age
group where the respondents were more than 50 years, are either retired or nearing
retirement and do not normally invest as actively as before.
4.2 GENDER OF THE RESPONDENTS
Gender No of respondents Percent
Male 68 66.7
Female 34 33.3
Total 102 100
Table 4.2
33
0
10
20
30
40
50
60
70
80
gender classification
Per
cen
t
Male
Female
Graph 4.2
Interpretation:
It is inferred from the above table and graph that 66.7% of respondents are male and
33.3% are female. This is so because the number of working male is more than the
number of working female.
4.3 MARITAL STATUS
Status No. of Respondents Percentage
34
Married 74 77
Single 28 23
Total 102 100
Table 4.3
Graph 4.3
Interpretation:
It is inferred from the above table and graph that 77% of respondents are married
and 23% of respondents are single. This is the case as majority of the respondents are
of marriageable age.
4.4 OCCUPATION OF RESPONDENTS
Occupation No of respondents Percentage
Student 2 2.0
35
Housewife 8 7.8
Professional 20 19.6
Services 6 5.9
Retired 7 6.9
Total 102 100
Table 4.4
Graph 4.4
Interpretation:
It is inferred from the above table and graph that most of the respondents are either
from business or profession.
4.5 INCOME OF RESPONDENTS
S. No. Options No. of respondents Percentage (%)
36
1. Below Rs.1,00,000/ 23 22.5
2.Between Rs.1,00,000/
and Rs.3,00,000/-42 41.1
3.Between Rs.3,00,000/
and Rs.5,00,000/-33 32.3
4. above Rs.5,00,000/ 4 3.9
Table 4.5
Graph 4.5
Interpretation:
It is inferred that 42.1% of respondents income is between 1,00,000 – 3,00,000 and
32.3% of respondents income lies between 3,00,000 – 5,00,000
4.6 NUMBER OF DEPENDENTS
Dependents No of respondents Percentage
37
1 dependent 22 22.6
2 dependents 21 21.6
3 dependents 42 41.2
More than 4 dependents 15 14.7
None 2 2.0
Total 102 100
Table 4.6
Graph 4.6
Interpretation:
It is inferred that majority of respondents have 3 dependents (41.2%) and 21.6% of
respondents have 1 dependent. This is the case mostly in nuclear families as the
number of dependents is generally more than 2.
4.7 KNOWLEDGE ABOUT MUTUAL FUND INVESTMENT
38
Knowledge No of respondents Percentage
Excellent 20 19.6
Good 54 52.9
Average 12 11.8
Bad 16 15.7
Total 102 100
Table 4.7
Graph 4.7
Interpretation:
It is inferred that 52.9% of respondents have a good knowledge about mutual
funds investment while 19.6% of respondents have an excellent knowledge about
mutual funds investment.
4.8 REASONS FOR INVESTING IN MUTUAL FUNDS
39
Factors No of respondents Percentage
Safety 21 20.6
High returns 11 10.8
Liquidity 27 26.5
Capital appreciation 9 8.8
Tax benefits 3 2.9
Total 102 100.0
Table 4.8
0
5
10
15
20
25
30
factors that allow to prefer the above said fund
Perc
ent
safety
high returns
liquidity
capital appreciation
tax benefits
Graph 4.8
Interpretation:
It is inferred from the above table and graph that most respondent are concerned
in safety (51%) and 27.5 of the respondents are concerned in getting high returns
40
4.9 RETURNS EXPECTED BY INVESTOR
Returns expected No of respondents Percentage
15% - 30% 71 69.6
30% - 50% 19 18.6
50% and above 12 11.8
Total 102 100.0
Table 4.10
0
10
20
30
40
50
60
70
80
return expected
Perc
ent
15% - 30%
30% - 50%
50% and above
Graph 4.10
Interpretation:
It is inferred from the above table and graph that 69.6% of respondents expect
15% - 30% returns on their investments in mutual funds and 18.6% of respondents
expect a return of 30% - 50%.
41
4.10 INVESTORS INVESTMENT HORIZON
Investment horizon No of respondents Percentage
< 1 year 37 39
1 year – 3 years 33 33
3 years – 5 years 17 15
> 5 years 15 13
Total 102 100.0
Table 4.11
Graph 4.11
Interpretation:
It is inferred from the above table that 39% of respondents prefer investing in mutual
funds with a time period less than 1 year and 33% of respondents prefer investing in
mutual funds with a time period of 1 year – 3 years.
42
4.11 GROWT RATE OF INVESTMENT
Growth No of respondents Percentage
Steadily 38 37.3
Rapidly 27 26.5
Average rate 37 36.3
Total 102 100.0
Table 4.13
0
5
10
15
20
25
30
35
40
rate at wich investment should grow
Perc
ent
steadily
rapidly
average rate
Graph 4.13
Interpretation:
43
It is inferred from the above table and graph that 37.3% of respondents wish
their investments to grow at a steady rate and 36.3% of respondents expect their
investments to grow at an average rate.
4.12 PERCENTAGE OF INCOME INVESTED
Percentage of income invested No of respondents Percentage
< 5% 47 46.1
5% - 10% 36 35.3
10% - 25% 15 14.7
> 25% 4 3.9
Total 102 100.0
Table 4.14
0
5
10
15
20
25
30
35
40
45
50
percentage of income invested
Perc
ent
< 5%
5% - 10%
10% - 25%
< 25%
Graph 4.14
Interpretation:
44
It is inferred from the above table and chart that 46.1% of respondents invest
less than 5% of their income and 35.3% of respondents invest up to 10% of their
income in mutual funds.
4.13 INVESTMENT OBJECTIVE
Investment objective No of respondents Percentage
Regular income 38 37.3
Growth only 12 11.8
Income and growth 41 40.2
Dividend 11 10.8
Total 102 100.0
Table 4.15
0
5
10
15
20
25
30
35
40
45
investment objective
Perc
ent
regular income
growth only
income and growth
dividend
Graph 4.15
Interpretation:
45
It is inferred from the above table and chart that 40.2% of respondents invest to
achieve the objective of income and growth and 37.3% of respondents invest for
regular income.
4.14 DURATION OF MONITORING INVESTMENTS
Duration No of respondents Percentage
Daily 12 11.8
Weekly 40 39.2
Monthly 27 26.5
Yearly 21 20.6
Occasionally 2 2.0
Total 102 100.0
Table 4.16
0
5
10
15
20
25
30
35
40
45
duration of monitoring investments
Perc
ent
daily
weekly
monthly
yearly
occasionally
Graph 4.16
46
Interpretation:
It is inferred from the above table and chart that 39.2% of respondents monitor
their investments weekly and 26.5% of respondents monitor their investments
monthly.
47
CHAPTER-5
Summary, Findings & Conclusions
48
A. SUMMARY
Mutual funds in India have come of age to cater to the needs of
investors. SEBI, which also controls the stock market operations, is the regulatory
body of the Indian mutual fund industry. Mutual funds can be classified into open-
ended funds, close-ended funds, and interval funds, based on the fund structure. Based
on the investment objectives, they are divided into growth funds, income funds,
balanced funds, and money-market funds. Based on the specific purpose of use,
mutual funds are classified into tax savings schemes, index funds, and theme-based
funds (including industry-specific or sectoral funds). Many fund marketers have come
out with innovative and customer friendly products that aim at satisfying the
investors’ financial goals. Systematic Investment Plan (SIP) is an innovation in
payment option for mutual fund investors. It is designed for those who are interested
in gradually accumulating wealth in a disciplined manner over a long term. Mutual
funds are priced based on their net asset value, which the fund houses declare on a
daily basis. Investors can sell their units back to the fund at the prevailing NAV.
Some funds attract entry and exit loads. Such loads are used to recover the costs spent
on distribution and other marketing costs. Mutual funds are distributed through five
channels of distribution, namely, direct channel, advice channel, retirement plan
channel, fund supermarket channel, and institutional channel. Apart from these
channels, mutual banking is also adopted, where cross-selling is used in association
with banks to sell the fund schemes through the banks’ branches.
Mutual fund marketers use advertising, sales promotions, brand
communications, and public relations to attract investors and to increase their sales.
Advertising includes print and electronic media, including the Internet. Fund
marketers give away incentives and gifts to the investors for investing in their funds
49
and such incentives and gifts may act as a catalyst for attracting more sales. They also
give incentives (in cash or kind) to their trade partners and their representatives.
Further, the fund houses have started the process of overhauling their brand image to
promote themselves more effectively to the customers. AMFI, the industry
association, has been actively involved in public relations (PR), by promoting the
mutual fund industry, both at the domestic level and in the international arena.
B. FINDINGS
Age group of the Respondents:
It is inferred that majority of respondents are of the age 25-50 (55.9%) and more
than 50 years old (27.5%). This is because there are very few among the age group of 18-
25 who are job holders and do not think of immediately investing. Where as in the age
group where the respondents were more than 50 years, are either retired or nearing
retirement and do not normally invest as actively as before.
Marital status:
It is inferred from the above table and graph that 77% of respondents are
married and 23% of respondents are single. This is the case as majority of the
respondents are of marriageable age.
Occupation of Respondents:
It was found that of the respondents are either from business or profession.
Income of Respondents:
The study shows that 42.1% of respondents income is between 1,00,000 –
3,00,000 and 32.3% of respondents income lies between 3,00,000 – 5,00,000.
50
Number of Dependents:
Majority of respondents have 3 dependents (41.2%) and 21.6% of
respondents have 1 dependent.
Knowledge about Mutual fund Investment:
About 52.9% of respondents have a good knowledge about mutual funds
investment while 19.6% of respondents have an excellent knowledge about mutual
funds investment
Reasons for Investing in Mutual funds:
Most respondent are concerned in safety (51.0) and 27.5 of the respondents
are concerned in getting high returns
Returns expected by Investor:
About 69.6% of respondents expect 15%-30% returns on their
investments in mutual funds and 18.6% of respondents expect a return of 30% - 50%.
Investors Investment Horizon:
Around 39% of respondents prefer investing in mutual funds with a
time period less than 1 year and 33% of respondents prefer investing in mutual funds
with a time period of 1 year – 3 years.
51
Growth Rate of Investment:
It was found from the study that 37.3% of respondents wish their
investments to grow at a steady rate and 36.3% of respondents expect their
investments to grow at an average rate.
Percentage of Income Invested:
About 46.1% of respondents invest less than 5% of their income and
35.3% of respondents invest up to 10% of their income in mutual funds.
Investment objective:
The study shows that 40.2% of respondents invest to achieve the
objective of income and growth and 37.3% of respondents invest for regular income.
Duration of monitoring investments:
About 39.2% of respondents monitor their investments weekly and
26.5% of respondents monitor their investments monthly.
C. CONCLUSION
The emergence of an array of savings and investment options and the
dramatic increase in the secondary market for financial assets in the recent years in
India has opened up an entirely new area of value creation and management. An
average Indian investor is a greenhorn when it comes to financial markets and the
causes may be many, e.g., lack of opportunity, lack of conceptual understanding and
the influence of a fixed-income orientation in the Indian culture. Salaried persons’
52
savings are most often deposited in investments; the theory behind this is that by
pooling together a huge aggregation of individual savings and investing them, using
the professional judgment of the fund manager, one spreads risk, takes advantage of
volume buying and scientific data analysis, expertise and so on. Therefore, it is seen
as the ideal option for an individual who does not have the time, knowledge or
experience to make a succession of judgments involving his hard-earned savings. MF
industry in India has a large untapped market in urban areas besides the virgin
markets in semi-urban and rural areas. This market potential can be tapped by
scrutinizing investor behavior to identify their expectations and articulate investor’s
own situation and risk preference and then apply to an investment strategy that
combines the usual four: cash and equivalents, Government-backed bonds, debt, and
equity.
Presently, more and more funds are entering the industry and their survival depend on
strategic marketing choices of mutual fund companies, to survive and thrive in this
highly promising industry, in the face of such cutthroat competition. In addition, the
availability of more savings instruments with varied risk-return combination would
make the investors more alert and choosy.
Studies similar to this, if conducted on a large scale at regular intervals by
organizations like AMFI/SEBI, will help capture the changing perceptions and
responses of these groups, and thus provide early warning signals to enable
implementation of timely corrective measures. It is hoped that the survey findings of
the study will have some useful managerial implications for the AMCs in their
product designing, marketing and management of the fund.
53
CHAPTER 6
BIBLIOGRAPHY
54
o Mutual funds in India: marketing strategies and investment
practices. H.Sadhak. Response Books. 2003
o . An Introduction to Mutual Funds World Wide.Russell ray.
John, wisely & son ltd. 2007
o www .hdfcbank.com
o www.bseindia.com
o www.yahoofinance.com
55
CHAPTER 7
ANNEXURE (OUESTIONAIRE)
56
QUESTIONAIRE
1. Name:
2. Age
<18yrs 18yrs-30yrs
30yrs-50yrs more than 50yrs.
3. Gender:
Male Female.
4. Marital Status:
Single Married.
5. Occupation:
Student Housewife Professional
Services Business Retired
57
6. Academic Qualification:
Under Graduate Post graduate
Diploma Others.
7. Annual Income:
< 2,00,000 2,00,000 - 3,00,000
3,00,000 – 5,00,000 >5,00,000.
8. Number Of Dependents:
None 1 dependent 2 dependents
3 dependents 4 and above
dependents.
9. Knowledge about Mutual Fund Investment:
Excellent Good
Average Bad.
58
10.Why do you invest in Mutual Fund?
Capital Appreciation Regular Income
Retirement Tax Savings.
11.Main concern/expectation from an investment made?
High Returns Liquidity
safety Risks.
12.Expected Rate of Returns?
<10% 10% - 15%
15% - 20% > 20%.
.
13. What is your investment horizon?
< 1 year 1yr -3yrs
3yrs – 5yrs >5yrs.
14 .Where do you prefer to invest?
59
Mutual Funds Shares Bonds/Debentures Bank Deposits
Real Estate Post Office NSC/KVP Bullions.
15. The time-period of your above preferred investment?
<1yr 1yr – 3yrs
3yrs – 5yrs >5yrs
16. You would like your investment to grow at:
Steadily Fast At an Average Rate.
17. What percentage of your income do you invest?
< 5% 5% - 15%
15% - 25% >25%.
18. Which best describes your investment objective?
Regular income Growth only
60
Income Growth.
19. Do you keep watch over your investments?
Yes No Sometimes.
20. If yes, how often?
Every day Weekly Monthly
Yearly Occasionally.
61