A STUDY ON INVESTORS PERCEPTION TOWARDS INVESTMENT

IN MUTUAL FUNDS WITH REFERENCE TO VELLORE CITY

A PROJECT REPORT

Submitted in partial fulfilment for the award of the degree of

Bachelor of Commerce

BY

KC. Arun Kumar (15BCC0097)

Under the Supervision of

Dr. Ramola Premalatha J

DEPARTMENT OF COMMERCE

School of Social Sciences and Languages

Vellore
 DECLARATION
I, Mr. KC. Arun Kumar with register number 15BCC0097, hereby declare that the project report
entitled “A STUDY ON INVESTORS PERCEPTION TOWARDS INVESTMENT IN
MUTUAL FUNDS WITH REFERENCE TO VELLORE CITY” submitted by me to Vellore
Institute of Technology, Vellore, in partial fulfilment of the requirement for the award of the degree
of Bachelor of Commerce is a bonafide work carried out by me under the supervision of Dr.
Ramola Premalatha J, Associate Professor, Department of Commerce, School of Social Sciences
and Languages, VIT, Vellore – 632 014. I further declare that the work reported in this project has
not been submitted and will not be submitted, either in part or in full, for the award of any other
degree or diploma in this institute or any other Institute or University.

Place: ________________

Date:
Mr. KC. Arun Kumar

(Signature)

i
 CERTIFICATE
This is to certify that the project work entitled “A STUDY ON INVESTORS
PERCEPTION TOWARDS INVESTMENT IN MUTUAL FUNDS WITH REFERENCE
TO VELLORE CITY” submitted by Mr. KC Arun Kumar with registration number
15BCC0097, to Vellore Institute of Technology, Vellore, in partial fulfilment of the requirement
for the award of the degree of Bachelor of Commerce, is a bonafide work carried out by him
under my supervision. The project fulfils the requirement as per the regulations of this VIT
Vellore and in my opinion, meets the necessary standards for submission. The contents of this
report have not been submitted and will not be submitted either part or in full, for the award of
any other degree or diploma in this Institute or any other Institute or University.

Place: ________________________

Date: Dr. Ramola Premalatha J

(Guide’s Name &

Signature)

Examiner 1: __________________ HOD, Commerce, SSL: ___________

Examiner 2: __________________ Dean, SSL: _____________________

ii
 ACKNOWLEDGEMENT

At the outset, we thank the Almighty God for his blessings for granting us the knowledge
and right aptitude to successfully complete my project work.

I would like to express our special gratitude and thanks to my guide Dr. Ramola
Premalatha, Associate Professor, Department of Commerce School of Social Sciences and
Languages, whose esteemed guidance and immense support encouraged me to complete the
project successfully.

I wish to express my sincere thanks to Honourable Chancellor, Dr. G. Viswanathan;

esteemed Vice-President, Shri. G. V. Selvam; respected Vice Chancellor, Dr. Anand A.
Samuel; respected Pro-Vice Chancellor Dr. S. Narayanan of this prestigious VIT, Vellore for
providing us an excellent world class academic environment and facilities for pursuing my
B.Com Programme.

My sincere gratitude lies to the Dean, Dr. K. Revathi, School of Social Sciences and
Languages, and Head of the Department of Commerce, Dr. G. Velmurugan for providing me
an opportunity to do my project work in the VIT, Vellore.

I also thank all the faculty members of the Department of Commerce and faculty of other
departments of the School of Social Sciences and Languages and the non-teaching staff for
giving us the courage and strength that we needed to achieve my goals.

My special thanks to our friends for their timely help and suggestions rendered for the
successful completion of this project.

This acknowledgement would be incomplete without expressing my whole hearted thanks to

my parents for their continuous support and guidance in all walks of my life.

Mr. KC Arun Kumar

iii
 CONTENTS

Page
TITLE
Number

Declaration i

Certificate ii

Acknowledgement iii

Contents iv

List of Figures v

List of Tables vi

Chapter I Introduction 1

Chapter II Review of Literature 6

Chapter III Research Methodology 9

Chapter IV Data Analysis and Interpretation 11

Chapter V Conclusions and Recommendations 31

References 32

Appendix 34

iv
 LIST OF FIGURES
Fig. No. Title Page
Number

1. Gender of Respondents 11

2. Age of Respondents 12

3. Qualification of Respondents 13

4. Occupation of The Respondents 14

5. Number of Earning Members in The Family 15

6. Income Level of The Investors 16

7. Amount of Savings 17

8. Modes of Investment 18

9. Investment in Mutual Fund Per Annum 19

10. Investment Experience 20

11. Investment Option 21

12. Timing of Investment 22

13. Investment Scheme 23

14. Expected Return of Investors 24

15. Satisfaction Level 25

16 Have You Suggested Others to Invest In Mutual

26
Funds?

v
 LIST OF TABLES

Fig. No. Title Page Number

1. Gender of Respondents 11

2. Age of Respondents 12

3. Qualification of Respondents 13

4. Occupation of The Respondents 14

5. Number of Earning Members in The Family 15

6. Income Level of The Investors 16

7. Amount of Savings 17

8. Modes of Investment 18

9. Investment in Mutual Fund Per Annum 19

10. Investment Experience 20

11. Investment Option 21

12. Timing of Investment 22

13. Investment Scheme 23

14. Expected Return of Investors 24

15. Satisfaction Level 25

16 Have You Suggested Others to Invest in Mutual Funds? 26

17 Association Between Income and Fund Preferred 27

18 Relation Between Age and The Length of The Investment 28

19 Association Between Age and Type of Scheme 29

20 Investors Opinion About Mutual Fund 30

vi
 CHAPTER I

INTRODUCTION

INTRODUCTION

The purpose of saving is differing among individuals. All savers are not investors. An investor is
one who invests in his/ her savings. Investment is an activity which is different from saving. Savings
are generated when a person abstain from present consumptions for a future use. Saving kept as cash
are not proffered as they do not earn anything. Hence the saver has to find a temporary for his savings
until they are required to for his future. This results in investment. The increase in the working
population, higher family incomes and consequent savings, availability of large and attractive
investment alternatives and an increase in investment related publicity have made investment a
household word and it is popular among people from all walks of life. Investment involves the
employment of money with an aim of achieving additional income or growth in number.

Investors are the backbone of any capital market. The capital market is the subsystem of the financial
system. It is a market for long term funds such as share, debenture and bonds. It brings together the
supplier and user of the capital and provides funds to industries and government, to meet their long-
term requirements. The capital market in India may be classified into organised and unorganised
capital market. The organised sector consists of individuals and corporate investors on supply side
and corporate enterprises, government and semi- government on the demand side. The unorganised
capital market consists of indigenous bankers and money lenders who provide loan to the individual
borrower.

The Indian stock market is one of the fastest growing markets. The sensitive nature of the market,
the high growth objective, the increased demand for funds and limited source open to the corporation
all suggest that both the corporation and the investors should understand the function of the stock
market. The investment climate in India is affected by the event of political, social and economic
factors and these are reflected in the volume of trading and the share price index of the stock
exchanges in India. The changed political thinking in terms of economic policies and the consequent
awareness have largely affected the investment climate.

The reform process has sent signals to a wave of changes in savings and investment behaviour adding
a new dimension to the growth of financial sector. With the increase in domestic savings and
improvement in deployment of investments through markets, the need and scope of mutual funds

1
operation has increased tremendously. Mutual funds are not only best suited for the purpose but also
are capable of meeting this challenge effectively. Professional who manages are considered to have
a better knowledge of market behaviour. Another important reason is that dividend and capital gains
are reinvested automatically in mutual fund and, hence, are not frittered away. Mutual fund also
creates awareness among urban and rural middle class about the benefits of investment in capital
market through profitable and safe avenues, and are able to gather a large amount of surplus fund
available with this section. For all investors, mutual funds have provided a better investment to all
types of investors.

With a short span of time mutual fund operation has become an integral part of the Indian financial
scheme and is poised for rapid growth in the nature. The mutual fund has been remarkably resilient
over the last decade in spite of varying economic condition, and increasing competition. Today
various schemes tailored to meet the diversified needs of the saver, are being offered by many mutual
fund institutions.

The new mutual fund products launches have been many of the equity-based funds in the market,
primarily to attract investors who would like to take risk for greater risk for greater return, while
debt funds also launched during this period. The investors hesitate to invest in equity funds when
the market is down. One is ought to design mutual fund products, which shall combine an optimal
mix of return, risk, liquidity, and safety for the investors for all the category.

ORGANIZATION STRUCTURE OF MUTUAL FUNDS

Mutual funds have organization structure as per the Security Exchange Board of India guideline;
Security Exchange Board of India specified authority and responsibility of Trustee and Asset
Management Companies. The objective is to controlling, to promoted, to regulate, to protect the
investors’ right and efficient trading of units. Operations of Mutual fund start with investors save
their money on mutual fund, than Mutual Fund manager handling the funds and strategic investment
on scrip. As per the objectives of particular scheme manager selected scrips. Unit value will become
high when fund manager investment policies generate the return on capital market. Unit return
depends on fund return and efficient capital market. Also affects international capital market,
liquidity and at last economic policy. Below the graph indicates how the process was going on to
investors to earn returns. Mutual fund manager having high responsibility inside of return and how
to minimize the risk. When fund provided high return with high risk, investors attract to invest more
fund for same scheme.

2
The Mutual fund organization as per the SEBI formation and necessary formation is needed for
sooth activities of the companies and achieved the desire objectives. Transfer agent and custodian
play role for dematerialization of the fund and unit holders hold the account statement, but custody
of the unit is on particular Asset Management Company. Custodian holds all the fund units on
dematerialization form. Sponsor had decided the responsibility of custodian when investor to
purchase the fund and to sell the unit. Application forms, transaction slip and other requests received
by transfer agent, middle men between investors and Assts Management Companies.

TYPES OF MUTUAL FUND INVESTMENT

I. Open-Ended. - This scheme allows investors to buy or sell units at any point in time. This
does not have a fixed maturity date

1.Debt/ Income - In a debt/income scheme, a major part of the investable funds is channelized
towards debentures, government securities, and other debt instruments. Although capital
appreciation is low (compared to the equity mutual funds), this is a relatively low risk-low return
investment avenue which is ideal for investors seeing a steady income.

2. Money Market/ Liquid - This is ideal for investors looking to utilize their surplus funds in
short term instruments while awaiting better options. These schemes invest in short-term debt
instruments and seek to provide reasonable returns for the investors.

3. Equity/ Growth - Equities are a popular mutual fund category amongst retail investors.
Although it could be a high-risk investment in the short term, investors can expect capital
appreciation in the long run. If you are at your prime earning stage and looking for long-term
benefits, growth schemes could be an ideal investment.
3.i. Index Scheme - Index schemes is a widely popular concept in the west. These follow a
passive investment strategy where your investments replicate the movements of benchmark
indices like Nifty, Sensex, etc.
3.ii. Sectoral Scheme - Sectoral funds are invested in a specific sector like infrastructure, IT,
pharmaceuticals, etc. or segments of the capital market like large caps, mid-caps, etc. This
scheme provides a relatively high risk-high return opportunity within the equity space.
3.iii. Tax Saving - As the name suggests, this scheme offers tax benefits to its investors. The
funds are invested in equities thereby offering long-term growth opportunities. Tax saving
mutual funds (called Equity Linked Savings Schemes) has a 3-year lock-in period.

3
4. Balanced - This scheme allows investors to enjoy growth and income at regular intervals.
Funds are invested in both equities and fixed income securities; the proportion is pre-determined
and disclosed in the scheme related offer document. These are ideal for the cautiously aggressive
investors.

II. Closed-Ended - In India, this type of scheme has a stipulated maturity period and investors
can invest only during the initial launch period known as the NFO (New Fund Offer) period.

1. Capital Protection - The primary objective of this scheme is to safeguard the principal amount
while trying to deliver reasonable returns. These invest in high-quality fixed income securities
with marginal exposure to equities and mature along with the maturity period of the scheme.

2. Fixed Maturity Plans (FMPs) - FMPs, as the name suggests, are mutual fund schemes with
a defined maturity period. These schemes normally comprise of debt instruments which mature
in line with the maturity of the scheme, thereby earning through the interest component (also
called coupons) of the securities in the portfolio. FMPs are normally passively managed, i.e.
there is no active trading of debt instruments in the portfolio. The expenses which are charged to
the scheme, are hence, generally lower than actively managed schemes.

ADVANTAGES & DISADVANTAGES OF MUTUAL FUND

1. Advanced Portfolio Management

you pay a management fee as part of your expense ratio, which is used to hire a professional portfolio
manager who buys and sells stocks, bonds, etc. This is a relatively small price to pay for help in the
management of an investment portfolio.

2. Dividend Reinvestment

As dividends and other interest income is declared for the fund, it can be used to purchase additional
shares in the mutual fund, thus helping your investment grow.

3. Risk Reduction (Safety)

4
A reduced portfolio risk is achieved through the use of diversification, as most mutual funds will
invest in anywhere from 50 to 200 different securities - depending on their focus. Several index stock
mutual funds own 1,000 or more individual stock positions.

4. Convenience and Fair Pricing

Mutual funds are common and easy to buy. They typically have low minimum investments and they
are traded only once per day at the closing net asset value (NAV). This eliminates price fluctuation
throughout the day and various arbitrage opportunities that day traders practice.

DISADVANTAGES
1. High Expense Ratios and Sales Charges

If you're not paying attention to mutual fund expense ratios and sales charges, they can get out of
hand. Be very cautious when investing in funds with expense ratios higher than 1.20%, as they will
be considered on the higher cost end. Be wary of 12b-1 advertising fees and sales charges in general.
There are several good fund companies out there that have no sales charges. Fees reduce overall
investment returns.

2. Management Abuses

churning, turnover and window dressing may happen if your manager is abusing his or her authority.
This includes unnecessary trading, excessive replacement and selling the losers prior to quarter-end
to fix the books.

3. Tax Inefficiency

Like it or not, investors do not have a choice when it comes to capital gain payouts in mutual funds. Due
to the turnover, redemptions, gains and losses in security holdings throughout the year, investors typically
receive distributions from the fund that are an uncontrollable tax event.

4. Poor Trade Execution

If you place your mutual fund trade any time before the cut-off time for same-day NAV, you'll receive
the same closing price NAV for your buy or sell on the mutual fund. For investors looking for faster
execution times, maybe because of short investment horizons, day trading, or timing the market, mutual
funds provide a weak execution strategy.

5
 CHAPTER II

REVIEW OF LITERATURE

Mutual fund has attracted a lot of attention and kindled the interest of both academic and practitioner
communities. This literature review reveals some of the investors behaviour studies.

Sujith siksander and Amrit Singh (1996) carried out a survey with an objective to understand the
behaviour aspect of the investors of the northern region towards equity and mutual fund investment
portfolio. The survey revealed that the salaried and self- employed formed the major investors in
mutual funds primarily due to tax concessions. UTI and SBI schemes were popular in that part of
the country.

Madhusudhan V jambodekar (1996) conducted a study to assess the awareness of mutual funds
among investors, to identify the information sources influencing the buyer decision and factors
influencing the choice of a particular mutual fund.

Shanmugam (2001) conducted a survey of 201 individual investors to study the information sourcing
by investors, their perception of various investment decisions, and reported that psychological and
sociological factors dominated economic factors in share investment decisions.

Rajeshwari T.R and Rama Moorthy (2006) studied the financial behaviour and factors influencing
fund/scheme selection of retail investors by conducting factors analysis using principal component
analysis, to identify the investor’s fund selection criteria, so as to group them into specific market
segments for designing of the appropriate marketing strategy.

Jaspal Singh and Subhash Singh (2006) conducted a study on perception of investors towards mutual
fund and analysed the reason for withdrawal and/or not investing anymore in mutual funds.

Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance. Drawing
on results obtained in the field of portfolio analysis, economist Jack L. Treynor has suggested a new
predictor of mutual fund performance, one that differs from virtually all those used previously by
incorporating the volatility of a fund's return in a simple yet meaningful manner.

Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensen’s alpha)
that estimates how much a manager’s forecasting ability contributes to fund’s returns. As indicated
by Statman (2000), the e SDAR of a fund portfolio is the excess return of the portfolio over the

6
return of the benchmark index, where the portfolio is leveraged to have the benchmark index’s
standard deviation.

Zakri Y.Bello (2005) matched a sample of socially responsible stock mutual funds matched to
randomly selected conventional funds of similar net assets to investigate differences in
characteristics of assets held, degree of portfolio diversification and variable effects of
diversification on investment performance. The study found that socially responsible funds do not
differ significantly from conventional funds in terms of any of these attributes. Moreover, the effect
of diversification on investment performance is not different between the two groups. Both groups
underperformed the Domini 400 Social Index and S & P 500 during the study period.

Mishra, et al., (2002) measured mutual fund performance using lower partial moment. In this paper,
measures of evaluating portfolio performance based on lower partial moment are developed. Risk
from the lower partial moment is measured by taking into account only those states in which return
is below a pre-specified “target rate” like risk-free rate.

Kshama Fernandes (2003) evaluated index fund implementation in India. In this paper, tracking error
of index funds in India is measured. The consistency and level of tracking errors obtained by some
well-run index fund suggests that it is possible to attain low levels of tracking error under Indian
conditions. At the same time, there do seem to be periods where certain index funds appear to depart
from the discipline of indexation.

K. Pendaraki (2000) studied construction of mutual fund portfolios, developed a multi-criteria

methodology and applied it to the Greek market of equity mutual funds. The methodology is based
on the combination of discrete and continuous multi-criteria decision aid methods for mutual fund
selection and composition. UTADIS multi-criteria decision aid method is employed in order to
develop mutual fund’s performance models. Goal programming model is employed to determine
proportion of selected mutual funds in the final portfolios.

S.Narayan Rao (2002) evaluated performance of Indian mutual funds in a bear market through
relative performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio, Sharpe’s measure ,
Jensen’s measure, and Fama’s measure. The study used 269 open-ended schemes (out of total
schemes of 433) for computing relative performance index. Then after excluding funds whose
returns are less than risk-free returns, 58 schemes are finally used for further analysis. The results of
performance measures suggest that most of mutual fund schemes in the sample of 58 were able to

7
satisfy investor’s expectations by giving excess returns over expected returns based on both premium
for systematic risk and total risk.

Jaidev (1996) evaluated the performance of two growth oriented mutual funds (master gain and
magnum express) on the basis of monthly returns compared in benchmark returns. For that purpose,
risk adjusted performance measures suggested by jenson, treynor and hsarpe were employed. It was
found that, Mastergain had performed better according to jenson and treynor measures and on the
basis of Sharpe ratio it’s performance was not upto the benchmark. The performance of Magnum
Express was poor on the basis of all these three measures. However, Magnum Express was well
diversified and had reduced its unique risk where as Master gain did not. It can be concluded that,
the two growth-oriented funds had not performed better in terms of total risk and the funds were not
offering advantages of diversification and professionalism to the investors.

Mark Grinblatt (1989) empirically examined the Jensen Measures, the positive period weighting
measures, developed in Grinblatt and titman (1987a), measures developed from the Treynor Mazuy
(1966) quadratic regression on a sample 179 mutual funds, using a variety of benchmark portfolios.
They found that the measures generally yield similar inference when using the same benchmark and
those inferences could vary, even from the same measures, when using different benchmarks.
Several benchmarks, developed there, appeared in improve upon traditional benchmark for
assessment of fund performance. This superior benchmark consisted of sets of portfolios formed on
the basis of securities characteristics. Tests of fund performance that employed fund characteristics,
such as ne asset value, load, expenses, portfolio turnover, management fee, and past performance
were also reported. Those potentially more powerful tests suggested that past performance and
turnover were positively related to fund performance.

8
 CHAPTER-III

RESEARCH METHODOLOGY

OBJECTIVES OF THE STUDY

 To know the investors perception towards investment in mutual fund

 To know the investment motives of mutual fund investors.
 To study the socio-economic profile of the investors
 To assess the investment pattern of the investment.
 To study the expectations of investors towards Mutual Fund

RESEARCH DESIGN

The present study adopts a descriptive design which deals about the existing facts and phenomenon.

POPULATION AND SAMPLE SIZE

The population of the study is infinite, so sample of 125 investors are taken for the analysis purpose.

SAMPLE DESIGN
Population in statistics means the whole of the information which purview of statistical investigation.
Here the population is the investors of mutual fund in Vellore City in Tamilnadu.

NATURE OF THE DATA

The data is collected through primary and secondary sources. The primary data have been collected
from the respondents through the survey method using the Questionnaire and the secondary data is
collected through books, journals websites.

SCOPE OF THE STUDY

The study is useful to understand the investors perception towards investment in mutual funds in
Vellore City, and also it helps to know the investors motives satisfaction level to conclude that results
will be analysed and presented in a detailed way for understanding of the research. The perception
of the investment in mutual fund can be analysed with the help of the survey results.

9
LIMITATIONS OF THE STUDY

 The sample size is limited to 125 individual investors in the City of Vellore. The sample size
may not adequate represent the national market.
 Time constrains was the biggest limitation. The project had to completed within 4 months.
 Respondents given their data based on the present status of the market, but the market is subject
to change.

10
 CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

TABLE – 1: GENDER OF THE RESPONDENTS

NO. OF
GENDER PERCENTAGE
RESPONDENTS

MALE 98 78
FEMALE 27 22
TOTAL 125 100

GRAPH – 1: GENDER OF THE RESPONDENTS

GENDER OF THE RESPONDENTS

120

100

80

60

40

20

0
MALE FEMALE

Interpretation:

From the study, the number of male respondents is more in number that is about 78% & the next
position has been occupied by female respondents they are about 22% of the sample so, mainly men
prefer to go for investments.

11
 TABLE – 2: AGE WISE CLASSIFICATION OF RESPONDENTS

No. of
Age Percentage
Respondents
Below 30 71 56.8
Between 30-50 31 24.8
Above 50 23 18.4
Total 125 100

GRAPH – 2: AGE WISE CLASSIFICATION OF RESPONDENTS

NO. OF RESPONDENTS

Above 50, 23

Below 30, 71
Between 30-50,
31

Interpretation

The above table reveals that the majority of the investors belong to the younger group of age i.e. less
than 30. The investors of age 30-50 are 31 in number with 24.8%. The investors of age above 50 are
23 in number with 18.4%.

12
 TABLE – 3: EDUCATIONAL QUALIFICATION OF THE RESPONDENTS

No. of
Qualification Percentage
Respondents
Below graduation 15 12
Graduation 36 28.8
Post-graduation 62 49.6
Other 12 9.6
Total 125 100

GRAPH – 3: EDUCATIONAL QUALIFICATION OF THE RESPONDENTS

EDUCATIONAL QUALIFICATION OF THE

RESPONDENTS

Other

Post graduation

Graduation

Below graduation

0 10 20 30 40 50 60 70

Interpretation

The above table reveals that the majority 49.6% of the investors fall under that category of post
graduates followed by 28.8% of the investors fall under graduation category, and only 12% fall under
the category other like Diploma, schooling etc.,

13
 TABLE – 4: OCCUPATION OF THE RESPONDENTS

No. of
Occupation Percentage
Respondents
Salaried 86 68.8
Businessman 22 17.6
Professional 13 10.4
House wife 2 1.6
Retired 2 1.6
Total 125 100

GRAPH – 4: OCCUPATION OF THE RESPONDENTS

OCCUPATION OF THE
RESPONDENTS
100
90 86
80
70
60
50
40
30 22
20 13
10 2 2
0
Salaried Businessman Professional House wife Retired

Interpretation

According to the survey the respondents were of different occupations. Most of respondents are from
salaried category is about 68.8% of the sample. Respondents from the business are occupying 17.6%,
then comes professional with 10.4%, house wife 1.6%, and retired people occupy 1.6%.

14
 TABLE – 5: NUMBER OF EARNING MEMBERS IN THE FAMILY

No of earning
No. of Respondents Percentage
members
One 30 24
Two 52 41.6
Three 34 27.2
Above 3 9 7.2
Total 125 100

GRAPH – 5: NUMBER OF EARNING MEMBERS IN THE FAMILY

NUMBER OF EARNING MEMBERS

IN THE FAMILY
One Two Three Above 3
52

34
30

No. of Respondents
One 30
Two 52
Three 34
Above 3 9

Interpretation

The above table reveals that 76% of the respondent’s family consist of more than one earning
member. People prefer to invest in mutual fund when their income increases.

15
 TABLE – 6: INCOME LEVEL OF THE INVESTORS

Number of
Total income Percentage
Respondents
Low income group 62 49
Middle income group 34 28
High income group 29 23
Total 125 100

GRAPH – 6: INCOME LEVEL OF THE INVESTORS

The income, savings and investment are closely related. Income of the investors is one of the factors
influencing in investment decision. The ability to save and depends upon the income level of the
investors. Hence, the information in respect of the income level of the respondents have been
collected and tabulated as follows.

While classifying the data the respondents who are having income of less than one lakh per annum
are considered as low income group. The people with an income between 1& 3 lakh per annum are
grouped under middle income, group and people with more than 3 lakhs per annum are grouped
under high income group.

INCOME LEVEL OF THE INVESTORS

70 62
60
50
40 34
29
30
20
10
0
Number of Respondents
Low income group 62
Middle income group 34
High income group 29

Low income group Middle income group High income group

16
Interpretation

The above table reveals that 49% of respondents are belongs to the low-income group. 28% of
respondents are belongs to the middle-income group and high-income group consist of 23% of
respondents.

TABLE – 7: AMOUNT OF SAVINGS

Amount of Savings No. of Respondents

Less than 25000 37
25000-50000 59
50000-75000 14
75000- 100000 8
Above 100000 7

GRAPH – 7: AMOUNT OF SAVINGS

AMOUNT OF SAVINGS

Above 100000 7

75000- 100000 8

50000-75000 14

25000-50000 59

Less than 25000 37

0 10 20 30 40 50 60 70

Interpretation

From the above table it is clear that around 59 respondents save RS.25000 to RS.50000 of their
annual income for mutual funds. Whereas only 7 respondents tend to save above RS.100000 for
their mutual funds.

17
 TABLE – 8: MODES OF INVESTMENT

No. of Respondents
Modes of Investment
Bank 24
Government Bonds 12
Post office savings 26
Mutual fund 30
Shares 22
Debenture 3
Gold 8

GRAPH – 8: MODES OF INVESTMENT

Interpretation

The above table states that there are more number of people who invest on post office savings than
mutual funds. Whereas very less number of people invest on debentures as a mode of their
investment, as debentures is only redeemable after a certain period of time.

18
 TABLE – 9: INVESTMENT IN MUTUAL FUND PER ANNUM

Investment in Mutual Fund No. of Respondents

Less than 10000 19
10000-20000 32
20000-30000 28
30000-40000 30
Above 40000 16

GRAPH – 9: INVESTMENT IN MUTUAL FUND PER ANNUM

INVESTMENT IN MUTUAL FUND

35
30
25
20
15
10
5
0
Less than 10000-20000 20000-30000 30000-40000 Above 40000
10000

Interpretation

As the above table shows that only 15 respondents tend to save above RS.40000, whereas around 28
respondents save RS.30000-RS.40000. But more than 30 respondents tend to save around RS.10000-
RS.20000 of their annual income as an investment in mutual fund.

19
 TABLE – 10: INVESTMENT EXPERIENCE

Investment Experience No. of Respondents

Less than 2 years 28
2- 4 years 41
4-6 years 23
6-8 years 20
above 8 years 13

GRAPH – 10: INVESTMENT EXPERIENCE

INVESTMENT EXPERIENCE
Less than 2 years 2- 4 years 4-6 years 6-8 years above 8 years

13, 11%
28, 22%
20, 16%

23, 18%
41, 33%

Interpretation

Here the above table clearly shows that there are very less number of respondents who has experience
on investment more than 8 years. Whereas 41 respondents have an experience of around 2-4 years
and 28 respondents has an experience of less than 2 years.

20
 TABLE – 11: INVESTMENT OPTION

No. Of
Investment Option Percentage
respondents
Every month 76 60.8
Quarterly 10 8
Half yearly 8 6.4
Annually 23 18.4
Occasionally 8 6.4
Total 125 100

GRAPH - 11: INVESTMENT OPTION

INVESTMENT OPTION
Occasionally
6%

Annually
18%

Half yearly
7% Every
month
61%
Quarterly
8%

Interpretation

The above table proves that investors are majority investing every month. This shows that the
investors have realized the importance of saving on regular basis for a longer which yields a better
return.

21
 TABLE – 12: TIMING OF INVESTMENT

Timing of the investment No. Of Respondents Percentage

New fund offers 35 28
When market is bullish 11 8.8
When dividend is declared 12 9.6
when funds are available 31 24.8
when market is declining 36 28.8
Total 125 100

GRAPH – 12: TIMING OF INVESTMENT

TIMING OF INVESTMENT

when market is declining 36

when funds are available 31

When dividend is declared 12

When market is bullish 11

New fund offer 35

0 5 10 15 20 25 30 35 40

Interpretation

The above table exhibits that 29 % investors coming forward to invest when market is declining
stage and 28% when new fund offer, 24% of investors invest when funds are available, 9.6% are
investing when dividend is declared.8.8% of respondents are investing when market is bullish. In
overall shows that investors highly motivated towards investment at the time of market declining
and new fund offer.

22
 TABLE – 13: INVESTMENT SCHEME

Investment Scheme No. Of Respondents

Equity 48
Debt fund 16
Hybrid 11
Sector Specific fund 19
Tax saving 31

GRAPH – 13: INVESTMENT SCHEME

INVESTMENT SCHEME
48
50
45
40
31
35
30
25 19
16
20
11
15
10
5
0
Equity Debt fund Hybrid Sector Tax saving
Specific fund

Interpretation

Here the table clearly shows that there are very less number of people who choose hybrid as their
investment scheme. And equity has around 48 respondents who tend to invest in equity as equity is
more liquidates in form than other forms of investment.

23
 TABLE - 14: EXPECTED RETURN OF INVESTORS

Return No. Of Respondents Percentage

Equivalent to bank (8%) 6 4.8
08%- 10% 13 10.4
10%-15% 52 41.6
15%-20% 20 16
Above 20% 34 27.2
Total 125 100

GRAPH – 14: EXPECTED RETURN OF INVESTORS

Return
60
50
40
30
20
10
0
No. Of Respondents
Equivalent to bank (8%) 6
08%- 10% 13
10%-15% 52
15%-20% 20
Above 20% 34

Equivalent to bank (8%) 08%- 10% 10%-15% 15%-20% Above 20%

Interpretation

The above table it is clear that almost all the investors expect a higher return than the bank rate
because of the risk involved. 42 percent of respondents want to earn a return from 10 to 15 percent
and 16 percent between15 to 20 percent. And 27 percent of the respondents prefer above 20%.

24
 TABLE - 15: SATISFACTION LEVEL

Satisfaction Level No. Of Respondents Percentage

Very much satisfied 14 11.2
Very satisfied 21 16.8
Satisfied 74 59.2
Dissatisfied 8 6.4
Very much dissatisfied 8 6.4
Total 125 100

GRAPH – 15: SATISFACTION LEVEL

Satisfaction Level

No. Of Respondents

0 10 20 30 40 50 60 70 80

Very much dissatisfied Dissatisfied Satisfied

Very satisfied Very much satisfied

Interpretation

The above table points out that only a 12% of the respondents are dissatisfied with their return on
investment. In other words, the majority of investors are satisfied with the return on their investment
in mutual fund.

25
 TABLE 16: HAVE YOU SUGGESTED OTHERS TO INVEST IN MUTUAL
FUNDS?

Have you suggested others to

invest in mutual funds? No. Of Respondents
Yes 96

No 29

GRAPH – 16: HAVE YOU SUGGESTED OTHERS TO INVEST IN MUTUAL

FUNDS?

HAVE YOU SUGGESTED OTHERS TO

INVEST IN MUTUAL FUNDS?
120
100
80
60
40
20
0
Yes No

Interpretation

This table shows that only less number people tend or suggest others to invest in mutual funds.
Whereas around 100 respondents have suggested others to invest in mutual funds. Respondents who
have not suggested others to invest is just around 20.

26
 TABLE – 17

THE ASSOCIATION BETWEEN INCOME AND FUND PREFERED BY

THE INVESTOR
Types of Fund
Close
Income Total
Open-Ended Fund Ended
Fund
low income group 25 37 62
Middle income
20 14 34
group
Higher income
16 13 29
group
Total 61 64 125

Ho- There is no association between fund preferred by the investor and income

H1- There is an association between fund preferred by the investor and income.

Chi Square value 10.488

Table value @ 5% level of significance 9.488

DF - 4

Interpretation

The result of the Chi Square suggests that there is no significant association between age and length
of the investment. So, accept the null hypothesis. So, we can conclude that there is no close
association between the age and length of the investment in mutual fund.

27
 TABLE – 18

RELATION BETWEEN AGE AND THE LENGH OF THE INVESTMENT

Analysis with The Help of Chi Square

Less than Between 2- Between Between 6- Above 8

AGE Total
2 years 4 years 4-6 years 8 years years
less than 30 44 22 2 1 2 71
between
12 9 2 2 1 31
30-50
above 50 5 8 6 2 2 23
Total 60 37 14 6 8 125

H0 - There is no association between the age and investment.

H1 - There is an association between the age and investment.

Chi Square value 22.94

Table value @ 5% level of significance 15.5

DF 8

Interpretation

The result of the Chi Square suggests that there is a significant association between age and length
of the investment. So null hypothesis is rejected. So, we can conclude that there is a close association
between the age and length of the investment in mutual fund.

28
 TABLE - 19

THE ASSOCIATION BETWEEN AGE AND TYPE OF SCHEME

Type of Scheme
Age Equity Debt fund Hybrid Sector Specific Tax Saving Others Total
Less than 30 14 14 16 12 10 5 71
Between 30-50 4 6 4 7 6 4 31
Above 50 4 5 3 4 7 0 23
22 25 23 23 23 6 125

H0 - There is no association between age and type of scheme.

H1 - There is an association between age and type of scheme.

Chi Square value 11.17

Table value @ 5% level of significance 18.307

DF 10

Interpretation

The result of the Chi Square suggests that there is no significant association between age and
length of the investment. So accept the null hypothesis. So, we can conclude that there is no close
association between the age and scheme preferred.

29
 TABLE 20

INVESTORS OPINON ABOUT MUTUAL FUND

Weighted
Factors SA A NO DA SDA Total
Average
Mutual funds
are safe investments
25 53 22 18 7 125 3.56
Mutual fund
gives regular return
14 61 24 19 7 125 3.44
Investment in
mutual fund are
more 32 47 26 13 7 125 3.67
Liquid
Risk of loss is
less compare to
direct investment in
49 53 9 8 6 125 4.04
capital market
Diversified
portfolio minimizes 50 45 15 8 7 125 3.98
the risk of loss
Mutual funds
are safer
investments than
36 46 25 11 7 125 3.74
other avenues
Overall
4.48
Weighted Average

Interpretation

On analysing the table, it is clear that great significance has been attached to the fact that more
number of investors are agreeing to the fact that risk is less compared to less compared to direct
investment in capital market (4.04). then followed by diversified portfolio minimizes the risk of loss
(3.98), mutual funds are safer investments than other avenues (3.74), Investment in mutual fund are
more liquid (3.67), Mutual funds are safe investments (3.56)) Mutual fund give regular return (3.44).

30
 CHAPTER V

CONCLUSIONS AND RECOMENDATIONS

CONCLUSION
A Mutual fund most suitable investment for the common man as it offers an opportunity to invest in
a diversified, professionally managed basket of securities at a relatively low cost. India has a bigger
class of middle class now estimated around 300 million. A typical Indian middle-class family can
have liquid savings ranging from Rs 2 to 10 lacks today. Investments in banks are liquid safe, but
with falling rate of interest offered by bank on deposit, .it is no longer attractive. India is one of the
best market for mutual fund business, so also for insurance business. This is the reason for that the
foreign companies compete with one another for setting up insurance and mutual fund business in
India.

The alternative to mutual fund is direct investment by the investors in equities and bonds or corporate
deposit. An investment whether in share or debenture or deposit involves the risk; share value
fluctuate depending upon the performance of the company, the industry and economy at the large.
Generally, however longer the term, lesser the risk companies may default in payment of interest/
principal on the roads, debenture or deposit, the rate of interest on investment may fall short of the
rate of inflation reducing the purchasing power. While risk cannot be eliminated, skill full
management can reduce risk. Mutual fund helps to reduce the risk by professional management and
diversification. The experience and expertise of mutual fund managers in fundamentally sound
securities and timing their purchase and sales help them to build a diversified portfolio that
minimizes risk and maximizes return.

RECOMENDATIONS

The following suggestions and recommendations are made based on the findings of the study.

 The mutual funds should focus their advertisement more on the younger investors.
 The mutual fund can high lighten the profitability aspect comparing it with the direct market
investment in their advertisement campaign in order to attract more number of new investors.
 The mutual fund can announce new schemes when the stock markets temporarily in boom stage
in order to collect more funds from the public
 Mutual fund provides a better in long term, so whenever the market declines, the benefit of the
long-term investment explained to the investors, thereby they can collect more funds

31
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33
 APPENDIX

1. Name:

2. Age: a) Below 30 b)30-40 c)40-50 e) Above 50

3. Educational qualification

a) Below graduation b) Graduate C) Post graduate d) others

4.Occupation

a) Salaried b) Businessman c) Professional d) Agriculturalist

e) House wife f) Retired

5. Number of earnings in the family

a)1 b)2 c)3 d) Above 3

6. Total income of the family

a) Less than 1 Lakh b) 1-2 Lakh c) 2-3 Lakh d) 3-4 Lakh

e) Above 4 Lakh

7. What is the approximate amount of savings in your family

a) Less than 25000 b) 25000-50000 c) 50000-75000

d) 75000- 100000 e) Above 100000

8. What are the various modes of the investment.

a) Bank

b) Government Bonds

c) Post office savings

d) Mutual fund

e) Shares

f) Debenture

34
g) Gold

9. How much do you invest in mutual fund per annum?

a) Less than 10000 b) 10000-20000 c) 20000-30000

d) 30000-40000 e) Above 40000

10. How long have you been investing in mutual fund?

a) Less than 2-year b) 2- 4-year c) 4-6-year d) 6-8 year

e) above 8 years

11.Please tick the investment option you make?

a) Every month b) Quarterly c) Half yearly

d) Annually e) Occasionally

12.How do you choose your investment timing?

a) New fund offers

b) When market is bullish

c) When market is declared by Mutual Fund Company

d) Whenever funds are available

e) When market is declining

13. What type of scheme do you prefer to invest?

a) Equity b) Debt fund c) Hybrid d) Sector Specific fund

e) Tax saving f) others

14. What is your expected return on your investment on mutual fund?

a) Equivalent to bank rate 8% b) 08%- 10% c) 10-15%

d) 15% -20% e) Above 20%

15. Are you satisfied with your return?

35
 a) Very much satisfied b) Very satisfied c) Satisfied d) Dissatisfied

e) Very much Dissatisfied

16. Have you suggested others to invest in mutual funds?

A) Yes b) No

17. What type of Mutual fund you prefer to invest?

a) Open ended b) Close ended

(SA- Strongly Agree; A-Agree; NO- No opinion; DA-Disagree;

SDA- Strongly Disagree.)

1. Mutual funds are safe investments.

2. Mutual Fund give regular returns.
3. Investments in Mutual fund are more liquid.
4. Risk of loss in Mutual funds is low as compared to direct investment in capital market
5. Diversified portfolio minimizes the risk of loss.
6. Mutual fund are better investment than other avenues.

36