BUSINESS RESEARCH REPORT

A STUDY ON
INVESTORS
PERCEPTION ON
MUTUAL FUNDS

By
Krishnakumar (1042266)
Arumugam S (1042270)
1. INTRODUCTION
Financial markets are constantly becoming more efficient by
providing more promising solutions to the investors. Being a part of
financial markets although mutual funds industry is responding very fast by
understanding the dynamics of investor’s perception towards rewards, still
they are continuously following this race in their endeavor to differentiate
their products responding to sudden changes in the economy. Thus, it is high
time to understand and analyze investor’s perception and expectations, and
unveil some extremely valuable information to support financial decision
making of mutual funds. Financial markets are becoming more exhaustive
with financial products seeking new innovations and to some extent
innovations are also visible in designing mutual funds portfolio but these
changes need alignment in accordance with investor’s expectations.
1.1OBJECTIVE
The objective has thus become imperative to study mutual funds from
a different angle, i.e., to focus on investor’s expectations and uncover the
unidentified parameters that account for their dissatisfaction.

1.2 PURPOSE OF STUDY

The research design applied for the study is described as descriptive
study. A descriptive study describes data and characteristics about the
population or phenomenon being studied. The significant purpose of
descriptive research is to obtain a wide range of information concerning the
present status of people, attitude and progress.

1.3 SAMPLE SIZE

60 respondents are selected for collecting data about the study.

1.4 PRILIMINARY DATA GATHERING

This study is purely based on primary data. The data required for the
study were purely collected through the field survey by preparing a
structured questionnaire, which contains only close-ended questions.
1.5 TOOL USED
 The Statistical tools such as Chi-Square Test method were used for
analyzing and interpreting the data as well as drawing statistical inferences
about the study.
The findings and conclusion are based on the responses given by the
selected respondents.

2 GENERAL INTRODUCTIONS – MUTUAL FUNDS

Mutual funds are financial intermediaries, which collect the savings of
investors and invest them in a large and well-diversified portfolio of
securities such as money market instruments, corporate and government
bonds and equity shares of joint stock companies. A mutual fund is a pool of
common funds invested by different investors, who have no contact with
each other. Mutual funds are conceived as institutions for providing small
investors with avenues of investments in the capital market. Since small
investors generally do not have adequate time, knowledge, experience and
resources for directly accessing the capital market, they have to rely on an
intermediary, which undertakes informed investment decisions and provides
consequential benefits of professional expertise. The advantages for the
investors are reduction in risk, expert professional management, diversified
portfolios, and liquidity of investment and tax benefits. By pooling their
assets through mutual funds, investors achieve economies of scale. The
interests of the investors are protected by the SEBI Regulations, 1993.

2.1 NEED OF THE STUDY:

In the financial literature, there are no clear models, which
explain the influence of “perception” and “beliefs” on “expectations”
and “decision making”. No doubt, reality is so complex that trying to
fit individual investor’s behavior into a model is impossible. Investor’s
behavior may change from period to period even if the other variables
influencing the behavior are held constant.

In India, the MUTUAL FUND industry has been in existence

since 1964, (with the establishment of UTI), so a major study has to
been done regarding the investor behavioral aspect with specific
reference to Mutual Funds, in India. It should be noted that the
“expectations” of investors play a vital role in the financial markets.
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 attempts to evaluate the
behavioral aspects of fund selection techniques of individual investors
and also to assess the conceptual awareness of Mutual Funds during
the period, MAY –JUNE 2011

2.2 SCOPE OF THE STUDY :

The scope of the study is restricted to 60 respondents only.
The opinions and suggestions given by the respondents are taken into
account for arriving conclusion about the study. This study throws a
light on how the investor perceive on performance of Mutual Funds
through their Investing pattern and financial behavior.
 This study may help the Fund managers to identify “HOW” and
“WHY” aspects of the investor behavior and develop certain models
which may have managerial implications.

3. RESEARCH METHODOLOGY AND DESIGN

3.1 INTRODUCTION

Research in common parlance refers to a search for knowledge.

Eminent research scholars have defined the term research as a scientific and
systematic search for pertinent information on a specific topic. In fact,
research is an art of scientific investigation. It is actually a voyage of
discovery. Thus research is an original contribution to the existing stock of
knowledge making for its advancement. It is pursuit of truth with the help of
study, observation, comparison and experiment. Technically speaking,
research comprises defining the problems; formulating the hypotheses;
collection, organising and evaluating the data; making the conclusions; and
testing the conclusions to determine whether they fit the formulated

hypothesis. The primary purpose of research is to discover answer to

questions through the application of scientific procedures.

3.2 RESEARCH DESIGN:

Once the research problem is formulated in clear cut terms, the

researcher will be required to prepare a research design. A research design is
the arrangement of conditions for collection and analysis of data in a manner
that aims to combine relevance to the research purpose with economy in
procedure. In fact, the research design is the conceptual structure within
which research is conducted. It constitutes the blueprint for the collection,
measurement and analysis of data. Decisions regarding what, where, why,
when, how, etc., concerning an inquiry or a research study constitute a
research design. Research design is needed because it facilitates the smooth
sailing of the various research operations, thereby making research as
efficient as possible yielding maximal information with minimal expenditure
of effort, time and money. Research design stands for advance planning of
the methods to be adopted for collecting the relevant data and the techniques
to be used in their analysis, keeping in view the objective of the research and
the availability of staff, time and money. A good research design is often
characterised to be flexible, appropriate, efficient, and economical and so on.
The research design applied for the study is described as descriptive
research study. The descriptive research study is used for defining and
analysing the research problem effectively. It is mainly concerned with

describing the essential characteristics of a particular individual or

group or situation. Descriptive research includes surveys and fact-finding
enquiries of different kinds. The major purpose of descriptive research is
description of the state of affairs as it exists at present. The descriptive
research design designed for the study comprises formulating the objectives
of the study, designing the methods of data collection, selecting the sample
size, collecting the data, processing and analysing the data and reporting the
finding, suggestions and conclusion.
3.3 RESEARCH OBJECTIVES:

Primary Objective:
1. Evaluate Perception towards risk involved in mutual funds in
comparison to other financial avenues.

Secondary Objective:
1. To study the marketing of Mutual Fund products in India.

2. To study the Investor awareness regarding Mutual Funds

3. To study the preferences of the distributors for Mutual Funds.

4. To study the pattern of Investor behavior within the available

investment options

5. To test awareness among the consumer about the various mutual fund
houses.

3.4 SAMPLING DESIGN:

Once the research design is framed, the researcher must decide the
way of selecting a sample from the universe or population. All items in any
field of inquiry constitute a ‘universe’ or ‘population’. A sample design is a
definite plan determined before any data are actually collected for obtaining
a sample from a given population. In other words, a sample design is a
concrete plan for obtaining a sample from a given population. It refers to the
technique or the procedure the researcher would adopt in selecting sample
item from the universe. The sampling technique can be either probability (or
random) sampling technique or non-probability (or non-random) sampling
technique.

Probability sampling is also known as ‘random sampling’ or ‘chance

sampling’. Under probability sampling, each and every item in the
population has an equal chance of inclusion in the sample. In this type of
sampling, each item of the universe has an equal probability of being
selected in the sample. This sampling method provides an equal probability
or chance for every item of the population to be included in the sample. It
gives each element in the population an equal probability or chance of
getting into the sample.

Non-probability sampling is also known as non-random sampling.

Under non-probability sampling, each and every item of the universe does
not have an equal chance of inclusion in the sample. This sampling method
involves purposive or deliberate selection of particular units of the universe
for constituting a sample which represents the universe. Non-probability
sampling is that sampling procedure which does not afford any basis for
estimating the probability that each item in the population has of being
included in the sample. In this type of sampling, items for the sample are
selected deliberately and purposively by the researcher.
 Convenience sampling technique was adopted for selecting the sample
size for the study.

3.5 METHODS OF DATA COLLECTION:

The task of data collection begins a research problem has been

defined and research design is chalked out. While deciding about the method
of data collection to be used for the study, the researcher needs to focus on
two types of data viz., primary data and secondary data.
The primary data are those which are collected a fresh 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 have been passed through the statistical process. The secondary data was
collected from periodicals, books and profile of the organization. The
primary data is collected mainly through questionnaire on five point rating
scale method this study involves only primary data collection method

3.6 RESEARCH INSTRUMENT:

The research instrument used for the study is structured questionnaire.
A structured questionnaire consists of a number of questions printed or
typed in a defined order on a form or set of forms. Structured questionnaire
is the one of the primary methods of collecting primary data. Structured
questionnaire is a questionnaire which contains definite, concrete and pre-
determined questions. The questions are presented with exactly the same
wording and in the same order to all the respondents. Structured
questionnaire is simple to administer and relatively inexpensive to analyse
the data effectively. The questionnaire used for the study normally
comprises closed-ended open ended, dichotomous questions method.

3.7 STATISTICAL TOOLS:

The statistical tools applied for the study includes Chi-square test.

3.8 PERIOD OF STUDY:

The study was undertaken for a period of 1month starting from MAY
– JUNE 2011.

3.9 LIMITATION OF THE STUDY

• The study was not completely generalized because the findings and
conclusion are restricted to 60 respondents only.

• The sample size chosen for the study might not be representative of
total population.
• Due to short span of time, the researcher was unable to meet sufficient
number of respondents for collecting data for the study.
• Few respondents were reluctant while answering the questionnaire.
• Data and information collected from the respondents are based on
their opinions and knowledge. Sometimes they may subject to bias.
4. DATA ANALYSIS AND INTERPRETATION
4.1. DATA ANALYSIS
 The data after collection has to be processed and analyzed in
accordance with the outline laid down for the purpose at the time of
developing the research plan .This is essential for a scientific study and for
ensuring that we have all the relevant data. Processing implies editing,
coding, classification and tabulation of collected data. The term analysis
refers to the computation of certain measures along with searching for
patterns of relationship that exit among data-groups .thus in the process of
analysis , relationships or differences supporting or conflicting with original
or new hypothesis should be subjected to statistical test of significance to
determine with validity data can be said to indicate any conclusion.
Analysis of data in a general way involves a number of closely related
operations that are performed with the purpose of summarizing the collected
data and organizing them in such a manner, that they answer the research
questions.

4.2 STATISTICAL ANALYSIS

CHI SQAURE TEST
The Chi-Square test, also known as Non Parametric Test or a
Distribution Free Test is used when it is impossible to make any
assumptions about population or when the researcher is unable to estimate
the population parametric. The main advantage of using Non Parametric
Test is that, the researcher can analyze quantitative data, the name Chi-
Square is generally denoted by the symbol (X2).
PROPERTIES
 • X2 cannot be negative value; it is either 0 or a positive value.

• X2 is not symmetrical; it is skewed to the right.

For degrees of freedom exceeding so, the X2 distribution is approximated by

STEPS INVOLVED IN APPLYING CHI-SQUARE TEST
 Calculate the expected frequencies on the basis of given hypothesis
or on the basis of null hypothesis.

 Obtain the difference between observed and expected frequencies

and find out the square of such differences (i.e.) Calculate (Oi –
Ei)2.

 Divide the quantity (Oi – Ei)2 obtained as stated above by the

corresponding expected frequency to get (Oi – Ei)2/ Ei and this
should be done for all the cell frequencies.

 Find out the summation of (Oi – Ei)2/ Ei values of what we call

[(Oi – Ei)2/ Ei]

 The calculated value should be compared with the tabulated value

to obtain the result.

USE OF CHI-SQUARE
 It is used to test the goodness of fit.

 It is used to test the significant difference between two variables.

FORMULA
The Chi-Square test is given by the formula X2 = (Oi – Ei)2/ Ei where O=
Observed frequency and E= Expected frequency. Where E= Row Total *
Column Total /Grand Total

5. QUESTIONNAIRE

Age Below 25 25 -45 45 -65 Above 65

Sex  Male  Female

Income P. A.  Below Rs. 2. 50 Lakhs  Rs. 2. 50 – 5.0 Lakhs

 Rs. 5.0 – 10 Lakhs  Above Rs. 10 Lakhs

1. Of the following what at present are your investment needs?

To build a corpus for retirement. 

To save for children education or marriage. 
To provide for medical emergencies. 
To provide for financial security. 
To create wealth. 
All of the above. 

2. Which of the following do you think as investment for tax saving?

Mutual Funds. 
Fixed deposits. 
Insurance 
All of the above 

3. If you have Rs.1000 where will you prefer to invest?

Direct Equity. 
Fixed deposits. 
Mutual Funds. 
Life Insurance. 
Post office deposits 

4. Have you ever invested in Mutual Funds?

Yes 
No 

5. If yes how aware are you about the existing Mutual Fund schemes?

Fully aware. 
Partly aware. 
Not aware. 
Not applicable 

6. How did you come to know about Mutual Funds?

Through Family and Friends. 

Through Advertisements. 
Through Peers. 
Others. 

7. How aware are you about the risk associated with Mutual Funds?

Fully aware. 
Partly aware. 
Not aware. 
Not applicable 
8. How safe do you think are Mutual funds when compared to Bank deposits
and other investments?

Very safe. 
Not so safe. 
Equally safe. 
Don’t know. 

9. which of the following Mutual fund Schemes do you prefer?

Open ended schemes. 

Close ended schemes. 
Growth ended schemes. 
Balanced Schemes. 

6. STATISTICAL ANALYSIS
6.1 CHI – SQUARE TEST
Aim: To test the significant association between Gender of the respondents
and the awareness of risk associated with Mutual Funds.
NULL HYPOTHEIS (H0):
Ho: There is no significant association between Gender of the
respondents and the awareness of risk associated with Mutual Funds.\

6.2 ALTERNATE HYPOTHESIS (H1):

H1: There is a significant association between Gender of the
respondents and the awareness of risk associated with Mutual Funds
 OBSERVED FREQUENCY
Risk
Awareness
Fully Partly
Not Aware Total
Aware Aware
Gender

Male 12 24 6 42

Female 6 10 2 18

Total 18 34 8 60

EXPECTED FREQUENCY

12.6 23.8 5.6

5.4 10.2 2.4

CALCULATION OF CHI-SQUARE VALUES

O E (0-E) (0-E)2 (0-E)2/E
12 12.6 -0.6 0.36 0.029
24 23.8 0.2 0.04 0.002
6 5.6 0.4 0.16 0.029
6 5.4 0.6 0.36 0.067
 10 10.2 -0.2 0.04 0.004
2 2.4 -0.4 0.16 0.067
Total 0.198

Calculated Chi-Square Value = 0.198

TABLE VALUE:
Degrees of freedom = (r-1) (c-1)
= (3-1)(2-1)
= 2*1= 2
D.F 2 at 5% level of significance = 5.991

6.3 RESULT
As calculated value 0.198 is lesser than table value 5.991.Hence Null
Hypothesis H0 is accepted.

6.4 CONCLUSION
There is no significant association between Gender of the respondents
and the awareness of risk associated with Mutual Funds.

7. ANALYSIS OF THE RESPONDENTS

RESPONDENTS –AGE WISE CLASSIFICATION

AGE No. of Respondents Percentage (%)

Below 25 years 11 18%
25 - 45 years 30 50%
45 -65 years 15 25%
 Above 65 Years 4 7%
Total 60 100%

INFERENCE:
There are 50% people in age group 25 - 45 years and 25% of people in 45
-65 years and 18% are below the age of 25 rest 7% are above 65 years.

RESPONDENTS –GENDER WISE CLASSIFICATION

GENDER No. of Respondents Percentage (%)

Male 42 70%
Female 18 30%
Total 60 100%

INFERENCE:
Among the respondents there were 70% male and 30% Female

RESPONDENTS – INCOME WISE

Income No. of Respondents Percentage (%)

Below Rs. 2. 50 Lakhs 22 36%
Rs. 2. 50 – 5.0 Lakhs 19 32%
 Rs. 5.0 – 10 Lakhs 12 20%
Above Rs. 10 Lakhs 7 12%
Total 60 100%

INFERENCE:
About 32% of the investors fall in salary band of Rs. 2. 50 – 5.0 Lakhs
and 36% of Investors draw salary below 2.50 Lakhs and 20% have their
salary anywhere between Rs. 5.00 and 10.00 Lakhs and 12% of the
respondents earn more than Rs. 10.00 Lakhs PA.

REASON FOR INVESTING

No. of
Income Percentage (%)
Respondents
Corpus for retirement. 5 8%
Children education /
14 24%
Marriage.
Medical emergencies. 5 8%
Financial security. 8 13%
Create wealth. 11 18%
All the Above 17 29%
Total 60 100%

INFERENCE:
Within the giving saving preferences of creating wealth, financial
security, Medical emergencies, Corpus for retirement, Children education
and Marriage many of the investors responded that they save for all the
above mentioned reasons and out of this 24% rated Children Education and
Marriage were their top priority.
 PREFERRED TAX SAVING OPTION

TAX SAVING TOOL No. of Respondents Percentage (%)

Mutual Funds. 13 22%
Fixed deposits. 9 15%
Insurance 26 43%
All of the above 12 20%

Total 60 100%

INFERENCE:
Respondents had various tax saving options, where among 43% said
they would invest in Insurance for the said purpose and 22% in Mutual
Funds for Tax Saving. 15% responded they would prefer Fixed Deposit as
their Tax saving tool.

EVER INVESTED IN MUTUAL FUNDS

Ever Invested in Mutual

No. of Respondents Percentage (%)
Funds
Yes 39 65%
No 21 35%
Total 60 100%
INFERENCE
When enquired whether they ever invested in Mutual Funds 39 out of 60
respondents said yes and 21 said they have not invested in Mutual Funds.

INVESTMENT PRIORITY WHILE HAVING RS. 1000/-

Investment priority with No. of

Percentage (%)
Rs.1000 Respondents
Direct Equity. 12 13%
Fixed deposits. 13 22%
Mutual Funds. 25 55%
Life Insurance. 10 17%
Total 60 100%

INFERENCE:
When enquired what would be their invest option if they had Rs. 1, 000/- in
hand 33% of the investors replied their option would be Mutual Funds and
22% said they would opt to invest in Fixed Deposits and 17% said they
would opt in for Life Insurance.

AWARENESS IN MUTUAL FUNDS SCHEMES

Awareness of Mutual Funds No. of

Percentage (%)
Schemes Respondents
Fully Aware 14 23%
Partly Aware 28 47%
Not Aware 18 30%
Total 60 100%
 INFERENCE

Awareness level of the Mutual Fund Schemes among respondents is

that 47% were partly aware of the Existing Mutual Fund Schemes and 23%
were fully aware of the schemes. 30% were not aware of the schemes.

SOURCE OF KNOWLEDGE ABOUT MUTUAL FUNDS

SOURCE OF
No. of Respondents Percentage (%)
KNOWLEDGE
Family and Friends 21 35%
Advertisements 9 15%
Peers 12 20%
Others 18 30%
Total 60 100

INFERENCE
About 35% came to know about Mutual Funds through their family
and friends and only 15% of the respondents were aware of Mutual Funds
through advertisements.

DEGREE OF RISK ASSOCIATED WITH MUTUAL FUNDS

DEGREE OF RISK No. of Respondents Percentage (%)

Fully aware. 18 30%
Partly aware. 34 57%
Not aware. 8 13%
Total 60 100%
INFERENCE
57% respondents declared they are partly aware of risk associated
with investing in Mutual Funds and 30% were fully aware of the risk and
13% said they were not aware of the risk factors at all.

SAFETY OF MUTUAL FUNDS COMPARED TO BANK DEPOSITS

AND OTHER INVESTMENTS

SAFETY OF MUTUAL No. of

Percentage (%)
FUNDS Respondents
Very Safe 8 13%
Not so Safe 25 42%
Equally Safe 17 28%
Don't Know 10 17%
Total 60 100%

INFERENCE
It is inferred that 13% of respondents are found Mutual Funds are very
safe compared to other investment option and 28% found Mutual Funds are
equally safe and 42% responded that they felt Mutual Funds were not so safe
when compared with other investment options.

PREFERRED MUTUAL FUND SCHEMES

No. of
Preferred Mutual Fund Schemes Percentage (%)
Respondents
Open ended schemes 13 22%
Close ended schemes 10 17%
Growth ended schemes 15 25%
Balanced Schemes 22 36%
 Total 60 100%

INFERENCE
When enquired about their preferred Mutual Fund scheme 36% of the
respondents favored only Balanced Schemes followed by the Growth
Schemes which is the preferred scheme of 25% of the respondents. And only
17% opted for close ended schemes

9. SUMMARY OF FINDINGS
9.1GENERAL FINDINGS

• 50% of the respondents fall in the age group of 25 to 45 years

• 70% of the respondents are Male.
• 36% of the respondents receive below Rs. 2.50 Lakhs per annum.
• 29% of the respondents are interested to invest for all the reasons like
corpus for retirement, children Education/Marriage, Medical
Emergencies, Financial Security, and Creating Wealth.
• 43% of the respondents preferred their tax saving tool as Insurance
• 65% of the respondents have invested in Mutual Funds.

• While having Rs 1000/- in hand, 33% of the respondents were

interested to invest in Mutual Funds.
• 47% of the respondents were partly aware of the Mutual Funds
schemes.
• 35% of the respondents came to know about Mutual Funds through
their Family and Friends.
 • 57% of the respondents were partly aware of the risk associated with
Mutual Funds.
• 42% of the respondents found that Mutual Funds were not so safe
when compared to Bank Deposits and other investments.
9.2 STATISTICAL FINDINGS:
• There is no significant association between Gender of the respondents
and the awareness of risk associated with Mutual Funds.

10. RECOMMENDATIONS & SUGGESTIONS

1. Tapping the upcoming market - Semi Urban Market as there is a lot of

opportunity. Most of the Mutual Funds are operating in the metros and
big cities as per their present branch office locations. If they have to
increase their market size they have to open more distribution centers
at the various urban and semi-urban markets.

2. To create the awareness about the different products of Mutual Fund

and not about the generic product. Various respondents were not
aware of the mutual fund products and the type of mutual fund
schemes and the risk associated with mutual fund products.

3. To provide some kind of curriculum at the school/college level to

create awareness regarding Mutual Fund.

11. CONCLUSION
 Mutual Funds (MF) have become one of the most
attractive ways for the average person to invest his money. A Mutual Fund
pools resources from thousands of investors and then diversifies its
investment into many different holdings such as stocks, bonds, or
Government securities in order to provide high relative safety and returns. .
There are many improvements pending in the field and it has to happen as
soon as possible so as to call the MF industry as an Organized and well-
developed sector.