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 Reddy Regd.No:1214110142 Under the guidance of Dr. K Manjusree Naidu

Gitam Institute of Management Gitam 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

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: Naidu Visakhapatnam Coordinator

Dr. K Manjusree Program (BBM)

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

CONTENTS Chapter Chapter 1 Title Theoretical Framework of HDFC Bank Introduction Methodology Need of the study Objectives of the study Chapter 2 Scope Limitations Research Design Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Data Collection Method Industry & Company Profile Analysis Findings & Suggestions Bibliography Annexure Questionnaire Page

CHAPTER-1 THEORETICAL FRAMEWORK

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.

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 funds 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 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 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 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. 10

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. 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

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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 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

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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 manufacturers 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 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.

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Chapter-2 Research Methodology

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

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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. 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 16

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 investors 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 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.

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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. 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:

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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 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. operation. The researcher used structured questionnaire and is in a multiple-choice format. It is treated as the heart of the survey

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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 investors buying pattern and preferences.

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CHAPTER-3 PROFILE OF HDFC BANK

A.PROFILE OF THE MUTUAL FUND INDUSTRY

Indian Mutual Fund Industry

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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, 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

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administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase - 1987-1993 (Entry of Public Sector Funds) Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47, 004 as assets under management.

Third Phase - 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed.

The erstwhile Kothari 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

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setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase - since February 2003 This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified undertaking of the Unit Trust of India with AUM of Rs.29, 835 crores (as on January 2003). The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.

With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of AUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. As of February 2006 the assets managed by Indian Mutual Fund industry stands at Rs.2, 17,471 crores.

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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 e g i s t e r e d o f f i c e in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.HDFC is Indias premier housing finance company and enjoys an impeccable track recording India as well as in international markets. Since its inception in 1977, the Corporation 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 Bank. It realized that only a single minded focus on 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

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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 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 ltd provides various financial products and services. I t o p e r a t e s i n t h r e e 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

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loans; loans Against securities and property and health care finance Working capital finance, construction equipment finance, and warehouse Receipt loans, as w e l l a s credit cards, debit cards, depository, investment Advisory, bill p a y m en t s , a n d 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 r o u gh i t s t i e - u p s w i t h i n s u r a n c e c o m p a n i e s a n d m u t u a l f u n d h o u s e s . Th e w h o l e s a l e banking Segment provides loans, non-fund facilities, 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, Supply chain financing, working CapitaLand term finance, agricultural loans, and funded non-funded treasury, and foreign exchange products. This segments services include trade services, cash management, and money M a r k e t , custodial, tax collection, and electronic banking. In a d d i t i o n , i t p r o v i d e s c o r r e s p o n d en t b a n k s e r v i c e s t o c o o p e r a t i v e b a n k s , p r i v a t e b a n k s , f o r e i g n b a n k s , a n d 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:

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S.M .

LOCAL MANAGER

RELATIONSHIP MANAGER

ASST. RELATIONSHIP MANAGER

BRANCH HEAD

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 long

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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.

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 Opportunities: o Changing demographics with higher disposable 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. income and

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.

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CHAPTER-4 DATA ANALYSIS AND INTERPRETATION

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4.1 AGE GROUP OF THE RESPONDENTS

Age Between 18-25 Between 25-50 More than 50 Total

No of respondents 17 57 28 102 Table 4.1

Percentage 16.7 55.9 27.5 100

60 50 40 between 18 -25 30 20 10 0 age classification between 25 -50 more than 50 Percent

Graph 4.1

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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 Male Female Total

No of respondents 68 34 102 Table 4.2

Percent 66.7 33.3 100

80 70 60 50 Percent 40 30 20 10 0 ge nde r cla ssifica tion Male Female

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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

Married Single Total

74 28 102 Table 4.3

77 23 100

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90 80 70 60 percent 50 40 30 20 10 0 marital status married single

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 Student Housewife Professional Services Retired Total No of respondents 2 8 20 6 7 102 Table 4.4 Percentage 2.0 7.8 19.6 5.9 6.9 100

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25 20 student percent 15 10 5 0 occupation housewife professional services business retired

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. 1. 2.

Options Below Rs.1,00,000/ Between Rs.1,00,000/ and Rs.3,00,000/Between Rs.3,00,000/

No. of respondents Percentage (%) 23 22.5 42 33 41.1 32.3 3.9 Table 4.5

3. 4. and Rs.5,00,000/above Rs.5,00,000/

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45 40 35 30 Percent < 1,00,00 25 20 15 10 5 0 income of respondents 1,00,000-3,00,000 3,00,000-5,00,000 > 5,00,000

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 1 dependent 2 dependents 3 dependents More than 4 dependents None Total No of respondents 22 21 42 15 2 102 Table 4.6 Percentage 22.6 21.6 41.2 14.7 2.0 100

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45 40 35 30 percent 25 20 15 10 5 0 number of dependents more than 4 dependents none 2 dependents 3 dependents 1 dependent

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 Knowledge Excellent Good Average Bad Total No of respondents 20 54 12 16 102 Table 4.7 Percentage 19.6 52.9 11.8 15.7 100

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60 50 40 percent 30 20 10 0 knowledge about mutual fund investment

excellent good average bad

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

Factors Safety High returns Liquidity Capital appreciation Tax benefits Total

No of respondents 21 11 27 9 3 102 Table 4.8

Percentage 20.6 10.8 26.5 8.8 2.9 100.0

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30 25 20 Percent 15 10 5 0 fa c to rs th a t a l lo w to p re fe r th e a b o ve sa id fu n d s a fe ty h igh retu rn s liq u id ity c a p ita l a p p rec ia tion ta x b e n e fits

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

4.9 RETURNS EXPECTED BY INVESTOR

Returns expected 15% - 30% 30% - 50% 50% and above Total

No of respondents 71 19 12 102 Table 4.10

Percentage 69.6 18.6 11.8 100.0

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80 70 60 50 Percent 40 30 20 10 0 re tu rn e x p e c te d 15% - 30% 30% - 50% 5 0 % a n d a b o ve

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%.

4.10 INVESTORS INVESTMENT HORIZON

Investment horizon < 1 year 1 year 3 years 3 years 5 years > 5 years Total

No of respondents 37 33 17 15 102 Table 4.11

Percentage 39 33 15 13 100.0

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45 40 35 30 < 1yr percent 25 20 15 10 5 0 investment horizon 1 year - 3 years 3 years - 5 years > 5 years

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.

4.11 GROWT RATE OF INVESTMENT

Growth Steadily Rapidly Average rate Total

No of respondents 38 27 37 102 Table 4.13

Percentage 37.3 26.5 36.3 100.0

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40 35 30 25 Percent 20 15 10 5 0 r a te a t w i c h i n v e stm e n t sh o u l d g r o w s t e a d ily ra p id ly a ve ra g e ra t e

Graph 4.13 Interpretation: 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 < 5% 5% - 10% 10% - 25% > 25% Total

No of respondents 47 36 15 4 102

Percentage 46.1 35.3 14.7 3.9 100.0

Table 4.14

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50 45 40 35 30 Percent 25 20 15 10 5 0 p e r c e n ta g e o f in c o m e i n v e ste d < 5% 5% - 10% 10% - 25% < 25%

Graph 4.14 Interpretation: 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 Regular income Growth only Income and growth Dividend Total

No of respondents 38 12 41 11 102 Table 4.15

Percentage 37.3 11.8 40.2 10.8 100.0

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45 40 35 30 Percent 25 20 15 10 5 0 in v e stm e n t o b j e c ti v e re g u la r in c o m e g ro w t h o n ly in c o m e a n d g ro w t h d ivid e n d

Graph 4.15 Interpretation: 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 Daily Weekly Monthly Yearly Occasionally Total

No of respondents 12 40 27 21 2 102 Table 4.16

Percentage 11.8 39.2 26.5 20.6 2.0 100.0

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45 40 35 30 Percent 25 20 15 10 5 0 d u ra tio n o f m o n ito rin g in v e stm e n ts da ily w eek ly m on th ly y e arly oc c as iona lly

Graph 4.16 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.

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CHAPTER-5 Summary, Findings & Conclusions

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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.

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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 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:

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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.

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:

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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.

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:

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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 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 semiurban and rural areas. This market potential can be tapped by scrutinizing investor behavior to identify their expectations and articulate investors 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 52

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.

CHAPTER 6 BIBLIOGRAPHY

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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

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CHAPTER 7 ANNEXURE (OUESTIONAIRE)

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QUESTIONAIRE

1. Name:

2. Age <18yrs 30yrs-50yrs 18yrs-30yrs more than 50yrs.

3. Gender: Male Female.

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4. Marital Status: Single Married.

5. Occupation: Student Housewife Professional

Services

Business

Retired

6. Academic Qualification: Under Graduate Diploma Post graduate Others.

7. Annual Income: < 2,00,000 3,00,000 5,00,000 2,00,000 - 3,00,000 >5,00,000.

8. Number Of Dependents:
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None

1 dependent

2 dependents 4 and above dependents.

3 dependents

9. Knowledge about Mutual Fund Investment: Excellent Average Good Bad.

10.Why do you invest in Mutual Fund? Capital Appreciation Retirement Regular Income Tax Savings.

11.Main concern/expectation from an investment made? High Returns safety Liquidity Risks.

12.Expected Rate of Returns? <10% 15% - 20% 10% - 15% > 20%.
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13. What is your investment horizon? < 1 year 3yrs 5yrs 1yr -3yrs >5yrs.

14 .Where do you prefer to invest? Mutual Funds Real Estate Shares Bonds/Debentures NSC/KVP Bank Deposits Bullions.

Post Office

15. The time-period of your above preferred investment? <1yr 3yrs 5yrs 1yr 3yrs >5yrs

16. You would like your investment to grow at: Steadily Fast At an Average Rate.

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17. What percentage of your income do you invest? < 5% 15% - 25% 5% - 15% >25%.

18. Which best describes your investment objective? Regular income Growth only Income Growth.

19. Do you keep watch over your investments?

Yes

No

Sometimes.

20. If yes, how often? Every day Yearly Weekly Monthly

Occasionally.

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