organizational study of hedge equities

1

MAHATMA GANDHI UNIVERSITY

RAJAGIRI COLLEGE OF BUSINESS STUDIES

A PROJECT REPORT ON

“ORGANISATIONAL STUDY OF HEDGE EQUITIES LTD.”

IN THE PARTIAL FULFILLMENT OF DEGREE

MASTER IN BUSINESS ADMINISTRATION (2013-2015)

SUBMITTED BY

APARNA HARI

ROLL NO. 1379

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ACKNOWLEDGEMENT

First of all, I thank Almighty God for all His blessings.

With regard to my Organisational Study and Project on Mutual Fund I

would like to thank each and every one who offered help, guideline and

support whenever required.

First and foremost I would like to express gratitude to my

Trainer Mr. Benil D. Alex, Head of Accounts Department, Mr. Sajin

Francis other staff of Hedge Equities Ltd. for their support and guidance

in the Project work. I am extremely grateful to my guide, Mr. Abraham

Joseph for his valuable guidance and timely suggestions.

And lastly, I would like to express my gratefulness to the parent’s for

seeing me through it all.

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LIST OF CONTENTS

SERIAL NO. TITLE PAGE NO.List of Tables 4

List of Figures 6

1. Section 1- Organisational Study

8

2. Chapter 1- Introduction 9

3. Chapter 2- Company Profile 16

4. Section 2- Problems Centred Study

37

5. Chapter 1- Problem Formulation

38

6. Chapter 2- Research Process 56

7. Chapter 3- Presentation and Analysis of Data

63

8. Chapter 4- Interpretation and Conclusions

82

9. Chapter 5- Suggestions/ Recommendations

84

Bibliography 87

Annexure 88

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LIST OF TABLES

FIGURE NO TITLE PAGE NO

3.1SHOWING AGE DISTRIBUTION OF INVESTORS 64

3.2RESPONSE SHOWING OCCUPATION OF INVESTORS 65

3.3RESPONSE SHOWING MONTHLY INCOME OF INVESTORS

66

3.4RESPONSE SHOWING HOW MANY INVESTORS HAS MADE INVESTMENTS.

67

3.5RESPONSE SHOWING THE VARIOUS INVESTMENTS MADE BY INVESTORS

68

3.6RESPONSE SHOWING PREFERENCE OF FACTORS WHILE INVESTING

69

3.7RESPONSE SHOWING NUMBER OF INVESTORS AWARE ABOUT MUTUAL FUNDS

70

3.8RESPONSE SHOWING THE VARIOUS SOURCES OF INFORMATION FOR INVESTORS ABOUT MUTUAL FUNDS

71

3.9RESPONSE SHOWING NUMBER OF INVESTORS WHO MADE INVESTMENTS IN MUTUAL FUNDS

72

3.10RESPONSE SHOWING THE REASONS FOR NOT INVESTING IN MUTUAL FUNDS

73

3.11RESPONSE SHOWING INVESTOR PREFERENCE TOWARDS DIFFERENT PLANS

74

3.12RESPONSE SHOWING PREFERENCE OF INEVSTORS REGARDING THE HOLDING PERIOD OF MUTUAL FUND INVESTMENTS

75

3.13RESPONSE SHOWING INVESTOR PREFERENCE TOWARDS DIFFERENT MUTUAL FUND SCHEMES

76

3.14RESPONSE SHOWING THE RISK PERCEPTION OF INVESTORS TOWARDS MUTUAL FUNDS

77

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3.15RESPONSE SHOWING THE PREFERRED CHANNEL OF INVESTMENT AMONG INVESTORS

78

3.16RESPONSE SHOWING PREFERRED MODE OF INVESTMENT AMONG INVESTORS

79

3.17 RESPONSE SHOWING WHETHER THE INVESTORS ARE SATISFIED WITH THEIR CURRENT MUTUAL FUND SCHEMES

80

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LIST OF FIGURES

FIGURE NO TITLE PAGE NO

3.1SHOWING AGE DISTRIBUTION OF INVESTORS 64

3.2RESPONSE SHOWING OCCUPATION OF INVESTORS

65

3.3RESPONSE SHOWING MONTHLY INCOME OF INVESTORS

66

3.4RESPONSE SHOWING HOW MANY INVESTORS HAS MADE INVESTMENTS.

67

3.5RESPONSE SHOWING THE VARIOUS INVESTMENTS MADE BY INVESTORS

68

3.6RESPONSE SHOWING PREFERENCE OF FACTORS WHILE INVESTING

69

3.7 RESPONSE SHOWING NUMBER OF INVESTORS AWARE ABOUT MUTUAL FUNDS

70

3.8 RESPONSE SHOWING THE VARIOUS SOURCES OF INFORMATION FOR INVESTORS ABOUT MUTUAL FUNDS

71

3.9RESPONSE SHOWING NUMBER OF INVESTORS WHO MADE INVESTMENTS IN MUTUAL FUNDS

72

3.10RESPONSE SHOWING THE REASONS FOR NOT INVESTING IN MUTUAL FUNDS

73

3.11RESPONSE SHOWING INVESTOR PREFERENCE TOWARDS DIFFERENT PLANS

74

3.12RESPONSE SHOWING PREFERENCE OF INEVSTORS REGARDING THE HOLDING PERIOD OF MUTUAL FUND INVESTMENTS

75

7

3.13RESPONSE SHOWING INVESTOR PREFERENCE TOWARDS DIFFERENT MUTUAL FUND SCHEMES

76

3.14RESPONSE SHOWING THE RISK PERCEPTION OF INVESTORS TOWARDS MUTUAL FUNDS

77

3.15RESPONSE SHOWING THE PREFERRED CHANNEL OF INVESTMENT AMONG INVESTORS 78

3.16RESPONSE SHOWING PREFERRED MODE OF INVESTMENT AMONG INVESTORS

79

3.17 RESPONSE SHOWING WHETHER THE INVESTORS ARE SATISFIED WITH THEIR CURRENT MUTUAL FUND SCHEMES

80

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SECTION 1

ORGANIZATIONAL STUDY

HEDGE EQUITIES LTD.

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CHAPTER 1:INTRODUCTION

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1.1 INTRODUCTION

The Indian Broking industry has grown rapidly in the past couple of years.

Financial intermediaries have played a significant role in recovering the chaotic

economic conditions in the recent years and this has therefore given a new life to the

broking industry in the financial sector. Increased competition and newer

opportunities have been a driving force for the changes in the trading pattern,

improvement in technology, diversification of operations and introduction of new

products. The various investor awareness programs and regulations have also

contributed to creating an environment that is favourable for the growth of the

Broking industry in India.

The advent of technology has resulted in rapid increase in the internet-

based broking segment. This rapid growth of online trading in terms of size and

volume has resulted in easy accessibility and faster facilitation through various

technological platforms. A major trend of consolidation is also seen in the current

scenario, as many small stock broking firms find it difficult to retain their clients due

to difficulties in providing value added services.

According to ICRA, in its earlier reports on the Brokerage Sector in FY12-

13- ‘The industry is witnessing signs of consolidation. The market share of the top

100 brokers on the NSE has increased substantially to ~89% as at August 2013 from

77% as at March 2013 and 73% as at March 2011. With companies needing to

continuously spend on upgrading their technology framework, the current

environment provides opportunity for the larger players to further consolidate their

positions. Further, we believe that the mid-sized brokers are being forced to cut back

and shut businesses in those areas where they do not have scale whereas some of the

smaller brokers face survival issues.’

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1.2 INDUSTRY PROFILE:

1.21 ALL ABOUT STOCK BROKING:

Stock broking is where a person (or an organization), who is licensed to

participate in the securities market, buys and sells securities and shares on the behalf

of their clients. Such individuals or organizations are known as stock brokers. They

play the role of an agent. The process of buying and selling of stock is done through

a stock exchange which is a mutual organization that facilitates the trading of

securities and shares among the stockbrokers. There are many stock exchanges in the

world such as the NASDAQ in the U.S., London Stock Exchange, Bombay Stock

Exchange, Tokyo Stock Exchange and Australian Stock Exchange (ASX).

A stock broker is a person who provides valuable service and information

to an investor to help him in making correct investment decisions. They perform

different functions based on the needs of the clients. The following are the three

major roles they play.

1. Execution Only role: The stock broker specifically carries out the

instructions given by the clients regarding the buying and selling of stocks.

2. Advisory Dealing role: The stock broker advises the clients as to what

type of shares and securities they should consider while buying or selling. However,

the final decision regarding the trade lies with the client.

3. Discretionary Dealing role: The stock broker sells/buys securities and

shares on behalf of the clients, based on the investment objective of each client

Stock brokers are governed by SEBI Act, 1992, Securities Contracts

(Regulation) Act, 1956, Securities and Exchange Board of India [SEBI (Stock

brokers and Sub brokers) Rules and Regulations, 1992], Rules, Regulations and Bye

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laws of stock exchange of which he is a member as well as various directives of

SEBI and stock exchange that is issued from time to time. Every stock broker is

required to be a member of a stock exchange as well as registered with SEBI. Only

Govt. tax rates like, security transaction tax, stamp duty and service tax are uniform.

Other charges like brokerage for delivery trades, intraday trades, minimum

transaction charge, statement charges, DP charges, annual maintenance charges etc.,

may vary from one broker to another.

There are many types of stock brokers. Some of them are:

Full service stock broker/investment advisor: They analyze portfolios,

suggest stocks, offer clients accounts from which they can buy stocks, and provide a

whole range of other services. These stockbrokers charge commissions for their

service, usually from one to three percent of the money invested. Full-service

stockbrokers charge at the high end of the range.

Discount stock broker: They only carry out the transactions, such as

buying or selling stocks, as desired by the client. People who prefer to do their own

research into their investments mostly go to a discount broker.

A Sub-Broker is a person who is not a member of the Stock Exchange but

acts on behalf of a member-broker as an agent; or who assists the investors in buying,

selling and dealing in securities through such member-brokers.

The two main functions that a stock broking firm engages in are:

Underwriting: When a stock broking firm owns a new security issue in

its inventory, it takes on a certain amount of risk. The reward for taking on this risk is

obtained through the profit that the underwriting firm makes from the difference in

the buying and selling prices. The issuer does not have to assume the same risk since

he is assured of the payment by the underwriter regardless of the price at which the

selling takes place.

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Principal Trading: A stock broking firm either acts as a principal or as

an agent. As a principal, it holds the securities (that are traded in the secondary

market) in its own inventory for a certain period of time and then sell them off at a

higher price later. As an agent, it only participates in the trading on behalf of the

seller or the buyer but it does not own the securities at point during the transaction.

The financial market has recently seen a major rise in the popularity of

stock broking as these days more people want to invest in securities that offer quick

and higher returns. But they either do not have the required expertise and knowledge

to make sound investment decisions or they lack the time to continuously follow the

trends in the market. Hence stock broking is seen as a wise option to make good

investments.

1.22 EVOLUTION OF STOCK BROKING INDUSTRY IN INDIA

The history of stock brokers dates back to 1602 during which the first stock

exchange started its operations in Amsterdam. The Amsterdam Stock Exchange was

involved in buying and selling of shares for the Dutch East India Company.

However, later on the stock exchanges that came up in the United States, especially

the New York Stock Exchange or Wall Street (as it is called now), gained more

popularity and became the hub of brokerage activities.

The Indian Stock Broking industry is one of the oldest trading industries

that existed even before the establishment of the BSE in 1875. In 1864, there were

almost 1000 brokers in Mumbai who traded in stocks.

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In the 1970s the Foreign Exchange Regulations Act (FERA) was

introduced that helped in giving a new momentum to retail investing since it

encouraged many MNCs to divest their foreign equity.

The Securities and Exchange Board of India (SEBI), which was set up in

1988 as an administrative arrangement, was given statutory powers after the

enactment of the SEBI Act in 1992. The main function of SEBI was to protect

investor interests in securities, to promote the development of securities markets and

to regulate the securities markets.

Later in the nineties, the numerous economic reforms that were introduced

brought about many changes such as abolition of open outcry, introduction of

electronic trading, consent for FIIs and for ADRs/ GDRs, transparency in IPO

issues, T+2 settlement cycles, dematerialisation of shares and e-broking.

The broking industry is fast emerging as a high growth segment in the

Indian financial services map, in terms of business growth, distribution and network,

and enterprise value. Even though there are plenty of brokerage firms in India,

currently the brokerage segment is largely dominated by the foreign brokerage.

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Figure 1: NSE and BSE website, ICRA analysis

1.3 SOME OF THE MAIN INDUSTRY PLAYERS

1. SHAREKHAN LIMITED

2. INDIA BULLS

3. ANGEL BROKING LIMITED

4. RELIANCE MONEY

5. INDIA INFOLINE LIMITED

6. KOTAK SECURITIES LIMITED

7. ICICI DIRECT

8. MOTILAL OSWAL SECURITIES

9. HDFC SECURITIES

10. BAJAJ CAPITAL

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CHAPTER 2

COMPANY PROFILE

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2.1 OVERVIEW

Hedge Equities Ltd. is one of the leading retail stock broking house,

running quite successfully in the country. Hedge offers a wide range of equity-related

services including trade execution on BSE, NSE, derivatives, depository services,

online trading, investment advice etc. to its customers. The firm also has an online

trading and investment site –www.hedgeequities.com. This site gives access to

superior content and transaction facility to the retail customers across the country. It

aims at simplifying the process of investing in stocks.

Hedge Equities is a company that has been built on the cutting edge

experience of its founders, of over 25 years. Even though they belong to various

industries each one of them is backed with a strong expertise in global financial

markets. The Board comprises of experts from different industries: FedEx Securities,

Baby Marine Exports, Thakker Developers, Smart Financial, S.M.Hegde (CFO –

Videocon Industries), and Padmashree Mohan Lal.

2.2 HISTORY AND INCORPORATION

Alex K Babu, the managing director of Hedge Equities, entered into the

family business of seafood exports Baby Marine Exports, after completing his

graduation in engineering. After receiving a thorough exposure in finance from the

business, he entered the financial market by starting up a stock broking company-

Hedge Equities Private Ltd, by 2007.

When Hedge Equities was launched, the Sensex was at 13,000. It soon

touched its lowest point, at 8000, in two months. But due to a strong capital back up,

the company was able to counter the recession with the aid of an aggressive

marketing campaign and through a wide expansion of its network. It was successful

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in setting up 50 branches in the first six months. When the market recovered, Hedge

gained from the brand name it had created.

Hedge Equities was incorporated under the Companies Act 1956 as Hedge

Equities Private Limited on 17th December 2007 with the registered office at 1205,

Dalamal Tower, Nariman Point. Later the company was converted into public limited

company on 17th February, 2009.

Hedge Equities Limited's Annual General Meeting (AGM) was last held on

28 September 2013 and as per records from Ministry of Corporate Affairs (MCA), its

balance sheet was last filed on 31 March 2013.

Hedge Equities Limited's Corporate Identification Number is (CIN)

U65990MH2007PLC176866 and its registration number is 176866.

Its registered address is 1205, DALAMAL TOWER, NARIMAN POINT,,

MUMBAI - 400021, Maharashtra INDIA.

2.3 CORPORATE OFFICE

The corporate office of Hedge is in Mamangalam, Cochin, Kerala.

Hedge Equities has 54 branches & 52 franchises which are spread across 4

states in India (Kerala, Karnataka, Tamil Nadu and Maharashtra) & in Dubai.

It has opened 120 branches in Kerala in the last two years, against an initial

target of 50. Hedge owns most branches, unlike most peers who prefer the franchisee

model.

2.4 VISION OF THE COMPANY

‘At Hedge Equities, we endeavour to become a well reputed financial

services super-mart catering to the evolving needs and unique requirements of our

clientele, and partnering with them to Build, Manage, and Grow their Wealth.’

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2.5 MISSION OF THE COMPANY

‘To create an ethical and sustainable financial services platform for our

customers and partner them to build business, to provide employees with meaningful

work, self-development and progression, and to achieve a consistent and competitive

growth in profit and earnings for our shareholders and staff.’

2.6 PROMISE

“To our Customers: We exist to serve and meet your needs. Our focus is to

create an ethical and sustainable financial services platform that places your unique

needs over and above everything else.

To our Employees: We will provide our employees with a meaningful and

rewarding career with emphasis on self development and career progression.

To our Shareholders: We will spare no efforts to achieve a consistent and

competitive growth in earnings and profitability.”

2.7 THE HEDGE ADVANTAGE

At Hedge Equities, the needs of our Customers stand before everything

else.

SEBI Registered Portfolio Manager with a dedicated Wealth

Management Services desk that aims to provide objective guidance tailored to meet

each customer’s individual needs.

Strong Research Team backed with best of breed data mining and

analysis.

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Industry leading technology solutions that make portfolio

administration simpler and cost effective.

A Global Outlook blended with a Local Flavour and backed with a

growing network of over 120 service outlets, 450 qualified employees, and over 200

support associates.

The Trust and Goodwill of over 20,000 satisfied customers.

Member of BSE, NSE, MCX, MCXSX,NMCE,NCDEX and

Depository Participant in CDSL

Rated as the top brand by the investor community of Asianet channel

Growing overseas presence with operations in Middle East and an

expanding presence in the European region and North America.

2.8 CO0RPORATE SOCIAL RESPONSIBILITY

Hedge Equities has initiated a Non Profit movement Hedge Yuva, as a part

of its Corporate Social Responsibility, which basically focuses on educating the

masses about Stock Market. The movement aims at inculcating equity investing

habits in college students. As part of the programme, faculty from Hedge conduct

presentations on equity investment and a quarterly review of the investment

portfolios which is organised in association with finance clubs in colleges,. The

movement has also formulated various scholarship programs for the youth.

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2.9 INITIAL INVESTMENTS

Hedge Equities is classified as an Indian Non-Government Company and is

registered at the Registrar of Companies, Mumbai. Its authorized share capital is Rs.

150,000,000 and its paid up capital is Rs. 137,804,992.

2.10 PROMOTERS

FEDEX SECURITIES

FedEx is a SEBI registered category I merchant banker that is managed by

a team of ex-bankers. The company concentrates on non-fund based activities like

structuring, tie up of project financing, financial restructuring, investment banking,

corporate and advisory services. FedEx has offices in Nariman point and Vile Parle

East, Mumbai. The core management team consists of bankers with rich experience

in commercial and investment banking.

BABY MARINE EXPORTS

Baby Marine Group, a leading Exporter of processed marine products,

started its operations in 1977 from Kozhikode and has grown into three units and

related industries that spans both the west and east coasts of Indian. The three units

namely, Baby Marine Exports, B.M products, and Baby Marine (Eastern) Exports,

are mainly aided by pre processing units, ice factories and a fleet of insulated and

refrigerated trucks for sea food transportation.

SMART FINANCIAL

Smart Financial is a leading financial service provider that entered the

financial market in1992. The company offers guidance to investors as to equities,

commodities, mutual funds, portfolio management services and insurance. It offers a

complete range of financial solutions that encompasses every sphere of life.

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THAKKER GROUP

Thacker’s group that started off as a land developer and builder in 1962,

gradually diversified into commercial production of agricultural and horticultural

products, housing real estate marketing, plantations etc. Thakker developer is the

flagship company of the group. It was established as a private limited in 1987 and

later went on to become the only public limited company in North Maharashtra that

was engaged in housing, commercial construction and land development.

S. M. HEDGE

Mr S. M. Hedge, a chartered accountant by profession, is the Chief Finance

Officer of the Indian Multinational Videocon International and has been at the helm

of affairs for the last 20 years.

PADMASHREE BHARAT MOHANLAL

Padmashree Bharat Mohanlal, the South Indian movie actor, has a few

business ventures, which include Vismaya Max Film Post production studio, college

for dubbing artists at the Kinfra fill and Video Park, Trivandrum. He is also the

director of Uni Royal Marine Exports; a Kozhikode based major Seafood Export

Company.

2.11MANAGEMENT:

DIRECTORS

ALEX K BABU

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Alex K Babu is the Founder, Chairman, and Managing Director of the Hedge

Group of Companies. He is recognized for his youthful zeal, creativity and business

intelligence. He believes his role as a business leader is to lead his organization and

society through change. According to him, the most effective way to run a company

successfully is by utilising all the resources with the objective of bringing about a

revolutionary change.

V.S.N BHUVANENDRAN

V.S.N. Bhuvanendran who is the Chief Executive Officer of Hedge Group of

Companies, is also a writer for various financial journals. In addition, he hosts a

market related show which aims at providing expert advices and answers to financial

queries of professionals and investors, in a leading Malayalam television channel.

BOBBY J ARAKUNNEL

Mr. Bobby the COO of Hedge Group of Companies, is responsible for the

entire operations of Hedge Equities. He has showcased excellent Man-Management

and Marketing Activities and is well versed in all aspects of Indian Financial

Markets. In the last 12 years, he has worked with all the major players in the

financial service sector of the country.

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MR. JOY ARRACKAL

Mr. Joy Arrackal is a successful entrepreneur with varied business

interests in Dubai and India spread across Petrochemicals, Oil Trading, Telecom,

Agriculture, Hospitality, and Construction.

He also owns and operates Oil Tankers in Dubai. Mr. Joy currently serves as the

Managing Director of Fringford Estates Ltd and is also a Director with Hill Track

Construction Pvt. Ltd, Arun Hospitalities Ltd, and Arun Agro Farms India Pvt. Ltd.

DR.SAMUEL GEORGE

Dr.Samuel George who is a doctor and an entrepreneur, also runs a clinic

named "City Clinic" in Abudhabi since the 1970's. Having completed his Bachelors

in Medicine from the Calcultta Medical College, Dr. George commenced his career

in government service and then subsequently moved to Abu Dhabi in the 1970s.

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PRADEEP KUMAR C

Mr. Pradeep Kumar C. is a leading Textile exporter of Kerala who has an

experience of 20 years in this field and has been successful in expanding his business

activities to foreign locations as well.

2.12 SERVICES OFFERED

Online trading

Hedge Equities has a large network of branches with online terminals of

NSE and BSE in the capital market and Derivative segments. Through their

dedicated phones and expert dealers at various offices, the clients are assured of

prompt order execution.

Internet Trading

Hedge Equities also offers internet trading through their site. This enables

one to trade through the internet from anywhere in the world. The dedicated IT

systems have ensured quality service in less time and more speed, thereby making

internet broking hassle-free. Using the EASIEST facility provided by NSDL, the

clients of Hedge Equities can transfer the shares sold by them, online, without

delivery instruction slips. Moreover, digitally signed contract notes can be sent to

clients through E-mail.

Depository Services

Hedge offers trading in the futures and options segment of the National

Stock Exchange (NSE).Through the present derivative trading, by paying a small

margin on the futures segment and a small premium in the options segment, an

investor can take a short term view on the market for up to a three months’

perspective. In the case of options, if the trade goes in the opposite direction the

maximum loss will be limited only to the premium paid.

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Knowledge Centre

Knowledge centre activities are aimed at providing systematic and

structured services mainly to new investors and also to young aspirants aiming for a

career in financial markets. The centre has three functional areas. They are:

The publication division,

The training centre and

Wealth management advisory service, which provides complete

investment solutions through knowledge-based personalized

services.

Equity Research

The research department is broadly divided into two divisions-

Fundamental Analysis Group (FAG) and Technical Analysis Group (TAG).

The Fundamental analysts are entrusted with the responsibility of

continuously scanning the entire economy and presenting information that is valuable

to the clients for making profitable investments.

The Technical Analysis Group predicts the market movements in advance

using complex analytical methods including Elliot Wave Theory. They are equipped

with cutting-edge technologies, for technical charting, which assist them to predict

both upside and downside movements efficiently.

Portfolio Management Services (PMS)

Hedge equity is a SEBI-approved portfolio manager and offers

discretionary and non-discretionary schemes to its clients. The portfolio management

team keeps track of the markets on a daily basis. They also look into other

technicalities pertaining to shares like dividends, rights, bonus, buy-back, Mergers

and Acquisitions.

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Commodity Trading

In commodities trading, trading is done in futures like gold, silver, crude

oil, rubber etc. which takes place during extended trading hours (10 am to 11 pm)

unlike stock trading.

Mutual Funds, Bonds etc

Hedge Equities also offers a wide range of Mutual funds and bonds that are

currently available in the market. It also keeps its clients informed about the top

mutual fund gainers/losers, latest NAVs, scheme profiles, forthcoming issues, etc.

through its website.

Currency Trading

Currency derivatives are contracts between the sellers and buyers, whose

values are to be derived from the underlying assets i.e. the currency amounts. These

are basically risk management tools used for hedging risks and acting as insurance

against unforeseen and unpredictable movements in the currency and interest rates.

Currency derivatives serve the purpose of financial risk management

encompassing various market risks. In currency trading, an upfront premium is

payable for buying a derivative.

Currency futures bring in more transparency and efficiency in price

discovery, eliminate counterparty credit risk, provide access to all types of market

participants and offer standardized products.

Hedge School of Applied Economics

Hedge School of Applied Economics is a knowledge initiative of Hedge

Equities, which was set up with the sole objective of moulding highly competent

investment professionals in the state. It is actually a company in itself which is

floated by Hedge Equities with the parent holding 100 percent stake. It offers a set of

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structured courses and various activities which enables students and aspirant

investors to build a better career in the financial industry and take informed

investment decisions.

2.13 ORGANISATION STRUCTURE

BOARD OF DIRECTORS

EXECUTIVE DIRECTOR

SYSTEMS LEGAL

MEMBER

-SHIP

SETTLEMENT

LISTING

MARKET

-INGFINANCE

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2.14 BUSINESS VERTICALS

2.14.1HEDGE WEALTH MANAGEMENT SERVICES

SERVICES OFFERED:

PORTFOLIO ADVISORY SERVICES

Portfolio Advisory Services is a value-added service offered to the clients.

They provide the following services to their Portfolio Advisory Services

clients

A dedicated Wealth Advisory Desk that is equipped to answer each of

their queries and unique needs

Assessment of their risk profiles and assistance in constructing /

balancing an investment portfolio that matches their individual risk appetite.

Access to high quality research and investment strategies

Under these services, the Wealth Management Service desk can only

suggest investment ideas that match the assessed risk-reward profile agreed for the

investor. The choice as well as the execution of the investment decisions rest solely

with the Investor. No fee is charged for this service.

PORTFOLIO MANAGEMENT SERVICES

Portfolio Management Service (PMS) is a product offering that caters to

the investment needs and objectives of a certain investor class.

The portfolios are designed and offered solely based on identifying the risk

profile of the customer. The investments in these portfolios are tailored to their risk-

reward profile. The portfolio invests in equities, debt instruments, gold ETF’s, and

other structured products and is managed by competent portfolio managers. The

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securities are held in an investor’s own depository account and this enables the

investor to monitor and view the securities. Regular performance reports and

research notes are also provided to the investors in the respective portfolios.

They currently offer three different portfolios to the customers

Hedge Conservative Portfolio

Hedge Moderate Portfolio

Hedge Aggressive Portfolio

MUTUAL FUND ADVISORY SERVICES

Hedge Wealth Management Services can help a person choose the mutual

fund schemes that best suit his/her requirements. They also provide advices on

redemptions, switch of units, etc according to variable market conditions.

The online mutual fund purchase terminals have made the purchase and

redemption of mutual funds much easier. The mutual fund units can be held in the

client’s demat account. This allows faster purchase & settlement process and

facilitates online viewing of his/her mutual fund holdings.

At Hedge, the investors are given the option to invest either in lump-sum

investment or through a Systematic Investment Plan (SIP) in Mutual Funds.

.

2.14.2 HEDGE SCHOOL OF APPLIED ECONOMICS (HSAE)

Hedge School of Applied Economics is a knowledge initiative from Hedge

Equities to provide a platform for imparting the importance of asset creation and its

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management as well as to encourage the development of entrepreneurship among the

youth. Hedge School of Applied Economics (HSAE) is the first ever educational

venture dedicated to creating a class of high-end investment professionals across

India.

The programs are designed for students, financial professionals and aspirant

investors.

2.14.3 HEDGE FINANCE

Hedge Finance which is a subsidiary of Hedge Equities, focuses on an

under tapped segment – Securities. The company provides loans to customers against

financial instruments like equities, bonds and debentures. The company

2.14.4 HEDGE COMMODITIES

Hedge Commodities Ltd, formed in 2008 as a fully owned subsidiary of

Hedge Equities, provides to its clients in the Commodities market segment. Hedge

Commodities Ltd offers services in Commodity Futures market.

With membership in all major national level exchanges, Hedge

Commodities provides services to a wide-range of clients, which includes investors,

hedgers, arbitragers and traders / speculators. The clientele belongs to different

segments of the market, including producers, manufacturers or end users, with

exposure to international, non agricultural commodities and agricultural

commodities.

32

2.14.5 HEDGE OHARI

Hedge Ohari is a monthly finance magazine that aims at providing its

readers comprehensive knowledge and a basic understanding of the various aspects

of financial planning as well as the entire spectrum of investment and wealth creation

methods, viz. stock market, mutual fund, real estate, gold, bonds, banking and so on.

The magazine’s content includes articles, features and interviews about the diverse

areas related to finance and business. The magazine’s contents are divided into

sections such as industry, business management, agriculture, education, automobile,

brand equity, success mantras, insurance, lifestyle, gadgets, and cinema.

2.14.6 KINSHIP

Kinship is a comprehensive stock market research by Hedge Equities that is

made available for subscription. The research is done by a panel of researchers on

Hedge Equities research desk. There are more than 150 report categories that caters

to almost all types of market players on the trading platform.

2.15 FUNCTIONAL DEPARTMENTS

CLIENT RELATION DEPARTMENT

This department, also known as the front office, assists the client or

customer to open an account in Hedge Equities.. A client has to open two types of

accounts to trade and own securities in the NSE & BSE.

FINANCE DEPARTMENT

This is a department to organize the financial activities and is created under

the direct control of the board of directors. The Finance manager decides the major

financial policy methods. Lower level managers delegate the other routine activities.

33

MARKETING DEPARTMENT

The major functions of marketing department are:

a) Business Associate Development: The company takes up the marketing

activities of the various branches. It encourages better relations in its branches and is

responsible for the development of various marketing strategies.

b) Brand promotion: An important function of marketing department is to

promote the name of the company. Hedge equities do it through different

promotional activities.

c) Investment promotion: Through its investment promotions, the

marketing department tries to capture as many investors as possible to encourage

them to invest, since they form the most important part of the clientele of Hedge

equities.

d) Delivery promotion: Intraday trading is not always profitable and might

involve a high risk. Hence Hedge Equities promotes delivery, where the shares are

kept to be sold for a later date after analyzing the profitability factors.

SYSTEMS DEPARTMENT

The systems department plays a fundamental role in the routine operations

of the company. The clients are provided with the facilities of Internet trading

through the systems department. The department directly maintains the optic fibre

cables and high bandwidth connections from the Hedge Equities office to the ISP, a

dedicated server and back-up ISDN connections. The two software namely, ODIN

(Open Dealers Integrated Network) and NEAT (National Exchange for Automated

Trading) are used for the purpose of trading.

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HUMAN RESOURCE DEPARTMENT

Human resource management is defined as asset of practices, policies and

programmes designed to maximize both personal and organizational goals. The

following are some of the main duties of the Human Resource department at Hedge

Equities:

a) Training & Induction

The selected employees undergo a, three days continuous, induction. The

employees are given training with all the departments of Hedge equities, during this

period. There are classroom induction sessions as well.

b) Wages and Salary Administration

The wages and salaries of the employees are fixed and granted by the HR

department only with the consent of the finance department.

c) Performance appraisal

The Human Resources department has the authority of granting promotions

and transfers to the employees as well as taking disciplinary actions when needed.

D) Grievance Handling

The grievances of the employees are received only through the respective

department heads. The HR department then takes appropriate measures as per the

rules and regulations of the company.

TRADING DEPARTMENT

The department deals with the trading related activities of the company.

Trading refers to the buying & selling of shares. This is the most important

department of the organization. There are two types of trading. They are:

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A ) Online Trading

Each computer of the department is termed as trading terminal. Each

terminal, that is assigned with NCFM certified dealers, who is in charge of each

portal, does the trade according to the client request. The terminal is managed by

either NEAT (National Exchange for Automated Trading) software or ODIN (Open

Dealers Integrated Network) software. The clients also place orders through written

requests or through the telephone, which are then placed by the dealers.

B ) Internet Trading

The internet trading is a facility that is provided by the company to enable

the client to trade the securities at his convenience. The order is placed by the client

himself. He can also make changes such as changing the price, cancellation of the

order, etc. before the trade is done.

DELIVERY & DEPOSITORY DEPARTMENT

Delivery refers to the shares that are bought on a particular day but are not

sold on that day itself. Instead, the shares are held for an appreciation in the value

and then traded on a future date. Deliver instruction slip is a slip the client fills and

gives the dealer regarding the purchase of the share. Depository is a facility that

transfers ownership of securities in electronic mode on behalf of its members. The

two procedures to move the shares are namely,

a) Power of attorney

This is a written document which the client signs at the time of opening a

trading account and depository participant account. Hedge Equities Ltd acquires the

power to transact the clients stocks without pay-in slips, once the client gives the

power of attorney to the company.

b) EASIEST

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‘Electronic Access to Securities Information and Execution of Secured

Transaction’ or EASIEST is a secured internet enabled service. This is a facility

through which the clients can give delivery instructions via internet. EASIEST is a

facility provided by CDSL.

The activities related with the depository department.

Depository function

Dematerialization

Pledging

EQUITY RESEARCH DEPARTMENT

The main function of this department is to study the details regarding the

share or security and to make forecasts regarding the future performance of the

company. The two approaches followed in the department to do the same, are:

a) Fundamental analysis

b) Technical Analysis

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SECTION 2:

PROBLEM CENTRED STUDY

HEDGE EQUITIES LTD.

38

CHAPTER1:

PROBLEM

FORMULATION

39

1.1 INTRODUCTION

The term ‘Mutual Fund’ refers to funds that are raised and invested mutually,

i.e. on behalf of everyone participating in the scheme. A mutual fund is just a

portfolio of stocks, bonds or other securities that is collectively owned by many

investors and managed by a professional investment company which is commonly

known as AMC (Asset Management Company).

Each fund has a specific objective that is clearly stated in its prospectus, the

official booklet that describes the mutual fund. A fund can invest in hundreds of

different securities since the pooled money has more buying power than of one

investor’s alone. Therefore, its success does not depend on the performance of one or

two companies, but of several stocks which the fund holds. The money that is

collected from the investors is invested in capital market instruments such as shares,

debentures and other securities. The income thus earned from such investments and

the capital appreciation that is realised (mainly from equity), is shared by these unit

holders in proportion to the number of units owned by them.

There has been a fast growth in the mutual fund industry in the recent period.

The performance is encouraging especially because the emphasis in India has been

on individual investors, which is in contrast to the advanced countries where mutual

funds depend largely on institutional investors.

Since 1991, the Indian mutual fund industry has seen a rise in the number of

equity oriented growth funds. There were many reforms in the economic policies that

were made during this period and one among them was the tax exemption of up to

Rs. 10,000 in ELSS. This has now increased to Rs. 1, 00,000 after introduction of

section 80 C in the year 2006. This move was taken to encourage the small investors

to make investments in the stock market through mutual funds.

40

Many foreign AMC’s are in the queue to enter the Indian markets. Moreover,

the entry of public sector banks and insurance companies to the mutual fund industry

has led to the launching of more and more new schemes. For example, LICMF has

concentrated on funds which includes life and accident cover. GICMF provide home

insurance policy. All this shows that there is growth in the Mutual Fund industry.

1.2 TITLE OF THE STUDY

‘AN EVALUATION OF INVESTOR PREFERENCE TOWARDS

MUTUAL FUNDS’

1.3 BACKGROUND OF THE STUDY

1.31 ABOUT MUTUAL FUNDS

Mutual Funds, in simple terms, are basically a mechanism of pooling

together investors’ money and deploying it in various financial assets. The money is

collected and managed by professionals called Fund Managers. They invest this

money in several capital market instruments such as shares, debentures and other

securities depending on the objective of the Mutual Fund product. The income that

is generated through such investments is shared by the various unit holders i.e. the

investors themselves, in proportion to the number of units held by them. Mutual

Fund is best suitable for the common man, as it allows him to invest his savings in

41

well-diversified portfolios at relatively low costs because small investors neither has

enough expertise nor have sufficient exposure to the various securities available to

them. When investments are spread across various securities it reduces the risk as all

stocks do not move in the same direction in the same proportion at the same time. In

India, Mutual Funds are subject to SEBI regulations, thereby providing more security

to the investors.

When an investor subscribes to the units of a Mutual Fund, he becomes a

part owner of the assets it comprises, in the same proportion as the contribution made

by him to the total fund. A Mutual Fund investor is also known as a Unit holder or

Mutual Fund shareholder. The Mutual Funds declare a value to their portfolios on a

unit basis and this is known as Net Asset Value or NAV. NAV is the market value of

the Mutual Fund’s assets minus the allowable expenses and charges. It is calculated

on a daily basis, by dividing the market value of the scheme’s assets by the total

number of units issued to the investors.

Advantages of Mutual Funds

Diversification of portfolio over various asset classes and securities.

Professional management of funds by experts.

Risk reduction due to diversification.

Wide choice of products across different markets and segments.

Protection of investors’ interests and strict regulatory supervision.

Convenient, flexible and easy to transact.

Low transaction costs.

Provides liquidity through open ended schemes and ETFs.

Tax advantages from structure and choice options.

Drawbacks of Mutual Funds

The returns on Mutual funds are not guaranteed.

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Too much diversification can affect the returns

The cost payable to the fund managers might not be related to the

performance of the fund.

1.32 HISTORY OF MUTUAL FUNDS

The formation of Mutual Fund industry in India began with the formation of

Unit Trust of India in 1963, at the initiative of the Government of India and the

Reserve Bank of India. The history of mutual funds in India can be broadly divided

into four distinct phases:

First phase 1964-1987

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It

was set up by the Reserve Bank of India and functioned under the Regulatory and

Administrative control of the Reserve Bank of India. In 1978 UTI was de-linked

from the RBI and the Regulatory and Administrative control was taken over by IDBI.

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

It was during this period when the non-UTI, public sector mutual funds set

up by public sector banks and Life Insurance Corporation of India (LIC) and General

Insurance Corporation of India (GIC), made an entry into the industry. SBI Mutual

Fund was the first non-UTI Mutual Fund which was established in June 1987

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 established its mutual fund in June 1989 while

GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual

fund industry had assets under management of Rs. 47,004 Crores.

Third phase 1993-2003

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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 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised SEBI (Mutual Fund) Regulations 1996 under which the

industry currently functions.

The number of mutual fund houses went on increasing, with many foreign

mutual funds setting up funds in India. The industry also 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

In February 2003, following the rescission of the Unit Trust of India Act

1963, UTI was bifurcated into two separate entities. One is the Specified

Undertaking of the Unit Trust of India that functions under an administrator and the

rules framed by Government of India. It does not come under the purview of the

Mutual Fund Regulations. The second is the UTI Mutual Fund, 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 and the recent mergers taking place

among different private sector funds, the mutual fund industry has entered its current

phase of consolidation and growth.

The graph indicates the growth of assets over the years.

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Figure 2: Growth in Assets under Management, source: www.amfiindia.com

1.33 PRODUCT VARIETY OF MUTUAL FUNDS

There are numerous classifications of Mutual Funds. Some of them are given

below:

45

Figure 3 : Product Variety of Mutual Funds

Open ended fundsClosed ended fundsInterval funds

Based on the Structure

Active managementPassive management

Based on portfolio management

Growth fundsIncome fundsBalanced funds

Based on Investment

ObectiveEquity fundsDebt fundsHybrid fundsLiquid funds

Based on Investment

PortfolioGold ETFArbitrage fundsInternational fundsELSSReal Estate Mutual Funds

Other Types of Funds

46

Each type of Mutual Fund is explained below:

Based on the Structure:

Mutual Funds can be classified on the basis of how the units are issued and

redeemed.

Open Ended Funds : Open Ended Funds are those which have no fixed

maturity date. They are open to purchases and redemption at any point of time. The

units of an open ended scheme are offered to the investors during NFO (New Fund

Offers), for the first time. The consequent purchases and redemption can either be

done at various maturity fund offices or investment service centres or on a

continuous basis after the NFO. And since there is continuous purchases and

redemption of units, open ended funds do not have a fixed unit capital. All the

transactions are based on the NAV of the fund.

Closed Ended Funds: Closed ended funds operate only for a specified

period of time. These funds are offered only in an NFO. No fresh investments can be

made after the offer period. Therefore, any further purchases and selling of units can

only be done in the secondary market, like any other listed stock, at the prevailing

market price. All the units are redeemed and the scheme comes to a close on a

specific maturity date. Since the transactions that happen in the stock market do not

affect the unit capital, the size of a listed closed ended fund is kept constant.

Interval Funds: These funds are actually a variant of closed end funds

but they become open ended at specific intervals of time. This is because purchases

and redemption of units are allowed only during the ‘specified transaction period’

and no transactions are allowed at any other point of time. This period should be a

minimum of two days and the period between two successive specified transaction

periods should be a minimum of 15 days. Like closed ended funds, they have to be

mandatorily listed on the stock exchange.

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Based on Portfolio Management:

Fund managers may use different investment strategies and styles with the

basic purpose of attaining the stated objective of the mutual fund scheme. On the

basis of management of the scheme portfolio, funds can be classified as

Actively managed Funds: Active management is a portfolio

management strategy where the fund manager makes investments with the objective

of outperforming an investment benchmark index such as BSE Sensex. There is an

active involvement of the fund manager in the allocation of securities and assets

under this strategy. An active fund may perform better or worse than the market

index. Active management requires more time, financial resources and market risk.

As a result, there are increased chances that the returns might reduce over time and

that the funds might not be able to outperform the benchmark index.

Passively managed Funds: Under Passive management, a market

index is chosen and the portfolios are designed to simply replicate it. Here, the funds

are invested in the same securities and the same proportion, as the index they

replicate. The investor’s goal is to match the returns of the benchmark index rather

than to outperform it. The portfolio is modified each time the index composition

changes. The two types of passive funds are- index funds and ETF (Exchange Traded

Funds).

1. Index Funds: It is a type of mutual funds that holds a portfolio that is

constructed to mirror the performance of a chosen market index. They provide

returns that are similar to the index they track. The main advantage of Index funds is

lower management fees than regular mutual funds. Moreover, since the composition

of the indices is known, the investors can hedge their positions after ascertaining the

risks.

48

2. Exchange Traded Funds (ETF): ETFs are those index funds that are

listed on the stock exchange just like stocks. The ETFs are initially offered in an

NFO as all other mutual funds. Further purchases and selling are done on the stock

exchange. The units are credited to the demat account. The ETFs trading value is

based on the net asset value of the underlying stocks that it represents. The only cost

to the investor is the brokerage commission that is incurred while trading the ETFs.

Therefore, it is considered as a lower cost option than many other forms of investing

even when it provides the investors a broader exposure to the entire stock market in

different sectors in different countries.

Based on Investment Objective:

Mutual funds are designed to cater various investment objectives and using

this as a basis for classification they can be:

Growth Funds: These are funds that focus on growth of the capital

invested. It comprises a diversified portfolio of equity stocks. The main objective of

such funds is to provide capital appreciation over the medium or long term. But the

risk involved is also higher as they are more volatile than income funds or liquid

funds. Such investments require a holding period of 5- 10 years. Therefore, growth

funds are also known as nest eggs or long haul investment.

Income Funds: Income funds are funds that focus on generating a

regular income. These funds primarily invest in medium or long term debt

instruments that will generate income on a monthly or a quarterly basis. The debt

instruments are mainly issued by the Government, banks, companies or financial

49

institutions. Such funds are offered in two forms; the first scheme earns a target

income that is constant at relatively low risk, while the second scheme offers the

maximum possible income. But this implies that higher the expected return, higher

the potential risk of the investment. This is because these funds are subject to interest

rate risk since investments are made for a long term.

Balanced Funds: Those funds that aim at striking a balance between

growth and income simultaneously are known as balanced funds. They invest in both

equity and debt. This type of funds is suitable for those investors who seek capital

appreciation with some protection from volatility. The performance of a balanced

fund solely depends on the performance of the two asset classes- equity and debt.

Also, the risk associated with such funds is directly related to the composition of

equity in the portfolio.

Based on Investment Portfolio:

Mutual funds can be classified on the basis of the composition of portfolios.

Equity Funds: Equity funds mainly invest in equity and equity related

instruments. Hence, they are associated with high degree of risk due to the short term

fluctuations in the share prices. But in the longer term it offers higher returns with

relatively low volatility. Also, it yields greater capital appreciation in the long term.

Equity can be classified into:

1. Diversified Equity: These funds invest in equity shares across various

sectors, sizes and segments with no single security dominating the portfolio. Due to

their diversified nature, they are less risky.

50

2. Sector Specific Funds: These funds invest in a particular sector such

as banking, pharmaceuticals, technology, etc. Since these are concentrated funds they

feature high risk.

3. Thematic Equity Funds: These funds hold a portfolio of equity shares

and sectors based on a theme. The investments can be spread across various sectors

and stocks whose performance is linked to a particular theme.

Debt Funds: Debt funds are mutual funds that invest in debt securities

such as treasury bills, Government securities, bonds and debentures. The main

objective of such investments would be preservation of capital and generation of

income. These funds have a fixed maturity date and also pay an explicit rate of

interest. They carry less risk and are very tax efficient.

1. Corporate bond funds invest in corporate bonds and debentures of

varying maturities.

2. Gilt funds invest in government securities of medium and long term

maturities issued by central and state governments.

3. Floating Rate funds invest in floating rate debt securities.

4. Bond Index fund creates the same portfolio as a specific bond index

and seeks to replicate the performance of that index.

5. Infrastructure Debt funds invest primarily in debt securities or

securitized debt instruments of infrastructure companies, infrastructure capital

companies, infrastructure projects etc.

51

6. Dynamic bond funds invest in different classes of debt and money

market instruments of different maturity profiles.

Hybrid Funds: Hybrid funds can have an equity or debt orientation.

Equity-oriented balanced funds invest up to 65% in equity and rest in debt securities

to offer a cushion to an all equity portfolio.

Debt oriented hybrid funds invest at least 75% or more in debt, and the

balance in equity to present a yield-kicker to a debt investor. Based on the objectives,

these funds come in three forms: Monthly Income Plans (MIP), asset allocation funds

and capital protection funds.

1. MIPs or Monthly Income Plans invest primarily in debt securities with

a very small proportion in equity (usually 5%-30% of the total funds). It not only

generates income from the debt securities, but also generates some benefit of growth

of funds in the long term from equity. They also provide periodic dividend

distribution to the investors on a monthly, quarterly or on an annual basis.

2. Asset Allocation Funds are those funds that invest in both equity and

debt in proportions that can be changed from time to time based on the fund

manager’s view on the future movements of asset prices.

3. Capital Protection Funds are closed ended schemes having the main

objective of capital protection. Hence, a large portion of the principal amount is

invested in fixed income securities and the rest in equity to provide capital

appreciation with time.

Liquid Funds: They are Funds that serve as short term parking

avenues and do not have a lock in period. These funds invest only in debt and money

market instruments (such as treasury bills, COD and commercial papers) of short

52

term maturity of up to 91 days. The objective of such funds is to provide high

liquidity with reasonable returns. Since liquid funds have a low level of risk, they are

assigned blue colour as per codes specified by the SEBI.

Other Types of Mutual Funds:

Gold ETFs are Exchange Traded Funds that has Gold as the underlying

asset. The NAV moves along with the market price of Gold. These funds hold Gold

in the physical form or in the form of Gold receipts.

Arbitrage Funds generate income through arbitrage opportunities due

to the differences in the pricing between cash market and derivatives market. They

buy in the spot market and sell in the derivatives market to earn the interest rate

differential.

International Funds invest in markets outside India as well as hold

some of their portfolios in India. The main advantage of such funds is diversification

of investments across global markets that will also diversify the macroeconomic

risks.

ELSS or Equity Linked Saving Schemes are special equity funds,

eligible for tax deduction under section 80C of the income Tax Act. They must hold

at least 80% of the portfolio in equity securities and the investments in ELSS

schemes are subject to lock-in period of 3 years from the date of investment.

Real Estate Mutual Funds are closed ended and listed funds that

directly invest at least 35% in real estate assets. They can also invest in MBS,

53

securities of companies engaged in real estate companies and real estate development

projects.

1.34 INVESTMENT STRATEGIES

Mutual funds offer many options that lets investors choose how to invest,

realize their returns and redeem their units. Some of them are:

Systematic Investment Plan (SIP): SIP enables investors to

periodically invest a fixed sum into a mutual fund scheme.

Systematic Withdrawal Plan (SWP): SWP allows investors to make

periodic redemptions i.e. they can withdraw a fixed sum at the end of each period.

Systematic Transfer Plan (STP): STP permits investors to transfer a

fixed sum from one scheme to another, periodically.

1.4 STATEMENT OF THE PROBLEM

An investment decision is a very complex activity for a common investor

due to the volatility and intricacy involved in the financial markets. Mutual fund

schemes are an important option that is available to the investors to invest their

savings. But since there are numerous varieties of schemes, of varying portfolio mix,

investment objectives and structures, it is a very complex decision for a small

54

investor to choose a particular scheme that suits his requirements. This problem has

been intensified in the recent times where the competition in this industry has led to

the launch of many newer and better products.

A different problem that the Indian mutual fund industry is facing is the lack

of awareness among the masses about the diverse mutual fund products. The main

reason the number of retail mutual fund investors remains small is that nine in ten

people with incomes in India do not know that mutual funds exist.

In addition, mutual funds have their own drawbacks and may not be for

everyone. No investment is risk free. If the entire stock market declines in value, the

value of mutual fund shares will go down as well, no matter how balanced the

portfolio is. Therefore, risk and return analysis plays an important role in choosing

mutual funds. There are various other factors that influence the investors to make an

investment decision.

The main purpose of this study is to discover the answers for the following

research questions:

1. What are the factors that influence investors in selecting a mutual fund

as investment option?

2. What are their perceptions about and attitude towards mutual fund

investments?

1.5 RELEVANCE OF THE STUDY

Savings form an important part of the economy of any nation. With savings

invested in various options available to the people, the money acts as the driver for

growth of the country. Indian financial scene too presents multiple avenues to the

55

investors. Indian Mutual Fund industry offers a plethora of schemes and serves

broadly all type of investors.

Keeping in view the big boom that has been seen in the mutual fund industry

in India recently with many new players entering into the improving market, it seems

to be the most suitable investment option for the common man as it offers an

opportunity to invest in a diversified, professionally managed basket of securities at a

relatively low cost. The benefits provided by them out across the boundaries of

investor category, creates a universal appeal for them.

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CHAPTER 2:

RESEARCH

PROCESS

58

2.1 OBJECTIVES OF THE STUDY

The study intends to meet the following objectives:

To analyse the attitude of investors towards mutual fund schemes.

To understand the various factors that influences the investors in

selecting mutual funds as an investment option.

To understand the level of awareness among the people regarding

mutual funds and their preference towards different schemes.

To find out the most preferred channel and mode of investment.

2.2SCOPE OF THE STUDY

It is very important to understand the needs and preferences of an investor to

find out the perfect investment for him. Moreover, every investor tries to derive

maximum economic advantage from his investment activity. The choice of the best

investment option will depend on personal circumstances as well as general market

conditions.

This project report titled ‘AN EVALUATION OF THE ATTITUDE OF

INVESTORS TOWARDS MUTUAL FUNDS’ aims at identifying the various

factors that influence the attitude of investors residing, in selecting a mutual fund for

investment as well as providing details about the concept of mutual funds. The

primary data has been gathered through an online survey.

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2.3 RESEARCH DESIGN

A research design is the arrangement of conditions for the collection and

analysis of data in a manner that aims to combine relevance to the research purpose

with economy in procedure. Research design includes the plan, structure and

procedure adopted to obtain the required information for the particular study. Each

research has a specific research design based on its nature.

2.31 METHOD OF RESEARCH:

Descriptive research: The method undertaken for this study is descriptive in

nature.

It is undertaken when the researcher wants to study/describe the

characteristics of a particular person, or of a group. Most of the social research comes

under this category.

Descriptive research involves gathering data that describe events and then

organizes tabulates, depicts, and describes the data collection. It often uses visual

aids such as graphs and charts to aid the investigator in understanding the data

distribution; they are very useful in reducing the data to manageable form. The

research uses description as a tool to organize data into patterns that emerge during

analysis. Those patterns aid in comprehending a qualitative study and its

implications.

60

2.32 VARIABLES IDENTIFIED FOR THE STUDY

The variables that have been identified for the study can be classified into

independent and dependent variables.

INDEPENDENT VARIABLES

Liquidity

Risk

Returns

Capital appreciation

Tax benefits

DEMOGRAPHIC FACTORS:

Age

Gender

Occupation

Income earned

DEPENDENT VARIABLE

Investor attitude

2.33 SOURCES OF DATA COLLECTION:

Two sources of data collection have been employed i.e. primary data and

secondary data.

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PRIMARY DATA:

Primary data are those collected by the investigator himself for the first time

and thus they are original in character. They are collected for a particular purpose.

Primary data though having the advantage of being truthful and suiting the purpose

of the research more, the process of its collection is very expensive and time

consuming.

Primary data necessary for the study were collected by interacting with

various people through a survey. A questionnaire has been used to systematically

collect the relevant information from the respondents. (Questionnaire has been

attached at the end of the project)

The questionnaire primarily consists of closed-ended questions which

include:

1. Multiple choice

2. Rating scale

3. Checklist

The first section of the questionnaire is prepared mainly for collecting the

personal details of the respondents.

The second section consists of multiple choice questions which help in

collecting information regarding investor perception towards mutual funds.

SECONDARY DATA

Secondary data are those which have been collected by some other person

for his purpose, and published. They are usually in the shape of finished products and

62

maybe collected from published or unpublished sources. Collection of secondary

data has the advantage of being less expensive and less time consuming.

The secondary data has been collected from the following sources:

1. Websites

2. Reports

3. Books on the subject

2.34 TOOLS FOR DATA COLLECTION:

The primary data for this study has been collected using questionnaires.

Questionnaires are most popular instrument for collecting data. A

questionnaire is a list of questions to be asked to the respondents. It also contains

suitable space where the answers can be recorded.

2.35 METHOD OF DATA COLLECTION:

The method of data collection used is sample survey. A sample survey is a

study that obtains data from a subset of population, in order to estimate the attributes

of the selected population.

The primary data was mainly collected by distributing the questionnaire

online through social networking sites and personal contacts.

2.36 DATA ANALYSIS TOOLS

The primary data that was collected was tabulated and percentages were

drawn from it. This was then shown in chart form (pictorial representation) for better

understanding. The data was then used to draw inferences and conclusions, and also

to give suggestions. The secondary data obtained was used in areas that required it.

63

2.37 SAMPLING TECHNIQUE:

A sample design is the specific scheme employed to acquire the facts and

figures needed for the study, from the selected population. Depending on his study, a

researcher can adopt probability or non-probability sample design.

Sample design used for this study: Non probability convenience sampling.

Convenience sampling refers to the collection of information from members of the

population who are conveniently available to the researcher. Due to time constraints

the questionnaire was distributed online and the first 60 responses received has been

taken as the sample.

2.38 SAMPLING SIZE:

The population for the study is quite large and unlisted. Hence, the sample

size of the survey was fixed at 60 for detailed information gathering.

2.4 LIMITATIONS:

1. Time was a big limiting factor to conduct an extensive study.

2. The response of the respondents to the questionnaire may not be

accurate.

3. As the project is of qualitative nature, there was bias from the

participants in some cases.

4. The research work had to be completed within the stipulated time and

since the sample size was restricted to 50 respondents it may not adequately

represent the whole market of mutual fund.

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CHAPTER 3:

PRESENTATION

AND ANALYSIS OF

DATA

65

DATA ANALYSIS AND INTERPRETATION OF DATA:

3.1 AGE DISTRIBUTION OF INVESTORS

TABLE3. 1: SHOWING AGE DISTRIBUTION OF INVESTORS

RESPONSENUMBER OF RESPONSES PERCENTAGE

below 25 2 3%between 26 and 35 11 18%between 36 and 40 20 33%between 41 and 45 14 23%between 46 and 50 7 12%above 50 6 10%TOTAL 60 100%

FIGURE 3.1: SHOWING AGE DISTRIBUTION OF INVESTORS

SOURCE: TABLE 3.1

INTERPRETATION

According to the table out of 60 respondents 33% belong to the age group of 36 to 40 years, 23% belong to the age group of 41 to 50 years, 18% belong to the age group of 26 to 35 years, 12% belong to the age group of 46 to 50 years, 10 % belong to the age group of above 50 years and only 3% belong to the age group of below 25 years.

3.2 OCCUPATION OF INVESTORS

below 25 between 26 and 35

between 36 and 40

between 41 and 45

between 46 and 50

above 500

5

10

15

20

25

Series1

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TABLE 3.2: RESPONSE SHOWING OCCUPATION OF INVESTORS

RESPONSENUMBER OF RESPONSES PERCENTAGE

Government sector 5 8%Business 12 20%Other 17 28%Private sector 26 44%TOTAL 60 100%

FIGURE 3.2: RESPONSE SHOWING OCCUPATION OF INVESTORS

Government sector; 5

Business; 12

Other; 17

Private sector; 26

SOURCE: TABLE 3.2

INTERPRETATION:

It is seen from the above table that most of the respondents i.e. 43% of the total are private sector employees, 28% belong to other sectors, 20% are businessmen/women and 8% are government employees.

3.3 MONTHLY INCOME OF THE INVESTORS

67

TABLE 3.3: RESPONSE SHOWING MONTHLY INCOME OF INVESTORS

RESPONSESNUMBER OF RESPONSES PERCENTAGE

Up to Rs.10,000 2 3%

Between Rs.10,001 and Rs.15,000 3 5%

Between Rs.15,001 and Rs.20,000 7 12%

Between Rs.20,001 and Rs.30,000 14 23%

Rs.30,001 and above 34 57%TOTALS 60 100%

FIGURE3.3: RESPONSE SHOWING MONTHLY INCOME OF INVESTORS

Up to Rs.10,000; 2 Between Rs.10,001 and Rs.15,000; 3

Between Rs.15,001 and Rs.20,000; 7

Between Rs.20,001 and Rs.30,000; 14

Rs.30,001 and above; 34

SOURCE: TABLE 3.3

INTERPRETATION:

From the above chart it is seen that out of 60 respondents, 57% are in the monthly income group of Rs.30,001 and above, 23% are in the monthly income group of Rs 20,001 toRs.30,000, 12% are in the monthly income group of Rs.15,001 to Rs.20,00, 5% are in the monthly income group of Rs.10,001 to Rs.15,000 and 3% are in the monthly income group of Rs.10,000 and below.3.4 NUMBER OF INVESTORS WHO HAVE MADE ANY INVESTMENTS

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TABLE 3.4: RESPONSE SHOWING HOW MANY INVESTORS HAS MADE INVESTMENTS.


Yes 56 93%No 4 7%TOTAL 60 100%

FIGURE3.4: RESPONSE SHOWING HOW MANY INVESTORS HAVE MADE INVESTMENTS.

Yes; 51

No; 9

SOURCE: TABLE 3.4

INTERPRETATION:

As per the table above, 93% of the respondents have made investments in one or many investment avenues, whereas 7 % have not made any investments yet.

3.5 INVESTORS INVESTED IN VARIOUS INVESTMENTS

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TABLE3.5: RESPONSE SHOWING THE VARIOUS INVESTMENTS MADE BY INVESTORS


Fixed Deposits 41 20%Savings Account 54 26%Mutual Funds 26 12%Insurance 25 12%Gold/Silver 23 11%Real Estate 25 12%

Shares/Debentures 9 4%

Post Office- NSC, etc. 7 3%TOTAL 210 100%

FIGURE3.5: RESPONSE SHOWING THE VARIOUS INVESTMENTS MADE BY INVESTORS

SOURCE: TABLE 3.5

INTERPRETATION:

The above table shows that 26% of respondents have invested in savings account, 20% have invested in fixed deposits, 12% have invested in mutual funds, 12% in insurance as well as 12% in real estate, 11% in Gold and Silver, 4% in shares and debentures and 3% in Post Office-NSC, etc.

3.6 PREFERENCE OF FACTORS WHILE INVESTING

70

TABLE 3.6: RESPONSE SHOWING PREFERENCE OF FACTORS WHILE INVESTING

RESPONSESNUMBER OF RESPONSES

PERCENTAGE

Liquidity 13 22%Low Risk 15 25%High Returns 22 37%Potential for Growth(Capital Appreciation) 7 12%Tax Benefits 3 5%TOTAL 60 100%

FIGURE 3.6: RESPONSE SHOWING PREFERENCE OF FACTORS WHILE INVESTING

Liquidity; 13

Low Risk; 15High Returns; 22

Potential for Growth(Capital Appreciation), 7

Tax Benefits; 3

SOURCE: TABLE 3.6

INTERPRETATION:

From the above table and chart it is seen that of the total respondents, 37% consider the possibility of earning high returns as an important factor while making an investment choice, 25% consider the risk factor to be an important parameter while 22% prefer investments that provide liquidity. Only 12% investors regard the potential for growth of funds to be a significant factor and 5% choose investments based on the tax benefits they provide.

3.7 AWARENESS ABOUT MUTUAL FUNDS

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TABLE 3.7: RESPONSE SHOWING NUMBER OF INVESTORS AWARE ABOUT MUTUAL FUNDS


Yes 51 85%No 9 15%TOTAL 60 100%

FIGURERE 3.7: RESPONSE SHOWING NUMBER OF INVESTORS AWARE ABOUT MUTUAL FUNDS

Yes; 51

No; 9

SOURCE: TABLE 3.7

INTERPRETATION:

The above chart shows that 51 out of 60 respondents i.e. 85% are aware about Mutual Funds and only 9% are not.

3.8 SOURCES OF INFORMATION REGARDING MUTUAL FUNDS

72

TABLE 3.8: RESPONSE SHOWING THE VARIOUS SOURCES OF INFORMATION FOR INVESTORS ABOUT MUTUAL FUNDS


Advertisements 21 41%Peer groups 12 24%Banks 11 22%Financial Advisers 7 14%TOTAL 51 100%

FIGURE 3.8: RESPONSE SHOWING THE VARIOUS SOURCES OF INFORMATION FOR INVESTORS ABOUT MUTUAL FUNDS

Advertisements; 21

Peer groups; 12

Banks; 11

Financial Advisers; 7

SOURCE: TABLE 3.8

INTERPRETATION:

The above table shows that 41% of the total respondents came to know about mutual funds through advertisements, 24% from their peer groups, 22% from banks and 14% from financial advisers.

3.9 INVESTORS WHO HAVE INVESTED IN MUTUAL FUNDS

73

TABLE 3.9: RESPONSE SHOWING NUMBER OF INVESTORS WHO MADE INVESTMENTS IN MUTUAL FUNDS


Yes 21 41%No 30 59%TOTAL 51 100%

FIGURE 3.9: RESPONSE SHOWING NUMBER OF INVESTORS WHO MADE INVESTMENTS IN MUTUAL FUNDS

Yes; 21

No; 30

SOURCE: TABLE 3.9

INTERPRETATION:

According to the table given above, 59% of the respondents have not invested in mutual funds, whereas 41% have made investments in mutual funds.

3.10 REASONS FOR NOT INVESTING IN MUTUAL FUNDS

74

TABLE 3.10: RESPONSE SHOWING THE REASONS FOR NOT INVESTING IN MUTUAL FUNDS

RESPONSES NUMBER OF RESPONSES PERCENTAGELack of proper knowledge about the product 17 57%Lack of confidence in the services provided 5 17%

Bitter past experience 1 3%Difficulty in the selection of schemes 6 20%Other 1 3%TOTAL 30 100%

FIGURE 3.10: RESPONSE SHOWING THE REASONS FOR NOT INVESTING IN MUTUAL FUNDS

SOURCE: TABLE 3.10

INTERPRETATION:

The table above shows that lack of proper knowledge regarding the product has prevented 17 out of 30 i.e. 57% of the investors to invest in mutual funds.20% have not invested in mutual funds due to the difficulty to make the right selection among different schemes. 17% have not invested as they lack confidence in the services provided, 3% due to bitter past experience and 3% due to other reasons.

3.11 PREFERENCE TOWARDS VARIOUS MUTUAL FUND PLANS

Lack of proper knowledge about the

product; 17

Lack of confidence in the services pro-

vided; 5

Bitter past expe-rience; 1

Difficulty in the selec-tion of schemes; 6

Other; 1

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TABLE 3.11: RESPONSE SHOWING INVESTOR PREFERENCE TOWARDS DIFFERENT PLANS

RESPONSENUMBER OF RESPONSE PERCENTAGE

Growth Funds (Only in equity) 9 43%Income Funds (Only in debt) 3 14%Balanced Funds (Having both equity and debt) 7 33%Liquid Funds (Money Market Mutual Funds) 2 10%TOTAL 21 100%

FIGURE 3.11: RESPONSE SHOWING INVESTOR PREFERENCE TOWARDS DIFFERENT PLANS

Growth Funds (Only in eq-

uity); 9

Income Funds (Only in debt); 3

Balanced Funds (Having both equity and debt); 7

Liquid Funds (Money Market Mutual Funds); 2

SOURCE: TABLE 3.11

INTERPRETATION:

It is seen from the above table that 43% of investors prefer to invest in growth funds, 33% in balanced funds, 14% in income funds and 10% in liquid funds.

3.12 HOLDING PERIOD PREFERRED BY INVESTORS

76

TABLE 3.12: RESPONSE SHOWING PREFERENCE OF INEVSTORS REGARDING THE HOLDING PERIOD OF MUTUAL FUND INVESTMENTS

RESPONSENUMBER OF RESPONSE

PERCENTAGE

1 to 3 years 7 33%4-6 years 10 48%7 to 10 years 3 14%More than 10 years 1 5%TOTAL 21 100%

FIGURE 3.12: RESPONSE SHOWING PREFERENCE OF INEVSTORS REGARDING THE HOLDING PERIOD OF MUTUAL FUND INVESTMENTS

1 to 3 years; 7

4-6 years; 10

7 to 10 years; 3

More than 10 years; 1

SOURCE: TABLE 3.12

INTERPRETATION:

The above table shows that 48% of mutual fund investors prefer to hold their investments for a period of 4-6 years, 33% prefer a period of 1-3 years, 14% prefer a holding period of 7-10 years and 5% prefer to hold their investments for more than 10 years.

3.13 INVESTOR PREFERENCE TOWARDS DIFFERENT MUTUAL FUND SCHEMES

77

TABLE 3.13: RESPONSE SHOWING INVESTOR PREFERENCE TOWARDS DIFFERENT MUTUAL FUND SCHEMES


Open end fund scheme 8 38%

Closed end funds scheme 9 43%Interval funds scheme 4 19%TOTAL 21 100%

FIGURE 3.13: RESPONSE SHOWING INVESTOR PREFERENCE TOWARDS DIFFERENT MUTUAL FUND SCHEMES

Open end fund scheme; 8

Closed end funds scheme; 9

Interval funds scheme; 4

SOURCE: TABLE 3.13\

INTERPRETATION:

According to the table given above, 43% of mutual fund investors prefer to invest in closed end fund schemes, 38% prefer open end fund schemes and only 19% investors prefer interval fund schemes.

3.14 RISK PERCEPTION OF INVESTORS TOWARDS MUTUAL FUNDS

78

TABLE 3.14: RESPONSE SHOWING THE RISK PERCEPTION OF INVESTORS TOWARDS MUTUAL FUNDS


1 4 9%2 11 23%3 23 49%4 6 13%5 3 6%TOTAL 47 100%

FIGURE 3.14: RESPONSE SHOWING THE RISK PERCEPTION OF INVESTORS TOWARDS MUTUAL FUNDS

SOURCE: TABLE 3.14

INTERPRETATION:

The above chart shows that 23 out of 47 investors i.e. 49% ranked the mutual funds at 3 on a scale of 1 to 5, 1 being the lowest and 5 being the highest. 23% of investors ranked mutual fund investments at 2, 13% ranked it at 4, 9% ranked the funds at 1 and 6% ranked it at 5.

3.15 PREFERENCE OF CHANNEL OF INVESTMENT

79

TABLE 3.15: RESPONSE SHOWING THE PREFERRED CHANNEL OF INVESTMENT AMONG INVESTORS


Financial adviser 6 29%Bank 10 48%Asset Management Company (AMC) 5 24%TOTAL 21 100%

FIGURE 3.15: RESPONSE SHOWING THE PREFERRED CHANNEL OF INVESTMENT AMONG INVESTORS

Financial adviser; 6

Bank; 10

Asset Man-agement Com-pany (AMC); 5

SOURCE: TABLE 3.15

INTERPRETATION:

The table above shows that 48% of investors prefer to invest in mutual funds through banks, 29% prefer financial advisers and the rest 24% prefer Asset Management Companies to invest in mutual funds.

3.16 INVESTOR PREFERENCE TOWARDS MODE OF INVESTMENT

80

TABLE 3.16: RESPONSE SHOWING PREFERRED MODE OF INVESTMENT AMONG INVESTORS


Systematic Investment Planning (SIP) 9 43%One Time Investment (Lump sum) 12 57%TOTAL 21 100%

FIGURE 3.16: RESPONSE SHOWING PREFERRED MODE OF INVESTMENT AMONG INVESTORS

Systematic In-vestment

Planning (SIP); 9

One Time Invest-ment (Lump sum);

12

SOURCE: TABLE 3.16

INTERPRETATION:

As per the table shown above, 57% of the mutual fund investors prefer to invest in lump sum whereas 43% investors prefer Systematic Investment Planning to make their investments.

3.17 SATISFACTION REGARDING CURRENT MUTUAL FUND SCHEMES

81

TABLE 3.17: RESPONSE SHOWING WHETHER THE INVESTORS ARE SATISFIED WITH THEIR CURRENT MUTUAL FUND SCHEMES


Yes 16 76%No 5 24%TOTAL 21 100%

FIGURE 3.17: RESPONSE SHOWING WHETHER THE INVESTORS ARE SATISFIED WITH THEIR CURRENT MUTUAL FUND SCHEMES

Yes; 16

No; 5

SOURCE: TABLE 3.17

INTERPRETATION:

From the above table, it is seen that 76% of investors are satisfied with their current mutual fund schemes while 24% are not.

3.18 SUGGESTIONS OF INVESTORS REGARDING MUTUAL

FUNDS

82

This was an open ended question and the responses given by the interviewees included:

More information should be provided regarding mutual funds Proper guidance should be provided to the investors so that they can

confidently invest in mutual funds

83

CHAPTER 4:

INTERPRETATION

AND CONCLUSIONS

4.1 FINDINGS:

According to this study, majority of the investors belonged to the

middle-aged group i.e. between 35 and 40.

84

Even though, 83% of the respondents are aware about mutual funds,

almost only half (41%) have invested in them.

For many of the investors, advertisements of mutual funds helped in

providing them more information about the product.

Majority of the investors choose investments on the basis of the returns

they provide.

57% of investors said that the lack of proper knowledge about mutual

funds and its operations have discouraged them from investing in them.

Most of the investors prefer investing in growth funds and in a closed

end fund scheme.

Mainly the mutual fund investors (57%) prefer to make their

investments in lump sum.

Up to 49% of investors associate mutual funds with only a moderate

risk.

Banks are the most preferred channel by investors on the whole, for

investing in mutual funds.

From among all those investors who have invested in mutual funds,

76% are satisfied with their current investments.

85

CHAPTER 5:

RECOMMENDATIONS

AND CONCLUSION

5.1 RECOMMENDATIONS

The study shows that people are hesitant to invest in mutual funds due

to lack of knowledge about the product. Steps should be undertaken to create

awareness among the investors about mutual funds and the benefits of investing in it.

86

Since advertisements have been seen as a major source of information

for the investors from the study and because its reach to the masses is extensive,

innovative and creative use of this channel to impart more knowledge regarding

mutual funds can be made.

SIP is an innovative and a relatively new concept. Hence, many

investors are not aware about it and prefer to invest in the traditional way, i.e. in

lump sum. Therefore, banks and financial advisers should familiarise their clients to

SIP. This might encourage more investors to invest in mutual funds especially those

who belong to the lower income groups.

Apart from lack of knowledge about the product, difficulty in selection

of schemes and low confidence in the services provided, were two major reasons that

prevented the investors from investing in mutual funds. Therefore the fund managers

should be well trained to deal with the clients and guide them in making sound

investment decisions. They must be capable of helping them in choosing schemes

that meet the investors’ objectives as well as suits their risk perception.

5.2 CONCLUSION:

From the study that was conducted, it can be concluded that even though the

level of awareness among people regarding mutual funds is high, most of them are

reluctant to invest in them because they lack a general understanding about the

product. Generally, investors who have invested in mutual funds consider mutual

funds to be associated with only a moderate risk. The main motive behind investing

in mutual funds has been seen to be regarding an expectation of high returns

87

especially through growth schemes. Since, more and more banks are coming up with

innovative varieties of schemes that meet the specific objectives of the investors;

people consider banks as the best and most reliable channel of investment.

People belonging to the middle income group are reluctant to invest in

corporate securities because of limited resources and also because the fate of their

savings completely depends on the fate of the few units they can afford to hold. But

by investing in mutual funds, they are assured of low risk, steady return, liquidity and

capital appreciations. Mutual funds also play the role of financial intermediation

wherein they provide a convenient and effective link between savings and investment

by investing the pooled savings in industrial securities. In addition, they are useful in

securing profitable investment avenues abroad for domestic savings. As a result,

mutual funds have proved to be a great solution to most of the savers and investors.

BIBLIOGRAPHY

www.businessstandard.com www.thehindubusinessline.com www.amfiindia.com www.investopedia.com www.moneycontrol.com www.economictimes.com Business Research Methods- Mc Graw Hill

http://www.economictimes.com/

http://www.moneycontrol.com/

http://www.investopedia.com/

http://www.amfiindia.com/

http://www.thehindubusinessline.com/

http://www.businessstandard.com/

88

ANNEXURE

QUESTIONNAIRE

Sir/Ma’am,

I am Aparna Hari , currently pursuing my MBA in Rajagiri College of Business Studies, Kochi. At present, I am working on a project regarding mutual funds and I have prepared this questionnaire as a part of the study. Feel free to respond after going through the following questions. I am sure your response will help me gain more insight in my project topic.

TOPIC: A study on investor preference towards mutual funds

Personal Details:

89

Name: 1. Age:

2. Occupation: o Government sector

o Private sector

o Business

o Other

3. What is your approximate family income in a month?o Up to Rs.10,000

o Between Rs.10,001 and Rs.15,000



o Rs.30,001 and above

4. Do you have any investment plans?o Yes

o No

5. If yes, what are the different investments you have made so far? □ Fixed Deposits

□ Savings Account

□ Mutual Funds

□ Insurance

□ Gold/Silver

□ Real Estate

□ Shares/Debentures

□ Post Office- NSC, etc.

6. What is the most important parameter that you consider while investing?

o Liquidity

o Low Risk

o High Returns

90

o Potential for Growth of funds

o Tax Benefits

7. Are you aware about the Mutual Funds?o Yes

o No

8. If yes, how did you come to know about it?o Advertisements

o Peer groups

o Banks

o Financial Advisors

9. Have you ever invested in Mutual funds?o Yes

o No

10. If no, then which of the following factors prevented you from investing in Mutual Funds?

o Lack of proper knowledge

o Lack of confidence in the services provided

o Bitter past experience

o Difficulty in the selection of schemes

o Other reasons

11. If yes, then which Mutual Fund plan do you consider to be the best?o Equity plan (Only in equity)

o Debt plan (Only in debt)

o Balanced plan (Having both equity and debt)

12. Which scheme do you feel is good?o Open end scheme

o Closed end scheme

91

13. How long would you prefer to hold your Mutual Fund investments?

o 1 to 3 years

o 4-6 years

o 7 to 10 years

o More than 10 years

14. How would you rate the risks associated with Mutual Funds?o High

o Moderate

o Low

15. Which channel would you prefer while investing in Mutual Funds?o Financial advisor

o Bank

o Asset Management Company (AMC)

16. Which mode of investment do you prefer while investing in Mutual Funds?

o Systematic Investment Planning (SIP)

o One Time Investment (Lump sum)

17. Are you satisfied with your current Mutual Fund Investment schemes?

o Yes

o No

18. Any suggestions:

Thank you for your cooperation!

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organizational study of hedge equities

Documents

occupation of investors

mutual funds

number of investors

age distribution of

monthly income of investors

risk perception of investors

various investments

different mutual fund