Study of Investor Perception towards Mutual Funds

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INSTITUTE OF MANAGEMENT STUDIES
BANARAS HINDU UNIVERSITY
Minor Project Report
On
STUDY OF INVESTOR PERCEPTION TOWARDS MUTUAL FUNDS
Master of Business Administration– II Semester
SubmittedTo Submitted By:
Prof. Ashish Bajpai Meghna Jaiswal
Dr. Harsh Pradhan MBA (2nd Semester)
Roll No: 19423MBA022

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ACKNOWLEDGEMENT
In this project, I have made an honest and dedicated attempt to make the Project Report so
easy to understand for a person who is willing to get knowledge about the “Study of
Investor Perception towards Mutual Funds” I am deeply indebted to my lecturers & my
faculties who gave me opportunity of making project report. I am also thankful to my Project
mentors Prof. Ashish Bajpai and Dr. Harsh Pradhan for their kind support & suggestion
for making project report.

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DECLARATION
I the undersigned solemnly declare that the report of the project work entitled
“Study of Investor Perception towards Mutual Funds” is based on my own work
carried out during the course of our study under the supervision of Prof. Ashish Bajpai
and Dr. Harsh Pradhan.
I assert that the statements made and conclusions drawn are an outcome of the
project work. I further declare that to the best of my knowledge and belief that the project
report does not contain any part of any work which has been submitted for the award of
any other degree/diploma/certificate in this University or any other University.
Meghna Jaiswal
(Signature of Candidate)

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CERTIFICATE BY GUIDE/SUPERVISOR
This is to certify that the project report entitled “Study of Investor Perception towards
Mutual Funds” is carried out by Meghna Jaiswal (Roll No:19423MBA022).The project
was carried out under my supervision as a part of the award of Degree in Master of
Business Administration – II Semester of Institute of Management Studies, Banaras
Hindu University, Varanasi.
To the best of my knowledge the report is the outcome of the candidate’s individual
efforts. I wish all the success to the candidate.
__________________________ __________________________
(Signature of Guide) (Signature of Guide)
Prof. Ashish Bajpai Dr. Harsh Pradhan
IM-BHU IM-BHU

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TABLE OF CONTENTS
SERIAL
NO.
PARTICULARS PAGE
NO.
Chapter-1 Introduction 6
Chapter-2 Literature Review 8
Chapter-3 Research Methodology 10
Chapter-4 Analysis of Data 13
Chapter-5 Findings and Conclusions 29
Chapter-6 Recommendations 31
Bibliography 33
Annexure 34

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CHAPTER 1
INTRODUCTION
A Mutual Fund is a trust that pools together the reserve funds of various investors who share
a typical financial objective. The cash gathered is then put resources into capital market
instruments, for example, shares, debentures and different securities dependent on their goal.
The income earned through these speculations and the capital gratefulness acknowledged are
shared by its unit holders in extent to the quantity of units claimed by the financial
specialists.
As per the above definition, a mutual fund in India can raise assets through closeout of units
to people in general. It tends to be setup as a Trust under the Indian Trust Act. The definition
has been additionally reached out by enabling mutual fund to differentiate their exercises in
the accompanying regions:
• Portfolio management services
• Management of offshore funds
• Providing advice to offshore funds
• Management of pension or provident funds
• Management of venture capital funds
• Management of money market funds
• Management of real estate funds
Mutual Funds pools up money from many small investors with similar (one could say
mutual) objectives, to achieve Economies of Scale and Diversification in the investment of
these funds. This can result in higher returns at lower risk. Each mutual fund schemes has a
defined investment objective and strategy. The Project is related to the field of Mutual Fund
in which comparative analysis of the various debt schemes in mutual fund. In the project, all
the points are explained like -what is mutual fund, types of mutual fund and which fund is
better. Mutual Fund industry has grown in many folds over the period of last two decades.
There has been an upsurge in the Mutual Fund industry in 90’s. During this period a large
number of private sector companies have started their mutual funds.
The growth in the number of distributors of mutual funds. Many private companies were
established which took up the job of selling mutual funds not only to the common man but

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also to the corporate. Mutual Fund provides better return as compared to the traditional
investment opportunities like Fixed Deposit and Saving Accounts etc.
Mutual Fund present an ideal solution to the investment needs of the corporate, which are
looking for returns from their surplus funds. The Mutual Fund gives them a chance to gain
more profits over a short period. The Mutual fund is the most suitable investment for
corporate as it offers an opportunity to invest in a diversified, professionally managed
portfolio at a low cost.
The strong and efficient research team which supports the investments advisors. The research
team provides the desk to the necessary information regarding the different mutual fund
schemes and other investments options like Insurance etc.

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CHAPTER 2
LITERATURE REVIEW
Literature on mutual fund performance evaluation is enormous. A few research studies that
have influenced the preparation of this paper substantially are discussed in this section.
Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance.
Drawing on results obtained in the field of portfolio analysis, economist Jack L. Treynor has
suggested a new predictor of mutual fund performance, one that differs from virtually all
those used previously by incorporating the volatility of a fund's return in a simple yet
meaningful manner.
Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance
(Jensen’s alpha) that estimates how much a manager’s forecasting ability contributes to
fund’s returns. As indicated by Statman (2000), the e SDAR of a fund portfolio is the excess
return of the portfolio over the return of the benchmark index, where the portfolio is
leveraged to have the benchmark index’s standard deviation.
S.Narayan Rao,et. al., evaluated performance of Indian mutual funds in a bear market
through relative performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio,
Sharpe’s measure , Jensen’s measure, and Fama’s measure. The study used 269 open-ended
schemes (out of total schemes of 433) for computing relative performance index. Then after
excluding funds whose returns are less than risk-free returns, 58 schemes are finally used for
further analysis. The results of performance measures suggest that most of mutual fund
schemes in the sample of 58 were able to satisfy investor’s expectations by giving excess
returns over expected returns based on both premium for systematic risk and total risk.
Bijan Roy,et. al., conducted an empirical study on conditional performance of Indian mutual
funds. This paper uses a technique called conditional performance evaluation on a sample of
eighty-nine Indian mutual fund schemes.This paper measures the performance of various
mutual funds with both unconditional and conditional form of CAPM, Treynor- Mazuy
model and Henriksson-Merton model. The effect of incorporating lagged information
variables into the evaluation of mutual fund managers’ performance is examined in the

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Indian context. The results suggest that the use of conditioning lagged information variables
improves the performance of mutual fund schemes, causing alphas to shift towards right and
reducing the number of negative timing coefficients. Mishra, et al., (2002) measured mutual
fund performance using lower partial moment. In this paper, measures of evaluating portfolio
performance based on lower partial moment are developed. Risk from the lower partial
moment is measured by taking into account only those states in which return is below a pre-
specified “target rate” like risk-free rate.
KshamaFernandes(2003) evaluated index fund implementation in India. In this paper,
tracking error of index funds in India is measured .The consistency and level of tracking
errors obtained by some well-run index fund suggests that it is possible to attain low levels of
tracking error under Indian conditions. At the same time, there do seem to be periods where
certain index funds appear to depart from the discipline of indexation.
K. Pendaraki et al. studied construction of mutual fund portfolios, developed a multi-criteria
methodology and applied it to the Greek market of equity mutual funds. The methodology is
based on the combination of discrete and continuous multi-criteria decision aid methods for
mutual fund selection and composition. UTADIS multi-criteria decision aid method is
employed in order to develop mutual fund’s performance models. Goal programming model
is employed to determine proportion of selected mutual funds in the final portfolios.
ZakriY.Bello (2005) matched a sample of socially responsible stock mutual funds matched
to randomly selected conventional funds of similar net assets to investigate differences in
characteristics of assets held, degree of portfolio diversification and variable effects of
diversification on investment performance. The study found that socially responsible funds
do not differ significantly from conventional funds in terms of any of these attributes.
Moreover, the effect of diversification on investment performance is not different between
the two groups.
Debasish (2009) studied the performance of selected schemes of mutual funds based on risk
and return models and measures. The study covered the period from April 1996 to March
2005 (nine years). The study revealed that Franklin Templeton and UTI were the best
performers and Birla Sun life, HDFC and LIC mutual funds showed poor performance.

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CHAPTER 3
RESEARCH METHODOLOGY
OBJECTIVES OF THE STUDY
• To Study Investor Perception towards Mutual Funds
• To assess the awareness levels of the investors regarding mutual funds
• To find the type of schemes of mutual fund preferred by investors
• To find out the importance of factors such as liquidity, higher return, company
reputation and other issues that influence investment decision of mutual fund
holder.
SCOPE OF THE STUDY
A big boom has been encountered in mutual fund industry in recent times. A large Number
of new players have entered the market & trying to gain market share in this rapidly
improving market. The study will help to know the preferences of the customers, which
company portfolio, mode of investment, option for getting return & so on they prefer
METHODOLOGY
The study aims to delineate the methodology, employed to undertake this study. Research is
a common parlance, which refers to a search for knowledge. One can say research as a
scientific and systematic search for pertinent.
Research is of great importance to find out the nature, extent and cause of the research issue
under study. Research methodology is a process in which various steps that are generally
adopted by a research are outlined.
The various steps provide useful guidelines regarding the research process are:
1. Preparation of the research design.
2. Source of data.
3. Technique of research.
4. Sampling design.

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Preparation of the Research Design:
A research design is an arrangement of situation for collection and analysis of data gathered.
Actually, it is the blueprint of research project.
The research design used for this project is Exploratory Research and Analytical
Research.
Sources of Data:
Sound marketing research depends upon the existence of facts or directly related to problem
studied. To fulfill a foresaid objective of study, the information was gathered from primary as
well as secondary sources.
A. Primary Source Information-
I. Method of obtaining data: Questionnaire.
II. Communication method: Personal meeting.
Research Technique:
The following research techniques were used for data collection:
(A) Questionnaire-
Questionnaire was structured to get it filled by investors.
(B) Collection of Information-
The respondents were first handedly approached to explain the objective of survey. During
the meeting the questionnaire was filled by the respondents.

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Sample Design:
Sample Design refers to the technique as the procedure that a researcher would adopt in
selective item for the sample.
(A) Target Population or Sampling Unit-
The universe of the study is investors from different age groups.
(B) Sample Size-
The sample size taken for the study is 100 respondents. The respondents were the investors.
(C) Sampling Method-
The agents and investors had been selected on the basis of Random Sampling. The study is
sample survey consisting of small sized sample of students, professionals of different age
groups.

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0%
5%
10%
15%
20%
25%
30%
35%
40%
Below 20 20-30 30-40 40-50 Above 50
Percentage
Percentage
CHAPTER4
ANALYSIS OF DATA
Personal Details
Age)
Age Response Percentage
Below 20 8 8%
20-30 22 22%
30-40 35 35%
40-50 20 20%
Above 50 15 15%
Interpretation
The Study shows that 35% respondents are between 30-40 years old, 22% are of
between 20-30 years and 20% people are between age group of 40-50 Years

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Qualification-
Qualification Response Percentage
Below matriculation 2 2%
Matriculation 5 5%
Higher Secondary 22 22%
Graduation 48 48%
Post Graduation 23 23%
Interpretation
48% Respondents are Graduate,23% are post graduate and 22% respondents have
done Higher Secondary.
0%
10%
20%
30%
40%
50%
60%
Percentage
Percentage

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Occupation-
Occupation Response Percentage
Salaried 20 20%
Business 45 45%
Student 2 2%
Professionals 28 28%
Others 5 5%
Interpretation
45% Respondents are businessman, 28% are Professionals, 20% are salaried while
5 % respondents belongs to other occupation
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Percentage
Percentage

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Monthly Salary
Salary Response Percentage
Below 20 5 5%
20-30 10 10%
30-40 15 15%
40-50 30 30%
Above 50 40 40%
Interpretation
Study shows that 40% Respondents having salary more the 50K, 30% have salary
between 40-50K, 15% have between 30-40K while 10% respondents have salary
between 20-30K
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Below 20 20-30 30-40 40-50 Above 50
Percentage
Percentage

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Monthly Saving
Savings Response Percentage
Below 10K 3 3%
10-15K 7 7%
15-20K 25 25%
20-25K 35 35%
Above 25K 30 40%
Interpretation
40% Respondents have savings of more than 25K, 35% having 20-25K, 25%
having 15-20K while 7% respondents having the monthly saving of 10-15K.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Below 10K 10-15K 15-20K 20-25K Above 25K
Percentage
Percentage

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2. What kind of investments you prefer the most?
Savings Response Percentage
Saving A/c 3 3%
Fixed Deposits 7 7%
Insurance 8 8%
Mutual funds 37 37%
Post Offices 20 20%
Shares/Debentures 10 10%
Real Estates 7 7%
PPF 5 5%
Others 3 3%
Interpretation
37% respondents prefer to invest in Mutual Funds, 20% in Post Office, 10% in
Shares/Debentures,7% in Real Estate,8% in Insurance while 7% prefer Fixed
Deposits
0%
5%
10%
15%
20%
25%
30%
35%
40%
Percentage
Percentage

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3. While investing which factor you consider the most?
Mode Liquidity Risk Return Brand
value
Social
security
Savings A/c
12 10 8 13 12
Fixed deposits
15 12 14 15 15
Insurance
11 8 8 10 11
Mutual fund
23 25 20 25 23
Post office
18 15 20 5 18
Shares/debenture
12 17 15 14 12
Real estate
7 10 13 17 7
others
2 3 2 1 2
0%
5%
10%
15%
20%
25%
30%
Liquidity
Risk
Return
Brand value
Social security

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3. Have you invested in mutual fund?
Status Response Percentage
Yes 100 100%
No 0 0%
Interpretation
100% People Invested in Mutual Funds.
Percentage
Yes
No

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If Yes
A) Where do you find yourself as a Mutual Fund investor?
Status Response Percentage
Totally ignorant 7 7%
Partial Knowledge 21 21%
Aware only of specific schemes 24 24%
Aware only about the schemes in
which investment is done
27 27%
Fully aware 21 21
Interpretation
21% Respondents are fully aware, 24% are aware only of specific schemes about
the Mutual Funds and 27% are aware about the mutual funds in which they have
invested.
0
5
10
15
20
25
30
1 2 3 4 5

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B) In which sector would you like to invest?
Status Response Percentage
Public 67 67%
Private 33 33%
Interpretation
67% Respondents like to invest in Public while 33% Respondents like to invest in
Private sector
0%
10%
20%
30%
40%
50%
60%
70%
80%
Public Private
Percentage
Percentage

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C) How did you come to know about Mutual Funds?
Source of Information No. of Respondents
Advertisement 18
Financial Advisor 46
Bank 22
Peer Group 14
Interpretation-
18%of the customers said that they get the information about MF from
Advertisement, 14% from Peer Group, 22% from Bank and 46% get information
from financial advisors.
18%
14%
22%
46%
No. of respondent
Advertisement
Peer Group
Bank
Financial Advisor

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D) In which Mutual Fund scheme have you invested?
Response Percentage
Open Ended 12 12%
Close Ended 15 15%
Liquid Fund 14 14%
Mid Cap 13 13%
Growth Fund 15 15%
Regular income Fund 9 9%
Large Cap 10 10%
Sector Fund 12 12%
Interpretation-
15% customers invested in growth fund and close ended, 14% in Liquid Fund,13% in
Mid Cap,12% Customers in Sector fund and Open Ended while 10% in large cap
respectively
0%
2%
4%
6%
8%
10%
12%
14%
16%
Percentage
Percentage

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E) Which feature of the mutual fund allure you most?
Salary Response Percentage
Diversification 5 5%
Better return and safety 12 12%
reduction in risk and transaction
cost 15 15%
Regular income 27 27%
tax benefit 25 25%
professional expertise 16 16%
Interpretation-
27% customers are allure towards mutual funds for regular funds, 25% for Tax
Benefits,15% for reduction in risk and transaction while 16% for professional
expertise.
0%
5%
10%
15%
20%
25%
30%
Percentage
Percentage

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F) When you invest in mutual fund which mode of investment will you prefer?
MODE RESPONSE (%)
One time investment 35
Systematic Investment Plan (SIP) 65
Interpretation-
65% investors replied that they prefer one time investment mode and 35% prefer
SIP mode for investment.
35%
65%
MODE OF INVESTMENT
One time
investment
SIP

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G) Where from you purchase mutual fund?
Status Response Percentage
Directly from the amc’s 27 27%
broker only 39 39%
broker/sub-broker 23 23%
Other sources 11 11%
Interpretation-
39% customers like to purchase mutual funds from Brokers only, 27% directly
from the AMc’s, 23% from broker/sub-broker while 11% customers buy from
other sources
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Percentage
Percentage

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H) How would you like to receive the return every year?
Interpretation-
71% investors prefer growth in NAV opinion, 21% prefer dividend reinvestment
and 8% prefer dividend pay-out as an opinion for getting return.
21%
8%
71%
No.of respondents
Dividend
Payout
Dividend
reinvestment
Growth in NAV
Opinion No. of respondents
Dividend Pay-out 21
Dividend Reinvestment 8
Growth in NAV 71

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CHAPTER 5
FINDINGS AND CONCLUSIONS
FINDINGS OF THE STUDY
The trend for investment is changing rapidly besides the traditional pattern of investment and
people today they are ready to undertake risk and also bear the volatility of changing mutual
fund market scenario.
• The Study shows that 35% respondents are between 30-40 years old, 22% are of
between 20-30 years and 20% people are between age group of 40-50 Years
• 48% Respondents are Graduate, 23% are post graduate and 22% respondents have
done Higher Secondary.
• 45% Respondents are businessman, 28% are professionals , 20% are salaried while 5
% respondents belongs to other occupation
• Study shows that 40% Respondents having salary more the 50K, 30% have salary
between 40-50K, 15% have between 30-40K while 10% respondents have salary
between 20-30K
• 40% Respondents have savings of more than 25K, 35% having 20-25K, 25% having
15-20K while 7% respondents having the monthly saving of 10-15K.
• 37% respondents prefer to invest in Mutual Funds, 20% in Post Office, 10% in
Shares/Debentures,7% in Real Estate,8% in Insurance while 7% prefer Fixed
Deposits
• 57% Respondents are fully aware, 19% are aware only of specific schemes about the
Mutual Funds.
• 18% of the customers said that they get the information about MF from
Advertisement, 14% from Peer Group, 22% from Bank and 46% get information
from financial advisors.
• 15% customers invested in growth fund and close ended, 14% in Liquid Fund,13%
in Mid Cap,12% Customers in Sector fund and Open Ended while 10% in large cap
respectively

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• 27% customers are allure towards mutual funds for regular funds, 25% for Tax
Benefits,15% for reduction in risk and transaction while 16% for professional
expertise.
• 65% investors replied that they prefer one time investment mode and 35% prefer SIP
mode for investment.
• 39% customers like to purchase mutual funds from Brokers only, 27% from directly
from the AMc’s.23 from broker/sub-broker while 11% customers buy from other
sources
• 71% investors prefer growth in NAV opinion, 21% prefer dividend reinvestment and
8% prefer dividend payout as a opinion for getting return.
CONCLUSIONS
• From the research, it is indicative that investors prefer Systematic Investment Plan
and close ended funds.
• The Firms helps investors to maintain an effective portfolio of wide range of
investments that diversifies their risk. The basic objective of investors is to invest for
tax saving, retirement planning and child’s future.
• Investors prefer to invest for very long term
• Investors are not experienced in investments and take decisions emotionally.

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CHAPTER 6
RECOMMENDATIONS
Understand the purpose of Investment: The first point to analyze before investing in a
fund is to find out whether the objective matches with the scheme. It is necessary, as any
mismatch of the same would directly affect the prospective probable returns
Low Risk Tolerance: Those investors with less risk tolerance should go for debt schemes, as
they are relatively safer, when compared to empowered schemes like equity. Aggressive
investors can go for equity investments. Investors that are even more aggressive can opt for
schemes that invest in specific industry or sector.
Track Record: Investors should go through the scheme’s track record, performance against
relevant market benchmarks and its competitors.
Period of Investment: One should look at covering the volatility exposure which can be
done by holding onto the investment for longer periods which also enables the scheme to
gain.
Cost Factor: Though the AMC fee is regulated, one should look at the expense ratio of the
fund before investing. This is because the money is deducted from the returns. A higher entry
load or exit load also will eat into the actual returns. A higher expense ratio can be justified
only by superlative returns. It is very crucial in a debt fund, as it will give a very few
percentages of returns.

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LIMITATIONS OF THE RESEARCH
• Sample size is limited to 100 due to time constraint. The Sample Size may not
adequately represent the whole set of target population.
• Possibility of error in data collection because many of investors may not gave
serious concern to my questionnaire.
• Some respondents were reluctant to divulge personal information which can affect
the validity of all responses.

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BIBLIOGRAPHY
Books:
• Bodie, Kane, Marcus “Security Analysis and Portfolio Management”, 5th
Edition Tata Mc GrawHill publications.
• “Mutual Fund testing program Book” AMFI publication.
• Association of Mutual Fund in India workbook.
• C.R. Kothari- Research Methodology,
Websites:
• www.mutualfundindia.com
• www.mututalfunds.com
• www.sebi.com
• www.moneycontrol.com
• www.rbi.org.in
• www.capitalmarket.com
• www.amfi.com
Magazine & Newspaper:
• Business World
• The Economic Times
• The Financial Express

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ANNEXURE
QUESTIONNAIRE
1. Personal detail:
Name (optional) – ______________________________
Age -
Below 20 20 to 30 30 to 40 40 to 50 above 50
Qualification-
Below matriculation matriculation higher secondary graduation
Post-graduation PhD
Occupation –
Salaried business student professional
others_______________
What’s your monthly salary?
Below 20k 20k to 30k 30k to 40k 40k to 50k above 50k
What’s your monthly savings?
Below10k 10k to 15k 15k to 20k 20k to 25k above 25k
2. What kind of investments you prefer the most? (Please tick at least one)
Savings A/c Fixed Deposits Insurance Mutual Funds
Post Office Shares/Debentures Real Estate PPF
Others________________ (Please specify)

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3. While investing which factor you consider the most?
4. Have you invested in mutual fund?
Yes No
If Yes,
A) Where do you find yourself as a Mutual Fund investor?
Totally ignorant Partial Knowledge Aware only of specific schemes
Fully aware only aware about the funds in which they have invested
B) In which sector would you like to invest?
Public Private
C) How did you come to know about Mutual Funds?
Advertisements Peer Group Banks Financial Advisors
D) In which Mutual Fund scheme have you invested?
Open Ended Close Ended
Liquid Fund Mid Cap
Growth Fund Regular income Fund
Large Cap Sector Fund
Mode Liquidity Risk Return Brand value Social
security
Savings A/c
Fixed deposits
Insurance
Mutual fund
Post office
Shares/debenture
Real estate
Others

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E) Which feature of the mutual fund allure you most?
Diversification Better return and safety reduction in risk and transaction cost
Regular income tax benefit professional expertise
F) When you invest in mutual fund which mode of investment will you prefer?
One time investment systematic investment plan
G) Where from you purchase mutual fund?
Directly from the AMCs broker only broker/sub-broker
Other sources-
H) How would you like to receive the return every year?
Dividend payout dividend re-investment growth in NAV