Asia Pacific Journal of Research Vol: I Issue XII, April 2014 ISSN: , E-ISSN

Transcription

1 INVESTORS PREFERENCES TOWARDS MUTUAL FUNDS - A STUDY ON SILK CITY SECURITIES AT BERHAMPUR TOWN-ODISHA, INDIA *Dr.Suman Kalyan Chaudhury, Faculty Member, P.G. Department of Business Administration, Berhampur University, Berhampur, Odisha, India. **Mr. C. S. Pattnaik, Faculty Member, St Vincent P G College (MBA), Hyderabad, India ABSTRACT With progressive liberalization of economic policies, there has been a rapid growth of capital market, money market and financial services industry including merchant banking, leasing and venture capital. Consistent with this evolution of the financial sector, the mutual fund industry has also come to occupy an important place. To meet these needs of the population new financial instruments like mutual funds and institutions like Asset Management Company (AMCs) are aimed at increasing the range of investment avenues. It is really challenging for the companies to change the attitude and perception of people. This research paper attempts to review and assess the preference of the investors for investment in mutual funds. Further, it intends to throw light in improving the efficiency of investing surplus money by the investors towards mutual funds. Keywords: Mutual Funds, Asset Management, Unit Holders, Mutual Funds Services System INTRODUCTION: Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The fund s Net Asset value (NAV) is determined each day. The flow chart below describes broadly the working of a mutual fund: Page 187

2 Mutual Fund Operation Flow Chart Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. In order to facilitate transactions through stock exchange infrastructure, National Stock Exchange (NSE) has introduced Mutual Fund Service System (MFSS). All trading members who are registered with NSE as participants and/or registered clearing members of National Securities Clearing Corporation Limited (NSCCL) who are registered with AMFI as mutual fund advisors and who are empanelled with Principal PNB Asset Management Co. Pvt. Ltd. (AMC) will be eligible (eligible brokers) to offer this facility to the investors (PNB-Punjab National Bank). Further, only for the purpose of processing redemption request, Depository Participant of Depositories, who are registered with AMFI (Association of Mutual Funds in India) as mutual fund advisors and who are empanelled with Principal PNB Asset Management Co. Pvt. Ltd. (AMC), are eligible for processing redemption transaction. HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY: The mutual fund industry in India started in 1963 with the formation of Unit Trust of India(UTI), at the initiative of the Government of India and Reserve Bank. Though the growth was slow, but it accelerated from the year 1987 when non-uti players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs. 67 billion. The private sector entry to the fund family raised the Amount to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. First Phase: Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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 Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme At the end of 1988 UTI had Rs.6,700 crores of assets under management. Second Phase: (Entry of Public Sector Funds) 1987 marked the entry of 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). SBI Mutual Fund was the first non-uti Mutual Fund established in June 1987 followed by Canada bank 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 Page 188

3 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 cores. Third Phase: (Entry of Private Sector Funds) 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 The 1993 Securities & Exchange Board of India-SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in The industry now functions under the SEBI (Mutual Fund) Regulations Fourth Phase: (Growth and SEBI Regulations) A set of regulations for all mutual funds operating in India was introduced with SEBI (Mutual Fund) Regulations, Fifth Phase: (Emergence of a large and uniform industry) In February 2003, following the repeal 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 with assets under management of Rs.29, 835 cores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The second is the UTI Mutual Fund Ltd, sponsored by SBI (Sate Bank of India), PnB (Punjab National Bank), BoB (Bank of Baroda) and LIC (Life Insurance Corporation of India). It is registered with SEBI and functions under the Mutual Fund Regulations Sixth Phase: 2004 onwards (Period of Consolidation & Growth) In this period the industry has witnessed a spate of mergers and takeovers. Also more and more new international and private sector players are entering the fray. This period has been witnessing the growth of the industry. MUTUAL FUND & FINANCIAL PLANNING: When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors. Mutual funds invest in a portfolio of securities. It is based on the fundamental principle: Do not put all your eggs in one basket This means that all funds are not invested in the same investment avenue. It is well known that risk and returns of various investment options do not move uniformly or in sympathy with one another. If a pharmacy company share is going down, an InfoTech company s shares could be moving up; if the equity market is moving down, the debt markets may be moving up. Therefore, holding a portfolio that is diversified across investment avenues is a wise way to manage risk. When such a portfolio is liquid and marked to market, it enables investors to continuously evaluate the portfolio and manage their risks more efficiently. By offering ready-made diversified portfolios, mutual funds enable investors to hold diversified portfolios. Though investors can create their own diversified portfolios, the costs of creating and monitoring such portfolios can be high, apart from the fact that investors may lack the professional expertise to manage such a portfolio. Mutual funds inform investors periodically, about the performance of the fund. They disclose the NAVs daily, and in most cases this information is available on phone and on the Internet. The complete portfolios of the fund, and commentaries of the fund managers on how they are managing the fund, are also available to investors. Many mutual funds also provide additional information on the maturity profile of their investments, credit quality of their portfolios, and the behavior of NAV Page 189

4 over the period since inception of the fund. Investors can make informed decisions about their mutual fund investments, from these disclosures made by funds. LITERATURE REVIEW: A Literature review is a body of text that aims to review the critical points of current knowledge on a particular topic. Most often associated with science-oriented literature, such as a thesis, the literature review usually precedes a research proposal, methodology and results section. Its ultimate goal is to bring the reader up to date with current literature on a topic and forms the basis for another goal, such as the justification for future research in the area. Chen, Kraft & Weiss (2011) have tested mutual funds that engage in tax planning and how do they respond to changes in the capital gains tax rates was investigated. It was found that there was consistency with tax planning by managers of both open-end and closed-end mutual fund and mutual fund managers may not tax plan like individuals because fund managers have incentives to consider the tax liability of both current and potential investors. Agapova (2011) has examined the crosssectional differences among money market mutual funds (MMMFs) in the context of sponsoring fund families and found that flows to family non-mmmfs are negatively related to family MMMF flows, and family non-mmmf cash flow volatility is positively related to family MMMF cash flow volatility. The study has further suggested that fund family investors also use family MMMFs as cash centres by utilizing free asset transfers within the family. Application of these strategies can, translate into significant benefits for the fund family and it s invested. Badrinath S.G & Gubellini S (2011) have evaluated the return performance of long-short, market-neutral and bear mutual funds using multifactor models and a conditional CAPM (Capital Assets Pricing Model) and revealed that Marketneutral funds provide a down market hedge, but bear funds do not generate the returns that investors hope for. Cao, Ghysels & Hatheway (2011) have investigated two types of funds that make more extensive use of derivatives, global funds and specialized domestic equity fund and found that risk and return characteristics of these two groups of funds are significantly different from funds employing derivatives sparingly or not at all and that Fund managers time their use of derivatives in response to past returns. Agarwal. et.al (2009) have examined the performance of these funds relative to hedge funds and traditional mutual funds and found that despite using similar trading strategies, hedged mutual funds underperform hedge funds. Bazo Javier & Pablo (2009) have examined the market for equity mutual funds and found that Funds with worse before-fee performance charge higher fees and that better fund governance may bring fees more in line with performance. Cao, Ghysels & Hatheway (2011) have investigated two types of funds that make more extensive use of derivatives, global funds and specialized domestic equity fund and found that risk and return characteristics of these two groups of funds are significantly different from funds employing derivatives sparingly or not at all and that fund managers time their use of derivatives in response to past returns. De Bond & Thaler (1985) while investigating the possible psychological basis for investor behavior, argue that mean reversion in stock prices is an evidence of investor over reaction where investors over emphasize recent firm performance in forming future expectations of the investment. Gupta (1994) made a household investor survey with the objective to provide data on the investor preferences on MF s and other financial assets. The findings of the study were more appropriate, at that time, to the policy makers and mutual funds to design the financial products for the future. Madhusudhan Vs Jambodekar (1996) conducted a study to assess the awareness of MFs among investors, to identify the information sources influencing the buying decision and the factors influencing the choice of a particular fund. The study reveals among other things that Income Schemes and Open Ended Schemes are more preferred than Growth Schemes and Close Ended Schemes during the then prevalent market conditions. Investors look for safety of Principal, Liquidity and Capital appreciation in the order of importance; Newspapers and Magazines are the first source of information Page 190

5 through which investors get to know about MFs/Schemes and investor service is a major differentiating factor in the selection of Mutual Fund Schemes. Syama Sunder (1998) conducted a survey to get an insight into the mutual fund operations of private institutions with special reference to Kothari Pioneer. The survey revealed that awareness about Mutual Fund concept was poor during that time in small cities. Agents play a vital role in spreading the Mutual Fund culture; open-end schemes were much preferred then; age and income are the two important determinants in the selection of the fund/scheme; brand image and return are the prime considerations while investing in any Mutual Fund. Ippolito (1992) says that fund/scheme selection by investors is based on past performance of the funds and money flows into winning funds more rapidly than they flow out of losing funds. Shanmugham (2000) conducted a survey of 201 individual investors to study the information sourcing by investors, their perceptions of various investment strategy dimensions and the factors motivating share investment decisions, and reports that among the various factors, psychological and sociological factors dominated the economic factors in share investment decisions. Goetzman (1997) states that there is evidence that investor psychology affect Fund/scheme selection and switching. Anjan Chakarabarti and Harsh Rungta (2000) stressed the importance of brand effect in determining the competitive position of the AMCs. Their study reveals that brand image factor, though cannot be easily captured by computable performance measures, influences the investor s perception and hence his fund/scheme selection. Shankar (1996) points out that the Indian investors do view Mutual Funds as commodity products and AMCs, to capture the market should follow the consumer product distribution model. Since 1986, a number of articles and brief essays have been published in financial dailies, periodicals, professional and research journals, explaining the basic concept of Mutual Funds and highlight their importance in the Indian capital market environment. They touch upon varied aspects like Regulation of Mutual Funds, Investor expectations, Investor protection, Trend in growth of Mutual Funds and some are critical views on the performance and functioning of Mutual Funds. A few among them are Vidyashankar (1990), Sarkar (1991), Agarwal (1992), Sadhak (1991), Sharma C. Lall (1991), Samir K. Barua (1991), Sandeep Bamzai (2001), Atmaramani (1995), Atmaramani (1996), Subramanyam (1999), Krishnan (1999), Ajay Srinivsasn (1999). Segmentation of investors on the basis of their characteristics was highlighted by Raja Rajan (1997). Investor s characteristics on the basis of their investment size Raja Rajan (1997), and the relationship between stage in life cycle of the investors and their investment pattern was studied by Raja Rajan (1998). Akhilesh Mishra(2008) has done a study on the topic Mutual Fund as a Better Investment Plan and states that many of the people have the fear of Mutual Funds. They think their money will not be secure in Mutual funds, says Mishra. He also says that the investors need the knowledge of Mutual Funds and its related terms. Many of the people have not invested in Mutual funds due to lack of awareness although they have money to invest, he adds. Mishra also points out that Brand plays an important role for the investment. Only people who invest directly know well about the Mutual fund and its operations as observed. From the above review it can be inferred that Mutual Fund has gained the attention of various segments of the society, like academicians, industrialists, financial intermediaries, investors and regulators for varied reasons and deserves an in depth study. SCOPE OF THE STUDY: A big boom has been witnessed in Mutual Fund Industry in recent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market. The research is carried at Silk City Securities (SCS) of Berhampur town in Odisha. The study will help to Page 191

6 know the preferences of the customers, to choose company, portfolio, mode of investment, and option for getting return and so on they prefer. OBJECTIVES OF THE STUDY : The main aim of the study is to focus on the preferences of the investors for Investment in Mutual Funds. The objectives are stated hereunder: 1. To know why one has invested or not invested in Mutual fund ; 2. To find out the investors Preferences for Asset Management Company; 3. To understand the Preferences for the portfolios ; 4. To find out the most preferred channel ; 5. To find out what should be done to boost Mutual Fund Industry. HYPOTHESES OF THE STUDY: The specific hypotheses are as follows: H 1 : Educational Qualifications does not have any effect on the composition of no of investors. H 2 : Occupations of investors does not play a role in making investments. H 3 : Family income and number of investors are no way related. H 4 : People do not try to access any source of information before investing in a mutual fund. H 5 : People are aware of the reason for not investing in any mutual funds. H 6 : People seek advice from banks as sole channel for investment through mutual funds. H 7 : There is no preference of options to get the returns from the mutual fund by the investors. RESEARCH METHODOLOGY OF THE STUDY : The study was conducted with the definitions of seven hypotheses as follows. Then the data were collected through various data sources as described. Simple Mathematical and statistical tools like percentages were being used to analyse and interpretate. Findings and suggestions were put forth at the end of the study. DATA SOURCES: Both primary and secondary sources were being used for data collection. Structured Questionnaire was administered for primary data collection while unstructured interviews with the executives, company websites, journals and news papers formed the sources for the collection of the secondary data. SAMPLING: Sampling Procedure: The study is based on a judgment sample of customers/visitors of Silk City Securities, Berhampur, irrespective of the fact that they are investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/statistical tool. Sample size: The sample size of the present research work is limited to 200 people only. Out of which only 120 people are aware of mutual funds and had invested in Mutual Fund. Other 80 people were neither aware nor have invested in Mutual Fund. LIMITATION OF THE STUDY: The following are the limitations of the study: Some of the persons were not so responsive. Possibility of error in data collection because many of investors may have not given actual answers to the questionnaire. Page 192

7 Sample size is limited to 200 visitors of silk City Securities, Berhampur, out of these only 120 are aware of mutual funds and had invested in Mutual Fund and the study is confined to limited areas of the Town. Some respondents were reluctant to divulge personal information which can affect the validity of all responses. DATA ANALYSIS & INTERPRETATION OF DATA: Table-1 Age wise distribution of the Investors Age Group < >50 No. of Investors From Table 1 it is observed that chart out of 120 Mutual Fund investors of Berhampur the most number of investors are in the age group of yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs. Table 2 Educational Qualification of investors Educational Qualification Number of Investors Graduate/ Post Graduate 88 Under Graduate 25 Others 7 Total 120 Source: Primary Data From Table 2 it is observed that out of 120 Mutual Fund investors 71% of the investors in Berhampur are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under High School Certificate-HSC i.e. 10th Class/Grade). Table-3 Occupation of the investors Occupation No. of Investors Govt. Service 35 Pvt. Service 45 Business 30. Agriculture 4 Others 6 Source: Primary Data Page 193

8 From Table 3 it is observed that out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others. Table-4 Monthly Family Income of the Investors Income Group No. of Investors <=10, ,001-15, ,001-20, ,001-30, >30, From Table 4 it is observed that out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000. Kind of Investments Table 5 Investors invested in different kind of investments No. of Respondents Saving A/C 117 Fixed deposits 89 Insurance 91 Mutual Fund 72 Post office (NSC) 45 Shares/Debentures 30 Gold/Silver 18 Real Estate 39 From the Table 5 it can be inferred that out of 120 people, 97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate. Further, for different combinations of investment options people have chosen Savings A/c as the common basis for almost all other combinations. Table 6 Preference of factors while investing Factors (a) Liquidity (b) Low Risk (c) Return High (d) Trust No. of Respondents Page 194

9 From Table 6 it is observed that out of 120 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust. Table 7 Awareness about Mutual Fund and its Operations Response Yes No No. of Respondents From the table 7 it is inferred that 67% People are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations. Table 8 Source of information for customers about Mutual Fund Source of information No. of Respondents Advertisement 16 Peer Group 22 Bank 27 Financial Advisors 55 From the Table 8 it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 120 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 18.5% through Peer Group and 13.5% through Advertisement. Table 9 Reason for not invested in Mutual Fund Reason No. of Respondents Not Aware 97 Higher Risk 8 Not any Specific Reason 15 Source : Primary Data Further from table 9 it is observed that out of 120 people, who have not invested in Mutual Fund, 81% are not aware of the reasons for not investment, 6.5% said there is likely to be higher risk and 12.5% do not have any specific reason. Table 10 Investors invested in different Assets Management Co. (AMC) Name of AMC No. of Investors SBIMF 55 UTI 75 HDFC 30 Reliance 75 ICICI Prudential 56 Kotak 45 Others 70 Page 195

10 From table 10 it is observed that in Berhampur, most of the Investors preferred UTI and Reliance Mutual Fund. Out of 120 Investors 62.5% have invested in each of them, only 46% have invested in SBIMF, 47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC. Further, out of different asset management companies (AMCs) people have opted for more than one AMC while making investment through mutual funds Table 11 Reason for invested in SBIMF Reason No. of Respondents Associated with SBI 76 Better Return 11 Agents Advice 33 Source: Primary Data From table 11 it is observed that out of 120 investors of SBIMF 64% have invested because of its association with Brand SBI, 27% invested on Agent s Advice, 9% invested because of better return. Table 12 Reason for not invested in SBIMF Reason No. of Respondents Not Aware 46 Less Return 33 Agent s Advice 41 Source: Primary Data From table 12 it is observed that out of 120 people who have not invested in SBIMF, 38% were not aware with SBIMF, 28% do not have invested due to less return and 34% due to Agent s Advice. Table 13 Preference of Investors for future investment in Mutual Fund Name of AMC No. of Investors SBIMF 76 UTI 45 HDFC 35 Reliance 82 ICICI Prudential 80 Kotak 60 Others 75 From table 13 it is observed that out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63% in SBIMF, 62.5% in others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual Fund. Further, People select more than one AMC for future investment. Table 14 Channel Preferred by the Investors for Mutual Fund Investment Channel Financial Advisor Bank AMC No. Respondents of From table 14 it is observed that Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and 15% through Bank. Page 196

11 Table 15 Mode of Investment Preferred by the Investors Mode of Investment One time Investment Systematic Investment Plan (SIP) No. of Respondents From table 15 it is observed that out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic Investment Plan. Table 16 Preferred Portfolios by the Investors Portfolio No. of Investors Equity 56 Debt 20 Balanced 44 From table 16 it is observed that 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred Debt portfolio. Table 17 Option for getting Return Preferred by the Investors Option Dividend Payout Dividend Reinvestment Growth No. of Respondents Source: Primary Data From table 17 it is observed that 71% preferred Growth Option, 21% preferred Dividend Payout and 8% preferred Dividend Reinvestment Option. Table 18 Preference of Investors whether to invest in Sectoral Funds Response No. of Respondents Yes 25 No 95 From table 18 it is observed that Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because there is maximum risk. Further, because the holdings of this type of fund are in the same industry, there is an inherent lack of diversification associated with these funds and even increases the risk. It is on this basis that only 21% of the investors prefer to invest in Sectoral Fund. TESTING OF HYPOTHESES: H1: Educational Qualifications does not have any effect on the composition of no of investors From Table 2 it is observed that out of 120 Mutual Fund investors 71% of the investors in Berhampur are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under High School Certificate-HSC i.e. 10th Class/Grade). As 71% of the investors are at least graduates, hence it is proved that, educational qualification and investors composition are very much affected. Hence the stated hypothesis i.e. H 1 is tested. Page 197

12 H2: Occupations of investors does not play a role in making investments From Table 3 it is observed that out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others. Since 38% of investors fall under the category of private employee and these are the largest occupation category among all the remaining categories of investors, it is proved that occupation has a role in the number of investors. Thus, the hypothesis i.e. H 2 is tested. H3: Family income and number of investors are no way related From Table 4 it is observed that out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000. Respondents in the family income group of 20,000/- to 30,000/- are the highest in number and hence in percentage too confirming that family income affects the number of investors. Thus, the hypothesis i.e. H3 is tested. H4: People do not try to access any source of information before investing in a mutual fund From the Table 8 it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 120 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 18.5% through Peer Group and 13.5% through Advertisement. Hence it has been found that, people definitely collect information and also consult various sources before making any investment in any mutual fund. Out of the four major sources people consult financial advisors the most prior to taking any investment decision. Thus Hypothesis H4 is tested. H5: People are aware of the reason for not investing in any mutual funds Further from table 9 it is observed that out of 120 people, who have not invested in Mutual Fund, 81% are not aware of the reasons of non-investment, 6.5% said there is likely to be higher risk and 12.5% do not have any specific reason. It is surprising to note that as 81% of people are not even aware of mutual funds, the question of reason behind non-investment does not arise. Thus the Hypothesis H5 is tested. H6: People seek advice from banks as sole channel for investment through mutual funds From table 14 it is observed that Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and 15% through Bank. As majority of the investors seek the advice from the financial advisors, the common assumption that people seek advice from banks for investment through mutual funds does not hold good. Hence the Hypothesis H6 is tested. H7: There is no preference of options to get the returns from the mutual fund by the investors From table 17 it is observed that 71% preferred Growth Option, 21% preferred Dividend Payout and 8% preferred Dividend Reinvestment Option. People prefer growth option to dividend payout and dividend reinvestment options. Hence Hypothesis H7 is tested. Page 198

13 MAJOR FINDINGS OF THE STUDY: The following are the major findings of the research study: In Berhampur in the Age Group of years were more in numbers. The second most Investors were in the age group of years and the least were in the age group of below 30 years. In Berhampur most of the Investors were Graduate or Post Graduate and below HSC(under High School Certificate-HSC i.e. 10th Class/Grade) there were very few in numbers. In Occupation group most of the Investors were Govt. employees, the second most Investors were Private employees and the least were associated with Agriculture. In family Income group, between Rs. 20,001-30,000 were more in numbers, the second most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000. About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only 60% Respondents invested in Mutual fund. Mostly Respondents preferred High Return while investment, the second most preferred Low Risk then liquidity and the least preferred Trust. Only 67% Respondents were aware about Mutual fund and its operations and 33% were not aware of the mutual fund and its operations. Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not invest in Mutual fund. Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not any specific reason for not invested in Mutual Fund and 6% told there is likely to be higher risk in Mutual Fund. Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI Prudential has also good Brand Position among investors, SBIMF (State Bank of India Mutual Fund) places after ICICI Prudential according to the Respondents. Out of 55 investors of SBIMF 64% have invested due to its association with the Brand SBI, 27% Invested because of Advisor s Advice and 9% due to better return. Most of the investors who did not invested in SBIMF due to not Aware of SBIMF, the second most due to Agent s advice and rest due to Less Return. For Future investment the maximum Respondents preferred Reliance Mutual Fund, the second most preferred ICICI Prudential, SBIMF has been preferred after them. 60% Investors preferred to Invest through Financial Advisors, 25% through AMC (means Direct Investment) and 15% through Bank. 65% preferred One Time Investment and 35% preferred SIP out of both type of Mode of Investment. The most preferred Portfolio was Equity, the second most was Balance (mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio. Maximum Number of Investors Preferred Growth Option for returns, the second most preferred Dividend Payout and then Dividend Reinvestment. Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to invest in Sectoral Fund. SUGGESTIONS AND RECOMMENDATIONS: Based on the above major findings of the study, the following suggestions and recommendations are offered for greater level of customers preference of the investors for Investment in Mutual Funds. Mutual Fund Company needs to give the training of the Individual Financial Advisors about the Fund/Scheme and its objective, because they are the main source to influence the investors. Before making any investment Financial Advisors should first enquire about the risk tolerance of the investors/customers, their need and time (how long they want to invest). By considering these three things they can take the customers into consideration. Younger people aged fewer than 35 will be a key new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality. Page 199

14 Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management Companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of investing through equated monthly installments (EMI). Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons. As there is no comprehensive law to regulate the mutual fund in India, uniform coordinated regulations by a single agency should be formed which would provide the shelter to the investors. As the investors are not willing to invest in mutual fund unless a minimum return is assured, it is very essential to educate the investors about mutual fund that they are market instruments and associated with market risk hence the guarantee of assured return can t be offered. Private sector may also be encouraged to float mutual funds, for creating intensifying competition in the industry as it has been done incase of Banks. Due to operations of many mutual funds, there will be need for appropriate guidelines for selfregulation in respect of publicity/advertisement and inter- scheme transactions within each mutual fund. Care should be taken not to promulgate misleading information to the public in general and unit holders in specific. The growth of mutual fund tends to increase the shareholdings in good companies, give raise to the fear of destabilising among industrial group, hence introduction of voting shares and lowering the debt-equity ratio help to remove these apprehension. Additional clarity is required regarding the roles and responsibilities together with duties and rights of Trustees, Sponsors, Fund Managers, Lead Managers, Custodians and Unit Holders. A separate legal framework in the lines of SEBI is the need of the hour to protect the interest of the investors. Some steps should be taken to make fair and truthful disclosures of information to the investors, so that subscribers know what risk they will have by investing in fund. Infrastructure bottlenecks will have to be removed and banking and postal network have to be taken place for growth of mutual funds. Mutual funds should formulate their working policy with the use of modern technology like computer and tele-communications to render service to the investors. Mutual funds are made by investors and investor s interest ought to be paramount by setting standard of behaviours and efficiency through self-regulations and professionalism. Whatever may be the conditions and regulatory framework, mutual fund is always subject to market risk and investors in their own interest must and should read the offer document carefully before deciding upon any investment through mutual funds. CONCLUSION: Financial planning is an exercise aimed at identifying all financial needs of an individual, translating the needs into monetarily measurable goals at different times in the future, and planning the financial investments that will allow the individual to provide for and satisfy his future financial needs and achieve his/her life s goals. Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, and Channels etc. It is observed that many people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing. Brand plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs in Berhampur but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. Distribution channels are also important for the investment in mutual fund. Financial Advisors are the most preferred channel for the investment in mutual fund. They can change investors mind from one investment option to others. Many of investors directly invest their money through AMC because they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations and those have time. Thus the need of the hour for all the domestic mutual fund companies is to expand their Page 200

15 investor base which can be possible, only when the companies are determined to understand the value drivers and thus lure retail investors to invest in mutual fund. REFERENCES : 1. Agapova, Anna,(2011), The Role of Money Market Mutual Funds in Mutual Fund Families, Journal of Applied Finance, Vol. 21, Issue. 1,pp Agarwal, Vikas; Boyson, Nicole M.; Naik, Narayan Y,(2009), Hedge Funds for Retail Investors? An Examination of Hedged Mutual Funds, Journal of Financial & Quantitative Analysis, Vol. 44, Issue 2, pp Anjan Chakrabarti and Harsh Rungta,( 2000), Mutual Funds Industry in India : An in depth look into the problems of credibility, Risk and Brand, The ICFAI Journal of Applied Finance, Vol.6, No.2, April,pp Badrinath, S.G & Gubellini, S,(2011), On the characteristics and performance of long-short, market-neutral and bear mutual funds Journal of Banking & Finance, Vol. 35 Issue 7, p Cao, Charles; Ghysels, Eric & Hatheway, Frank,(2011), Derivatives do affect mutual fund returns: Evidence from the financial crisis of 1998, Journal of Futures Markets, Vol. 31 Issue 7, pp DeBondt, Werner F. M., and Richard Thaler. (1985) Does the Stock Market Overreact? Journal of Finance Vol 40,pp Feng Chen; Kraft, Arthur; Weiss, Ira, (2011), Tax Planning by Mutual Funds: Evidence from Changes in the Capital Gains Tax Rate, National Tax Journal, Vol. 64, Issue 1, pp Gil-Bazo, Javier; Ruiz & Verd, Pablo, (2009), The Relation between Price and Performance in the Mutual Fund Industry, Journal of Finance, Vol. 64 Issue 5, pp Goetzman, W.N., (1997), Cognitive Dissonance and Mutual Fund Investors, The Journal of Financial Research, Vol. 20, Summer 1997, pp Gupta, L.C.,(1994), Mutual Funds and Asset Preference, Society for Capital Market Research and Development, Delhi. 11. Ippolito, R., (1992), Consumer reaction to measures of poor quality : Evidence from Mutual Funds, Journal of Law and Economics, 35,pp Krishnan, M.A., 1999, Moving into growth mode, The Hindu Survey of Indian Industry, pp Kulshreshta, C.M.,(1994 ), Mastering Mutual Funds, Vision Books, New Delhi. 14. Madhusudan V. Jambodekar, 1996, Marketing Strategies of Mutual Funds Current Practices and Future Directions, Working Paper, UTI IIMB Centre for Capital Markets Education and Research, Bangalore. 15. Shankar, V., (1996), Retailing Mutual Funds : A consumer product model, The Hindu, July 24, Shanmugham, R.,( 2000), Factors Influencing Investment Decisions, Indian Capital Markets Trends and Dimensions (ed.), Tata McGraw-Hill Publishing Company Limited, New Delhi, Websites: gov. in Page 201