PERCEPTION OF INVESTOR IN MUTUAL FUND: INDIAN PERSPECTIVE

Transcription

1 PERCEPTION OF INVESTOR IN MUTUAL FUND: INDIAN PERSPECTIVE Peeyush Bangur- M.B.A (Financial Administration) Lecturer, Shri Vaishnav Institute of Management, Indore. Madhya Pradesh Pratima Jain- MBA (Finance) Reader, Shri Vaishnav Institute of Management, Indore. Madhya Pradesh. Niraj Vijayvargiya, MBA (Finance) Reader, Shri Vaishnav Institute of Management, Indore. Madhya Pradesh ABSTRACT: - Domestic saving and investment is the best tool to cure recession and it leads to the growth of our domestic financial market. The present study is comprise of mutual fund industry along with its history with all ups and down happened to it.the main aim of study is to analyses the perception and awareness of different investors and also one who invest in the mutual fund. Volume:01, Number:04, August-2011 Page 24

2 INTRODUCTION A mutual fund is trust that pools the saving of a number of investor who share a common financial goal. The money thus collected is then invested in capital market instrument such as shares, debenture, and securities. The income earned through these investments and the capital appreciation realized is shared by its unit holder 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 security a relatively cost. BENEFITS OF MUTUAL FUND Professional management Portfolio diversification Reduction in transaction cost Liquidity Convenience Flexibility Tax benefits Transparency Stability to stock market Equity research HISTORY OF MUTUAL FUND INDUSTRY IN INDIA The history of mutual fund industry can broadly divided into 4 distinctive phase- Volume:01, Number:04, August-2011 Page 25

3 PHASE 1 ST The Indian mutual fund industry were incepted in 1964 by UTI (unit trust of India) under the UTI act 1963 (a special act of parliament). UTI was a set up by the Reserve Bank Of India and functioned under the regulatory and administrative control of RBI. In 1978 UTI was unlinked from RBI, and the Industrial development bank of India (IDBI) took over the regulatory and administrative control in place of RBI. UTI acted as sole player from and it maintained its monopoly and experienced a consistent growth till Although the growth of mutual fund industry was slow but it becomes intensive after 1987 when non UTI companies were entered in the industry. PHASE 2 nd (entry of public sector fund) In 1987, SBI mutual fund (June), and Can bank M.F.(December), were set up as trusts under the Indian trust act These circumstances were followed by PNB mf (aug-89), Indian bank mf (nov-89), Bank of India (june-90), BOB mf (oct-92). The two nationalized giant LIC(june-89) and GIC(dec-90), set up their mutual fund. At the end of 1993 AUM(asset under management) was of Rs Crs. PHASE 3 rd jan.(entry of private sectors) With the entry of private sector funds in 1993, new era were started in mutual fund industry. Also 1993 was the year in which 1 st mutual fund regulation incipient, under which all MF, except UTI were registered and governed. The Kothari Pioneer (now merged with Franklin Templeton) was first private sector MF registered in July The number of mutual fund houses went on increasing with many foreign mutual fund setting up funds in India and also the industry has witness several mergers and acquisition. As at the end of January 2003, there were 33 MFs with total asset of Rs Crs. The UTI with Crs. Of AUM was way ahead of other MF. PHASE 4 th Since Feb 2003 In February 2003, following the repeal of the UTI act 1963, UTI was bifurcated into two separate entities, One is specified undertaking of the UTI with the AUM of Rs Crs. As at the end of January 2003 representing broadly, the asset of US 64 scheme, assured return and certain their scheme. The specified undertaking UTI, functioning under the rules framed by government of India and does not come under the purview of the MF regulation. The second is UTI MF Ltd. Sponsored by SBI, PNB, BOB, and LIC. It is registered under SEBI and function under MF regulation. Volume:01, Number:04, August-2011 Page 26

4 Different type of Mutual Fund scheme present in India So many schemes exist in MF industry which fulfill the desire of Investor and provide them safety, different type of mutual fund scheme are as follows, Functional type Portfolio type Geographical type Other Open-ended Income fund Domestic sectoral Close ended Growth fund Offshore Tax saving Interval schemes Balanced fund Gilt fund Money market MF Load fund index fund ELSS 1. Functional classification Open Ended scheme- Open ended scheme do not have fixed Corpus, and is not closed for public subscription. Investor can Enter and Exit the scheme any time during the life of the fund. The corpus of the fund Increase or decrease, depending on the purchase or redemption by the investors, there is no such period of maturity. It is not listed in stock exchange, liquidity is main feature of this scheme. Close Ended scheme- This scheme are open for a limited period (30-45 days), this scheme has stipulated maturity period from 5-7 years. This is transected at the stock exchange. Interval scheme- This schemes combine the feature of open and close ended scheme. They are open for the sale or redemption during predetermined intervals at net asset value (NAV) related prices. 2. Portfolio classification- Income fund- Main objective of this scheme is to provide a safety of investment and regular income to investor, Investment are made in debt instrument viz. bond, debenture, and government securities. Risk and returns are lower in this scheme. Growth fund- Main objective of this scheme is capital appreciation, rather than regular income, Investment are mainly done in equity share and small portion in money market instruments. Risk are higher in this schemes. Balance fund- Aim is both distributing regular income and providing capital appreciation to the investor by balancing the investment of corpus between high growth equity shares and income earning securities, risk is moderate. Money market mutual fund- Investment done in money market instruments viz. treasury bills and certificate of deposits, risk is of low rate. Volume:01, Number:04, August-2011 Page 27

5 3. Geographical classification- Domestic fund- Investment done in one s own country are domestic funds. The market is limited and confined to boundaries of nation in which fund operates. Offshore fund-these funds attract foreign capital for investment in country of issuing company. They facilitates cross border fund flow which leads to an increase in foreign currency and foreign exchange reserve. 4. Others- Sectoral- Investment of funds in different sector such as I.T., pharmaceuticals, life science etc. having aim of growth in capital and income generation. Tax saving schemes- These scheme offer tax rebate on investment made in the equity shares, under section 88 of income tax,1961.income may also be periodically distributed depending upon distributable surplus, subscription made up to Rs in an assessment year are eligible for tax rebate. Equity linked saving scheme- The scheme controlled by government to encourage the investor to invest in equity market which is followed by7 tax concession. Gilt fund- This fund seeks to generate return through investment in gilts. Under this scheme funds are invested only in central and state government securities, repo and reverse repo rather than equity and corporate debt securities. Load fund- mutual fund incurs certain expenses such as brokerage, marketing expenses and communication expenses are known as load fund. These expense are known as load and recovered by the fund when it sales the unit to investor or repurchase the units from withholder. Load is of two types- 1. Front end load or sale load, is that charge collect at the same time when an investor enters into the scheme. 2. Back end load- or repurchase load, is that charge collected when the investor gets out of scheme. Index fund- This type of mutual fund invest in the securities in the index on which it is based BSE sensex or S and P CNX Nifty. NET ASSET VALUE- The performance of a particular scheme of a mutual fund is denoted by NAV. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme divided by the total number of units of the scheme, on any particular date. In simple words, NAV is the market value of the security held by the scheme. Volume:01, Number:04, August-2011 Page 28

6 Organization: Source: AMFIINDIA.com Sponsor- The sponsor means any person who, acting alone or in combination with the another body corporate establishes a mutual fund. A mutual fund is set up after certificate of registration is issued by SEBI some eligibility criteria should be fulfilled by sponsor. Trustee- A mutual fund in India is constituted in the form of a public trust created under the Indian trust act, The sponsor forms the trust and registers it with SEBI. The fund sponsor appoints a trustee to held the asset of trust for benefits of units holder, who are beneficiaries of Trust. Asset management company- The trustee appoints the asset management company (AMC) with prior approval of SEBI. The AMC is a company formed and register under companies act 1956, to manage affairs of mutual fund and operates the scheme of mutual fund the AMC should have a net worth of net less than 10 crores. Growth of Mutual Funds: Indian Perspective: The Mutual Fund industry had shown a colossal growth and climatic improvement in last decade. AUM crossed Rs. 1 Lac Crore during March This showed a growth of 65% comparison to previous year. However in subsequent year i.e. March 2001 AUM sharply declined by 20% to Rs Cr. Due to extreme volatility & depressed equity condition. There was turnaround in year March 2002 the AUM grew by 11% to Rs Cr. Again the Mutual Fund Industry had shown a sharp decline in the year 2003, due to bifurcation of UTI into UTI Mutual Fund and specified undertaking of UTI, effective from Feb From 2003 Mutual Fund Industry shown a rapid and consistent growth AUM crossed 1.5 Lac Cr. In 2005, 2 Lac in 2006 which were followed by 3 Lac in March Presently AUM is by ending of March 31 st Volume:01, Number:04, August-2011 Page 29

7 Table & Graph unveils the growth of M.F. Industry Year Total AUM Growth % (0.75%) 65.03% (19.8%) 11.05% (21%) 75.6% 7.1% 55.03% 40.7% 54.8% Growth % RoundOff Source: Amfindia.com (1%) 65% (20%) 11% (21%) 76% 7% 55% 41% 55% Year Ending 31 st March i.e were total AUM in 31 st March, 1998 Growth % calculated on the previous year basis GROWTH IN ASSETS UNDER MANAGEMENT Volume:01, Number:04, August-2011 Page 30

8 Objective of Study: To determine the cognizance of the people & to make aware them regarding to mutual fund. Procedure of Research Methodology: 1. A proper questionnaire was prepared which contains the 6 question regarding Mutual Fund. 2. A survey were shaped among 154 people which belongs to the region of Madhyapradesh(Indore) and Rajasthan(Jaipur & Ajmer) 3. Data (obtained from survey) were collected in very systemic way. 4. Data were arranged properly 5. Different mathematical tool viz. mean, percentage, & chi square test were applied as per requirements data relied on primary data. Analysis of Research: Research analysis is the analysis of different questions which were asked in survey. Question 1: Do you know about Mutual Fund? Table A Retort Number Percentage Yes % No % Total % Survey were made among 154 people. It reveals the fact that the 81.81% (out of 154) were insightful about the Mutual Fund. This is because of rapid growth of Mutual Fund Industry. Question 2: Are you interested to invest in Mutual Fund? Table B Retort Number Percentage Yes % No Total % Survey was made among 154 people. Table B reveals that 119 people out of154 were interested to invest or they had invested in different Mutual Funds. Volume:01, Number:04, August-2011 Page 31

9 Question 3: Why you want to invest in Mutual Fund? Table C Purpose Number Percentage Safety % Growth % Other 7 5.8% Total % This question was fired to those people who had invested in Mutual Fund. The question was very clear and was about purpose of investment either growth or safety And resultant supported the safety purpose. Question 4: Best way of investment: Income perspective: Table D: Different ways Number Percentage of Investment Equity Share % Mutual Fund % Bank % Property(Real % Estate) Other % Total % This survey was made among 154 people. It discloses the fact that the best way for investment( For income purpose) is property( Real Estate) business which is followed by bank, equity shares, mutual funds, and the other sources like gold and commodity. Question 5: Best way of Investment: Safety Purpose: Table E Best way of Number Percentage investment Equity Share % Mutual Fund % Bank % Property % Post Office % Insurance % Commodity % Other % Total % Survey was made among 154 people. Table E shows fact that 41 persons choose bank as a safety investment which is followed by property (28), equity share(21), mutual fund(19), insurance(14), post office(12) as safe side investment. Question 6: How many mutual fund schemes you know? Volume:01, Number:04, August-2011 Page 32

10 Table F Scheme Number Percentage Open % Closed % Growth % Income % Gilt % Others % Total % This question was asked to only those people which were interested to invest in Mutual Fund, and hence survey was made among 119 people. Question 7: Which is the best Mutual fund for investment purpose? This Question was asked to study that the investors is biased or unbiased towards investment in all mutual fund. For this Chi Square test have been applied. H 0 : Investor is unbiased towards invest in all mutual funds. H 1 : Investor is biased towards invest in all mutual funds. S. No. Different Mutual F. O E (O-E) 2 (O-E) 2 E 1. Reliance LIC UTI TATA ICICI Other Total Where: O : Observer Frequency E : Expected Frequency Level Of Significance = 5% X 2 =Sigma (O-E) 2 = E Critical Value: The table value at 5% level of significance and for 6-1 =5 degree of freedom is Y = Decision : since calculated value of Y 2 =24.05 is > Y = null hypothesis is rejected. Research analysis based on personal attributes:- this research is very interesting part of Volume:01, Number:04, August-2011 Page 33

11 our whole research paper after completion of this research some outstanding facts comes out Research analysis based on personal feature viz. occupation, age, gender, salary, marital status, of investor for this purpose questionnaire of 5 question were prepared and it was fired to those who were interested invest in mutual fund. Question 1: Tell us about your occupation Table A Question 2: May we know about your salary package Question 3: What is your age? Occupation Number Percent Student % Business class % Service class % Other % Total % Table B Salary Number Percentage % % % % &above % Total % Table C Age Number Percentage % % % 75&above % Total % Question 4: Gender and Marital status Table D Volume:01, Number:04, August-2011 Page 34

12 Gender Number Percentage Male Female Marital Number Percentage status Married Unmarried Result and Discussion: No stone remain unturned for the completion of research analysis and finally we concluded that: about 80% people are cognizant about mutual fund (table A), out of these 80% people are invested in mutual fund(table B), out of these about 51% investors invest for safety purpose (table C). In our analysis some facts were revealed are as follows: Investors thought that Real Estate is a most appropriate source of income, probably you will get 2-3 times return and it may go up to 6 times. Investors thought that Bank deposits are the safest source of investment. Mutual fund industry is male dominant Most of the investor is rely on business class. Most of the investors are rely between the salary packages of References:- 1 Varshney P.N.; Mittal D. K.; (2005); Indian Financial system; Sultan Chand hand & sons; New Delhi 2. Khan M. Y.; (2007); Indian Financial system; Tata McGraw hill; New Delhi 3. Pathak B. V.; (2004); Indian Financial system; Pearson education; Delhi Module 2; Securities Laws and Compliances ;company secretaries of India, Volume:01, Number:04, August-2011 Page 35