CONSUMER S PERCEPTION TOWARDS MUTUAL FUNDS AS AN INVESTMENT OPTION SPECIALLY FOCUSED ON VALSAD CITY LOCATED IN GUJARAT

International Journal of Business Management & Research (IJBMR) ISSN 2249-6920 Vol. 2 Issue 4 Dec - 2012 59-66 TJPRC Pvt. Ltd., CONSUMER S PERCEPTION TOWARDS MUTUAL FUNDS AS AN INVESTMENT OPTION SPECIALLY FOCUSED ON VALSAD CITY LOCATED IN GUJARAT 1 DHIMEN JAGDISHBHAI JANI, 2 BHAUTIK ALPESHKUMAR PATEL & 3 RAJEEV V. JAIN 1 Assistant Professor, Dolat-Usha Inst of Applied Sciences and Dhiru-Sarla Inst, of Mgt. & Commerce, Near BKM science College, Tithal Road, Valsad, India 2 Assistant Professor, Shri D.N. Institute of Business Administration, Anand (Affiliated to Sardar Patel University, Vallabh Vidyanagar) In M.B. Patel Science College Campus, Sardar Gunj, Anand-388001, Gujarat, India 3 Dean & Head, Faculty of Mgt. and Comm. University of Kota, Rajasthan, India ABSTRACT Small drops of water make a big ocean on this concept mutual fund works. Small investors can also invest in mutual fund and earned a fair rate of return with less risk compare to shares. Mutual fund also provide the benefits of specialized services, expert knowledge, tax benefits etc. Consumers don t spend all his income into various goods and services. Certain amount he will save and out of saved amount he will invest certain proportion in mutual fund. Mutual fund is expected a better option for the Consumers at present. They are financial intermediaries concerned with channelizing the saving of those individual who have excess surplus. There are many investment options available with the Consumers, but mutual fund is different from other in terms of risk, return, liquidity, profitability, transparency etc. and that is it has become more popular nowadays. This study focused on the consumer s perception towards mutual fund as an investment option in Valsad city from Gujarat. The reveled that Consumers perception were positive toward investment in mutual funds. KEY WORDS: Mutual funds, Consumer Perception, Investors and Financial Intermediaries INTRODUCTION Indian economy up to 1991 was closed economy. Private players were not allowed to enter into Indian market. It was the arm of the government, controlling entire supply chain of production, supply and distribution of various goods and services; however political institutions were not able to manage the valuable resources. Low rate of GDP, GNP, savings, poor forex reserve and high rate of unemployment were the chief characteristics of Indian economy prior to 1991. As a matter of fact, financial market was also opened for the private player both domestic and international. It is the financial market, which accelerate the growth of economy. Actually, economic activities are nothing but financial activities, which all are undertaken by an individual or group of individual to earn some financial reward. The income earning and income spending activities is a part of financial system. It channelizes the savings of million small and retail Consumers into gigantic capital formation. Today, Consumers have large number of option available for investment i.e. Stock market, Bank F.D., Insurance (ULIPS), Mutual funds, PPF, NSC, KVP etc. All these financial instruments mobilize financial resources in the economy.there are number of options available in the financial market for investment. The function of all financial instrument is to mobilize savings from those have surplus to those corporate house who are in need of capital. Mutual fund is also performing same function, but it has certain distinct

60 Dhimen Jagdishbhai Jani, Bhautik Alpeshkumar Patel & Rajeev V. Jain features over the other investment avenues. i.e. comparative risk return profile, transparency, liquidity etc. with the evolution of financial system in India, mutual funds have become more popular as compare to other investment option. The reason is that, it satisfies the wants of each and every class of a segment and an individual can start investing at INR. 500 or even INR.100 in some cases (SBI Mutual Fund). Besides that, Consumers can get expert knowledge, various schemes i.e. debt, growth, hybrid, balanced, gold etc. have created a great impact on the Consumers awareness for risk and return profile. MUTUAL FUND A BRIEF IDEA Mutual fund is an investment instrument which mobilizes the savings of millions of small and retail Consumers into huge capital formation. The basic objective behind investment in mutual fund is goods return with relative low risk. Consumers invest their money into mutual fund through Asset Management Company (AMC). There are experts available in the market, which are in constant touch with micro and macro aggregates of the economy viz. share market, consumer preference; trend, fashion etc. act as fund manager. When investor invest some money in mutual fund, the invested amount is converted into units at prevailing price of fund (generally called NAV- Net Asset Value), which are declared on daily working basis. If the value of units that is NAV increases that would be appreciation in the invested amount and if it decrease the value of invested amount decreases. There are different schemes of mutual funds for different purpose. For i.e. equity funds which is characterized by high risk, high return, debt fund low risk, low return, gilt fund, close ended funds, open ended fund, ELSS etc. Besides that money market funds gives liquidity, that is desirable by banks and corporate who wish to invest their surplus for extreme short time to short time say 1 hour to 7 days. Balancer is the fund which satisfies the need of Consumers who wish to have both safe side as well as good return. It satisfy the requirement of fixed return on debt as well as variable return on equity in certain proportion generally 60:40, or 50:50 etc. Equity oriented funds are highly risky; it may have direct exposures to stock market up to 100 per cent. Mostly the Consumers with long term vision invest their money in equity oriented funds. Besides that, there are mutual funds which have direct exposure to physical gold as well as ETF (Exchange Traded Fund) i.e. Reliance gold plan. MUTUAL FUND AN INDIAN PERSPECTIVE The Indian Mutual Fund industry has witnessed significant growth in the past few years driven by favorable economic and demographic factors such as rising income, rising saving rate, rising income earning-spending activity etc. Mutual funds in India was firstly launched in July 1964 by UTI, with the objective of employment of individual savings into gigantic capital formation by investing it in capital market, besides that there was strong need for channelizing household savings for circulation and making it available for corporate for their productive use. At the same time it was felt that UTI could be an effective option to bridge the gap between individual saving and capital formation. UTI enjoyed the monopoly for almost two decades. In early nineties the following players entered into the market. They are SBI (1987), Can Bank (1987), LIC (1989), Indian Bank (1990), Bank of India (1990), PNB (1990), GIC (1991) etc. Presently the concept of mutual fund has become very familiar to almost all retail Consumers. The key benefits of mutual funds is that, it can be started with nominal amount of INR 500, besides that tax benefit is also available in some schemes, smart moves by experts, advantage of equity return and at the same time Consumers can reap the benefit of economies of scale.

Consumer s Perception towards Mutual Funds as an Investment 61 Option Specially Focused on Valsad City Located in Gujarat The Total Asset under Management (AUM) of Mutual Fund Industry Note (Rs. In Crore) Year (end-march) 1 2 1998 97228 1999 68193 2000 107946 2001 90587 2002 100594 2003 109299 2004 139616 2005 149600 2006 231862 2007 326292 2008 505152 2009 417300 2010 613979 2011 592250 : Data for the Year-2011 is provisional Source: Security and Exchange Board of India RESEARCH METHODOLOGY This research is descriptive type of research study. It is related to the analysis of perception of Consumers of Valsad city towards mutual funds. 150 Consumers were surveyed with the help of structured questionnaire. Objectives of Research 1. To analyze the impact of various demographical factors like Age, Gender, Income and Education on consumer decision towards mutual fund. 2. To study and rank the factor having implications on Consumers perception towards mutual fund. Literature Review Mutual fund has emerged as one of the best option for investment nowadays. Great amount of research has been carried out on investor s behavior on mutual fund. Anand and Murugalah (2004) explored that, in order to attract investor financial industries requires innovation in developing and delivering financial services to survive and even to earn profit. Raja (1998) examined several Consumers and found that there is impact of demographical variables such as age, gender, income etc. Bogle (1992) and Ippolito (1992) have suggested that the Consumers are selecting fund on the past performance. They also specify that investor invest in such a fund whose past performance is positive rather than negative for specific period of time. Desigan et al. (2006) conducted a study on women investor perception towards investment selection. Accordingly, women Consumers generally avoid mutual fund, the main reason is lack of awareness, investment procedures, entry and exit move etc. According to Lu Zheng (1999) majority of Consumers, investing in mutual fund; do invest on the basis of short-term future performance and they use fund specific information for their selection decision. K. Lashmana Rao (2011) made analysis of investor s perception towards mutual fund schemes, he made conclusion SEBI, AMFI, and IRDA should take appropriate steps to enhance Consumers knowledge for making more prudent decisions.

62 Dhimen Jagdishbhai Jani, Bhautik Alpeshkumar Patel & Rajeev V. Jain Source of Data Primary data is collected through questionnaire. And secondary data is collected through AMFI report, journals, SEBI, reports of RBI (list is attached at the end ) Data collection Method Primary data is collected through structured questionnaire by face to face interview. While secondary data is collected from various websites of institutions like AMFI, RBI and financial journals time to time. Sampling Plan Population - Valsad City From the Gujarat State Sampling Unit Retail Consumers Sampling Method Convenient Sampling Method Sample size 150 respondents Statistical tools & techniques applied There are several techniques available to analyze data and to draw a conclusion. For this purpose chi-square is used to judge the phenomena. DATA ANALYSIS AND INTERPRETATION Age wise Attitude of Investors NULL HYPOTHESIS Ho There is insignificant difference between age group of Consumers and their attitude towards investment in mutual funds. Table 1: Age and Attitude of Investor towards Mutual Funds AGE POSITIVE NEGATIVE TOTAL Below 30 Years 57 4 61 30-50 Years 32 13 45 Above 50 Years 25 19 44 TOTAL 114 36 150 Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 19.640 a 2.000 Interpretation 150 Consumers taken as a sample and evaluated that there is insignificant difference between age group of Consumers and their attitude towards investment in mutual funds. The data was analyzed by using chi-square goodness of fit test. The null hypothesis is rejected χ2 df(2) = 19.640, p<0.05. There is a significant difference between age group of Consumers and their perception towards investment in mutual fund. Gender wise Attitude of Consumers NULL HYPOTHESIS Ho There is insignificant difference between gender of Consumers and their attitude towards investment in mutual funds.

Consumer s Perception towards Mutual Funds as an Investment 63 Option Specially Focused on Valsad City Located in Gujarat Table 2: Genders and Attitude of Investor towards Mutual Funds GENDER POSITIVE NEGATIVE TOTAL MALE 93 4 97 FEMALE 21 32 53 TOTAL 114 36 150 Chi-Square Test Particulars Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 59.461 a 1.000 Interpretation 150 Consumers taken as a sample and evaluated that there is insignificant difference between gender of Consumers and their attitude towards investment in mutual funds. The data was analyzed by using chi-square goodness of fit test. The null hypothesis is rejected χ2 df (1) = 59.461, p<0.05. There is a significant difference between gender of Consumers and their perception towards investment in mutual fund. Income wise Attitude of Consumers NULL HYPOTHESIS Ho - There is insignificant difference between income of Consumers and their attitude towards investment in mutual funds. Table 3: Incomes and Attitude of Investor towards Mutual Funds INCOME POSITIVE NEGATIVE TOTAL BELOW 15000 17 19 36 15000-30000 46 12 58 30000 ABOVE 51 5 56 TOTAL 114 36 150 Chi-Square Tests Particulars Value Df Asymp. Sig. (2-sided) Pearson Chi-Square 11.777 a 2.003 Interpretation 150 Consumers taken as a sample and evaluated that there is insignificant difference between income of Consumers and their attitude towards investment in mutual funds. The data was analyzed by using chi-square goodness of fit test. The null hypothesis is rejected χ2 df(2) = 11.777, p<0.05. There is a significant difference between income of Consumers and their perception towards investment in mutual fund. Qualification wise Attitude of Consumers NULL HYPOTHESIS Ho There is insignificant difference between Qualification of Consumers and their attitude towards investment in mutual funds. Table 4: Qualifications and Attitude of Investor towards Mutual Funds QULIFICATION POSITIVE NEGATIVE TOTAL UNDER GRADUATE 7 21 28 GRADUATE 32 13 45 POST GRADUATE AND ABOVE 75 2 77 TOTAL 114 36 150 Chi-Square Tests Particulars Value df Asymp. Sig. (2-sided) Pearson Chi-Square 31.861 a 2.000

64 Dhimen Jagdishbhai Jani, Bhautik Alpeshkumar Patel & Rajeev V. Jain Interpretation 150 Consumers taken as a sample and evaluated that there is insignificant difference between educational qualification of Consumers and their attitude towards investment in mutual funds. The data was analyzed by using chisquare goodness of fit test. The null hypothesis is rejected χ2 df(2) = 31.86, p<0.05. There is a significant difference between educational qualification of Consumers and their perception towards investment in mutual fund. Ranking of Various Factors Responsible for Investment in Mutual Funds following factor. The study has revealed the fact that those Consumers who are investing in mutual fund is generally due to Risk-Returns profile, Liquidity, Tax benefits, Affordability etc. During the survey, respondents were asked to rank these most common factors according to their priorities. The data is presented in the table no. 5 Table 5: Factor Affecting Investment Decision of Investors in Mutual Funds Factors No. of Respondents 1 2 3 4 Total Risk Return Profile 85 26 17 22 150 Liquidity 19 37 45 49 150 Affordability 31 45 24 50 150 Tax Benefits 15 42 64 29 150 Total 150 150 150 150 For analytical purpose, scales are provided to the various factors that influence the behaviour of the Consumers. The scaling is done as per following scales. Rank Weights 1 4 2 3 3 2 4 1 Table 6: Ranking of Various Factors Factors Weighted Scores Percentage Rank Risk Return Profile 474 31.6 1 Liquidity 326 21.73 4 Affordability 357 23.8 2 Tax benefits 343 22.87 3 Total 1500 100 FINDINGS 1) This study revealed that out of 150 Consumers surveyed, 114 (i.e. 76%) Consumers have positive perception towards investment in mutual fund and 36 (i.e. 24%) Consumers have negative perception towards it. 2) The age of respondents and their attitude towards mutual fund are significantly concerned with each other. Age plays very important role in determining their perception towards mutual fund as an investment. 3) As far as figures are concern, it indicates that 93% (57 out of 61) of the respondents of below 30 years age group, 71% (32 out of 45) of the respondents of 30-50 years age group, 57% (25 out of 44) of the respondents of above 50 years age group, have positive perception towards investment in mutual fund.

Consumer s Perception towards Mutual Funds as an Investment 65 Option Specially Focused on Valsad City Located in Gujarat 4) If we observe, on the gender basis, figures shows that gender plays important role in determining one s perception towards investment in mutual fund. i.e. 95% (93 out of 97) of the male respondents found with positive perception and 40% (21 out of 53) of the female respondents are found with positive perception towards in mutual fund. Which simply states that male are more likely to be perceived mutual funds as an investment option as compare to female. 5) On the basis of income level, the research suggest that, income leads significant differences in the perception of Consumers perception towards investment in mutual fund, the figure suggest that, those Consumers whose income is less than 15000 per month have not shown much interest in mutual fund, only 47% (17 out of 36) of the respondents favored mutual fund for investment, while 79% (46 out of 58) Consumers having income between 15000 30000 per month favored mutual fund for investment. As far as, income group above 30000 per month is concern, 91% (51 out of 56) respondents took mutual fund with positive perception. 6) The qualification of respondents and their perception towards mutual fund are greatly associated with each other. Both variables have significant association with each other. i.e. 25% (7 out of 25) respondents of the U.G. group, 71% (32 out of 45) respondents of graduate, 97% (75 out of 77) respondents of P.G. above have shown positive interest towards mutual fund, Which means that educated persons are more likely to perceived mutual fund as investment option. They have significant relationship with each other. 7) Consumers invest in mutual fund for various reasons like risk return profile, liquidity, affordability and tax CONCLUSIONS benefits. We asked the Consumers to rank these factors which could possibly affect their decision of investment in mutual fund. It indicates that Consumers invest mostly in mutual fund for high return and comparatively low to medium risk and that is why first rank is allocated to risk and return, second rank is given to affordability, third is given to tax benefits and forth is given to liquidity. Comparative low return of bank fixed deposits, public provident fund, National saving certificate and Kisan Vikas Patra etc. made mutual fund more attractive. In 1999-2000 total AUM was crossing 61000 crores. In resource mobilization, mutual funds outperformed the bank fixed deposits. Mutual funds on net basis increases their resources by INR 18516 crore, there was decline in the accretion to the bank deposits from INR 108615 crore in 1998-99 to INR 9175 crore in 1999-2000. The Asset Under Management in 2010 was INR 613979 crore, which is expected to reach INR 592250 in 2011 (provisional). It indicates that Consumers are changing their perception from traditional investment to hybrid investment. The study was conducted during June-July of 2012 in Valsad city; it has revealed many facts regarding perception of Consumers towards mutual fund as an investment option. It has shown that how different demographical factor have influence on perception of Consumers. Majority of Consumers of valsad city have framed positive perception towards mutual fund. Demographic factors (i.e. age, gender, income, education etc.) have influence on investor perception. Most of the Consumers were investing in mutual fund for good return and affordability. REFERENCES 1. Anand S. and Murugaiah V (2004), Marketing of financial services: strategic issues, SCMC journal of Indian Management, july-sept, pp. 41-49 2. Bogle J C (1992), Selecting Equity Mutual Fund, The Journal of Portfolio Management, Vol. 18 No.2, PP. 94-100. 3. Desigan Gnana, Kalaselvi S and Ansuya L (2006), Women Consumers Perception Towards Investment: An empirical Study, Indian Journal of Marketing, April

66 Dhimen Jagdishbhai Jani, Bhautik Alpeshkumar Patel & Rajeev V. Jain 4. Gorden E. and Natrajan K. (2010), Financial Markets and Services, Himalaya Publishing House, pp. 330-340 5. Ippolito R A (1992), Consumer Reaction to Measure of Poor Quality: evidence from the mutual fund industry, Journal of Law and Economics, Vol. 35, pp. 45-70 6. Dr. K. Lakshmana Rao (2011), Analysis of Consumers perception towards mutual fund schemes, Zenith International Journal of Multidisciplinary Research, Vol. 1 Issue 8, pp. 175-192 7. Lu Zheng (1999), Is Money Smart? A study of mutual fund investor s fund selection ability, The Journal of Finance, Vol. LIV, No.3 8. Raja Rajan (1997), Chennai Consumers is conservative, Business Line, 23 Feb. 9. www.rbi.org 10. www.sebi.com