Management Thesis I - Deepalaxmi

2007-09
A STUDY ON THE EFFECTS OF MARKET FLUCTUATIONS ON INVESTOR DEMAND FOR MUTUAL FUNDS
(With reference to Investors in Mangalore region)
ICFAI NATIONAL COLLEGE MANGALORE 2007-2009
FACULTY SUPERVISOR Ms. Chitranjali, INC Mangalore.

DEEPALAXMI, ENROLLMENT NO. - 7NBMG077 ICFAI NATIONAL COLLEGE, MANGALORE 1|P a g e
A STUDY ON THE EFFECT OF MARKET FLUCTUATIONS ON INVESTOR DEMAND FOR MUTUAL FUNDS
A Report of Management Thesis
A STUDY ON THE EFFECTS OF MARKET FLUCTUATIONS ON INVESTOR DEMAND FOR MUTUAL FUNDS
(With reference to Investors in Mangalore region)
In the partial fulfillment of the requirements for the degree of MASTERS IN BUSINESS ADMINISTRATION (Affiliated to ICFAI University)
Submitted by Deepalaxmi 7NBMG077
Under the guidance of MISS. CHITRANJALI (LECTURER- IN- CHARGE)
ICFAI NATIONAL COLLEGE MANGALORE 2007-2009
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Table of Contents
TITLE PAGE ................................................................................................................................................................. 2 TABLE OF CONTENTS ............................................................................................................................................... 3 DECLARATION ........................................................................................................................................................... 4 CERTIFICATE.5 ACKNOWLEDGEMENT ............................................................................................................................................. 6 ABBREVIATIONS ........................................................................................................................................................ 7 ABSTRACT/ EXECUTIVE SUMMARY ..................................................................................................................... 8 INTRODUCTION TO THE TOPIC ............................................................................................................................. 9 OBJECTIVES AND LIMITATIONS OF THE STUDY .............................................................................................12 OVERVIEW OF MUTUAL FUND INDUSTRY .........................................................................................................14 The Evolution: ................................................................................................................................................................15 Advantages of the Mutual Fund: .....................................................................................................................................21 Drawbacks of Mutual Funds: ..........................................................................................................................................22 Regulatory Aspects: ........................................................................................................................................................22 Types of Mutual Fund: ....................................................................................................................................................23 AMFI AND ITS ROLE .................................................................................................................................................26 Objectives of AMFI: .......................................................................................................................................................27 SWOT ANALYSIS OF THE INDUSTRY ...................................................................................................................28 Strengths:........................................................................................................................................................................29 Weaknesses: ...................................................................................................................................................................29 Opportunities: .................................................................................................................................................................29 Threats:...........................................................................................................................................................................30 LITERATURE REVIEW .............................................................................................................................................32 FLUCTUATIONS IN THE SHARE MARKET ..........................................................................................................36 EFFECT OF MARKET FLUCTUATIONS ON INVESTOR DEMAND FOR MUTUAL FUNDS ..........................42 REPORT ON ACTUAL STUDY .................................................................................................................................44 Hypothesis testing I: .......................................................................................................................................................45 Hypothesis Testing II: .....................................................................................................................................................47 Correlation Analysis between Sensex Index Movement and the AUM of top 10 Mutual Fund AMCs: .............................50 Correlation Analysis between Sensex Index Movement and the NAV of top 10 Mutual Fund schemes: ...........................61 FINDINGS AND SUGGESTIONS ...............................................................................................................................71 CONCLUSIONS/ RECOMMENDATIONS ................................................................................................................78 APPENDIX ...................................................................................................................................................................79 REFERENCES .............................................................................................................................................................86
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DECLARATION
I hereby declare that this Management Thesis entitled A STUDY ON EFFECT OF MARKET FLUCTUATIONS ON INVESTOR DEMAND FOR MUTUAL FUNDS is a bonafied work carried out in partial fulfillment for the degree of Masters in Business Administration from INC, Mangalore affiliated to ICFAI University during the year 2007-09. I have not submitted this work to any other University or Institution for the award of any fellowship, degree, diploma or any other similar titles.
Date: Place:
Name and Enrollment Number: DEEPALAXMI 7NBMG077
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CERTIFICATE
ICFAI NATIONAL COLLEGE MANGALORE
This is to Certify that the Management Thesis-I entitled A study on the effect of Market Fluctuations on Investor demand for Mutual Funds- with reference to Investors in Mangalore region submitted by Ms. Deepalaxmi, Enrollment No. 7NBMG077, during the semester-III of MBA[2007-09] batch. This thesis is a bonafied work carried out in partial fulfillment for the degree of Masters in Business Administration from INC, Mangalore affiliated to ICFAI University during the year 2007-09 and is not submitted to any other University or Institution for the award of any fellowship, degree, diploma or any other similar titles. We wish her a bright career in the future.
Ms. Chitranjali Faculty Supervisor, INC Mangalore.
Prof. K. Narayan The Principal, INC Mangalore.
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ACKNOWLEDGEMENT Any work of excellence requires inspiration, guidance and co-operation. In the Process of completion of this project I had many hands guiding and motivating me. First and foremost, I would like to express my gratitude to all those who helped me complete this project directly or otherwise. I would like to thank the INC, Mangalore for giving us the opportunity to commence this project in the first instance. In this context I would extend my heartfelt gratitude to our Principal Professor K.Narayan for inspiring and guiding me about the significance and method of writing the Management Thesis. I am deeply indebted to my Faculty Guide, Ms.Chitranjali whose help, stimulating suggestions and encouragement helped us in drafting the Project Report. I thank her from the depth of my heart for providing her constant support and guidance right from the proposal of the project till the successful completion of the same. I am also thankful to all the faculty guides of the INC for providing all the necessary information and guidance directly or otherwise, without which it would not be possible to come out with this Report. Also I am deeply thankful to all others who guided me in writing the thesis. I also extend my gratitude to all the people who helped me by giving the primary data without which it was impossible to conduct this study.
Deepalaxmi 7NBMG077
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ABBREVIATIONS AMFI- Association of Mutulal Funds in India Sensex- Bombay Stock Exchange Sensitive Index SEBI - Securities and Exchange Board of India 7 Ps of service marketing- Product, Price, Place, Promotion, People, Process and Physical Evidence. AUM- Assets under Management AMC- Asset Management Company NAV- Net Asset Value
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ABSTRACT/ EXECUTIVE SUMMARY This Study Deals with the analysis of the effect of market Fluctuations on Investor Demand for Mutual Funds. This study uses the Chi-Square testing method to test the hypothesis that proves whether the Market Fluctuations and the Demand for mutual Funds are dependent on each other or Independent of each other. The study also makes use of Chi square testing to evaluate the time period of Investment and the ranking criteria for Mutual funds by the respondents, in order to test the hypothesis whether the ranking as actually given is according to the expectation of ranks during a particular period. The study also gives the abstract view on the correlation between the Sensex returns and the AUM of top 10 Mutual Fund AMCs and also between Sensex returns and the NAVs of the top 10 Mutual Fund Schemes. The conclusions are derived on the basis of the study done on the responses of 150 Investors in and around Mangalore city. Few Investors invested in Mutual Funds just because of limited sources of Income available to them. They also told that they have further investment ideas only after liquidation of their current investments. Also few investors said ranking of Mutual Funds depended on various factors like price, services offered by Funds, Fund Managers performance, scheme a person has Invested in and many other similar factors. Also they said that the Investment decision regarding Mutual Funds depends on the Fund Managers performance.
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INTRODUCTION TO THE TOPIC
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very Human Being earns for his living. Whatever may be his earnings, he spends a part of his income for fulfilling his needs and requirements. Thus, every person saves a part of his income for future benefits.
Saving is a stage on the way to investing. You cannot be an investor without being a saver but you can be a saver without being an investor. Savings are effectively cash or cash instruments, such as deposit accounts, term bonds etc. Investing is what you do with the savings you have created if you are looking to generate a return on your money that is greater than what is already available to you through your savings instruments. There are different instruments of investments which are called as Investment Avenues. The various avenues of investments can be classified under four heads as follows: 1. Financial securities: These investment instruments are freely tradable and negotiable. These would include equity shares, preference shares, convertible debentures, non-convertible debentures, public sector bonds, savings certificates, gilt-edged securities1 and money market securities. 2. Non-securitized financial securities: These investment instruments are not tradable, transferable nor negotiable. These would include bank deposits, post office deposits, company fixed deposits, provident fund schemes, national savings schemes and life insurance. 3. Mutual fund schemes: If an investor does not directly want to invest in the markets, he/she could buy units/shares in a mutual fund scheme. These schemes are mainly growth (or equity) oriented, income (or debt) oriented or balanced (i.e. both growth and debt) schemes. 4. Real assets: Real assets are physical investments, which would include real estate, gold & silver, precious stones, rare coins & stamps and art objects. Before choosing the avenue for investment the investor would probably want to evaluate and compare them. This would also help him in creating a well diversified portfolio, which is both maintainable and manageable. Mutual fund is one of the most secured and sought after avenue of investment in recent days. We can see the increasing trend in the investment in mutual funds. This Mutual fund investment, like the investment in direct securities, is affected by the fluctuations in the stock market. Thus, it is a requirement to study whether the changes in the investment decisions of the investors are based on the fluctuations of stock market. This study deals with the effects of stock market fluctuations on the Investors demand for Mutual Funds as an avenue for Investments.
Government securities, also called the gilt edged securities or G-secs, are not only free from default risk but also provide reasonable returns and, therefore, offer the most suitable investment opportunity to provident funds.
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The research is very important for any Mutual Fund Organization to determine the demand for their products in the times of fluctuations in the market. This research will help the organization to determine the trends of Investor demand for Mutual Fund Schemes with clear relation to the changes in the stock market indices, especially the BSE-Sensex Index. However this research is subject to certain constraints. Also this study is an attempt to reveal the benefits of the 7 Ps of services marketing in triggering the demands for Mutual Funds. So it also helps the Organizations to know the efficiency of their promotional tools in gaining Investors. This study also has an objective to show the right time which the investors perceive is appropriate to invest in the schemes of Mutual Funds. Every Company in the Mutual Fund Industry needs to know the mindsets of the investors in making their investments during different stages of fluctuations in the stock market. This study may help the companies in assessing their performance as against the market performance and to see the Investors behavior during the ups and downs in the market.
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OBJECTIVES AND LIMITATIONS OF THE STUDY
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OBJECTIVES: PRIMARY OBJECTIVE: To know the relationship between stock market fluctuations and the Investors demand for Mutual Funds. SECONDARY OBJECTIVES: To know the relationship between the movements in Sensex and the movements in NAV of top 10 Mutual Fund Schemes. To know the relationship between the movements in Sensex and the movements in AUM of top 10 Mutual Fund AMCs. To understand the competitive strategies adopted by Mutual Fund Organizations in converting prospective customers into Investors. To know which type of fund is mostly seeked by the investors and which fund is mostly canvassed by the Organization. Thus, this study deals with finding the relationship between the share market fluctuations with reference to BSE- Sensex, and the Investors demand for Mutual Funds.
LIMITATIONS: Errors of Sampling: Sometimes the samples may not be the part of the population required for the study. This may divert the results to a wrong path. Invalid and inappropriate data provided by the respondents: Sometimes, the respondents may not reveal the right information regarding their income levels and other matters which they may not feel comfortable answering. Time frame allotted for the study is limited. Hence the study could not be conducted for almost all the Mutual Fund Organisations and all the schemes. Only the top ten Funds and the top ten schemes are considered in the study. Restricted Geographical coverage: Since the study is conducted in Mangalore Region, the study cannot be universalized. It will be feasible only for investors in Mangalore.
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OVERVIEW OF MUTUAL FUND INDUSTRY
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utual fund is a mechanism for pooling resources by issuing units to the investors and investing funds in securities in accordance with the objectives as disclosed in the offer document. 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 Unitholders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives, which are launched from time to time. A mutual fund is required to be registered with the Securities and Exchange Board of India (SEBI), which regulates securities markets before it can collect funds from the public. A mutual fund is set up in the form of a trust, which has Sponsor, Trustees, Asset Management Company and Custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unitholders. AMC approved by SEBI manages the funds by making investments in various types of securities. Custodian who is registered with SEBI holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI regulations by the mutual fund. SEBI regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50 per cent of the directors of AMC must be independent.
The Evolution: The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India. The history of mutual fund industry in India can be better understood divided into following phases: Phase 1: Establishment and Growth of Unit Trust of India - 1964-87: Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an act of Parliament.
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UTI was set up by the Reserve Bank of India and it continued to operate under the regulatory control of the RBI until the two were de-linked in 1978 and the entire control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years.
UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between 1981 and 1984, Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (Indias first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700 crores. Phase II: Entry of Public Sector Funds - 1987-1993: The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share. 1992-93 Amount Mobilised Assets Under Management UTI Public Sector Total 11,057 1,964 13,021 38,247 8,757 47,004 Mobilisation as % of gross Domestic Savings 5.2% 0.9% 6.1%
Phase III: Emergence of Private Secor Funds - 1993-96: The permission given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutual fund industry in 1993, provided a wide range of choice to investors and more competition in the industry. Private funds introduced innovative products, investment techniques and investor-servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.
Phase IV. Growth and SEBI Regulation - 1996-2004: The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after the year 1996. The mobilisation of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds.
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Investors' interests were safeguarded by SEBI and the Government offered tax benefits to the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all dividend incomes in the hands of investors from income tax. Various Investor Awareness Programmes were launched during this phase, both by SEBI and AMFI, with an objective to educate investors and make them informed about the mutual fund industry. In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by an Act of Parliament. The primary objective behind this was to bring all mutual fund players on the same level. UTI was re-organized into two parts: 1. The Specified Undertaking (UTI- International) 2. The UTI Mutual Fund Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past schemes (like US-64, Assured Return Schemes) are being gradually wound up. However, UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant growth in mobilisation of funds from investors and assets under management ASSETS UNDER MANAGEMENT (RS. CRORES) AS ON UTI PUBLIC SECTOR 31-March-99 53,320 8,292 PRIVATE SECTOR 6,860 68,472 TOTAL
Phase V. Growth and Consolidation - 2004 Onwards: The industry has also witnessed several mergers and acquisitions recently, examples of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29 Mutual funds as at the end of March 2006. This is a continuing phase of growth of the industry through consolidation and entry of new international and private sector players.
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At present there are 35 Mutual funds operating in India. The total Assets Under Management for all these Mutual Fund houses are given in the following table: Latest Asset Under Management for all Mutual Fund houses, increase or decrease in corpus, sales & redemption figures: Amount in Rs. Crores Mutual Fund Name No. of Schemes As on Corpus As on Corpus Net increase /decrease ABN AMRO Mutual Fund AIG Global Investment Group Mutual Fund Benchmark Mutual Fund Bharti AXA Mutual Fund Birla Mutual Fund BOB Mutual Fund Canara Robeco Mutual Fund DBS Chola Mutual Fund Deutsche Mutual Fund DSP Merrill Lynch Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund 49 Jun 30, 2008 7,549.52 May 31, 2008 7,898.64 -349.12 34 Mar 31, 2008 173.42 Feb 29, 2008 146.93 26.491 245 Feb 29, 2008 19,940.40 Jan 31, 2008 19,136.00 804.396 227 Apr 30, 2008 12,740.00 Mar 31, 2008 11,996.00 744 84 Aug 31, 2008 1,566.09 Jul 31, 2008 1,851.15 -285.06 361 22 101 Jun 30, 2008 Jun 30, 2008 Aug 30, 2008 37,446.00 53.86 5,395.05 May 31, 2008 May 31, 2008 Jun 30, 2008 41,426.64 64.83 3,913.65 -3980.64 -10.968 1481.4 32 Aug 31, 2008 392.30 Jul 31, 2008 364.53 27.77 12 Feb 29, 2008 4,954.72 Jan 31, 2008 5,611.00 -656.276 62 Aug 31, 2008 3,147.68 Jul 31, 2008 3,277.38 -129.7 353 Aug 31, 2008 8,231.84 Jul 31, 2008 8,299.23 -67.39 Asset Under Management
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Franklin Templeton Investments HDFC Mutual Fund HSBC Mutual Fund ICICI Prudential Mutual Fund IDFC Mutual Fund ING Mutual Fund JM Financial Mutual Fund JPMorgan Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Lotus India Mutual Fund Mirae Asset Mutual Fund Morgan Stanley Mutual Fund PRINCIPAL Mutual Fund Quantum Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SBI Mutual Fund
262
Mar 31, 2008
25,621.97
Feb 29, 2008
29,424.58
-3802.607
400 211 478
Feb 29, 2008 Aug 31, 2008 Jun 30, 2008
46,291.97 16,960.53 54,237.22
Jan 31, 2008 Jul 31, 2008 May 31, 2008
43,762.70 17,138.98 59,573.08
2529.274 -178.448 -5335.86
306 351 211
Aug 31, 2008 Mar 31, 2008 Aug 31, 2008
12,405.65 8,608.29 11,721.35
Jun 30, 2008 Feb 29, 2008 Jul 31, 2008
10,859.28 9,844.71 10,927.29
1546.37 -1236.42 794.06
19
Aug 31, 2008
2,581.67
Jul 31, 2008
2,931.13
-349.46
200
Aug 31, 2008
19,544.99
Jul 31, 2008
19,595.09
-50.102
91 243
Feb 29, 2008 Feb 29, 2008
15,103.00 9,763.88
Jan 31, 2008 Jan 31, 2008
13,387.40 10,057.10
1715.602 -293.218
40
Aug 29, 2008
2,459.52
Jul 31, 2008
3,092.53
-633.01
Aug 29, 2008
2,983.81
Jul 31, 2008
2,915.44
68.37
166
Aug 31, 2008
10,571.65
Jul 31, 2008
11,525.10
-953.45
Aug 31, 2008
73.28
Jul 31, 2008
68.94
4.34
346
Feb 29, 2008
93,531.68
Jan 31, 2008
77,210.04
16321.638
43
Aug 31, 2008
178.69
Jul 31, 2008
293.09
-114.4
197
Feb 29, 2008
29,492.97
Jan 31, 2008
27,581.54
1911.428
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Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund UTI Mutual Fund
Source: http:://www.moneycontrol.com
225
Feb 29, 2008
14,356.00
Jan 31, 2008
13,285.04
1070.96
260 14
Aug 31, 2008 Aug 29, 2008
21,318.93 435.97
Jul 31, 2008 Jul 31, 2008
20,959.75 323.50
359.174 112.47
353
Mar 31, 2008
48,347.60
Feb 29, 2008
52,464.71
-4117.114
ABOUT MUTUAL FUNDS: A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money collected & invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and its unit holders in proportion to the number of units owned by them (pro rata) shares the capital appreciation realized by the scheme. Thus, a Mutual Fund is the most suitable investment for the common person as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. THE SECURITY AND EXCHANGE BOARD OF INDIA (Mutual Funds) REGULATIONS,1996 defines a mutual fund as, " a fund establishment in the form of a trust to raise money through the sale of units to the public or a section of the public under one or more schemes for investing in securities, including money market instruments." Mutual Funds have been a significant source of investment in both government and corporate securities. It has been for the decades the monopoly of the state with UTI being the key player with invested funds exceeding Rs. 300 bn. (US $ 10 bn.). The state owned insurance companies also hold a portfolio of stocks. Presently, numerous mutual funds exist, including private and foreign companies. Banks - mainly state owned too have established Mutual Funds (MFs). Foreign participation in mutual funds and asset management companies permitted on a case-by-case basis. A mutual fund is managed by an Asset Management Company (AMC). Professional investors, who study where and when to make investments are a part of the AMC. The AMC creates a mutual fund, and invites the public to
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subscribe in the mutual fund with their investment. The funds collected are then invested by the AMC and are continually managed. Unlike other investments, the mutual fund itself is not traded nor does it offer guaranteed returns like a deposit. The mutual fund's Net Asset Value (NAV) determines the value of the investment. Investors redeem their investments in the mutual fund on the basis of the NAV from the mutual fund itself. Equally, when investors want to buy, they buy into the mutual fund on the basis of the NAV. The investments are managed by professionals who know more about deciding what to buy and sell and when to buy and sell. The risks and rewards of investments are spread across a large number of individuals, so losses are minimized. Access to funds is quick, since there is no need to sell or buy from the market.
Advantages of the Mutual Fund: Diversification: Investments spread across a wide cross-section of industries and sectors and so the risk is reduced. Diversification reduces the risk because not all stocks move in the same direction at the same time. One can achieve this diversification through a Mutual Fund with far less money than one can on his own. Professional Management: Mutual Funds employ the services of skilled professionals who have years of experience to back them up. They use intensive research techniques to analyze each investment option for the potential of returns along with their risk levels to come up with the figures for performance that determine the suitability of any potential investment. Potential of Returns: Returns in the mutual funds are generally better than any other option in any other avenue over a reasonable period. People can pick their investment horizon and stay put in the chosen fund for the duration. Equity funds can outperform most other investments over long periods by placing long-term calls on fundamentally good stocks. The debt funds too will outperform other options such as banks. Though they are affected by the interest rate risk in general, the returns generated are more as they pick securities with different duration that have different yields and so are able to increase the overall returns. Efficiency: By pooling investors' monies together, mutual fund companies can take advantage of economies of scale. With large sums of money to invest, they often trade commission-free and have personal contacts at the brokerage firms. Risk: In general, mutual funds carry much lower risk than stocks. This is primarily due to diversification (as mentioned above). 21 | P a g e
Liquidity: Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time.
Drawbacks of Mutual Funds: No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money. Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if a broker or other financial adviser is not used, a sales commission has to be paid in case of a Load Fund. Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If a fund makes a profit on its sales, taxes have to be paid on the income received, even if reinvestment of the proceeds is done. Management risk: When investment is done in a mutual fund, it depends on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform well, the investments may come down. Although there is no management risk in case of Index Funds.
Regulatory Aspects: Schemes of a Mutual Fund: The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has filed with the Board. Every mutual fund shall along with the offer document of each scheme pay filing fees. The offer document shall contain disclosures, which are adequate in order to enable the investors to make informed investment decision including the disclosure on maximum investments proposed to make by the scheme in the listed securities of the group companies of the sponsor. A close-ended scheme shall fully redeemed at the end of the maturity period. "Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution". The mutual fund and asset management company shall be liable to refund the application money to the applicants: 22 | P a g e
(i)
If the mutual fund fails to receive the minimum subscription amount referred to in clause (a) of sub-regulation (1);
(ii)
If the moneys received from the applicants for units are in excess of subscription as referred to in clause (b) of sub-regulation (1).
Rules Regarding Advertisement:
The offer document and advertisement materials shall not be
misleading or contain any statement or opinion, which are incorrect or false. General Obligations: The financial year for all the schemes shall end as of March 31 of each year. Every mutual fund or the asset management company shall prepare in respect of each financial year an annual report and annual statement of accounts of the schemes and the fund as specified in Eleventh Schedule. Every mutual fund shall have the annual statement of accounts audited by an auditor who is not in any way associated with the auditor of the asset management company. Restrictions on Investments: A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of asset Management Company.
Types of Mutual Fund: Mutual fund schemes may be classified on the basis of its structure and its investment objective. By Structure: Open-ended Funds: An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. Closed-ended Funds: A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed.
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In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. Interval Funds: Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices. By Investment Objective: Growth Funds: The aim of growth funds is to provide capital appreciation over the medium to longterm. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time. Income Funds: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income. Balanced Funds: The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. Money Market Funds: The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. Load Funds: A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history. No-Load Funds: A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work.
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Other Schemes: Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds. Special Schemes: o Industry Specific Schemes: Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, Pharmaceuticals etc. o Index Schemes: Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50 o Sectoral Schemes: Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.
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AMFI AND ITS ROLE
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he Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian Mutual
Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in
all areas with a view to protecting and promoting the interests of mutual funds and their unit holders. Objectives of AMFI: To define and maintain high professional and ethical standards in all areas of operation of mutual fund industry To recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset management including agencies connected or involved in the field of capital markets and financial services. To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry. To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry. To develop a cadre of well trained Agent distributors and to implement a programme of training and certification for all intermediaries and other engaged in the industry. To undertake nation wide investor awareness programme so as to promote proper understanding of the concept and working of mutual funds. To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies.
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SWOT ANALYSIS OF THE INDUSTRY
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Strengths: There are 35 players in the industry, which gives way to a competitive environment and hence it encourages growth in every aspects of the Industry. There is perfect competition, existing between the players, which increase the efficiency in every aspects of service providing. This sector encourages small saving habits among people giving them the benefits of portfolio investments however small the amount of their investments is. Thus, it gives the benefits of diversification to any category of investors. With a reputation of being one of the fastest growing market segments even amidst uncertainties and panic in the capital markets, the industry has displayed a sure sign of maturity. The efforts put in by the regulators and the industry participants such as the fund houses, the distributors and the advisors are definitely yielding good results. Good performance combined with liquidity and convenience ensures steady investor interest in mutual funds. The tax breaks makes mutual funds an attractive investment option.
Weaknesses: There are two main reasons for mutual fund underperformance: Frequently changing Market conditions which are hard to predict even by the best stock pickers and the Top performers in Mutual Fund Industry have a hard time staying on top.
Opportunities: Areas such as real estate funds, regulation complication issues etc could be dwelt upon to provide deeper insight into the latent potential inherent to the Industry as well as deal with issues which would make the journey spellbinding for the industry, it's participants as well as the investors. In order to place the Indian Mutual Fund Industry among the global majors, it is essential to deepen and broaden the reach of this segment in the market. As an investing option, Mutual funds need to become the most logical bet for the investor base and end users. To facilitate this it is essential to educate the investors through PPP models.
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Decision of expanding the corporate debt market will help in increased focus towards bond funds and in a scenario where interest rates are not expected to be adverse in the medium term, this would further assist in increasing the popularity of the debt funds which have not been doing well in the last few years. Easing of the Tax Slabs is expected to increase the disposable income in the hands of the individuals to some extent which could translate into increased retail investments in mutual funds. With so much focus on the infrastructure sector, it is expected that infrastructure funds which have been the key out-performers in the industry of late both in terms of returns performance as well as attracting fund flows, will continue to occupy a prominent place. The fact that the dividend distribution tax structure has not changed would mean that dividend reinvestment plans in liquid schemes will continue to be popular and also the liquid plus category will continue to attract inflows as the tax rates there would continue to be lower than the liquid category. Since long term capital gains tax has been left unchanged, this hike in short-term capital gains tax could encourage long-term investments which augur well to the development of the concept of "long termism" in the Indian Mutual Fund industry, which is conspicuous by its absence but which is coveted by the fund industry given the greater flexibility that this provides in fund management. At the same time since the short term capital gains tax is still lower than the income tax slabs of typical capital market investors, it is not expected to cause too many investors to turn away from mutual funds. Threats: The challenge for the industry now lies in developing and creating paperless transaction platform in order to increase the business. Technology has been the most dynamic tool for every industry to reduce their cost of transaction, for higher penetration and for identifying newer markets. Transactional expense levels of mutual funds are expected to go up marginally on account of their exposure to stock and commodity exchanges which are expected to pass on the service tax. This Industry is growing drastically. The facts and studies show that Indian funds have started performing far better than Global standards. A good number of foreign Asset Management Companies are in queue to enter Indian Markets. However, The combined average assets under management (AUM) of the 34 fund houses in the country dropped to Rs.5,29,629.46 crores in July, as compared to Rs.5,64,752.76 crores in June, according to the data released by the Association of Mutual Funds in India (AMFI). Analysts believe the bearish sentiments in the market and hardening of interest rates led to heavy redemptions last month leading to the sharp drop in average assets under management. 30 | P a g e
Reliance Mutual Fund registered the biggest drop of over Rs.6,200 crores in its average Assets under Management (AUM) in July. However, despite the drop, Reliance Mutual Fund continues to be the top fund house in the country with assets valued at Rs.84,563.91 crores last month, against Rs.90,813.45 crores in the previous month. ICICI Prudential, the second largest mutual fund, witnessed a loss of Rs.4,313 crores in its assets at Rs.55,160.66 crores in July, from Rs59,473.58 crores in June. HDFC Mutual Fund, which beat state-run UTI MF to notch the third slot in June, reported an average AUM of Rs.50,752.03 crores in July, down from last months Rs.52,710.80 crores. UTI Mutual Fund continued its fall in the average AUM, which was Rs.46,119.91 crores at the end of July, down 9.16% from Junes figure of Rs.50,770.57 crores. Besides, AUM of Franklin Templeton MF stood at Rs.24,440.94 crores in July, against Rs.24,742.06 crores in the previous month. Meanwhile, about eight fund houses managed to increase their assets under management in July which include ABN Amro MF, Benchmark MF, JP Morgan, Lotus India and Mirae Assets.
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LITERATURE REVIEW
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1. Market trends in Mutual Funds- posted in the bharat.com website: Last six years have been the most turbulent as well as exiting ones for the Mutual fund industry. New players have come in, while others have decided to close shop by either selling off or merging with others. Product innovation is now pass with the game shifting to performance delivery in fund management as well as service. Those directly associated with the fund management industry like distributors, registrars and transfer agents, and even the regulators have become more mature and responsible. The industry is also having a profound impact on financial markets. Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and technology sector. Funds performances are improving. Mutual funds are now also competing with commercial banks in the race for retail investors savings and corporate float money. The power shift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are losing out in the current scenario. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way. In India, mutual fund assets are not even 10% of the bank deposits, but this trend is beginning to change. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. (Source: Thinktank, The Financial Express September, 99) This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds are going to change the way banks do business in the future. 2. Mutual funds industry should focus on investors interest- posted in TheIndiaStreet: Investors education and cost effectiveness are the major issues and challenges before Mutual Funds industry. Advisory Committee is to be set up to discuss and debate on issues and policies and investors protection. Mutual Fund needs to become a conscious choice of the large untapped investor community through investors education undertaking through the model of PPP to make Mutual Fund Investment to the households in the tier II and III cities. However, along the growth come responsibilities as expectation of investors are ever rising. Mutual funds insight should be on developing institutional market like pension/insurance funds and sustaining growth in a maturing market.
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3. Mutual Fund Industry in India: Authors- E. Mrudula and Priya Raju, Publisher- The Icfai University press, Hyderabad. First edition, 2005: This book is compiled keeping in view the growth and popularity of Mutual Funds as Investment option and provides a platform to Investors for taking well informed Investment decisions. This study gives out the factors influencing the choice of Mutual Funds by an Investor as follows: Past record of the organization, Growth prospects, Credit Rating, Market Speculations, Disclosure of Adequate Information and Early bird Incventives. It also gives the appraisal criteria generally preferred by the investors for evaluating the performance of a mutual fund. It also shows the timings when one can exit from any mutual funds. 4. Marketing of Mutual Fund Investments- A Thorough Analysis of the Seven Ps of Services Marketing: Author: Zaheer Zaidi: As per this book, the suggestions were as follows: Think laterally about the market: Come up with new ideas, view the scenario in a simplistic fashion, appeal to basic issues. Understand your customer deeply: Understand their needs, their concerns, their lifestyles, their aspirations and their likes and dislikes. Feedback loop: Develop a strong feedback loop from the Marketing team to the Organisation, and vice versa. There should be no loss of messages that are being sent out into the market. There ought to a feedback system installed that gives us feedback on Market, Competition and Customer. Stick to the organisations Core Values.
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FLUCTUATIONS IN THE SHARE MARKET
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FLUCTUATIONS IN THE SHARE MARKET (With reference to BSE- Sensex) Stock prices change every day as a result of market forces. By this we mean that share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall. Understanding supply and demand is easy. What is difficult to comprehend is what makes people like a particular stock and dislike another stock. This comes down to figuring out what news is positive for a company and what news is negative. There are many answers to this problem and each investor has his own ideas and strategies. The price movement of a stock indicates what investors feel a company is worth. The value of a company is its market capitalization, which is the stock price multiplied by the number of shares outstanding. The price of a stock doesn't only reflect a company's current value, but also reflects the growth that investors expect in the future. The most important factor that affects the value of a company is its earnings. Earnings are the profit a company makes, and in the long run no company can survive without them. If a company never makes money, it isn't going to stay in business. Public companies are required to report their earnings four times a year (once each quarter). Wall Street watches with extreme attention at these times, which are referred to as earnings seasons. The reason behind this is that analysts base their future value of a company on their earnings projection. If a company's results surprise (are better than expected), the price jumps up. If a company's results disappoint (are worse than expected), then the price will fall. Why do stock prices change? The best answer is that nobody really knows for sure. Some believe that it isn't possible to predict how stock prices will change, while others think that by drawing charts and looking at past price movements, you can determine when to buy and sell. The only thing visible factually is that stocks are volatile and can change in price extremely rapidly. Thus to summarize we can say as follows: 1. 2. At the most fundamental level, supply and demand in the market determines stock price. Price times the number of shares outstanding (market capitalization) is the value of a company.
Comparing just the share price of two companies is meaningless. 3. Theoretically, earnings are what affect investors' valuation of a company, but there are other indicators
that investors use to predict stock price. It is investors' sentiments, attitudes and expectations that ultimately affect stock prices. 36 | P a g e
4.
There are many theories that try to explain the way stock prices move the way they do. Unfortunately,
there is no one theory that can explain everything.
SENSEX: SENSEX, first compiled in 1986, was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing large, well-established and financially sound companies across key sectors. The base year of SENSEX was taken as 1978-79. SENSEX today is widely reported in both domestic and international markets through print as well as electronic media. It is scientifically designed and is based on globally accepted construction and review methodology. Since September 1, 2003, SENSEX is being calculated on a free-float market capitalization methodology. The "free-float market capitalization-weighted" methodology is a widely followed index construction methodology on which majority of global equity indices are based; all major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the free-float methodology. The growth of the equity market in India has been phenomenal in the present decade. Right from early nineties, the stock market witnessed heightened activity in terms of various bull and bear runs. In the late nineties, the Indian market witnessed a huge frenzy in the 'TMT' sectors. More recently, real estate caught the fancy of the investors. SENSEX has captured all these happenings in the most judicious manner. One can identify the booms and busts of the Indian equity market through SENSEX. As the oldest index in the country, it provides the time series data over a fairly long period of time (from 1979 onwards). Small wonder, the SENSEX has become one of the most prominent brands in the country. SENSEX - Scrip Selection Criteria: The general guidelines for selection of constituents in SENSEX are as follows: Listed History: The scrip should have a listing history of at least 3 months at BSE. Exception may be considered if full market capitalization of a newly listed company ranks among top 10 in the list of BSE universe. In case, a company is listed on account of merger/ demerger/ amalgamation, minimum listing history would not be required. Trading Frequency: The scrip should have been traded on each and every trading day in the last three months at BSE. Exceptions can be made for extreme reasons like scrip suspension etc. Final Rank: The scrip should figure in the top 100 companies listed by final rank. The final rank is arrived at by assigning 75% weightage to the rank on the basis of three-month average full market
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capitalization and 25% weightage to the liquidity rank based on three-month average daily turnover & three-month average impact cost. Market Capitalization Weightage: The weightage of each scrip in SENSEX based on three-month average free-float market capitalization should be at least 0.5% of the Index. Industry/Sector Representation: Scrip selection would generally take into account a balanced representation of the listed companies in the universe of BSE. Track Record: In the opinion of the BSE Index Committee, the company should have an acceptable track record. Index Review Frequency The BSE Index Committee meets every quarter to discuss index related issues. In case of a revision in the Index constituents, the announcement of the incoming and outgoing scrips is made six weeks in advance of the actual implementation of the revision of the Index. History of Replacement of Scrips in SENSEX Date 01.01.1986 Outgoing Scrips Bombay Burmah Asian Cables Crompton Greaves Scinda Voltas Peico Premier Auto. G.E.Shipping Replaced by
03.08.1992
Zenith Ltd.
Bharat Forge
19.08.1996
Ballarpur Inds. Bharat Forge Bombay Dyeing Ceat Tyres Century Text. GSFC Hind. Motors Indian Organic Indian Rayon Kirloskar Cummins
Arvind Mills Bajaj Auto BHEL BSES Colgate Guj. Amb. Cement HPCL ICICI IDBI IPCL
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Mukand Iron Phlips Premier Auto Siemens Voltas
MTNL Ranbaxy Lab. State Bank of India Steel Authority of India Tata Chem
16.11.1998
Arvind Mills G. E. Shipping IPCL Steel Authority of India
Castrol Infosys Technologies NIIT Ltd. Novartis
10.04.2000
I.D.B.I Indian Hotels Tata Chem Tata Power
Dr. Reddy's Laboratories Reliance Petroleum Satyam Computers Zee Telefilms
08.01.2001
Novartis
Cipla Ltd.
07.01.2002
NIIT Ltd. Mahindra & Mahindra
HCL Technologies Hero Honda Motors Ltd.
31.05.2002
ICICI Ltd.
ICICI Bank Ltd.
10.10.2002
Reliance Petroleum Ltd.
HDFC Ltd.
10.11.2003
Castrol India Ltd. Colgate Palomive (India) Ltd. Glaxo Smithkline Pharma. Ltd. HCL Technologies Ltd. Nestle (India) Ltd.
Bharti-Tele-Ventures Ltd. HDFC Bank Ltd. ONGC Ltd. Tata Power Company Ltd. Wipro Ltd.
19.05.2004
Larsen & Toubro Ltd.
Maruti Udyog Ltd.
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27.09.2004
Mahanagar Telephone Nigam Ltd.
Larsen & Toubro Ltd.
06.06.2005
Hindustan Petroleum Corp Ltd. Zee Telefilms Ltd.
National Thermal Power Corpn. Ltd. Tata Consultancy Services Ltd.
12.06.2006
Tata Power Ltd.
Reliance Communiation Ventures Ltd.
09.07.2007
Hero Honda Motors Ltd.
Mahindra & Mahindra Ltd.
19.11.2007
Dr. Reddy's Laboratories Ltd.
DLF Ltd.
14.03.2008
Bajaj Auto Ltd.
Jaiprakash Associates Ltd.
28.07.2008
Ambuja Cements Ltd. Cipla Ltd.
Sterlite Industries Ltd. Tata Power Co. Ltd.
The fluctuation in Sensex from Jan 2008 to August 2008 can be shown in the following graph:
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EFFECT OF MARKET FLUCTUATIONS ON INVESTOR DEMAND FOR MUTUAL FUND
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T
used:
his research is done to study the effects of the stock market fluctuations on the demand for the mutual funds. The study considers fluctuations in the BSE- Sensex Index from the time period of Jan08 to
August 08. For the purpose of studying the Investors demand for Mutual funds the following methodology is
POPULATION: The population considered for study is: the individual Investors and the Mutual fund organizations in Mangalore city. SAMPLE: The sample for individual investors is selected from the population using random sampling technique. The Mutual Fund Organizations considered for the study consists of almost all the Mutual Fund Organizations in Mangalore. The sample size appropriate for this study is 150 people in Mangalore region. AREA UNDER STUDY: Area under study is Mangalore. Since the study is for a short period of time the area has to be limited to a small area of Mangalore. DATA COLLECTION METHOD: The Primary data for the study is collected using the questionnaire distribution and Interview method. Each of the respondents filling the questionnaire was individually interviewed and responses were recorded in the questionnaire in written format. Also, other opinions from each of the individuals were considered for the study. TOOLS FOR THE ANALYSIS OF THE DATA: The statistical techniques used to undertake the study are as follows: 1. Chi- Square technique to solve the following two hypothesis: Hypothesis I: H0: The market fluctuations and the investor demand for Mutual funds are independent. H1: The market fluctuations and the investor demand for Mutual funds are dependent.
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Hypothesis II: H0: The actual ranks assigned by the investors for Mutual Funds are the same as expected during a particular time period. H1: The actual ranks assigned by the investors for Mutual Funds are not the same as expected during a particular time period. 2. Correlation analysis to study whether there is any relationship between the Market changes and the changes in the Assets under Management of top 10 Mutual Fund companies. 3. Correlation analysis to find the relationship between market index and the changes in the NAV of top 10 schemes.
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REPORT ON ACTUAL STUDY The primary data collected through questionnaires gave the following results: The questionnaire was distributed using simple random sample technique. The following tables show the results of the questionnaire collected. The following charts and figures give the abstract of the data collected: The number of respondents classified on the basis of Gender:
Male:
94
Male Female
Female: 56
The respondents as classified on the basis of age group: The data collected included people from different age groups which can be shown in the following chart.
80
20- 35 yrs: 11 35- 45 yrs: 76 45- 60 yrs: 47 >60 yrs: 16
70 60 50 40 30 20 10 0 1st Qtr 20-35yrs 35-45yrs 45-60yrs >60yrs
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Now let us begin with the empirical analysis of the collected data. For the analysis purpose, this study considers two different kinds of Hypothesis and analyses using Chi-square technique. Also, Correlation analysis is done for 10 different Asset Management Companies and 10 different Mutual Fund Schemes. The study is shown as follows: Hypothesis testing I: H0: The market fluctuations and the investor demand for Mutual funds are independent. H1: The market fluctuations and the investor demand for Mutual funds are dependent. The result of the survey revealed the Investors decision regarding the best time and the best avenue to invest in the Mutual Fund revealed the following table:
Sensex Downward Sensex Upward trend trend Total 119 31 95 55 214 86
Mutual Funds Other sources Total
150 150 300
Here, the test statistic will be:
= =
N(ad-bc)2 (a+b)(c+d)(a+c)(b+d) 300 [(119*55)-(95*31)]2 (150*150*214*86) 300(6545-3945)2 414090000
300*12960000 414090000
3888000000 414090000
9.389263204 = (number of rows-1)(number of columns-1) = (2-1)(2-1) =1
The degree of freedom is
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Therefore, (i) At 5% Level of Significance, the critical value of 2 is found to be 3.84. Since the calculated 2 is 9.389263204 which is greater than the critical value 3.84, H0 is rejected. This can be depicted in the figure as follows:
0 3.84 Acceptance region Since the calculated value of 2 falls in the region of rejection, H0 is rejected. 9.3893
Therefore, it can be concluded by saying that, the market fluctuations and the investor demand for Mutual funds are dependent on each other. (ii) At 1% Level of Significance, the critical value of 2 is found to be 6.64. Again, since the calculated 2 is 9.389263204 which is greater than the critical value 6.64, H0 is rejected. This can be depicted in the figure as follows:
0 6.64 Acceptance region 46 | P a g e 9.3893
Since the calculated value of 2 falls in the region of rejection, H0 is rejected. Therefore, it can be concluded by saying that, the market fluctuations and the investor demand for Mutual funds are dependent on each other even if we take confidence level at 99%. Strength of Dependence between Investors demand for Mutual funds and the market Fluctuations: Phi- coefficient = (2/n) = (9.3893/300) = 0.031297544 = 0.176911119 Thus, the conclusion is that, the strength of relationship between the Investors demand for Mutual Funds and the Market Fluctuations is 0.176911119.
Hypothesis Testing II: Now, if the time period of investment by the Mutual Fund Investors, and the rankings those investors have given to the Mutual Fund as an avenue of Investment are considered, the following result is obtained:
R1 Oct-Dec Jan-Mar Apr-Jun Jul onwards 2 1 2 1 6
R2 8 6 8 6 28
R3 6 5 9 5 25
R4 2 3 4 2 11
R5 1 1 0 0 2
R6 0 1 0 1 2 19 17 23 15 74
Here the following hypothesis is considered for testing: H0: The actual ranks assigned by the investors for Mutual Funds are the same as expected during a particular time period. H1: The actual ranks assigned by the investors for Mutual Funds are not the same as expected during a particular time period.
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The proportion expected during each time period is as follows:

Oct-Dec Jan-Mar Apr-Jun Jul onwards 0.256756757 0.22972973 0.310810811 0.202702703
The test statistic will be calculated as follows: 2 = [(O-E)2/E]
Thus the observed and expected values of Rankings are as follows: Here O= Observed Ranks and E= Expected Ranks
The degree of freedom is
= (number of rows-1)(number of columns-1) = (4-1)(6-1) = 3*5 = 15.
O 2 8 6 2 1 0 1 6 5 3 1 1 2 8 9 4 0 0 1 6 5 2 0 1
E 1.540540541 7.189189189 6.418918919 2.824324324 0.513513514 0.513513514 1.378378378 6.432432432 5.743243243 2.527027027 0.459459459 0.459459459 1.864864865 8.702702703 7.77027027 3.418918919 0.621621622 0.621621622 1.216216216 5.675675676 5.067567568 2.22972973 0.405405405 0.405405405
O-E 0.459459459 0.810810811 -0.418918919 -0.824324324 0.486486486 -0.513513514 -0.378378378 -0.432432432 -0.743243243 0.472972973 0.540540541 0.540540541 0.135135135 -0.702702703 1.22972973 0.581081081 -0.621621622 -0.621621622 -0.216216216 0.324324324 -0.067567568 -0.22972973 -0.405405405 0.594594595
(O-E) 0.211102995 0.657414171 0.175493061 0.679510592 0.236669102 0.263696129 0.143170197 0.186997809 0.552410519 0.223703433 0.292184076 0.292184076 0.018261505 0.493791088 1.512235208 0.337655223 0.38641344 0.38641344 0.046749452 0.105186267 0.004565376 0.052775749 0.164353543 0.353542732
(O-E) /E 0.137031769 0.091444828 0.027339972 0.240592267 0.460881935 0.513513514 0.103868574 0.029071088 0.09618442 0.088524353 0.635930048 0.635930048 0.009792401 0.05673997 0.194618096 0.098760816 0.621621622 0.621621622 0.038438438 0.018532819 0.000900901 0.023669124 0.405405405 0.872072072 6.0224861
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Thus From the above table we get the value of 2 as 6.0224861. Therefore, (i) At 5% Level of Significance, the critical value of 2 is found to be 25.00. Since the calculated 2 is 6.0224861 which is much lower than the critical value 25.00, H0 is accepted. This can be depicted in the figure as follows:
0 6.022 Acceptance region 25.00
Since the calculated value of 2 falls in the region of acceptance, H0 is accepted. Therefore, to conclude, the actual ranks assigned by the investors for Mutual Funds are the same as expected during a particular time period. (ii) At 1% Level of Significance, the critical value of 2 is found to be 30.58. Again, since the calculated 2 is 6.0224861 which is again lower than the critical value 30.58, H0 is accepted. This can be depicted in the figure as follows:
0 6.022 Acceptance region 30.58
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Since the calculated value of 2 falls in the region of acceptance, H0 is accepted. Therefore, the conclusion will be that the actual ranks assigned by the investors for Mutual Funds are the same as expected during a particular time period.
Correlation Analysis between Sensex Index Movement and the AUM of top 10 Mutual Fund AMCs: In this study, even correlation analysis for the Assets Under Management of top 10 Mutual Funds is done to assess the relationship between the movement of AUM and the movement in the Sensex index. The movement is tracked for the last day of each month beginning from October, 2007 to August, 2008. The correlation is calculated using the following formula: Karl Pearsons Coefficient of Correlation, r = nuv- (u)(v) [nu2-(u)2]*nv2-(v)2] Where, n u v = = = number of values under each variable, x- a, where a is the average of x y- b, where b is the average of y
The Analysis for each Mutual Fund is given as follows:
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1. Reliance Capital AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of Reliance Capital AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 79,974.0000 77,765.0000 80,780.0000 77,210.0000 93,532.0000 90,938.0000 96,386.0000 98,431.0000 90,813.0000 84,564.0000 88,616.0000 959,009.0000
U= X- AvgX 2,838.9300 2,418.6100 3,342.4100 704.1300 634.2000 (1,300.1400) 342.7300 (529.0100) (3,482.9800) (2,588.8300) (2,380.0500) (0.0000)
V= Y- AvgY Usq Vsq UV (7,208.6364) 8,059,523.5449 51,964,438.2231 (20,464,814.0318) (9,417.6364) 5,849,674.3321 88,691,874.6777 (22,777,589.4855) (6,402.6364) 11,171,704.6081 40,993,752.4050 (21,400,235.8082) (9,972.6364) 495,799.0569 99,453,476.0413 (7,022,032.4427) 6,349.3636 402,209.6400 40,314,418.5868 4,026,766.4182 3,755.3636 1,690,364.0196 14,102,756.0413 (4,882,498.4782) 9,203.3636 117,463.8529 84,701,902.2231 3,154,268.8191 11,248.3636 279,851.5801 126,525,684.4959 (5,950,496.8473) 3,630.3636 12,131,149.6804 13,179,540.1322 (12,644,483.9382) (2,618.6364) 6,702,040.7689 6,857,256.4050 6,779,204.3773 1,433.3636 5,664,638.0025 2,054,531.3140 (3,411,477.1227) (0.0000) 52,564,419.0864 568,839,630.5455 (84,593,388.5400)
The Correlation is as follows: R = -930,527,273.9400 ( 578,208,609.9504)* (6,257,235,936.0000) = -930,527,273.9400 1,902,100,862.9109 = - 0.4892
Thus here there is negative correlation between Movement of Sensex and the AUM of Reliance Capital AMC.
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2. ICICI Prudential AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of ICICI Prudential AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 56,213.0000 54,904.0000 56,773.0000 64,045.0000 59,278.0000 54,322.0000 55,709.0000 59,060.0000 59,474.0000 55,161.0000 53,093.0000 628,032.0000
U= X- AvgX 2,838.9300 2,418.6100 3,342.4100 704.1300 634.2000 (1,300.1400) 342.7300 (529.0100) (3,482.9800) (2,588.8300) (2,380.0500) (0.0000)
V= Y- AvgY (880.8182) (2,189.8182) (320.8182) 6,951.1818 2,184.1818 (2,771.8182) (1,384.8182) 1,966.1818 2,380.1818 (1,932.8182) (4,000.8182) (0.0000)
Usq Vsq UV 8,059,523.5449 775,840.6694 (2,500,581.1609) 5,849,674.3321 4,795,303.6694 (5,296,316.1527) 11,171,704.6081 102,924.3058 (1,072,305.8991) 495,799.0569 48,318,928.6694 4,894,535.6536 402,209.6400 4,770,650.2149 1,385,208.1091 1,690,364.0196 7,682,976.0331 3,603,751.6909 117,463.8529 1,917,721.3967 (474,618.7355) 279,851.5801 3,865,870.9421 (1,040,129.8436) 12,131,149.6804 5,665,265.4876 (8,290,125.6691) 6,702,040.7689 3,735,786.1240 5,003,737.6936 5,664,638.0025 16,006,546.1240 9,522,147.3136 52,564,419.0864 97,637,813.6364 5,735,303.0000
The Correlation is as follows: R = 63,088,333.0000 ( 578,208,609.9504)* (1,074,015,950.0000) = 63,088,333.0000 788,038,875.6363 = 0.0801
Thus here there is low positive correlation between Movement of Sensex and the AUM of ICICI Prudential AMC.
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3. HDFC AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of HDFC AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 47,745.0000 46,752.0000 48,561.0000 43,763.0000 46,292.0000 44,773.0000 51,771.0000 56,107.0000 52,711.0000 50,752.0000 53,859.0000 543,086.0000
U= X- AvgX 2,838.9300 2,418.6100 3,342.4100 704.1300 634.2000 (1,300.1400) 342.7300 (529.0100) (3,482.9800) (2,588.8300) (2,380.0500) (0.0000)
V= Y- AvgY (1,626.4545) (2,619.4545) (810.4545) (5,608.4545) (3,079.4545) (4,598.4545) 2,399.5455 6,735.5455 3,339.5455 1,380.5455 4,487.5455 0.0000
Usq 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
Vsq 2,645,354.3884 6,861,542.1157 656,836.5702 31,454,762.3884 9,483,040.2975 21,145,784.2066 5,757,818.3884 45,367,572.5702 11,152,563.8430 1,905,905.7521 20,138,064.2066 156,569,244.7273
UV (4,617,390.6027) (6,335,438.9582) (2,708,871.3773) (3,949,081.0991) (1,952,990.0727) 5,978,634.6927 822,396.2136 (3,563,170.9009) (11,631,570.0273) (3,573,997.4891) (10,680,582.5591) (42,212,062.1800)
The Correlation is as follows: R = - (464,332,683.9800) ( 578,208,609.9504)* (1,722,261,692.0000) = - (464,332,683.9800) 997,911,087.6737 = - 0.4653
Thus here there is negative correlation between Movement of Sensex and the AUM of HDFC AMC.
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4. UTI AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of UTI AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 51,753.0000 52,180.0000 56,854.0000 52,656.0000 52,465.0000 48,983.0000 52,549.0000 54,652.0000 50,771.0000 46,120.0000 46,947.0000 565,930.0000
U= X- AvgX V= Y- AvgY Usq Vsq UV 2,838.9300 304.8182 8,059,523.5449 92,914.1240 865,357.4809 2,418.6100 731.8182 5,849,674.3321 535,557.8512 1,769,982.7727 3,342.4100 5,405.8182 11,171,704.6081 29,222,870.2149 18,068,460.7491 704.1300 1,207.8182 495,799.0569 1,458,824.7603 850,461.0164 634.2000 1,016.8182 402,209.6400 1,033,919.2149 644,866.0909 (1,300.1400) (2,465.1818) 1,690,364.0196 6,077,121.3967 3,205,081.4891 342.7300 1,100.8182 117,463.8529 1,211,800.6694 377,283.4155 (529.0100) 3,203.8182 279,851.5801 10,264,450.9421 (1,694,851.8564) (3,482.9800) (677.1818) 12,131,149.6804 458,575.2149 2,358,610.7291 (2,588.8300) (5,328.1818) 6,702,040.7689 28,389,521.4876 13,793,756.9364 (2,380.0500) (4,501.1818) 5,664,638.0025 20,260,637.7603 10,713,037.7864 (0.0000) 0.0000 52,564,419.0864 99,006,193.6364 50,952,046.6100
The Correlation is as follows: R = 560,472,512.7100 ( 578,208,609.9504)* (1,089,068,130.0000) = 560,472,512.7100 793,541,788.1804 = 0.7063
Thus here there is highly Positive correlation between Movement of Sensex and the AUM of UTI AMC.
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5. Birla Sunlife AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of Birla Sunlife AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 51,753.0000 52,180.0000 56,854.0000 52,656.0000 52,465.0000 48,983.0000 52,549.0000 54,652.0000 50,771.0000 46,120.0000 46,947.0000 565,930.0000
U= X- AvgX V= Y- AvgY Usq Vsq UV 2,838.9300 304.8182 8,059,523.5449 92,914.1240 865,357.4809 2,418.6100 731.8182 5,849,674.3321 535,557.8512 1,769,982.7727 3,342.4100 5,405.8182 11,171,704.6081 29,222,870.2149 18,068,460.7491 704.1300 1,207.8182 495,799.0569 1,458,824.7603 850,461.0164 634.2000 1,016.8182 402,209.6400 1,033,919.2149 644,866.0909 (1,300.1400) (2,465.1818) 1,690,364.0196 6,077,121.3967 3,205,081.4891 342.7300 1,100.8182 117,463.8529 1,211,800.6694 377,283.4155 (529.0100) 3,203.8182 279,851.5801 10,264,450.9421 (1,694,851.8564) (3,482.9800) (677.1818) 12,131,149.6804 458,575.2149 2,358,610.7291 (2,588.8300) (5,328.1818) 6,702,040.7689 28,389,521.4876 13,793,756.9364 (2,380.0500) (4,501.1818) 5,664,638.0025 20,260,637.7603 10,713,037.7864 (0.0000) 0.0000 52,564,419.0864 99,006,193.6364 50,952,046.6100
The Correlation is as follows: R = - (669,414,108.9900) ( 578,208,609.9504)* (1,296,440,948.0000) = - (669,414,108.9900) 865,802,124.2905 = -(0.7732)
Thus there is highly negative correlation between Movement of Sensex and the AUM of Reliance Capital AMC.
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6. SBI AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of SBI AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 26,594.0000 27,360.0000 29,242.0000 27,582.0000 29,493.0000 29,179.0000 30,395.0000 31,795.0000 30,132.0000 29,151.0000 29,577.0000 320,500.0000
U= X- AvgX V= Y- AvgY Usq Vsq UV 2,838.9300 (2,542.3636) 8,059,523.5449 6,463,612.8595 (7,217,592.3982) 2,418.6100 (1,776.3636) 5,849,674.3321 3,155,467.7686 (4,296,330.8545) 3,342.4100 105.6364 11,171,704.6081 11,159.0413 353,080.0382 704.1300 (1,554.3636) 495,799.0569 2,416,046.3140 (1,094,474.0673) 634.2000 356.6364 402,209.6400 127,189.4959 226,178.7818 (1,300.1400) 42.6364 1,690,364.0196 1,817.8595 (55,433.2418) 342.7300 1,258.6364 117,463.8529 1,584,165.4959 431,372.4409 (529.0100) 2,658.6364 279,851.5801 7,068,347.3140 (1,406,445.2227) (3,482.9800) 995.6364 12,131,149.6804 991,291.7686 (3,467,781.5418) (2,588.8300) 14.6364 6,702,040.7689 214.2231 (37,891.0573) (2,380.0500) 440.6364 5,664,638.0025 194,160.4050 (1,048,736.5773) (0.0000) 0.0000 52,564,419.0864 22,013,472.5455 (17,614,053.7000)
The Correlation is as follows: R = - (193,754,590.7000) ( 578,208,609.9504)* (242,148,198.0000) = -(193,754,590.7000) 374,182,005.1360 = -(0.5178)
Thus there is negative correlation between Movement of Sensex and the AUM of Reliance Capital AMC.
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7. Franklin Templeton AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of Franklin Templeton AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 32,042.0000 30,773.0000 31,176.0000 29,604.0000 29,902.0000 26,842.0000 28,632.0000 27,991.0000 24,742.0000 24,441.0000 27,715.0000 313,860.0000
U= X- AvgX V= Y- AvgY Usq Vsq UV 2,838.9300 3,509.2727 8,059,523.5449 12,314,995.0744 9,962,579.6236 2,418.6100 2,240.2727 5,849,674.3321 5,018,821.8926 5,418,346.0209 3,342.4100 2,643.2727 11,171,704.6081 6,986,890.7107 8,834,901.1964 704.1300 1,071.2727 495,799.0569 1,147,625.2562 754,315.2655 634.2000 1,369.2727 402,209.6400 1,874,907.8017 868,392.7636 (1,300.1400) (1,690.7273) 1,690,364.0196 2,858,558.7107 2,198,182.1564 342.7300 99.2727 117,463.8529 9,855.0744 34,023.7418 (529.0100) (541.7273) 279,851.5801 293,468.4380 286,579.1445 (3,482.9800) (3,790.7273) 12,131,149.6804 14,369,613.2562 13,203,027.2764 (2,588.8300) (4,091.7273) 6,702,040.7689 16,742,232.0744 10,592,786.3155 (2,380.0500) (817.7273) 5,664,638.0025 668,677.8926 1,946,231.7955 (0.0000) 0.0000 52,564,419.0864 62,285,646.1818 54,099,365.3000
The Correlation is as follows: R = 595,093,018.3000 ( 578,208,609.9504)* (685,142,108.0000) = 595,093,018.3000 629,408,504.7766 = 0.9455
Thus there is highly positive correlation between Movement of Sensex and the AUM of Franklin Templeton AMC.
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8. Tata AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of Tata AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 20,199.0000 21,320.0000 23,518.0000 18,988.0000 20,205.0000 19,679.0000 22,348.0000 24,496.0000 23,853.0000 20,443.0000 21,197.0000 236,246.0000
U= X- AvgX V= Y- AvgY 2,838.9300 (1,277.9091) 2,418.6100 (156.9091) 3,342.4100 2,041.0909 704.1300 (2,488.9091) 634.2000 (1,271.9091) (1,300.1400) (1,797.9091) 342.7300 871.0909 (529.0100) 3,019.0909 (3,482.9800) 2,376.0909 (2,588.8300) (1,033.9091) (2,380.0500) (279.9091) (0.0000) (0.0000)
Usq 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
Vsq 1,633,051.6446 24,620.4628 4,166,052.0992 6,194,668.4628 1,617,752.7355 3,232,477.0992 758,799.3719 9,114,909.9174 5,645,808.0083 1,068,968.0083 78,349.0992 33,535,456.9091
UV (3,627,894.4555) (379,501.8964) 6,822,162.6655 (1,752,515.5582) (806,644.7455) 2,337,533.5255 298,548.9873 (1,597,129.2818) (8,275,877.1145) 2,676,614.8718 666,197.6318 (3,638,505.3700)
The Correlation is as follows: R = - (40,023,559.0700) ( 578,208,609.9504)* (368,890,026.0000) = - (40,023,559.0700) 461,839,137.7504 = - (0.0867)
Thus there is negative correlation between Movement of Sensex and the AUM of Tata AMC.
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9. Kotak Mahindra AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of kotak Mahindra AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 22,199.0000 21,277.0000 20,428.0000 22,296.0000 20,968.0000 18,071.0000 20,092.0000 22,170.0000 21,183.0000 18,782.0000 18,413.0000 225,879.0000
U= X- AvgX V= Y- AvgY Usq Vsq UV 2,838.9300 1,664.5455 8,059,523.5449 2,770,711.5702 4,725,528.0273 2,418.6100 742.5455 5,849,674.3321 551,373.7521 1,795,927.8618 3,342.4100 (106.4545) 11,171,704.6081 11,332.5702 (355,814.7373) 704.1300 1,761.5455 495,799.0569 3,103,042.3884 1,240,357.0009 634.2000 433.5455 402,209.6400 187,961.6612 274,954.5273 (1,300.1400) (2,463.4545) 1,690,364.0196 6,068,608.2975 3,202,835.7927 342.7300 (442.4545) 117,463.8529 195,766.0248 (151,642.4464) (529.0100) 1,635.5455 279,851.5801 2,675,008.9339 (865,219.9009) (3,482.9800) 648.5455 12,131,149.6804 420,611.2066 (2,258,870.8473) (2,588.8300) (1,752.4545) 6,702,040.7689 3,071,096.9339 4,536,806.9009 (2,380.0500) (2,121.4545) 5,664,638.0025 4,500,569.3884 5,049,167.8909 (0.0000) 0.0000 52,564,419.0864 23,556,082.7273 17,194,030.0700
The Correlation is as follows: R = 189,134,330.7700 ( 578,208,609.9504)* (259,116,910.0000) = 189,134,330.7700 387,070,572.8233 = 0.4886
Thus there is positive correlation between Movement of Sensex and the AUM of Kotak Mahindra AMC.
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10. DSP Merill lynch AMC: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the AUM of DSP Merill lynch AMC (Y):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 18,163.0000 19,485.0000 21,029.0000 19,136.0000 19,139.0000 16,675.0000 18,165.0000 21,560.0000 20,540.0000 19,483.0000 19,419.0000 212,794.0000
U= X- AvgX V= Y- AvgY Usq Vsq UV 2,838.9300 (1,181.9091) 8,059,523.5449 1,396,909.0992 (3,355,357.1755) 2,418.6100 140.0909 5,849,674.3321 19,625.4628 338,825.2736 3,342.4100 1,684.0909 11,171,704.6081 2,836,162.1901 5,628,922.2955 704.1300 (208.9091) 495,799.0569 43,643.0083 (147,099.1582) 634.2000 (205.9091) 402,209.6400 42,398.5537 (130,587.5455) (1,300.1400) (2,669.9091) 1,690,364.0196 7,128,414.5537 3,471,255.6055 342.7300 (1,179.9091) 117,463.8529 1,392,185.4628 (404,390.2427) (529.0100) 2,215.0909 279,851.5801 4,906,627.7355 (1,171,805.2418) (3,482.9800) 1,195.0909 12,131,149.6804 1,428,242.2810 (4,162,477.7345) (2,588.8300) 138.0909 6,702,040.7689 19,069.0992 (357,493.8882) (2,380.0500) 74.0909 5,664,638.0025 5,489.4628 (176,340.0682) (0.0000) (0.0000) 52,564,419.0864 19,218,766.9091 (466,547.8800)
The Correlation is as follows: R = - (5,132,026.6800) ( 578,208,609.9504)* (211,406,436.0000) = - (5,132,026.6800) 349,624,114.5775 = - (0.0147)
Thus there is negative correlation between Movement of Sensex and the AUM of DSP Merill lynch AMC.
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Correlation Analysis between Sensex Index Movement and the NAV of top 10 Mutual Fund schemes: In this study, even correlation analysis for the Assets Under Management of top 10 Mutual Funds is done to assess the relationship between the movement of NAV and the movement in the Sensex index. The movement is tracked for the last day of each month beginning from October, 2007 to August, 2008. 1. TATA Infrastructure Fund (G): In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of TATA Infrastructure Fund (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 39.9050 41.5930 44.2440 36.6680 36.0570 31.8850 34.0340 32.2790 26.8300 28.2040 28.4130 380.1120
U= X- AvgX V= Y- AvgY 2,838.9300 5.3494 2,418.6100 7.0374 3,342.4100 9.6884 704.1300 2.1124 634.2000 1.5014 (1,300.1400) (2.6706) 342.7300 (0.5216) (529.0100) (2.2766) (3,482.9800) (7.7256) (2,588.8300) (6.3516) (2,380.0500) (6.1426) (0.0000) 0.0000
Usq Vsq 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
UV 28.6157 49.5245 93.8644 4.4621 2.2541 7.1323 0.2721 5.1831 59.6855 40.3433 37.7320 329.0689 15,186.4689 17,020.6381 32,382.4835 1,487.3786 952.1648 3,472.2012 (178.7804) 1,204.3634 26,908.2369 16,443.3068 14,619.7817 129,498.2434
The Correlation is as follows: R = 1,424,480.6776 ( 578,208,609.9504)* (3,619.7583) = 1,424,480.6776 1,446,711.9415 = 0.9846
Thus there is highly positive correlation between Movement of Sensex and the NAV of TATA Infrastructure Fund (G).
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2. DSP ML top 100 Equity Reg (G) In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of DSP ML top 100 Equity Reg (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 85.2610 87.1590 94.4660 78.0230 77.4000 70.8250 77.5170 75.1110 63.8600 66.3870 68.2840 844.2930
U= X- AvgX V= Y- AvgY 2,838.9300 8.5071 2,418.6100 10.4051 3,342.4100 17.7121 704.1300 1.2691 634.2000 0.6461 (1,300.1400) (5.9289) 342.7300 0.7631 (529.0100) (1.6429) (3,482.9800) (12.8939) (2,588.8300) (10.3669) (2,380.0500) (8.4699) (0.0000) 0.0000
Usq Vsq 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
UV 72.3706 108.2659 313.7182 1.6106 0.4174 35.1520 0.5823 2.6992 166.2529 107.4728 71.7394 880.2812 24,151.0356 25,165.8569 59,201.0698 893.6050 409.7509 7,708.4119 261.5341 869.1153 44,909.2275 26,838.1653 20,158.8071 210,566.5794
Thus there is highly positive correlation between Movement of Sensex and the NAV of DSP ML top 100 Equity Reg (G).
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3. Reliance Regular Savings Equity: In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of Reliance Regular Savings Equity:
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 22.6220 23.8470 30.1810 26.2160 25.6620 21.8820 23.7430 22.2080 18.4410 19.5130 20.2370 254.5520
U= X- AvgX V= Y- AvgY 2,838.9300 (0.5191) 2,418.6100 0.7059 3,342.4100 7.0399 704.1300 3.0749 634.2000 2.5209 (1,300.1400) (1.2591) 342.7300 0.6019 (529.0100) (0.9331) (3,482.9800) (4.7001) (2,588.8300) (3.6281) (2,380.0500) (2.9041) (0.0000) (0.0000)
Usq Vsq 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
UV 0.2695 0.4983 49.5603 9.4551 6.3550 1.5853 0.3623 0.8707 22.0909 13.1630 8.4337 112.6440 (1,473.6628) 1,707.3188 23,530.2625 2,165.1357 1,598.7605 1,636.9945 206.2923 493.6144 16,370.3226 9,392.5106 6,911.8816 62,539.4308
The Correlation is as follows: R = 687,933.7391 ( 578,208,609.9504)* (1,239.0844) = 687,933.7391 846,433.2649 = 0.8127
Thus there is positive correlation between Movement of Sensex and the NAV of the Reliance Regular Savings Equity
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4. DWS Alpha Equity (G): In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of the DWS Alpha Equity (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 78.8600 80.3800 85.5300 72.3900 73.1500 65.5500 72.2100 69.1500 57.9100 61.0400 61.6300 777.8000
U= X- AvgX V= Y- AvgY 2,838.9300 8.1509 2,418.6100 9.6709 3,342.4100 14.8209 704.1300 1.6809 634.2000 2.4409 (1,300.1400) (5.1591) 342.7300 1.5009 (529.0100) (1.5591) (3,482.9800) (12.7991) (2,588.8300) (9.6691) (2,380.0500) (9.0791) (0.0000) 0.0000
Usq Vsq 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
UV 66.4373 93.5265 219.6593 2.8255 5.9580 26.6162 2.2527 2.4308 163.8167 93.4913 82.4299 759.4443 23,139.8603 23,390.1574 49,537.5548 1,183.5785 1,548.0245 6,707.5405 514.4066 824.7747 44,578.9777 25,031.6326 21,608.6903 198,065.1979
Thus there is highly Positive correlation between Movement of Sensex and the NAV of the DWS Alpha Equity (G).
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5. DWS Investment Opportunity (G): In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of DWS Investment Opportunity (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 39.2000 40.9300 44.8300 37.7900 38.0500 32.8400 36.3600 35.3100 29.1900 30.1600 30.4800 395.1400
U= X- AvgX V= Y- AvgY 2,838.9300 2,418.6100 3,342.4100 704.1300 634.2000 (1,300.1400) 342.7300 (529.0100) (3,482.9800) (2,588.8300) (2,380.0500) (0.0000)
Usq 3.2782 5.0082 8.9082 1.8682 2.1282 (3.0818) 0.4382 (0.6118) (6.7318) (5.7618) (5.4418) (0.0000) 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
Vsq 10.7465 25.0819 79.3557 3.4901 4.5292 9.4976 0.1920 0.3743 45.3174 33.1985 29.6134 241.3966
UV 9,306.5287 12,112.8386 29,774.7960 1,315.4429 1,349.6929 4,006.7951 150.1781 323.6579 23,446.7881 14,916.3678 12,951.7994 109,654.8854
Thus there is highly positive correlation between Movement of Sensex and the NAV of DWS Investment Opportunity (G).
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6. HDFC top 200 (G): In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of HDFC top 200 (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 158.9710 158.3560 169.7940 147.7180 147.6890 131.5440 143.0250 137.6750 115.4240 123.9020 129.2350 1,563.3330
U= X- AvgX V= Y- AvgY 2,838.9300 16.8498 2,418.6100 16.2348 3,342.4100 27.6728 704.1300 5.5968 634.2000 5.5678 (1,300.1400) (10.5772) 342.7300 0.9038 (529.0100) (4.4462) (3,482.9800) (26.6972) (2,588.8300) (18.2192) (2,380.0500) (12.8862) (0.0000) (0.0000)
Usq Vsq 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
UV 283.9164 263.5693 765.7849 31.3244 31.0006 111.8768 0.8169 19.7685 712.7395 331.9386 166.0537 2,718.7895 47,835.4543 39,265.6936 92,493.9042 3,940.8876 3,531.1103 13,751.8172 309.7656 2,352.0746 92,985.7503 47,166.3645 30,669.7570 374,302.5793
Thus there is highly positive correlation between Movement of Sensex and the NAV of HDFC top 200 (G).
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7. DSP ML Equity (G): In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of DSP ML Equity (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 13.0380 13.5470 15.3070 12.2710 12.3320 11.0940 12.2220 11.7900 9.9830 10.4420 10.6950 132.7210
U= X- AvgX V= Y- AvgY 2,838.9300 2,418.6100 3,342.4100 704.1300 634.2000 (1,300.1400) 342.7300 (529.0100) (3,482.9800) (2,588.8300) (2,380.0500) (0.0000)
Usq 0.9725 1.4815 3.2415 0.2055 0.2665 (0.9715) 0.1565 (0.2755) (2.0825) (1.6235) (1.3705) (0.0000) 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
Vsq 0.9457 2.1947 10.5070 0.0422 0.0710 0.9439 0.0245 0.0759 4.3370 2.6359 1.8784 23.6562
UV 2,760.7304 3,583.0608 10,834.2701 144.6667 168.9855 1,263.1451 53.6217 145.7663 7,253.4642 4,203.0832 3,261.9667 33,672.7606
The Correlation is as follows: R = 370,400.3662 ( 578,208,609.9504)* (260.2183) = 370,400.3662 1,675,407.6757 = 0.9549
Thus there is highly positive correlation between Movement of Sensex and the NAV of DSP ML Equity (G).
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8. Kotak Opportunities (G): In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of Kotak Opportunities (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 44.6670 47.6290 54.1810 45.7980 44.3700 37.7150 41.5360 39.9630 32.2950 33.9780 34.5560 456.6880
U= X- AvgX V= Y- AvgY Usq Vsq 2,838.9300 3.1499 8,059,523.5449 2,418.6100 6.1119 5,849,674.3321 3,342.4100 12.6639 11,171,704.6081 704.1300 4.2809 495,799.0569 634.2000 2.8529 402,209.6400 (1,300.1400) (3.8021) 1,690,364.0196 342.7300 0.0189 117,463.8529 (529.0100) (1.5541) 279,851.5801 (3,482.9800) (9.2221) 12,131,149.6804 (2,588.8300) (7.5391) 6,702,040.7689 (2,380.0500) (6.9611) 5,664,638.0025 (0.0000) (0.0000) 52,564,419.0864
UV 9.9219 37.3554 160.3746 18.3262 8.1391 14.4559 0.0004 2.4152 85.0470 56.8379 48.4568 441.3303 8,942.3714 14,782.3244 42,327.9764 3,014.3165 1,809.3149 4,943.2505 6.4807 822.1296 32,120.3582 19,517.4247 16,567.7444 144,853.6919
Thus there is negative correlation between Movement of Sensex and the NAV of Kotak Opportunities (G).
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9. DSP ML T.I.G.E.R Reg (G): In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of the DSP ML T.I.G.E.R Reg (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 53.7700 54.3140 59.9270 49.7160 48.5740 41.3080 44.3900 41.6750 33.4000 36.1650 35.9680 499.2070
U= X- AvgX V= Y- AvgY Usq Vsq 2,838.9300 8.3875 8,059,523.5449 2,418.6100 8.9315 5,849,674.3321 3,342.4100 14.5445 11,171,704.6081 704.1300 4.3335 495,799.0569 634.2000 3.1915 402,209.6400 (1,300.1400) (4.0745) 1,690,364.0196 342.7300 (0.9925) 117,463.8529 (529.0100) (3.7075) 279,851.5801 (3,482.9800) (11.9825) 12,131,149.6804 (2,588.8300) (9.2175) 6,702,040.7689 (2,380.0500) (9.4145) 5,664,638.0025 (0.0000) 0.0000 52,564,419.0864
UV 70.3509 79.7725 211.5438 18.7796 10.1860 16.6012 0.9850 13.7452 143.5792 84.9615 88.6320 739.1368 23,811.6544 21,601.9252 48,613.8342 3,051.3794 2,024.0781 5,297.3613 (340.1439) 1,961.2805 41,734.6495 23,862.4229 22,406.8725 194,025.3141
Thus there is highly positive correlation between Movement of Sensex and the NAV of the DSP ML T.I.G.E.R Reg (G):
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10. UTI Infrastructure (G): In the following table the Correlation analysis is done for the movement in Sensex Index (X) and the NAV of UTI Infrastructure (G):
X 19,783.5100 19,363.1900 20,286.9900 17,648.7100 17,578.7800 15,644.4400 17,287.3100 16,415.5700 13,461.6000 14,355.7500 14,564.5300 186,390.3800
Y 46.2900 46.2500 49.1100 40.2900 40.3300 35.6100 36.9800 34.1700 28.6800 30.3600 30.4600 418.5300
U= X- AvgX V= Y- AvgY 2,838.9300 8.2418 2,418.6100 8.2018 3,342.4100 11.0618 704.1300 2.2418 634.2000 2.2818 (1,300.1400) (2.4382) 342.7300 (1.0682) (529.0100) (3.8782) (3,482.9800) (9.3682) (2,588.8300) (7.6882) (2,380.0500) (7.5882) (0.0000) (0.0000)
Usq Vsq 8,059,523.5449 5,849,674.3321 11,171,704.6081 495,799.0569 402,209.6400 1,690,364.0196 117,463.8529 279,851.5801 12,131,149.6804 6,702,040.7689 5,664,638.0025 52,564,419.0864
UV 67.9276 67.2698 122.3638 5.0257 5.2067 5.9447 1.1410 15.0403 87.7628 59.1081 57.5805 494.3712 23,397.9449 19,836.9995 36,973.1317 1,578.5314 1,447.1291 3,169.9777 (366.0980) 2,051.5970 32,629.1899 19,903.3957 18,060.2521 158,682.0511
Thus there is highly positive correlation between Movement of Sensex and the NAV of UTI Infrastructure (G)
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FINDINGS AND SUGGESTIONS Classification of respondents on the basis of their occupation: The respondents for this study are mostly from the salaried class as shown in the following table. There are 55 from salaried class and next highest number is from business. This can be depicted graphically as follows:
60 50 40 30 20 10 0 6 1st Qtr 19 12 7 51 55 Student Business Agriculture Salaried Senior Citizen Others
Student: Business: Agriculture: Salaried:
6 51 19 55
Senior Citizen: 12 Others: 7
Cross-tabulated data on the basis of Income level and the Percentage of Investments invested annually: The Level of Income of the respondents also was mostly falling in the category of 1-3 lakhs and also with 20% of Income as Investments.
10% <1 lakh: 1- 3 lakhs: >3 lakhs: Total
45 40 35 30 25 20 15 10 5 0 10% 20% 30% 40%
20% 13 43 16 72
30% 3 13 6 22
>30% 3 9 3 15
Total 27 89 34 150
8 24 9 41
<1 lakh 1-3 Lakhs >3 lakhs
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Table showing the Investors Investments in various avenues of Investment: Coming to the avenues of Current Investments, the respondents showed higher interests in Bank Savings and Insurance. This shows that the risk profile of the respondents is very low and most of the respondents prefer to get good returns without having to experience much risk. Out of 150 respondents almost all of them except 26 people were having Bank savings as a avenue for safety purpose, even though it doesnt fetch high returns. Also 102 people had Insurance in the form of Life Insurance, Vehicle Insurance etc. Many Invested in Mutual Funds due to Less amount available for investing. And in the others category, people invested in Equity shares, small businesses, etc.
Bank Savings: Insurance: Mutual Funds: Real Estates: 124 102 79 42
Gold, Silver etc: 21 Others: 30
The above table can be represented as follows:
160 140
No. of Investors
120 100 80 60 40 20 0
Bank Savings Insurance Mutual Funds Real Estates Gold, Silver Others
Not Invested Invested
Avenues of Investments
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Investors reasons for not investing in Mutual Funds: Out of the 150 respondents the maximum of the 71 people who did not invest in Mutual Funds were of the opinion that they were not interested in Mutual Funds even if they were having good knowledge of it.
Lack of knowledge 23% 20% has knowledge but not interested in Mutual Funds 57% percieved as an unsafe investment avenue
Investors decision regarding their investment in Mutual Funds at a particular time period: Out of the 79 respondents who invested in Mutual Funds were opining about their investment as right or wrong as follows:
10% Right Decision Wrong Decision 89% Cant say
The force that drove the investors towards investing in Mutual Funds: Ad in Print media: Ad in audio/ Visual media: 7 14
Word of mouth from friends: 13 Advice of brokers: Self thinking: Other forces: 64 57 6
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The above chart clearly shows that, most of the investors were driven by the advice of the brokers. Many were driven by the combination of both advices of the brokers and the self thinking abilities. Time period of investments: Most of the investors invested in Mutual Funds during April and June. The following table shows how many investors invested in Mutual Funds during which time period:
Oct- Dec: 19 Jan- Mar: 17 Apr- Jun: After Jul: 23 15
Type of funds mostly demanded and canvassed: From the study it is clear that most of the investors seek Equity funds as there is high returns even if the risk profile is also high.
Equity:
41
Balanced: 29 Debt: 3
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Some of the Opinions of the respondents are as follows: Few Investors invested in Mutual Funds just because of limited sources of Income available to them. They also told that they have further investment ideas only after liquidation of their current investments. Ranking of Mutual Funds depended on various factors like price, services offered by Funds, Fund Managers performance, scheme a person has Invested in and many other similar factors. The Investment decision regarding Mutual Funds depends on the Fund Managers performance. One of the Investor was very particular about the performance of one Mutual Fund Scheme after which he literally stopped investing in Mutual Funds. There was a fund called UTI Mastervalue Fund, which was giving 100% dividends continuously. Seeing the trend of dividend payments this Investor invested nearly Rs.5 lakhs along with his relatives and friends. They all enjoyed 100% dividend for 2 more years as the performance of the fund Manager was mind blowing. Even during the times of market drops this fund was performing extremely well. Due to some reason the fund Manager of the Scheme changed which caused for the fall in the NAV of the scheme. This caused for huge loss for all these investors. After this, the respondent stopped investing in Mutual Funds. The investment in Mutual Fund not only depends on SENSEX performance but also depends on the sector specific performance. The timing for investing in Mutual Funds depends on sector to sector. The investment idea of any person depends on the agents. Some of the agents deal with unethical practices like giving a share from the commission, Freebies offered to the investor etc. So, it can be concluded by saying that the investment decision depends on various factors other than the SENSEX fluctuations. From the Chi- square analysis: It clearly shows in the Chi- square analysis that the demand for Mutual Funds is dependent on the Market Fluctuations. Also this can be proved using the correlations between the AUMs of various AMCs and the Index value of Sensex. Also the proof of correlation between the NAVs of various schemes and the market index values shows the same. It is also seen that the actual ranks assigned by the investors for Mutual Funds are the same as expected during a particular time period. This shows that the Mutual Fund rankings or the demand for Mutual Funds depends on the time factor as well.
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From the Correlation Analysis: The study shows that the correlation between AUM of various AMCs and the Index of the market are most of the time positively correlated. Asset Management Company 1. Reliance Capital AMC 2. ICICI Prudential AMC 3. HDFC AMC 4. UTI AMC 5. Birla Sunlife AMC 6. SBI AMC 7. Franklin Templeton AMC 8. Tata AMC 9. Kotak Mahindra AMC 10. DSP Merill lynch AMC Correlation Coefficient (r) - 0.4892 0.0801 -0.4653 0.7063 -0.7732 -0.5178 0.9455 -0.0867 0.4886 -0.0147
Even if there were a few negatively correlated pairs, the correlation analysis shows that there was positive correlation in most of the cases. The negative relationship may be due to non investment by the investors in that particular AMCs products during a particular time period. The AUM of the Mutual Fund AMC is also a representative of the increase or decrease in the Investments. Hence, there is similar movement in the Index and the AUM, showing that there were more investments when the Index was moving positive. Thus even this analysis shows that there is an effect of market fluctuations on Investors demand for Mutual Funds. Also, the Correlation analysis of NAVs of various schemes and the Index values are always positively correlated and also highly positive correlated. Top 10 Mutual Fund Schemes 1. TATA Infrastructure Fund (G) 2. DSP ML top 100 Equity Reg (G) 3. Reliance Regular Savings Equity 4. DWS Alpha Equity (G) 5. DWS Investment Opportunity (G) 6. HDFC top 200 (G) 7. DSP ML Equity (G) 76 | P a g e Correlation Coefficient (r) 0.9846 0.9789 0.8127 0.9913 0.9735 0.9901 0.9549
8. Kotak Opportunities (G) 9. DSP ML T.I.G.E.R Reg (G) 10. UTI Infrastructure (G)
0.9510 0.9844 0.9844
This shows that the NAVs of the schemes moved similar to the market index. Thus, here also it can be proved that there is an effect of share market on the Mutual Funds. This will be the same for almost all the Schemes because the NAV is also a result of Equity indices as the Mutual Funds are investing in the Equity markets. But it is just a means of connecting small individual investors and the corporates, in an indirect way.
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CONCLUSIONS/ RECOMMENDATIONS The main objective of the study was to learn whether there is any relationship between the Market Fluctuations and the Investors demand for Mutual Funds. The study revealed that the Market fluctuations has an effect on Investors demand for Mutual Funds and also that the rankings assigned by the investors for Mutual Funds are the same as expected during a particular time period. This shows that the Mutual Fund rankings or the demand for Mutual Funds depends on the time factor as well. From the study conducted it can be seen that the most commonly demanded schemes are equity schemes. And the Investors demand for Mutual funds mainly depended on the advices of brokers. Most of the respondents have good knowledge about Mutual funds but do not want to take the Management risk, i.e. risk arising from inefficient management of their funds. Thus, to conclude though there is relationship between Market fluctuations and the investors demand for mutual funds, there are other factors affecting the Mutual Fund investments such as- Fund Managers efficiency, Unethical practices of the agents, like offering freebies, Changes in the fund manager and Sector specific performance etc..
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APPENDIX
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EFFECT OF MARKET FLUCTUATIONS ON INVESTOR DEMAND FOR MUTUAL FUNDS FOR INDIVIDUAL INVESTORS Dear Respondent, This Questionnaire is for the purpose of assimilating primary data as part of a study on effect of market fluctuations on investor demand for mutual funds. It is purely for academic purposes and the data given will not be disclosed anywhere. I request you to fill this and help me in my research. Thank you.
NAME (optional): GENDER: MALE AGE GROUP: 20-35 yrs. 35-45 yrs. OCCUPATION: Student Business Agriculture INCOME LEVEL: < 1 lakhs 1-3 lakhs > 3 lakhs Salaried Senior Citizen Others (Specify) __________________ 45-60 yrs. 60 yrs. & above FEMALE
___________________________________________________________________________ 1. What Percentage of your Income do you invest annually? (Approx.) 10% 20% 30% >30%
2. What are the avenues of your current investments? (Tick whichever is applicable) Bank Savings Insurance Mutual Funds Real Estates Gold, Silver etc. Others (Specify) __________________
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3. If you own Mutual Fund Schemes, Which one/ ones? (Specify) _________________________________________ _________________________________________ _________________________________________
4. If not, what is the reason for not holding mutual fund schemes? Lack of knowledge Has knowledge, but not interested in Mutual Funds Perceived as an unsafe Investment Avenue.
5. Until today, what is the force that drove you towards Investing in Mutual Funds? Advertisements in Print Media (Newspapers, Magazines etc.) Advertisements in Audio/Visual Media (Radio, Television etc.) Word of mouth from friends Advice of Brokers Self thinking Others, (Specify) ______________
6.
(A) When is the last time period you made your investments in mutual funds? Oct `07- Dec `07 Jan 08- Mar `08 Apr `08- Jun `08 Recently, i.e, after Jul `08.
(B) Do you think the decision of your Investment was right? Yes No
Reason: _____________________________________________
7. Do you have any further Investment ideas? Yes No
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8. Yes
(A) Would you like to invest your money in Mutual Fund? No (B) Which type of mutual Fund Scheme would you invest in? Equity/ Growth Balanced Income/ Debt
10. Rank the following avenues of Investments: (Rank 1-best; 2-very good; 3-good; 4-satisfactory; 5- not satisfactory; 6- bad) Bank Savings Insurance Mutual Funds Real Estates Postal Savings Gold, Silver etc.
9. Tick ( ) where you think is the best time and best avenue to invest: SENSEX is Upward Trend Mutual Funds SENSEX is Downward Trend
Other Sources
Thank you very much for your cooperation and time given Deepalaxmi 7NBMG077 ICFAI National College, Mangalore.
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EFFECT OF MARKET FLUCTUATIONS ON INVESTOR DEMAND FOR MUTUAL FUNDS FOR MUTUAL FUND DEALERS Dear Respondent, This Questionnaire is for the purpose of assimilating primary data as part of a study on effect of market fluctuations on investor demand for mutual funds. It is purely for academic purposes and the data given will not be passed on to anyone. I request you to kindly fill up the form. Thank you.
NAME OF THE DEALER:
1. What are the different types of Mutual fund Schemes you are dealing with? (Equity schemes, Income schemes, Balanced schemes etc.) ______________________ ______________________ ______________________ ______________________ ______________________ ______________________ ______________________ ______________________ _____________________
2. According to you, which is considered the most preferred category by the Investors? (Equity schemes, Income schemes, Balanced schemes etc.) ________________________________________________________ ________________________________________________________ ________________________________________________________
3. What are the various strategies adopted by you for canvassing different schemes of Mutual Funds?(specify all) Advertisements in Print Media (Newspapers, Magazines etc.) Advertisements in Audio/Visual Media (Radio, Television etc.) In- house marketing department Outsourcing (hiring a professional agency) Others, (Specify) _________________________________________________
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4. Why do you think the Investors Invest in Mutual Funds? Tax benefits Professional management Lower risk Higher returns
5. What do you think is/are the reason/s for Investors not investing in Mutual Funds? Lack of knowledge Has knowledge, but not interested in Mutual Funds Perceived as an unsafe Investment Avenue.
6. During which time period there was a hike in the rate of investments in mutual fund? Oct `07- Dec `07 Jan 08- Mar `08 Apr `08- Jun `08 Recently, i.e, after Jul `08.
9. Tick ( ) where you think the Investors consider as the best time and best avenue to invest: SENSEX is Upward Trend Mutual Funds SENSEX is Downward Trend
Other Sources
Thank you very much for your cooperation and time given Deepalaxmi 7NBMG077 ICFAI National College, Mangalore.
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Table of Chi-square statistics- For one-tailed test:

=0.05 | =0.01 | =0.001 d.f 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 = 0.05
3.84 5.99 7.82 9.49 11.07 12.59 14.07 15.51 16.92 18.31 19.68 21.03 22.36 23.69 25.00 26.30 27.59 28.87 30.14 31.41 32.67 33.92 35.17 36.42 37.65 38.89 40.11 41.34 42.56 43.77 44.99 46.19 47.40
= 0.01
6.64 9.21 11.35 13.28 15.09 16.81 18.48 20.09 21.67 23.21 24.73 26.22 27.69 29.14 30.58 32.00 33.41 34.81 36.19 37.57 38.93 40.29 41.64 42.98 44.31 45.64 46.96 48.28 49.59 50.89 52.19 53.49 54.78
= 0.001
10.83 13.82 16.27 18.47 20.52 22.46 24.32 26.13 27.88 29.59 31.26 32.91 34.53 36.12 37.70 39.25 40.79 42.31 43.82 45.32 46.80 48.27 49.73 51.18 52.62 54.05 55.48 56.89 58.30 59.70 61.10 62.49 63.87
34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68
48.60 49.80 51.00 52.19 53.38 54.57 55.76 56.94 58.12 59.30 60.48 61.66 62.83 64.00 65.17 66.34 67.51 68.67 69.83 70.99 72.15 73.31 74.47 75.62 76.78 77.93 79.08 80.23 81.38 82.53 83.68 84.82 85.97 87.11 88.25
56.06 57.34 58.62 59.89 61.16 62.43 63.69 64.95 66.21 67.46 68.71 69.96 71.20 72.44 73.68 74.92 76.15 77.39 78.62 79.84 81.07 82.29 83.52 84.73 85.95 87.17 88.38 89.59 90.80 92.01 93.22 94.42 95.63 96.83 98.03
65.25 66.62 67.99 69.35 70.71 72.06 73.41 74.75 76.09 77.42 78.75 80.08 81.40 82.72 84.03 85.35 86.66 87.97 89.27 90.57 91.88 93.17 94.47 95.75 97.03 98.34 99.62 100.88 102.15 103.46 104.72 105.97 107.26 108.54 109.79
69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100
89.39 90.53 91.67 92.81 93.95 95.08 96.22 97.35 98.49 99.62 100.75 101.88 103.01 104.14 105.27 106.40 107.52 108.65 109.77 110.90 112.02 113.15 114.27 115.39 116.51 117.63 118.75 119.87 120.99 122.11 123.23 124.34
99.23 100.42 101.62 102.82 104.01 105.20 106.39 107.58 108.77 109.96 111.15 112.33 113.51 114.70 115.88 117.06 118.24 119.41 120.59 121.77 122.94 124.12 125.29 126.46 127.63 128.80 129.97 131.14 132.31 133.47 134.64 135.81
111.06 112.31 113.56 114.84 116.08 117.35 118.60 119.85 121.11 122.36 123.60 124.84 126.09 127.33 128.57 129.80 131.04 132.28 133.51 134.74 135.96 137.19 138.45 139.66 140.90 142.12 143.32 144.55 145.78 146.99 148.21 149.48
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REFERENCES Articles and Books: 1. Mutual Funds or Stocks: Which Investment Is Better for First Time Investors?- By Steve Sjuggerud, Advisory Panelist, Investment U 2. Mutual funds What, How & Why- Written by Tarun Kumar Singh 3. Determining the yield of a mutual fund- by Christina Pomoni 4. Market trends in Mutual Funds- posted in the bharat.com website: 5. Mutual funds industry should focus on investors interest- posted in TheIndiaStreet: 6. Mutual Fund Industry in India: Authors- E. Mrudula and Priya Raju, Publisher- The Icfai University press, Hyderabad. First edition, 2005: 7. Marketing of Mutual Fund Investments- A Thorough Analysis of the Seven Ps of Services Marketing: Author: Zaheer Zaidi Websites: 1. http://www.amfiindia.com/showhtml.asp?page=prmutual 2. http://www.thehindu.com/2006/05/06/stories/2006050606071700.htm 3. http://im.rediff.com/money/2001/jul/06mutual.htm 4. http://www.mutualfundsindia.com/Assets%20_under%20_Management.asp 5. http://www.bseindia.com/about/abindices/bse30.asp 6. http://www.investopedia.com/university/stocks/stocks4.asp
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Management Thesis I - Deepalaxmi

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Management Thesis I - Deepalaxmi

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2007-09

ICFAI NATIONAL COLLEGE MANGALORE 2007-2009

FACULTY SUPERVISOR Ms. Chitranjali, INC Mangalore.

A Report of Management Thesis

Submitted by Deepalaxmi 7NBMG077

Under the guidance of MISS. CHITRANJALI (LECTURER- IN- CHARGE)

ICFAI NATIONAL COLLEGE MANGALORE 2007-2009

Name and Enrollment Number: DEEPALAXMI 7NBMG077

ICFAI NATIONAL COLLEGE MANGALORE

Ms. Chitranjali Faculty Supervisor, INC Mangalore.

Prof. K. Narayan The Principal, INC Mangalore.

INTRODUCTION TO THE TOPIC

OBJECTIVES AND LIMITATIONS OF THE STUDY

OVERVIEW OF MUTUAL FUND INDUSTRY

Mar 31, 2008

Feb 29, 2008

400 211 478

Feb 29, 2008 Aug 31, 2008 Jun 30, 2008

46,291.97 16,960.53 54,237.22

Jan 31, 2008 Jul 31, 2008 May 31, 2008

43,762.70 17,138.98 59,573.08

2529.274 -178.448 -5335.86

306 351 211

Aug 31, 2008 Mar 31, 2008 Aug 31, 2008

12,405.65 8,608.29 11,721.35

Jun 30, 2008 Feb 29, 2008 Jul 31, 2008

10,859.28 9,844.71 10,927.29

1546.37 -1236.42 794.06

Aug 31, 2008

Jul 31, 2008

Aug 31, 2008

Jul 31, 2008

Feb 29, 2008 Feb 29, 2008

Jan 31, 2008 Jan 31, 2008

Aug 29, 2008

Jul 31, 2008

Aug 29, 2008

Jul 31, 2008

Aug 31, 2008

Jul 31, 2008

Aug 31, 2008

Jul 31, 2008

Feb 29, 2008

Jan 31, 2008

Aug 31, 2008

Jul 31, 2008

Feb 29, 2008

Jan 31, 2008

Feb 29, 2008

Jan 31, 2008

Aug 31, 2008 Aug 29, 2008

Jul 31, 2008 Jul 31, 2008

Mar 31, 2008

Feb 29, 2008

Rules Regarding Advertisement:

The offer document and advertisement materials shall not be

AMFI AND ITS ROLE

SWOT ANALYSIS OF THE INDUSTRY

FLUCTUATIONS IN THE SHARE MARKET

there is no one theory that can explain everything.

Mukand Iron Phlips Premier Auto Siemens Voltas

Arvind Mills G. E. Shipping IPCL Steel Authority of India

N(ad-bc)2 (a+b)(c+d)(a+c)(b+d) 300 [(11955)-(9531)]2 (150150214*86) 300(6545-3945)2 414090000