Research Journal of Business Management and Accounting Vol. 2(2), pp.

036 - 047, February 2013

ISSN 2277 0712 2013 Wudpecker Journals

Perceptions of investors on mutual funds: A comparative study on public and private sector mutual funds
Ms Manasa Vipparthi, Assistant Professor, Department of Commerce and Business Management, P.G Centre, Lal Bahadur College, Warangal, 506001 Andhra Pradesh. 2 Ashwin Margam MBA, Research Scholar,P.G.Centre, Lal Bahadur College. Warangal. 506001 Andhra Pradesh. *Corresponding author E-mail: manasa_vipparthi@yahoo.co.in. Accepted 10 January 2013 Indian Mutual Fund (MF) industry provides reasonable options for an ordinary man to invest in the share market. The plethora of schemes provides variety of options to suit the individual objectives whatever their age, financial position, risk tolerance and return expectations. In the past few years, we had seen a dramatic growth of the Indian MF industry with many private players bringing global expertise to the Indian MF industry. Investment in mutual funds is effected by the perception of the investors. Financial markets are constantly becoming more efficient by providing more promising solutions to the investors. Being a part of financial markets although mutual funds industry is responding very fast by understanding the dynamics of investors perception towards rewards, still they are continuously following this race in their endeavor to differentiate their products responding to sudden changes in the economy. Therefore a need is there to study investors perception regarding the mutual funds. The study at first tests whether there is any relation between demographic profile of the investor and selection of mutual fund alternative from among public sector and private sector. For the purpose of analysis perceptions of selected investors from public and private sector mutual funds are taken into consideration. The major perceptual factors identified are Liquidity, Security, Flexibility, Transparency, Returns and Tax benefits along with Monetary and Core product as the most influencing factors. Key words: Mutual funds, perception, public sector, private sector, liquidity, security, flexibility, monetary, core product, service quality, transparency. INTRODUCTION Mutual funds are recognized as a mechanism of pooling together the investment of unsophisticated investors and turn in the hands of professionally managed fund managers for consistent return along-with capital appreciation. Money collected in this process is then invested in capital market instrument such as shares, debentures and other securities. Finally, unit holders in proportion of units owned by them share the income earned through these investments and capital appreciation. Mutual funds put forward a way out to investors to approach most schemes and get welldiversified portfolio because investors with small savings neither have sufficient expertise nor have access to required diversification. Figure 1 describes broadly the working of a mutual fund. Mutual funds have already entered into a world of exciting innovative products. These products are now tailor made to suit specific needs of investors. Intensified competition and involvement of private players in the race of mutual funds have forced professional managers to bring innovation in mutual funds. Thus, mutual funds industry has moved from offering a handful of schemes like equity, debt or balanced funds to liquid, money market, sector specific funds, index funds and gilt edged funds. Beside this recently mutual funds have also introduced some special specific funds like children plans, education plans, insurance linked plans, and exchange traded funds (Vidya, 1990). The result is that over the time Indian investors have started shifting towards mutual funds instead of traditional financial avenues. With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin
1

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Figure 1. Working of a mutual fund.

Templeton) was the first private sector mutual fund registered in July 1993. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. The MF industry has evolved as an important financial intermediary in the Indian capital market. As of March 2009, the industry comprising 37 Asset Management Companies (AMCs) managed financial assets of over 4.89 trillions. Domestic MF industry is growing at a CAGR of 30% during the last three years, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM). According to the ASSOCHAM study, Asset Under Management (AUM) as percentage of GDP in India is 4.12% as against those of Australia 88.22%, Germany 10.54%, Japan 7.57%, UK 18.81%, USA 61.27%, Canada 34.33%, France 59.63%, Hong Kong 101.085 and Brazil 19.95%. The entry of commercial banks and private players in the MF industry coupled with the rapid growth of the Indian capital markets during the past couple of years has fostered an impressive growth in the Mutual Funds (Samir et al., 1991). The Indian mutual funds business is expected to grow significantly in the coming years due to a high degree of transparency and disclosure standards comparable to anywhere in the world, though there are many challenges that need to be addressed to increase net mobilisation of funds in the sector. ORGANISATION OF MUTUAL FUNDS There are many entities involved and Figure 2 illustrates the organisational set up of a mutual fund. The organization of Mutual funds has a unique structure not shared with other entities such as companies of firms. It is important for employees & agents to be aware of the special nature of this structure, because it determines the

rights & responsibilities of the funds constituents viz., sponsors, trustees, custodians, transfer agents & of course, the fund & the Asset Management Company(AMC) the legal structure also drives the interrelationships between these constituents. The structure of the mutual fund India is governed by the SEBI (Mutual Funds) regulations, 1996. These regulations make it mandatory for mutual funds to have a structure of sponsor, trustee, AMC, custodian. The sponsor is the promoter of the mutual fund, & appoints the trustees. The trustees are responsible to the investors in the mutual fund, & appoint the AMC for managing the investment portfolio. The AMC is the business face of the mutual fund, as it manages all affairs of the mutual fund. The mutual fund & the AMC have to be registered with SEBI (Securities and Exchange Board of India). Custodian, who is also registered with SEBI, holds the securities of various schemes of the fund in its custody. Role of decision making process In financial markets, expectations of the investors play a vital role. They influence the price of the securities; the volumes traded and determine quite a lot of things in actual practice. These expectations of the investors are influenced by their perception and human beings generally relate perception to action. The beliefs and actions of many investors are influenced by the dissonance effect and endowment effect. The tendency to adjust beliefs to justify past actions is a Psychological phenomenon termed by Festinger (1957) as Cognitive Dissonance. We find ample proof for the wide prevalence of such a psychological state among Mutual Fund (MF) investors in India. However, in the financial literature, there are no models which explain the influence of these perceptions and

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Figure 2. Organisational set up of a mutual fund.

beliefs on Expectations and Decision Making. Because of our own inability to understand the sources of motivations and the basis of these expectations we tend to ignore it (Ippolito, 1992). No doubt, reality is so complex that trying to fit an individual investors beliefs into a model is impossible. But, to a certain extent, we can borrow concepts from social psychology where behavioural patterns, rational or irrational, are developed and empirically tested (Sharma, 1991). On the same lines, we can develop certain models to test the financial behaviour, to the extent of the availability of the explanatory variables. Such models can help to understand the Why? and How? aspect of investor behaviour, which can have managerial implications for policy makers( Freeman, Romney and Freeman. 1987). Review of literature The existing Behavioural Finance studies are very few and very little information is available about investor perceptions, preferences, attitudes and behaviour. All efforts in this direction are fragmented (De Bondt and Thaler, 1985) while investigating the possible psychological basis for investor behaviour, argue that mean reversion in stock prices is an evidence of investor over reaction where investors overemphasize recent firm performance in forming future expectations (Gupta, 1994) made a household investor survey with the objective to provide data on the investor preferences on MFs and other financial assets. The findings of the study were more appropriate, at that time, to the policy makers and mutual funds to design the financial products for the future, Madhusudhan and Jambodekar (1996) conducted a study to assess the awareness of MFs among investors, to identify the information sources influencing the buying decision and the factors influencing the choice of a particular fund. The study reveals among other things that Income Schemes and Open Ended Schemes are more preferred than

Growth Schemes and Close Ended Schemes during the then prevalent market conditions. Investors look for safety of Principal, Liquidity and Capital appreciation in the order of importance; Newspapers and Magazines are the first source of information through which investors get to know about MFs/Schemes and investor service is a major differentiating factor in the selection of Mutual Fund Schemes. (Goetzman, 1997) state that there is evidence that investor psychology affects fund/scheme selection and switching. Shanmugham (2000) conducted a survey of 201 individual investors to study the information sourcing by investors, their perceptions of various investment strategy dimensions and the factors motivating share investment decisions, and reports that among the various factors, psychological and sociological factors dominated the economic factors in share investment decisions (Anjan and Harsh, 2000) stressed the importance of brand effect in determining the competitive position of the AMCs. Their study reveals that brand image factor, though cannot be easily captured by computable performance measures, influences the investors perception and hence his fund/scheme selection. Need of the study The mutual funds industry has grown by leaps and bounds in last couple of years. Following the strengthening of regulatory framework there is now greater transparency and credibility in the functioning of mutual funds and has been successful in regaining investors faith. But to sustain the momentum it should start focusing on the areas where greater accountability and transparency could propel the industry towards a new growth trajectory (Sarkar, 1991). As of now big challenge for the mutual fund industry is to mount on investor awareness and to spread further to the semiurban and rural areas. These initiatives would help towards making the Indian mutual fund industry more vibrant and competitive. To make this happen it calls for a greater role not only part of the regulator but also on industry and distributors and ensure that investor confidence is maintained through consistent performance and best business practices. (Shankar, 1996). In this context, the need of study has been aroused in order to see the preference, awareness and the investors perception regarding the mutual funds in public and private sectors.

Objectives of the study The study has been undertaken with the following objectives. 1. To test whether the choice of public and private sector

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mutual funds is independent of demographic profile. 2. To identify the factors affecting investors perception and the choice of public and private sector mutual funds. RESEARCH METHODOLOGY In order to achieve the objective of developing an understanding about investors perception towards mutual funds, a well structured questionnaire was designed. Responses of individual investors were collected through filled questionnaire with pre explained objectives of research. Questionnaires were distributed to 400 individual investors-200 each for public and private sector investors, who were selected from different regions of Warangal, which included selective investors who were assumed to be having basic knowledge of financial environment. Main focus of questionnaire was to obtain responses of individual investors regarding how they evaluate mutual funds services in terms of various factors on their investment. For analyzing primary data percentage method, cross tabulation, Chi-Square analysis and factor analysis were used. RESULTS OF THE SURVEY Impact of demographic factors on investment in public and private sector mutual funds The success of any mutual fund, a popular means of investment, depends on how effectively it has been able to meet the investor's expectation. The present study focuses on measuring the investors' expectation and their preference. It also attempts to gauge the factors that they take into consideration for making any investment in mutual fund as well as the awareness level among individual investors regarding mutual fund investment. For the purpose of analysis demographic profile of the investors is cross tabulated in relation to choosing of the investment alternative in public and private sector mutual funds by the investors. It provides a view on perception of investors based on their social factors like Gender, Age, Educational Qualification, Marital Status, Occupation and Level of income. Hence an attempt is made to study the impact of demographic profile of the investor on the choice of investment in public and private sector mutual funds. Gender: Gender is said to be the most significant factor for investment purpose and as male are the basic bread winners, they are keener in various investments than females. Table 1 shows the distribution of the sample respondents based on gender and their investment in public and private sector mutual funds. Table 1 reveals that the percentage of male MF investors of private sector is 89.5% and female MF investors are

10.5%, whereas in public sector it is84% and 16% respectively. the male constitute 86.8% (347) and female 13.2% (53) It clearly implies that mutual fund investment is more prevalent among men rather women and that female investors were not tapped fully in both the sectors. Thus out of 400 investors of public and private sector MFs the male investors are 86.8% and female investors are 13.2%. The male investors are dominating the investment in MFs both in public and private sectors. To test this saying Chi-Square test is applied and inferences are drawn. The calculated value is 2.62 at 1 degree of freedom and at 5% significance level. The table value is 3.84 which is more than the calculated value. Thus the null hypothesis is accepted indicating that there is no significant difference of opinion of gender on the investment pattern in both public and private sector mutual funds and female investors were not tapped fully in both the sectors, Table 1.1. Age: Age is considered as one of the important parameters in the investment decision because the saving pattern usually differs according to age. Table 2 shows the distribution of the sample respondents based on age and their investment in public and private sector mutual funds. It can be observed from Table 2 that majority of the investors belong to the age group of 20 to 30 and 51 to 60 in both the public and private sector mutual funds, followed by the age group of 31 to 40 where majority investors are from public sector. Very few constitute the middle aged group of 41 to 50 in public sector and none in private sector. Thus, we can infer that middle aged persons are more cautious in their investment and dont like to take risk. We can also conclude with the chi-square result that, as the calculated value is more than the table value, null hypothesis is rejected and there is a significant difference in the investment pattern in both public and private sector mutual funds as people belonging to different age groups have different perception in both the sectors, Table 2.2. Marital Status: It is a known fact that married people have more responsibilities and they are known for their saving spree. They also carefully invest their hard earned money so that it will be useful in the future for various needs and expenditure. Table 3 shows the distribution of the sample respondents based on marital status and their investment in public and private sector mutual funds. Table 3 shows that, majority of the investors both in public and private sectors are married people. Comparing both the sectors, there is more number of married people in public sector (171) than in private sector (120). But in total, even though unmarried constitute very less, the percentage of investment by the unmarried in private sector is high (40%). The results of the chi-square shows that the calculated value is more than the table value

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Table 1. Gender.

Gender Type Private Public Total

(Source; Primary Data)

Male 179 89.5% 168 84.0% 347 86.8%

Female 21 10.5% 32 16.0% 53 13.2%

Total 200 100.0% 200 100.0% 400 100.0%

Table 1.1. Result showing relationship between gender and investment decision in public and private sector. Test Statistic Chi-Square Degrees of Freedom 1 Significance Level 5% Calculated Value 2.62 Table Value 3.84 Result Accept Ho

Table 2. Age.

Age Type Private Public Total 20-30 76 38.0% 49 24.5% 125 31.2%
(Source: primary data)

31-40 8 4.0% 59 29.5% 67 16.8%

41-50 0 .0% 15 7.5% 15 3.8%

51-60 94 47.0% 68 34.0% 162 40.5%

61 & above 22 11.0% 9 4.5% 31 7.8%

Total 200 100.0% 200 100.0% 400 100.0%

Table 2.2. Result showing relationship between age and investment decision in public and private sector mutual funds. Test Statistic Chi-Square Degrees of Freedom 4 Significance Level 5% Calculated Value 69.277 Table Value 9.488 Result Reject Ho

Table 3. Marital status. Marital status Type Private Public Total Married 120 60.0% 171 85.5% 291 72.8%
(Source: primary data)

Unmarried 80 40.0% 29 14.5% 109 27.2%

Total 200 100.0% 200 100.0% 400 100.0%

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Table 3.3. Result showing relationship between marital status and investment decision in public and private sector.

Test Statistic Chi-Square

Degrees Freedom 1

of

Significance Level 5%

Calculated Value 32.801

Table Value 3.841

Result Reject Ho

and null hypothesis is rejected implying that there is a significant difference in the investment pattern in both public and private sector investors with regard to the marital status, Table 3.3. Occupation: Occupation is also one of the vital social factors that is to be considered for knowing the perception of the investors in their saving and investment pattern. Table 4 shows the distribution of the sample respondents based on occupation and their investment in public and private sector mutual funds. Table 4 shows that, among the total sample respondents, majority were from the business sector (41.8%)in both public and private sector but comparatively the private sector constitutes more number of investors(51.5%), followed by Govt. employees (20.8%) in both the sectors-but majority are from public sector, and then followed by self employed(15.5%). Chi-square result shows that the calculated value (69.725) is more than the table value (11.071) rejecting null hypothesis. Hence concluding that there is a significant difference in the pattern of investment in both the sectors and the perception is not the same. And certainly the level of occupations plays a significant impact on the investment pattern, Table 4.4. Educational Qualification: General perception is that the investment pattern differs according to the level of literacy. Higher the qualification, higher the awareness levels. Table 5 shows that majority (58.50%) investors are from the post graduate level in both the sectors and 30% are graduates. The least percentage goes to the non graduates. From the results of the chi-square we can infer that the calculated value is less than the table value, accepting the null hypothesis which implies that, in both the sectors education plays a prominent role and there is no significant difference of opinion in the perception of the investors, Table 5.5. Level of Income: The investment of an individual is directly correlated with the income of the investors. It is a saying that high income people tend to save and invest more because their disposable income after meeting their fixed obligation is high. Also the investment preferences and investment objectives differ according to income level.

Table 6 shows that majority of investors in both public and private sectors fall in the monthly income group of Rs.10, 000-20,000(35.8%) followedbyRs.20, 000-Rs.30, 000(22.2%) and then 30,000 and above. Chi-square result shows that at 5% significance level and at 3degrees of freedom the calculated value is less than the table value implying that null hypothesis is accepted and there is no significant difference in the investment pattern in both the sectors and people from middle income level are the highest investors in mutual funds. It is also a known fact that, middle income people tend to take minimum risk and thus might have invested more in mutual funds. II. (A).Factors affecting investors perception towards mutual funds The perceptions of various investment strategy dimensions and the factors motivating fund investment decisions are very important to bring out a proper conclusion and in this context, it becomes crucial to understand the psychological and economic factors that influence the level of satisfaction of the investors. With the growing risk appetite, rising income, and increasing awareness, mutual funds in India are becoming a preferred investment option compared to other investment avenues like Fixed Deposits (FDs) and postal savings that are considered safe but give comparatively low returns (Sadhak, 1991). But before investing in mutual funds, investors have to analyse the factors of the economy, industry and company within the investment environment in which they operate. There are several macro economic factors having influence on the investment choices. In response to the changing circumstances, the fund houses have introduced a host of interesting technological innovations to grab the attention of the investors. Investors need to correctly appraise the risks and rewards of investing in schemes which seek to offer attractive returns. Against this backdrop, the factors identified and considered to compare between perceptions of public and private sector mutual fund investors are Liquidity, Flexibility, Management fee, Tax benefits, Service Quality, Returns, Transparency and Security. Chi-square test is applied to test and analyse their significance and importance attached in selection of mutual funds in public and private sectors. Table 7 gives a perusal view of the hypothesis framed, the results of the test and inferences drawn from it.

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Table 4. Occupation.

Type

Occupation Agriculturist Pvt. Employee Govt. Employee Businessman 14 7.0% 9 4.5% 23 5.8% 23 11.5% 60 30.0% 83 20.8% 103 51.5% 64 32.0% 167 41.8% Self- employed Pensioner 47 23.5% 15 7.5% 62 15.5% 13 6.5% 37 18.5% 50 12.5%

Total 200 100.0% 200 100.0% 400 100.0%

0 Private .0% 15 Public 7.5% 15 Total 3.8%

(Source: primary data)

Table 4.4. Result showing relationship between occupation and investment decision in public and private sector.

Test Statistic Chi-Square

Degrees Freedom 5

of

Significance Level 5%

Calculated Value 69.725

Table Value 11.071

Result Reject Ho

Table 5. Educational Qualification.

Type

Education SSC Intermediate Graduate Post Graduate 9 10 18 28 51 25.5% 69 34.5% 120 30.0% 130 65.0% 104 52.0% 234 58.5% 4.5% 5.0% 9 4.5% 9.0% 18 4.5% 7.0%

Total 200 100.0% 200 100.0% 400 100.0%

Private Public Total

Table 5.5. Result showing relationship between educational qualification and investment decision in public and private sector.

Test Statistic Chi-Square

Degrees of Freedom 3

Significance Level 5%

Calculated Value 7.875

Table Value 9.488

Result Accept Ho

Table 6. Level of Income.

Income Type Below Rs.10,000 51 Private Public Total 25.5% 30 15.0% 81 20.2%
(Source: primary data)

Rs.10,000Rs.20,000 75 37.5% 68 34.0% 143 35.8%

Rs.20,00030,000 38 19.0% 51 25.5% 89 22.2%

Rs.30,000& Total above 36 18.0% 51 25.5% 87 21.8% 200 100.0% 200 100.0% 400 100.0%

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Table 6.6. Result showing relationship between level of income and investment decision in public and private sector.

Test Statistic Chi-Square

Degrees of Freedom 3

Significance Level 5%

Calculated Value 10.272

Table Value 15.086

Result Accept Ho

Table7. Factors influencing investors perception towards mutual funds.

Hypothesis Ho: Perception of Public and private sector mutual investors are independent of liquidity factor. Ha: Perception of Public and private sector mutual investors is not independent of liquidity factor. . Ho: Perception of Public and private sector mutual investors are independent of Flexibility factor. Ha: Perception of Public and private sector mutual investors is not independent of Flexibility factor. fund fund

Chi Square Value X = 25.460 2 X 4.005= 9.488

2

Remarks Thus, Ho Hypothesis is rejected and it can be said that the Perceptions of Public and Private sector mutual fund investors are not independent of Liquidity factor. Thus, Ho Hypothesis is rejected and it can be said that the Perceptions of Public and Private sector mutual fund investors are not independent of Flexibility factor. Thus, Ho Hypothesis is accepted and it can be said that the Perceptions of Public and Private sector mutual fund investors are independent of Management Fee factor. Thus, Ho Hypothesis is rejected and it can be said that the Perceptions of Public and Private sector mutual fund investors are not independent of Tax Saving factor. Thus, Ho Hypothesis is rejected and it can be said that the Perceptions of Public and Private sector mutual fund investors are not independent of Service Quality factor. Thus, Ho Hypothesis is accepted and it can be said that the Perceptions of Public and Private sector mutual fund investors are independent of Return on Income factor. Thus, Ho Hypothesis is rejected and it can be said that the Perceptions of Public and Private sector mutual fund investors are not independent of Transparency factor. Thus, Ho Hypothesis is accepted and it can be said that the Perceptions of Public and Private sector mutual fund investors are independent of Security factor.

fund fund X = 9.534 2 X 4.005=9.488

2

Ho: Perception of Public and private sector mutual fund investors are independent of Management Fee factor. Ha: Perception of Public and private sector mutual fund investors is not independent of Management Fee factor. . Ho: Perception of Public and private sector mutual fund investors are independent of Tax Saving factor. Ha: Perception of Public and private sector mutual fund investors is not independent of Tax Saving factor. Ho: Perception of Public and private sector mutual fund investors are independent of Service Quality factor. Ha: Perception of Public and private sector mutual fund investors is not independent of Service Quality factor. Ho: Perception of Public and private sector mutual fund investors are independent of Return on Income factor. Ha: Perception of Public and private sector mutual fund investors is not independent of Return on Income factor. Ho: Perception of Public and private sector mutual fund investors are independent of Transparency factor. Ha: Perception of Public and private sector mutual fund investors is not independent of Transparency factor. Ho: Perception of Public and private sector mutual fund investors are independent of Security factor. Ha: Perception of Public and private sector mutual fund investors is not independent of Security factor.
(Source: primary data)

X = 7.326 2 X 3.005= 7.815

X = 16.275 2 X 4.005= 9.488

X = 28.391 2 X 4.005= 9.488

X =6.574 2 X 4.005=9.488

X = 11.622 2 X 4.005=9.488

X = 4.314 2 X 4.005=9.488

DISCUSSION From the analysis it is clear that the significantly influencing factors on the investment made by the investors of public and private sector mutual funds are liquidity, flexibility, and savings on tax, service quality and transparency. As per the table 7 above, at 5% significant

level and at 4 degrees of freedom, the calculated values of all these factors were greater than the table values, which implies that the perception of investors are dependent on these factors and there is no significant difference in the opinion of both the public and private sectors mutual fund investors. As far as the other factors like Management Fee, Return on Income and Security

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are concerned, there is a significant difference in the perceptions of the investors of the public and private sector mutual funds and needs to be concentrated on. Management fee is the minimum fee charged by the AMC for floating different investment schemes, and from the study the investors opine that private sector mutual fund companies charge more fees compared to that of public sector mutual fund companies and thus there is dissatisfaction regarding this factor among the private sector investors. Hence fund manager of the private sectors should concentrate on this aspect and try to come up to the expectations of the investors and maintain the costs at low level similar to that of public sector mutual funds. Investors investment in any particular fund scheme of mutual funds depends upon anticipated return that will accrue from that particular investment. The analysis shows that there is a significant difference in the perception of the investors of public and private sector mutual funds and feel that the returns from the public sector are not satisfactory and upto their expectations. It is a known fact that most of the public sector MF companies invest in safe instruments which have less returns but surer returns, where as the private sector MF companies invests in equities which are highly risky but get greater returns . So this can be the differentiating factor in the perceptions of the investors. Therefore requisite steps should be taken by the public sector MF companies to develop such schemes which will ultimately satisfy the investors by giving appropriate returns. Security is one area where investors like to bank on. The main reason behind saving and investing in any of the financial investments is to secure for the future. As per the analysis it is quite evident that there is a significant difference in the perception of the investors on public and private sector mutual funds. The investors of the public sector feel more secured compared with that of private sector mutual funds even though the returns are not that much expected because they feel that the public sector MFs are well regulated and are less risky compared to that of private sector MFs. This may be due to lack of awareness or very cautious nature of the investors as many of the investors are risk averters. Therefore the investors should be well educated with the dos and donts of investment. Factors influencing investment decision in mutual funds Apart from the above factors, the following factors such as Monetary, Core product, Fund strength, Promotional measures, Customer expectation and Service quality were identified as the major factors along with 30 variables for preferring mutual funds. The investors view on the variables influencing their investment decision in mutual funds is measured at five point Likert scale. The

assigned scores on these scales range from 5 to 1 marks. These scores were analysed by factor analysis in order to identify the important factors leading to their investment decision. Before applying the factor analysis, Kaiser- Meyer- Ohlin measure of sample adequacy and Bartletts test of sphericity has been conducted to test the validity of data for factor analysis. The 30 identified variables have been coded against a five point likert scale. The Rotated Component Matrix (RCM) for the 30 variables measuring the preference level in fund market has been obtained in seven iterations using SPSS(version16).To have more clarity the factors influencing the public sector mutual funds and private sector mutual funds are taken separately and analysed and later on compared. The factor analysis results in six important factors leading to investment in mutual funds. The factor loading of the variables in each factor, its reliability coefficient, its eigen value and the percent of variation explained of public sector mutual funds are given in table 8. According to table 8, the narrated six factors explain the variables leading to investment in mutual funds. The first two important factors given by the factor analysis are monetary and core product factors since the respective eigen values are 4.1159 and 3.6086. The monetary factor consists of seven variables with the reliability coefficient of 0.7149. It informs that the included seven variables in monetary factor explain it to the extent of 71.49%.The second factor namely core product consists of seven variables with the reliability coefficient of 0.7326 which explains to the extent of 73.26%. The next two important factors identified by the factor analysis are fund strength and promotional measures since their eigen value are 2.5868 and 2.1141 respectively. The fund strength factor consists of four variables with the reliability coefficient of 0.8188.The percent of variation explained by this factor is 15.84 percent. It infers that this factor alone explains all variables leading to investment on mutual funds to the extent of 15.84 percent. The promotional measures consist of four variables with the reliability coefficient of 0.8093 and 11.17 as percent of variation. The last two factors narrated by the factor analysis are customer expectation and service quality with the eigen values of 1.3632 and 1.2145 respectively. Each factor consists of four variables with the reliability coefficient of 0.7883 and 0.7117 respectively. To conclude the public sector mutual fund investors highly perceive monetary and core product as the influencing factors for their investment in mutual fund, followed by fund strength and promotional measures. Hence the players of the public sector mutual funds should prepare a suitable strategy to meet the customer needs and expectations. According to table 9, the assigned six factors explain the variables leading to investment in mutual funds. The private sector investors also view the first two factors

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Table 8. Factor loading of the variables influencing the investment decision on mutual funds Public sector

Factor

Variables Range of schemes Load conditions Minimum amount required Entry and exit loads Past performance Expenses charged Collaboration with reputed banks Back ground of the promoters Reputation of fund managers Type of portfolio and schemes Fund size Liquidity factors Corpus of the fund Performance Brand image Utilities offered Previous interaction Research team strength Advertisements Timing of the scheme launching Redemption duration Distribution networks Safety Convenience of investing Regular income Consistency in income

Monetary

Core product

Fund strength

Promotional measures

Customer expectation

Factor loading 0.9234 0.8119 0.7968 0.7336 0.6894 0.6237 0.5494 0.8997 0.8236 0.7494 0.7211 0.6804 0.6246 0.5917 0.9296 0.8334 0.8071 0.7493 0.8596 0.8091 0.7569 0.7224 0.9083 0.8334 0.7696 0.6969 0.8508 0.7669 0.7123 0.6039

Reliability Coefficient

Eigen Value

Percent of variation explained

0.7149

4.1159

21.33

0.7326

3.6086

20.26

0.8188

2.5868

15.84

0.8093

2.1141

11.17

0.7883

1.3632

8.22

Transparency Reliability Responsiveness Level of technology application KMO measures of sampling adequacy :0.7894 Service quality
(source: primary data)

0.7117

1.2145

7.14

Bartletts test of sphericity: Chi-square value : 183.34 at 5%sig.level

monetary and core product as important factors, given by the factor analysis since the respective eigen values are 4.1041 and 3.5976. The monetary factor consists of seven variables with the reliability coefficient of 0.7094. It infers that the included seven variables in monetary factor explain it to the extent of 70.94%.The second factor namely core product consists of seven variables with the reliability coefficient of 0.7243 which explains to the extent of 72.43%. The next two important factors identified by the factor analysis are fund strength and promotional measures since their eigen values are 2.5431 and 2.1039 respectively. The fund strength factor consists of four variables with the reliability coefficient of 0.8090 .The percent of variation explained by this factor is 14.94 percent. It infers that this factor alone explains all variables leading to investment on mutual funds to the extent of 14.94 percent. The promotional measures consist of four variables with the reliability coefficient of 0.8055 and 10.85 as percent of variation.

The last two factors narrated by the factor analysis are customer expectation and service quality with the eigen values of 1.3558 and 1.2122 respectively. Each factor consists of four variables with the reliability coefficient of 0.7767 and 0.7221 respectively. We can come to the conclusion that even the private sector mutual fund investors give priority to the factors, monetary and core product as the influencing factors for their investment in mutual fund, followed by fund strength and promotional measures. Therefore it becomes the responsibility of the fund managers to concentrate more on these factors so that the investors confidence can be retained thereby satisfying the investors, and also improvise on those areas and factors which the investors strongly aspire (Agarwal, 1992) thereby disbursing a wholesome package of fulfillment and contentment which surely will be an ever shining star and never sun setting kingdom. By comparing both the sectors, we can deduct that it becomes highly essential for the policy makers to understand the expectations of various investors in the

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Table 9. Factor loading of the variables influencing the investment decision on mutual funds Private sector.

Factor

Variables Range of schemes Load conditions Minimum amount required Entry and exit loads Past performance Expenses charged Collaboration with reputed banks Back ground of the promoters Reputation of fund managers Type of portfolio and schemes Fund size Liquidity factors Corpus of the fund Performance Brand image Utilities offered Previous interaction Research team strength Advertisements Timing of the scheme launching Redemption duration Distribution networks Safety Convenience of investing Regular income Consistency in income

Monetary

Core product

Fund strength

Promotional measures

Customer expectation

Factor loading 0.9123 0.8009 0.7658 0.7106 0.6324 0.6117 0.5744 0.8692 0.8133 0.7386 0.7200 0.6764 0.6157 0.5812 0.9121 0.8036 0.7917 0.7349 0.8469 0.7091 0.7357 0.7024 0.9058 0.8264 0.7690 0.6769

Reliability Coefficient

Eigen Value

Percent of variation explained

0.7094

4.1041

21.03

0.7243

3.5976

19.46

0.8090

2.5431

14.94

0.8055

2.1039

10.85

0.7767

1.3558

7.76

Transparency Reliability Responsiveness Level of technology application KMO measures of sampling adequacy :0.7699 Service quality

0.8508 0.7669 0.7221 1.2122 7.14 0.7123 0.6039 Bartletts test of sphericity: Chi-square value : 183.34 at 5%sig.level

capital market and also should have an idea on the significantly influencing factors which influence the perception of the investors of both the public and private sector investors so that the fund managers can develop a suitable strategy to meet the investors needs and also by providing service to the investors in full fledged manner through the modern and innovative mutual fund schemes. Effective and ongoing communication with unit holders heightens the importance for the mutual fund industries. Conclusion Mutual Funds have emerged as an important segment of financial markets and so far have delivered value to the investors. The study reveals that the investors perception is dependent on the demographic profile and assesses that the investors Age, Marital status and occupation has direct impact on the investors choice of investment. The study further reveals that female segment are not fully tapped and even there is low target on higher income

group people. Hence fund managers should take steps to tap the female segment and higher income group segment to enhance more investment in mutual fund Investment Avenue, which would really help the industry to flourish. Furthermore the findings of the research were on the factors influencing investors perception on public- private MFs. It reveals that Liquidity. Flexibility, Tax savings, Service Quality and Transparency are the primary factors which have a higher impact on perception of investors and monetary and core product are the influencing factors which give them the required boosting in the investment process. Therefore it becomes imperative on part of the fund managers to enhance these features for attracting more investors and also to retain the trust, the investors have in them. REFERENCES Agarwal GD (1992). Mutual Funds and Investors

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Interest, Chartered Secretary, 22(1): 23-24. Anjan Chakarabarti, Harsh Rungta (2000). Mutual Funds Industry in India: An in-depth look into the problems of credibility, Risk and Brand, The ICFAI J. Appl. Finance, 6(2): 27-45. Kothari CR (2009). Research Methodology Methods and Techniques New Age International Pvt Ltd Publishers. De Bondt WFM, Thaler R (1985). Does the stock market over react? J. Finance, 40: 793-805. Festinger, L. (1957). A theory of cognitive dissonance. Stanford, CA: Stanford University Press. Freeman, Romney and Freeman. (1987). "Cognitive Structure and Informan Accuracy." American Anthropologist 89:310-325 Goetzman, W.N., (1997), Cognitive Dissonance and Mutual Fund Investors, The J. Financial Res., 20: 145158. Gupta LC (1994). Mutual Funds and Asset Preference, Society for Capital Market Research and Development, Delhi. Ippolito R (1992). Consumer reaction to measures of poor quality: Evidence from Mutual Funds, J. Law and Econ., 35: 45-70.

Madhusudan V Jambodekar (1996). Marketing Strategies of Mutual Funds Current Practices and Future Directions, Working Paper, UTI IIMB Centre for Capital Markets Education and Research, Bangalore. Shanmugham (2000) Factors Influencing Investment Decision, Indian Capital Markets- Trends and Dimensions (ed.), Tata Mc Graw-Hill publishing company limited, New Delhi. Shankar, V.,(1996), Retailing Mutual Funds : A consumer product model, The Hindu,July 24, 26 Sarkar,A.K.,(1991), Mutual Funds in India: Emerging Trends, Management Accountant, 26(3): 171-194. Sadhak H (1991). The alternate saving media, The Economic Times, April 30, 9. Sharma C Lall (1991). Mutual Funds How to keep them on Right Track,Yojana, 35(23): 18-19. Samir K, Barua et al. (1991). Master Shares: A bonanza for large Investors, Vikalpa, 16(1): 29-34. Vidya Shankar S (1990). Mutual Funds Emerging Trends in India Chartered Secretary,.20(8): 639-640.