IMPACT OF CONSUMER BEHAVIOUR AND

PERCEPTION TOWARDS DIFFERENT INVESTMENTS

PRODUCTS

Submitted for the partial fulfillment of the requirement for the award
Of
MASTER OF BUSINESS ADMINISTRATION
SUBMITTED BY
TANYA QMAR
ROLL NO. : 1582970029

Department of management

DECLARATION
We the students of MBA

IST year, 2ND semester of IILM

ACADEMY OF HIGHER LEARNING, SAHIBABAD,

Ghaziabad, 2008-10 batch,
Project

Report

BEHAVIOUR

titled
AND

hereby declare that the Winter

A IMPACT OF CONSUMER
PERCEPTION

TOWARDS

DIFFERENT INVESTMENTS PRODUCTS is the outcome

of our own work and the same has not been submitted by any
Institute for the award of any degree or any Professional
diploma.
Date:
---------------------------TANYA QMAR

ABSTRACT
The first and most objective of our study is IMPACT OF
CONSUMER

BEHAVIOUR

AND

PERCEPTION

TOWARDS DIFFERENT INVESTMENTS PRODUCTS. The

study of consumer behavior is the most important factor for
marketing of any goods and services. The consumer behavior
suggest how individual, groups and organization select, buy,
use and dispose of goods, services, ideas or experience to
satisfy there needs and wants. It also clues for improving or
introducing products or services, setting price, devising
channels etc.
Since liberalization 100% FDI is allowed in India. This has
attracted foreign companies to penetrate the Indian market.
The marketers always look for emergent trends that suggest
new marketing opportunities and here in India a lot of
opportunities are available.

ACKNOWLEDGEMGNT

This Project Report is the fruit of our intense hard work and
dedication during our project work. We wish to express our
sincere

gratitude

to

our

project

supervisor

Mr.

____________________for his esteemed guidance during the

course of project work. We are grateful to her for giving us an
insight into the realm of Buying consumer Behaviour on
Investment products . In spite of her busy schedule, she was
always available whenever we required help .

TABLE OF CONTENT
S.No.

TABLE OF CONTENT

CHAPTER-1
INTRODUCTION
OBJECTIVES
RESEARCH METHODOLOGY
LIMITATIONS

II

31-38
39-46

CHAPTER-4
DATA ANALYSIS & INTERPRETATION
FINDINGS

72-74
75-76

CHAPTER- 6
BIBLIOGRAPHY

VI

47-70
71

CHAPTER-5
SUMMARY& CONCLUSIONS
SUGGESTIONS

VI

12-30

CHAPTER-3
INDUSTRY PROFILE
COMPANY PROFILE

IV

5-8
9
10
11

CHAPTER-2
REVIEW OF LITERATURE

III

PAGE NO.

77-78

CHAPTER- 7
ANNEXURE

79-82

INTRODUCTION

INTRODUCTION
INTRODUCTION
As a consumer we are all unique and this uniqueness is reflected in the
consumption pattern and process purchase. The study of consumer behavior
provides us with reasons why consumers differ from one another in buying
using products and services. We receive stimuli from the environment and the
specifics of the marketing strategies of different products and services, and
responds to these stimuli in terms of either buying or not buying product. In
between the stage of receiving the stimuli and responding to it, the consumer
goes through the process of making his decision.

Stages of the Consumer Buying Process:

Six Stages to the Consumer Buying Decision Process (For complex decisions).
Actual purchasing is only one stage of the process. Not all decision processes
lead to a purchase. All consumer decisions do not always include all 6 stages,
determined by the degree of complexity...discussed next.
The 6 stages are:
1. Problem Recognition--difference between the desired state and the
actual condition. Deficit in assortment of products. Hunger--Food.
Hunger stimulates your need to eat.
Can be stimulated by the marketer through product information--did not
know you were deficient? I.E., see a commercial for a new pair of shoes,
stimulates your recognition that you need a new pair of shoes.
2. Information search-o

Internal search, memory.

External search if you need more information. Friends and

relatives (word of mouth). Marketer dominated sources;
comparison shopping; public sources etc.

A successful information search leaves a buyer with possible

alternatives, the evoked set.
Hungry, want to go out and eat, evoked set is
o

Chinese food

Indian food

burger king

3. Evaluation of Alternatives--need to establish criteria for evaluation,

features the buyer wants or does not want. Rank/weight alternatives or
resume search. May decide that you want to eat something spicy, Indian
gets highest rank etc. If not satisfied with your choices then return to the
search phase. Can you think of another restaurant? Look in the yellow
pages etc. Information from different sources may be treated differently.
Marketers try to influence by "framing" alternatives.
4. Purchase decision--Choose buying alternative, includes product,
package, store, method of purchase etc.
5. Purchase--May differ from decision, time lapse between 4 & 5, product
availability.
6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction.
Cognitive Dissonance, have you made the right decision. This can be
reduced

by

warranties,

after

sales

communication

etc.

After eating an Indian meal, may think that really you wanted a Chinese
meal instead.
Types of Consumer Buying Behavior
Types of consumer buying behavior are determined by:

Level of Involvement in purchase decision. Importance and intensity of

interest in a product in a particular situation.

Buyers level of involvement determines why he/she is motivated to seek

information about a certain products and brands but virtually ignores
others.

High involvement purchases--Honda Motorbike, high priced goods, products

visible to others, and the higher the risk the higher the involvement. Types of
risk:

Personal risk

Social risk

Economic risk

The four type of consumer buying behavior are:

Routine Response/Programmed Behavior--Buying low involvement

frequently purchased low cost items; need very little search and decision
effort; purchased almost automatically. Examples include soft drinks,
snack foods, milk etc.

Limited Decision Making--Buying product occasionally. When you

need to obtain information about unfamiliar brand in a familiar product
category, perhaps. Requires a moderate amount of time for information
gathering. Examples include Clothes--know product class but not the
brand.

Extensive Decision Making/Complex high involvement, unfamiliar,

expensive and/or infrequently bought products. High degree of
economic/performance/psychological risk. Examples include cars,
homes, computers, education. Spend a lot of time seeking information
and

deciding.

Information from the companies MM; friends and relatives, store

personnel etc. Go through all six stages of the buying process.

Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same Buying
Behavior. Product can shift from one category to the next.
For example:
Going out for dinner for one person may be extensive decision making
(for someone that does not go out often at all), but limited decision
making for someone else. The reason for the dinner, whether it is an
anniversary celebration, or a meal with a couple of friends will also
determine the extent of the decision making.
Factors Effecting the Consumer Buying Decision Process
A consumer, making a purchase decision will be affected by the following three
factors:
1. Cultural and sub culture Factor
2. Social Factor
3. Personal Factor

Culture and Sub-culture-Culture refers to the set of values, ideas, and attitudes that are accepted
by a homogenous group of people and transmitted to the next
generation.
Culture also determines what is acceptable with product advertising.
Culture determines what people wear, eat, reside and travel. Cultural
values in the US are good health, education, individualism and freedom.
In American culture time scarcity is a growing problem that is change in
meals. Big impact on international marketing.
Culture can be divided into subcultures:
o

geographic regions

Human characteristics such as age and ethnic background.

9

West Coast, teenage and Asian American.

Culture affects what people buy, how they buy and when they buy.
Understanding Consumer Buying Behavior offers consumers greater
satisfaction (Utility). We must assume that the company has adopted the
Marketing Concept and are consumer oriented.

Social Factors
Consumer wants, learning, motives etc. are influenced by opinion leaders,
person's family, reference groups, social class and culture.

Roles and Family Influences-Role...things you should do based on the expectations of you from your
position

within

group.

People

have

many

roles.

Husband, father, employer, employee. Individuals role are continuing to

change therefore marketers must continue to update information. Family
is the most basic group a person belongs to. Marketers must understand:
o

that many family decisions are made by the family unit

consumer behavior starts in the family unit

family roles and preferences are the model for children's future
family (can reject/alter/etc)

family buying decisions are a mixture of family interactions and

individual decision making

Family acts an interpreter of social and cultural values for the

individual.

The Family life cycle: families go through stages; each stage creates
different consumer demands:

Reference Groups--

10

Individual identifies with the group to the extent that he takes on many
of the values, attitudes or behaviors of the group members.
Families, friends, sororities, civic and professional organizations. Any
group that has a positive or negative influence on a persons attitude and
behavior.
Membership groups (belong to)
Affinity marketing is focused on the desires of consumers that belong to
reference groups. Marketers get the groups to approve the product and
communicate that approval to its members. Credit Cards etc.!!
Aspiration groups (want to belong to)Disassociate groups (do not want
to belong to) Honda, tries to disassociate from the "biker" group. The
degree to which a reference group will affect a purchase decision
depends on an individuals susceptibility to reference group influence
and the strength of his/her involvement with the group.

Social Class
An open group of individuals who have similar social rank. US is not a
classless society. US criteria; occupation, education, income, wealth,
race, ethnic groups and possessions.
Social class influences many aspects of our lives. i.e; upper middle class
Americans prefer luxury cars Mercedes.
o

Upper-upper class, .3%, inherited wealth, aristocratic names.

Lower-upper class, 1.2%, newer social elite, from current

professionals and corporate elite

Upper-middle class, 12.5%, college graduates, managers and

professionals

11

Middle class, 32%, average pay white collar workers and blue
collar friends

Working class, 38%, average pay blue collar workers

Lower class, 9%, working, not on welfare

Lower-lower class, 7%, on welfare

Social class determines to some extent, the types, quality, and quantity
of products that a person buys or uses.
Lower class people tend to stay close to home when shopping; do not
engage

in

much

pre-purchase

information

gathering.

Stores project definite class images.

Family, reference groups and social classes are all social influences on
consumer behavior. All operate within a larger culture.

Personal Factor Unique to a particular person. Demographic Factors, Sex,

Race, Age etc. Who in the family is responsible for the decision making?
Young people purchase things for different reasons than older people.

Psychological factors
Psychological factors include:

Motives- A motive is an internal energizing force that orients a person's

activities toward satisfying a need or achieving a goal. Actions are
effected by a set of motives, not just one. If marketers can identify
motives then they can better develop a marketing mix.

MASLOW hierarchy of needs:

12

Physiological

Safety

Love and Belonging

Esteem

Self Actualization

Need to determine what level of the hierarchy the consumers are at to

determine what motivates their purchases. The product was not selling
well, and was almost terminated. Upon extensive research it was
determined that the product did sell well in inner-city convenience
stores. It was determined that the consumers for the product were
actually drug addicts who couldn't digest a regular meal. They would
purchase Nutriment as a substitute for a meal. Their motivation to
purchase was completely different to the motivation that B-MS had
originally thought. These consumers were at the Physiological level of
the hierarchy. BM-S therefore had to redesign its MM to better meet the
needs

of

this

target

market.

Motives often operate at a subconscious level therefore are difficult to

measure.

Perception
Perception is the process of selecting, organizing and interpreting
information inputs to produce meaning. IE we chose what info we pay
attention

to,

organize

it

and

interpret

it.

Information inputs are the sensations received through sight, taste,

hearing, smell and touch.
Selective Exposure-select inputs to be exposed to our awareness. More
likely if it is linked to an event, satisfies current needs, intensity of input
changes (sharp price drop).

13

Selective Distortion-Changing/twisting current received information,

inconsistent with beliefs.
Advertisers that use comparative advertisements (pitching one product
against another), have to be very careful that consumers do not distort
the facts and perceive that the advertisement was for the competitor. A
current example...MCI and AT&T...do you ever get confused?
Selective Retention-Remember inputs that support beliefs, forgets those
that

don't.

Average supermarket shopper is exposed to 17,000 products in a

shopping visit lasting 30 minutes-60% of purchases are unplanned.
Exposed to 1,500 advertisement per day. Can't be expected to be aware
of all these inputs, and certainly will not retain many.
Interpreting information is based on what is already familiar, on
knowledge that is stored in the memory.

Ability and Knowledge-Need to understand individuals capacity to learn. Learning, changes in a

person's behavior caused by information and experience. Therefore to
change consumers' behavior about your product, need to give them new
information re: product...free sample etc.
When making buying decisions, buyers must process information.
Knowledge is the familiarity with the product and expertise.
Inexperience buyers often use prices as an indicator of quality more than
those

who

have

knowledge

of

product.

Non-alcoholic Beer example: consumers chose the most expensive sixpack, because they assume that the greater price indicates greater
quality.
14

Learning is the process through which a relatively permanent change in

behavior results from the consequences of past behavior.

Attitudes-Knowledge and positive and negative feelings about an object

or

activity-maybe tangible or intangible, living or non living.....Drive

perceptions
Individual learns attitudes through experience and interaction with other
people. Consumer attitudes toward a firm and its products greatly
influence the success or failure of the firm's marketing strategy.
Honda "You meet the nicest people on a Honda", dispel the unsavory
image of a motorbike rider, late 1950s. Changing market of the 1990s,
baby boomers aging, Hondas market returning to hard core. To change
this they have a new slogan "Come ride with us".
Attitudes and attitude change are influenced by consumers personality
and lifestyle.
Consumers screen information that conflicts with their attitudes. Distort
information to make it consistent and selectively retain information that
reinforces our attitudes. IE brand loyalty.
There is a difference between attitude and intention to buy (ability to
buy)

Personality--

All the internal traits and behaviors that make a person unique,

15

uniqueness arrives from a person's heredity and personal experience.

Examples include:
o

Work holism

Compulsiveness

Self confidence

Friendliness

Adaptability

Ambitiousness

Dogmatism

Authoritarianism

Introversion

Extroversion

Aggressiveness

Competitiveness.

Traits affect the way people behave. Marketers try to match the store
image to the perceived image of their customers.
There is a weak association between personality and Buying Behavior;
this may be due to unreliable measures. Nike ads. Consumers buy
products that are consistent with their self concept.

Lifestyles-Recent US trends in lifestyles are a shift towards personal independence

and individualism and a preference for a healthy, natural lifestyle.
Lifestyles are the consistent patterns people follow in their lives.

16

The marketer must be aware of these factors in order to develop an appropriate

MM for its target market.

1.1

What is Marketing?

Marketing on the one hand is a business philosophy and on the other an action
oriented process. The philosophy - also termed as marketing concept - has its
roots in market economy. There are four critical ideas that form the foundation
of such an economy:
Individuals pursue their self-interest to seek rewarding experience
Their choices determine as to what would constitute such experience, the
choices themselves being shaped by personal (taste) and external (cultural)
influences.
Consumers enjoy the freedom to choose; they are sovereign.
This freedom ensures free and competitive exchange between buyers and
sellers. Marketing in turn is based on these four principles.
Thus Marketing can be defined as a
Process that aims at satisfying individual and organizational needs by
creating, offering and exchanging competitively made products that
provide value to the buyers
Today our focus is on customer. Objectives liken revenue, profit, market share,
etc. Re important, but they will flow only by acquiring customer competence.
In our country particularly the customer, even as late as in 1980s, was bereft of
alternatives; he would uncomplainingly buy whatever the seller dished out. Not
any more. Todays choice empowered customer, supported by a competitive
environment, global quality, and new economic realities, decides the fate of the
marketer.

17

So lets define Marketing once more: It is a total business philosophy aimed at

identifying the needs of each customer group, then designing and producing
product / service package so as to serve the groups more effectively than the
competitors.
This definition reveals three key dimensions of marketing:
It seeks to identify customer needs: Many manufacturers would know all
there is to know about relevant production technology, but nothing about their
customers wants. They may design products with fancy features without
considering the perceived value of such features to their
buyers. Then they wonder why their sales staff fails to push the product in the
market.
Marketing attempts to select customer groups for which it can develop a
competitive edge: Companies taking a shotgun approach - meaning all
things to all people - inevitably end up with sackful of unsold product
inventories.
What is Consumer Buying Behavior?
Definition of Buying Behavior: Buying Behavior is the decision processes and
acts of people involved in buying and using products.
Need to understand:
Why consumers make the purchases that they make?
What factors influence consumer purchases?
Changing factors in our society.
Consumer Buying Behavior refers to the buying behavior of the ultimate
consumer. A firm needs to analyze buying behavior for:

Buyers reactions to a firms marketing strategy has a great impact on the

firms success.

18

The marketing concept stresses that a firm should create a Marketing

Mix (MM) that satisfies (gives utility to) customers, therefore need to
analyze the what, where, when and how consumers buy.

Marketers can better predict how consumers will respond to marketing

strategies.

19

Investment can be defined as an item of value purchased for income or

capital appreciation. Investments are made to achieve a specific objective and
savings are made to meet an unforeseen event.
There are various avenues of investments in accordance with individual
preferences. Investments are made in different asset classes depending on an
individuals risk and return characteristics Investment choices are physical
assets and financial assets.
Gold and Real estates are examples of physical assets, which have a
physical form to them. There is a strong preference for these assets, as these
assets can be purchased with cash and held for a long term. The obvious
disadvantages with physical assets are the risks of loss and theft, lower levels
of return; illiquid secondary markets; and adhoc valuations and transactions.
Financial assets are securities, which are certificates embodying a
financial contract between parties. Bonds, Equity shares, Deposits and
Insurance policies are some of the examples of financial assets. In financial
assets investors only hold the proof of their investments in the form of a
certificate or account. These products are usually liquid, transferable and in
most cases, stored electronically with high degree of safety.
But a minimum amount of cash is always kept in hand for
transactions and contingencies. To face the contingencies and unexpected
events the insurance came into existence.
Another avenue of investment is mutual funds. It is created when
investors put their money together. It is therefore a pool of the investors funds.
The most important characteristics of a mutual fund is that the contributors and
the beneficiaries of the fund are the same class of people, namely the investors.
The term mutual means that investors contribute to the pool, and also benefit
from the pool. There are no other claimants to the funds. The pool of funds held
mutually by investors is the mutual fund.

20

A mutual fund pools the money of people with similar investment

goals. The money in turn is invested in various securities depending on the
objectives of the mutual fund scheme, and the profits (or loss) are shared
among investors in proportion to their investments.
Mutual fund schemes are usually open-ended (perpetually open for
investments and redemptions) or closed end (with a fixed term). A mutual fund
scheme issues units that are normally priced at Rs.10 during the initial offer.
Thus, the number of units you own as against the total number of units issued
by the mutual fund scheme determines your share in the profits or loss of a
scheme.
In the case of open-end schemes, units can be purchased from or
sold back to the fund at a Net Asset Value (NAV) based price on all business
days.
The NAV is the actual value of a unit of the fund on a given day.
Thus, when you invest in a mutual fund scheme, you normally get an account
statement mentioning the number of units that have been allotted to you and the
NAV based price at which the units have been allotted. The account statement
is similar to your bank statement.
Mutual funds invest basically in three types of asset classes:
Stocks: Stocks represent ownership or equity in a company, popularly known
as shares.
Bonds: These represent debt from companies, financial institutions or
Government agencies.
Money market instruments: These include short-term debt instruments such
as treasury bills, certificate of deposits and inter-bank call money.

21

A mutual funds business is to invest the funds thus collected, according to the
wishes of the investors who created the pool. In many markets these wishes are
articulated as investment mandates.
Analysis of The perception towards these mutual funds is done
here in this project. Even what factors the investors look before investing can
also be observed.

22

OBJECTIVES
To study the level of awareness of mutual funds
To analyses the perception of investors towards mutual funds.
To study the factors considered by the investors and those which
ultimately influence him while investing.
To determine the type of mutual fund investor prefers the most.

23

RESEARCH METHODOLOGY

Primary data is data that is tailored to a companys needs, by customizing true

approach focus groups, survey, field-tests, interviews or observation.
Primary data delivers more specific results than secondary research,
which is an especially important consideration when one launching a new
product or service. In addition, primary research is usually based on statistical
methodologies. The tiny sample can give an accurate representation of a
particular market.
Secondary data is based on information gleaned from studies
previously performed by government agencies, chambers of commerce, trade
associations and other organizations. This includes census bureau information.
Much kind of this information can be found in libraries or on the web, but
looks and business publications, as well as magazines and newspapers.
Analysis of individual investment patterns can be done by this
primary data analysis. In this project I have done a survey with a questionnaire
with a sample size of 100 individuals who are employees and tax payees. The
questionnaire includes the economic status of the individuals, age group,
marital status, investments made etc.
As Redwood Consulting distributes several investment products
like mutual funds, insurance, shares, debentures etc. This survey will help them
in developing marketing strategies for their investment products.

24

LIMITATIONS

Geographic Scope: The sample used for the study has been taken from the
investors of the city Lucknow.
Frame work: Sampling frame (i.e the list of population members) from which
the sample units are selected was incomplete as it takes into consideration only
those (target investors) who have made their investments during March and
April 2006.
Although adequate care was taken to elicit the accurate information from the
respondents, some of them have felt difficulty in crystallizing their feelings into
words. Apart from the problem faced in articulating, it is the validity of the
feedback can be speculated.
Despite the above limitations the study is useful in that it does point out the
trends and helps to identify the dimensions for improving the scope of mutual
funds.

25

RIVIEW OF
LITERATURE

26

MUTUAL FUNDS
THEORITICAL BACKGROUND

Mutual fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as
disclosed in offer document.
A mutual fund is an investment vehicle for investors who pool their savings for
investing in diversified portfolio of securities with the aim of attractive yields
and appreciation in their value.
Investments in securities are spread across a wide cross-section of industries
and sectors and thus the risk is reduced .Mutual funds issues units to the
investors in accordance with quantum of money invested by them. Investors of
mutual funds are known as unit-holders. The profit 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
securities and exchange board of India.
A mutual fund is setup in the form of a trust, which has
1. Sponsor
2. Trustees
3. Asset Management Company and
4. Custodian.
The trust is established by a sponsor or more than one sponsor who is like
promoter of a company. The trustees of mutual fund hold its property for the
benefit of the unit-holders. Asset management company (AMC) approved by
SEBI manages the funds by making investments in various types of securities.

27

Respective asset management companies (AMC) management mutual fund

schemes. Different business groups have sponsored these AMC s. some
international funds are also operation independently in India like Aliens and
Template.

A BRIEF HISTORY OF MUTUAL FUND

The concept of mutual fund is a new feather in Indian capital market but not
to international capital markets. The formal origin of mutual funds can be
traced to Belgium where society generated Belgium was established in 1822 as
an investment company to finance investments in National Industries with high
associated risk. The concept of mutual funds spread to USA in the beginning of
20th century and three investment companies were started in 1924 since then the
concept of mutual funds has been growing all around the world
In India, first mutual fund was started in 1964 when unit trust of India (UTI)
was established in the similar line of operation of the UK.
The term Mutual fund has not been explained in British literature but it is
considered as synonym of investment trust of

DEFINITIONS
The concept of mutual fund has been defined in various ways.
The mutual fund as an important vehicle for bringing wealth holders and
deficit units together indirectly
...Mr. James pierce
Mutual fund as financial intermediaries which being a wide variety of
securities with in the reach of the most modest of investors.
Frank Relicy
According to SEBI mutual fund regulations 1993, Mutual fund means a fund

28

established in the form of trust by sponsor to raise moneys by the trustees

through the sale of units to the public under one or more schemes for investing
in securities in accordance with these regulations.

CONCEPT OF 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 thus collected is then invested
in capital market instruments such as shares, debentures and other securities.
The income earned through these investments and the capital appreciation
realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.

The flow chart below describes broadly the working of a mutual fund:

29

VALUE CHAIN OF MUTUAL FUND

SPONSOR:
Any person who, acting alone or in combination with another body
corporate, establishes a mutual fund.
Asset Management Company
A firm that invests the pooled funds of retail investors in securities in line
with the stated investment objectives. For a fee, the investment company
provides more than diversification, liquidity, and professional management
service than is normally available to individual investors.
Trustee
The Board of Trustees or the Trustee company who hold the property of the
Mutual Fund in trust for the benefit of the unit holders.
Mutual Fund

30

A fund established 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.
Transfer Agent
A transfer agent is employed by a mutual fund to maintain records of
shareholder accounts calculate and disburse dividends and prepare and mail
shareholder account statements, federal income tax information and other
shareholder notices.
Custodian
Mutual funds are required by law to protect their portfolio securities by
placing them with a custodian. Nearly all mutual funds use qualified bank
custodians.
Unit Holder
A person who is holding units in a scheme of a mutual fund.
CLASSIFICATION OF SCHEMES
By Structure
Open-ended
A scheme where investors can buy and redeem their units on any business day.
Its units are not listed on any stock exchange but are bought from and sold to
the mutual fund.
Close-ended
A mutual fund scheme that offers a limited number of units, which have a lockin period, usually of three to five years. The units of closed-end funds are often

31

listed on one of the major stock exchanges and traded like securities at prices,
which may be higher or lower than its NAV.In India 90% of the schemes is
open-ended fund and the rest 10% is close-ended funds. There are 1062 openended funds and 119 close-ended funds.

By Objective
A scheme can also be classified as growth scheme, income scheme, or balanced
scheme considering its investment objective. Such schemes may be open-ended
or close-ended schemes as described earlier. Such schemes may be classified
mainly as follows:
Growth / Equity Oriented Scheme
The aim of growth funds is to provide capital appreciation over the medium to
long- term. Such schemes normally invest a major part of their corpus in
equities. Such funds have comparatively high risks. These schemes provide
different options to the investors like dividend option, capital appreciation, etc.
and the investors may choose an option depending on their preferences. The

32

investors must indicate the option in the application form. The mutual funds
also allow the investors to change the options at a later date. Growth schemes
are good for investors having a long-term outlook seeking appreciation over a
period of time.
Income / Debt Oriented Scheme
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, Government securities and money market instruments.
Such funds are less risky compared to equity schemes. These funds are not
affected because of fluctuations in equity markets. However, opportunities of
capital appreciation are also limited in such funds. The NAVs of such funds are
affected because of change in interest rates in the country. If the interest rates
fall, NAVs of such funds are likely to increase in the short run and vice versa.
However, long-term investors may not bother about these fluctuations.
Balanced Fund
The aim of balanced funds is to provide both growth and regular income as
such schemes invest both in equities and fixed income securities in the
proportion indicated in their offer documents. These are appropriate for
investors looking for moderate growth. They generally invest 40-60% in equity
and debt instruments. These funds are also affected because of fluctuations in
share prices in the stock markets. However, NAVs of such funds are likely to be
less volatile compared to pure equity funds.
Money Market or Liquid Fund
These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest exclusively
in safer short-term instruments such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money, government securities, etc.

33

Returns on these schemes fluctuate much less compared to other funds. These
funds are appropriate for corporate and individual investors as a means to park
their surplus funds for short periods.

Gilt Fund
These funds invest exclusively in government securities. Government securities
have no default risk. NAVs of these schemes also fluctuate due to change in
interest rates and other economic factors as, is the case with income or debt
oriented schemes.
Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the
securities in the same weightage comprising of an index. NAVs of such
schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as
"tracking error" in technical terms. Necessary disclosures in this regard are
made in the offer document of the mutual fund scheme.
There are also exchange traded index funds launched by the mutual funds that
are traded on the stock exchanges.
AVENUES OF INVESTMENTS
Savings form an important part of the economy of any nation. With the savings
invested in various options available to the people, the money acts as the driver
for growth of the country. Indian financial scene too presents a plethora of
avenues to the investors.
Banks:

34

Considered as the safest of all options, banks have been the roots of the
financial system in India. For an ordinary person though, they have acted as the
safest investment avenue wherein a person deposits money and earns interest
on it. One and all have effectively used the two main modes of investment in
banks, savings accounts and fixed deposits. However, today the interest rate
structure in the country is headed southwards, keeping in line with global
trends. With the banks offering little above 7% in their fixed deposits for one
year, the yields have come down substantially in recent times. Add to this, the
inflationary pressures in economy and you have a position where the savings
are not earning. The inflation is creeping up, to almost 8% at times, and this
means that the value of money saved goes down instead of going up. This
effectively mars any change f gaining from the investments in banks.
Post office Schemes
Among all saving options, post office schemes have been offering the highest
rates. Added to it is that the investments are safe with the department being a
government of India entity. So the two basic and most sought for features,
those of return safety and quantum of returns were being handsomely taken
care of Public Provident Funds act as options to save for the post retirement
period for most people and have been considered good option largely due to the
fact that returns were higher than most other options and also helped people
gain from tax benefits under various sections. The following are the post office
savings schemes available for the investors:
Monthly Income scheme:
This scheme offers an interest of 8%p.a, payable monthly and a bonus of
10% payable at maturity after 6 years. There is no tax deductible at source
(TDS) applicable on investments made in this scheme.
National Savings Scheme:

35

This scheme offers an interest of 8% p.a; compounded half yearly and

payable at maturity in 6 years.

Post Office Time Deposits:

There are 4 options available to investors depending on the term of
investment desired by the investor. They are:
1 year) this gives an interest of 6.25% p.a
2 year) This gives an interest of 6.5% p.a
3 year) This gives an interest of 7.25% p.a
4 year) This gives an interest of 7.5% p.a
Kisan Vikas Patra:
An important feature of this scheme is that it assures that the money invested
doubles in 8 years and 7 months.
Public Provident Fund:
This scheme gives a return of 8% per annum, compounded annually for
maturity of 15 years.
Government of India Bonds:
The GOI Bonds have the following investment options:
6.5% Tax free bonds

36

There is no ceiling on the amount of investment in these bonds. The effective

yields of these bonds are 9.28% p.a for the period of 5 years and premature
encashment option available to investors only after the completion of 3 years.

8% Taxable Bonds:
These bonds do not have any TDS charged on them. There is no maximum
limit of investment in these bonds but there should be a minimum investment
of Rs.1, 000. The maturity period is 6 years. The investor has the option of
interest payable half yearly or cumulative. The investors can also avail tax
benefit under section 80L of income Tax Act, up to Rs. 15,000.
Company Fixed Deposits:
Companies have used fixed deposit schemes as a means of mobilizing funds
for their operations and have paid interest on them. The safer a company is
rated, the lesser the return offered has been the thumb rule. However, there are
several potential roadblocks in these.
The danger of financial position of the company not being understood by the
investor lurks.
1. Liquidity is a major problem with the amount being received monthly
after the due dates.
2. The safety of principal amount has been found lacking.
Stock markets:
Stock markets provide an option to invest in a high risk, high return game.
While the potential return is much more than 10-11% any of the options

37

discussed above can generally generate, the risk is undoubtedly of the highest
order. However, as it might appear, people generally are clueless as to how the
stock market functions and in the process can endanger the hard-earned money.
For those who are not adept at understanding the stock market, the task
of generating superior returns at similar levels of risk is arduous to say the
least. This is where mutual funds come into picture.
COMPARISION OF OTHER AVENUES WITH MUTUAL FUNDS
The mutual fund sector operates under stricter regulations as compared
to most other investment avenues. Apart from offering investors tax efficiency
and legal comfort, how do mutual funds compare with other products?
Company Fixed Deposits versus Mutual Funds
Fixed deposits are unsecured borrowings by the company accepting the
deposit. Credit rating of the fixed deposit program is an indication of the
inherent default risk in t he investment. The money of investors in a mutual
fund scheme are invested by the AMC in specified investments under that
scheme. These investments are held and managed in-trust for the benefit of the
schemes investors. On the other hand, there is no such direct correlation
between a companys fixed deposit mobilization, and the avenues where it
deploys these resources.
There can be no certainty of yield, unless a named guarantor assures a
return or to a lesser extent, if the investment is in a serial gilt scheme. O the
other hand, the return under a fixed deposit is certain, subject only to the
default risk of the borrower.
The basic value at which fixed deposits are encashable is not subject to
market risk. However, the value at which units of a scheme are redeemed
entirely depends on the market. If securities have gained value during the

38

period, then the investor can even earn that is higher than what she anticipated
when she invested. Conversely, she could also end up with a loss.
Early encashment of fixed deposits is always subject to a penalty
charged by the company that accepted the fixed deposit. Mutual fund schemes
also have the option of charging a penalty on early redemption of units (by
way of an exit load).

Bank Fixed Deposits versus Mutual Funds

Bank fixed deposits are similar to company fixed deposits. The major
difference is that banks are more stringently regulated than are companies.
They even operate under stricter requirements regarding Statutory Liquidity
ratio (SLR) and Cash Reserve Ratio (CRR) mandated by RBI.
While the above are for comfort, bank deposits too are subject to default
risk. However, given the political and economic impact of bank defaults, the
government as well as Reserve Bank of India (RBI) tries to ensure that banks
do not fail.
Further, the Deposit Insurance and Credit Guarantee Corporation
(DICGC) protect bank deposits up to Rs. 100,000. The monetary ceiling of
Rs.100,000 is for all the deposits in all the branches of a bank, held by the
depositor in the same capacity and right.
Bonds and Debentures versus Mutual funds
As in the case of fixed deposits, credit rating of a bond or debenture is an
indication of the inherent default risk in the investment. However, unlike fixed
deposits, bonds and debentures are transferable securities.

39

While an investor may have an early encashment option from the issuer ( for
instance through a put option), liquidity is generally through a listing in the
market, implications of this are:
The value that the investor would realize in an early exit is subject to
market risk. The investor could have a capital gain or a loss. This aspect is
similar to a mutual fund scheme.
A hypothecation or mortgage of identified fixed and / or current assets
could back debt securities, e.g secured bonds or debentures. In such a case, if
there is a default, the identified assets become available for meeting redemption
requirements.
An unsecured bond or debenture is for all practical purposes like a fixed
deposit, as far as access to assets is concerned.
A custodian for the benefit of investors in the scheme holds the investment
of a mutual fund scheme.
Equity versus Mutual fund
Investment in both equity and mutual funds are subject to market risk.
Investment in an open-end mutual fund eliminates this direct risk of not being
able to dell the investment in the market. An indirect risk remains, because the
scheme has to realize its investments to pay investors. The AMC is however in
a better position to handle the situation. Further, on account of various SEBI
regulations, such as illiquid securities are likely to be only a part of the
schemes portfolio.
Another benefit of equity mutual fund scheme is that they give investors the
benefit of portfolio diversification through a small investment.
RISK AND RETURN GRID:

40

An investor has mainly three investment objectives.

1. Safety of Principal
2. Return
3. Liquidity
BANKS
Returns

Low

Administrativ
e expenses
Risk

High

Investment
options
Network

Less

BONDS AND
DEBENTURE
S
Low
to Low
to
Moderate moderate
Moderate Moderate
to
to High
high
Low
to Low
to
Moderate moderate
Few
Few

High
penetratio
n
At a cost

Low
penetratio
n
Low

of Not
transparen
t
Guarantee
Maximum
Rs 1 lakh

Not
transparen
t

Liquidity
Quality
Assets

Low

FIXED
DEPOSIT

Low
penetration

EQUITY
MARKET

Low
but Low
but
improving fast
improving

Moderate
high
Low
Moderate
High
Many

Low
to Moderate
moderate
High
Not
Transparent
transparent

MUTUAL
FUND
to Better
to Low
Moderate
More

to Better
Transparent
None

Pricing
The net asset value of the fund is the cumulative market value of the asset fund
net of its liabilities. In other words, if the fund is dissolved or liquidated, by
selling off all the assets in the fund, this is the amount that the shareholders
would collectively own. This gives rise to the concept of the net asset value per
unit, which is the value, represented by the ownership of one unit in the fund. It
is calculated simply by dividing the net asset value of the fund by the number
of units. However, most people refer loosely to the NAV per unit as NAV,
ignoring the per unit. We also abide by the same convention.

41

Calculation of NAV
The most important part of the calculation is the valuation of the assets
owned by the fund. Once it is calculated, the NAV is simply the net value of
assets divided by the number of units outstanding. The detailed methodology
for the calculation of the asset value is given below.
Asset value = (Value of investments+ receivables+ accrued income+ other
current assets- liabilities- accrued expenses) /Number of units outstanding.
ADVANTAGES OF INVESTING IN MUTUAL FUND:
Number of options available
Mutual funds invest according to the underlying investment objective
as specified at the time of launching a scheme. Mutual fund have equity funds,
debt funds, gilt funds and many others that cater to the different needs of the
investor. While equity funds can be as risky as the stock markets themselves,
debt funds offer the kind of security that is aimed for at the time making
investments. The only pertinent factor here is that the fund has to be selected
keeping the risk profile of the investor in mind because the products listed
above have different risks associated with them.
Diversification
Diversification reduces the risk because all stocks dont move in the same
direction at the same time. One can achieve this diversification through a
Mutual Fund with far less money that one can on his own.

Professional Management

42

Mutual Funds employ the services of the 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 the performance that determine the
suitability of any potential investment.
Potential of returns
Returns in the mutual are generally better than any option in any other
avenue over a reasonable period of time. People can pick their investment
horizon and stay put in the chosen fund for the duration.
Liquidity
The investors can withdraw or redeem money at the Net Asset Value
related prices in the open-end schemes. In the Closed-end Schemes, the units
can be transacted at the prevailing market price on a stock exchange. Mutual
Funds also provide the facility of direct repurchase at NAV related prices.
Well Regulated
The Mutual Fund industry is very well regulated. All investment has to
be accounted for, decisions judiciously taken. SEBI acts as a true watch dog in
this case and can impose penalties on the AMCs at fault. The regulations
designed to protect the investors interests are implemented effectively.
Transparency
Being under a regulatory frame work, Mutual Funds have to disclose
their holdings, investment pattern and all the information that can be
considered as material, before all investors. This means that investment
strategy, outlooks of the markets and scheme related details are disclosed with
reasonable frequency to ensure that transparency exists in the system.

43

Flexible, Affordable and Low cost

Mutual Funds offer a relatively less expensive way to invest when
compared to other avenues such as capital market operations. The fee in terms
of brokerages, custodial fees and other management fees are substantially
lower than other options and are directly linked to the performance of the
scheme. Investment in Mutual Funds also offer a lot of flexibility with features
such as regular investment plans, regular withdrawal plans and dividend
investment plans enabling systematic investment or withdrawal of funds.
Convenient Administration
Investment in the mutual fund reduces paper work and helps you avoid
many problems such as bad deliveries, delayed payments and follow up with
brokers and companies. Mutual Funds save your time and make investing easy
and convenient.
TAXATION ON MUTUAL FUNDS
An Indian mutual fund registered with the SEBI, or schemes sponsored
by specified public sector banks/financial institutions and approved by the
central government or authorized by the RBI are tax exempt as per the
provisions of section 10(23D) of the income tax act. The mutual fund will
receive all income without any deduction of tax at source under the provisions
of section 196(iv), of the income tax act.

44

45

MUTUAL FUND INDUSTRY

INDUSTRY OVERVIEW
The financial markets in India are in the process of maturing. The
markets witnessed many structural changes in the years gone by primarily due
to the market regulators proactive approach to the changes in the global
scenario as well as to meet the needs of domestic investors.
The RBI has carried out major reforms in the Indian financial markets
in the last few years primarily by reducing Cash Reserve ratio by 4% over three
years and Bank Rate by 5% over five years. It is due to measures like these that
the Indian economy is currently showing fundamental robustness, with the
GDP expected to grow by almost 8%. With rising exports and stable inflation
of around 5%, the foreign exchange reserves are at an all time high of $118
billion. The interest rates in the country are at record lows and have led to an
increase in credit flow to the commercial sector.
The equity markets have passed through a tumultuous phase in the
last 3 years. The improving macro-economic fundamentals of the Indian
economy have led the market players to expect a bright future. During the year,
the equity markets around the world are showing good performance. However
the markets in India outperformed the world major scripts showed around more
than 75% growth in last 12 months. The year began with resumption of peace
process with Pakistan and end of war in Gulf. The market also has welcome
robust increase in agriculture production with more-than-normal monsoons.
Most of the groundwork for the disinvestment completed over the last few
years, the last Government had started disinvestments and new government has
already acquired shape and started it is not reluctant of divestment.

46

The debt markets have witnessed a rally for over 2 years and now
seem to be stabilizing. The measures to deepen and widen the debt markets
continued throughout the year. A key step in developing the markets was the
launch of Negotiated Dealing System (NDS). NDS allows electronic bidding in
primary markets, thereby bringing about transparency in trading, electronic
settlement of trades and better monitoring and controls. Issuances of a 30-year
paper, floaters ranging from 5 to 15 years and securities with call and put
options by the government will also go a long way in deepening the markets. In
a bid to increase the retail participation, non-competitive bidding is being
encouraged by the RBI.
INDUSTRY STRUCTURE
Global Scenario
At the end of 2006:Q3, mutual fund assets worldwide were $ 17.28 trillion,
having increased 18 percent over the year 2005:Q3.
Worldwide mutual fund assets (trillions of US dollars)

47

Worldwide assets of Equity, Bond, Money Market & Balanced fund

(Billions of US dollars)

48

Composition of world Wide mutual fund assets by the types of fund 2006 Q4

Source: Ici.org
The end of 2006:Q3, mutual fund assets were split into 44% Equity, 18%
Money market, 20% Bonds, 9% Balanced / Mixed and remaining 8%
unclassified.

Worldwide mutual fund assets by region 2006;Q3

49

At the end of 2006:Q3 by region, 55% of the global assets was in America,
34% in Europe and the remaining 11% in Africa and Asia / Pacific.
World wide mutual funds by the type of fund 2006;Q2

At the end of the fourth quarter of 2006, the number of mutual funds
worldwide stood at 54,986. By type of fund, 41 percent were equity funds, 24
percent were bond funds, 20 percent were balanced/mixed funds, and 6 percent
were money market funds.

Number of funds 2000-2006;Q3

50

2000
All Reporting Countries1 52,746

2005

2006

2001

2002

2003

2004

Q4

Q1

Q2

Q3

51,692

52,849

54,110

54,569

54,984

55,095

55,919

56,095

Equity

22,453

20,381

22,348

22,974

22,688

22,364

22,796

23,043

23,050

Bond

15,474

13,128

12,183

11,619

11,886

13,309

13,127

13,213

13,225

Money Market

6,745

4,692

4,277

4,394

4,974

3,623

3,618

3,598

3,569

Balanced/Mixed

6,375

11,110

11,155

11,228

11,465

11,603

11,111

11,291

11,181

Other

612

1,000

1,195

1,310

1,578

1,997

2,364

2,659

3,017

39,367

41,620

42,393

41,689

42,356

42,093

42,529

42,377

Countries Reporting in
Every Period2
35,962
Equity

15,656

18,637

20,630

20,808

20,018

19,920

19,971

20,052

19,952

Bond

10,867

10,176

9,830

9,946

9,847

9,961

10,004

10,026

10,076

Money Market

2,701

2,786

2,727

2,674

2,652

2,899

2,901

2,867

2,831

Balanced/Mixed

6,149

6,926

7,500

7,723

7,857

8,095

7,674

7,966

7,850

Other

589

842

933

1,242

1,315

1,481

1,543

1,618

1,668

MUTUAL FUNDS IN INDIAN SCENARIO

Unit Trust of India was the first mutual fund set up in India in the year 1963. In
early 1990s, Government allowed public sector banks and institutions to set up
mutual funds.
In the year 1992, Securities and exchange Board of India (SEBI) Act was
passed. The objectives of SEBI are to protect the interest of investors in
securities and to promote the development of and to regulate the securities
market.

51

As far as mutual funds are concerned, SEBI formulates policies and regulates
the mutual funds to protect the interest of the investors. SEBI notified
regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored
by private sector entities were allowed to enter the capital market. The
regulations were fully revised in 1996 and have been amended thereafter from
time to time. SEBI has also issued guidelines to the mutual funds from time to
time to protect the interests of investors.
All mutual funds whether promoted by public sector or private sector entities
including those promoted by foreign entities are governed by the same set of
Regulations. There is no distinction in regulatory requirements for these mutual
funds and all are subject to monitoring and inspections by SEBI. The risks
associated with the schemes launched by the mutual funds sponsored by these
entities are of similar type. It may be mentioned here that Unit Trust of India
(UTI) is not registered with SEBI as a mutual fund (as on January 15, 2002).
In February 2003, following the repeal of Unit Trust of India act 1963; UTI
was bifurcated into two separate entities. One is the specified undertaking of
UTI with assets under the management of Rs.29, 835 crores as at the end of
January 2003; representing broadly, the assets of US 64 scheme, assured return
and certain other schemes. The specified undertaking administrator & under
rules framed by Government of India and does not come under the purview of
mutual fund regulation.
The second is the UTI mutual fund Ltd sponsored by SBI, BOB & LIC.
It is registered with SEBI & functions under the mutual fund regulations. With
the bifurcation of the erstwhile UTI which had in March 2000, more than Rs
76,000 crores of assets under management and with setting up of a UTI mutual
fund, conforming to the SEBI, mutual fund regulation and with recent mergers
taking place among different private sector funds, the mutual fund industry has
entered its current phase of consolidation and growth.

52

As at the end of September,2004, there were 29 funds which manage assets of

Rs. 231358.03 crores under 421 schemes.

GROWTH IN ASSETS UNDER MANAGEMENT

53

COMPANY
PROFILE
54

The Company Background:

Redwood Consulting is a venture by expert professionals from the field
of Banking, Insurance, NBFC, Mutual Fund and Retail Business with an
aim to provide the best Recruitment and Training Solutions in the
field of Banking and Financial Service Industry (BFSI) and Retail
Industry.
We understand that banking and financial services is one of the industry
where apart from product, service is of paramount importance and hence
the critical role which human capital plays in the progress of the
organization. The cost of hiring a wrong person is one of the biggest drag
on any organization profitability and we understand it.We are committed
to service excellence in all areas we operate. We are always looking for
better ways to serve you. We are not looking to be another vendor, we
would like to be your partner. It is through your successes that we will be
successful.

55

COMPANIES VISION:
" To be reckoned as the Best Recruitment and Training Company in the
field of Banking and Financial Services and Retail Industry in the hindi
speaking belt of the country.

COMPANY MISSION:
"Our Mission is to provide fast and cost efficient Recruitment and
Training Solutions to our clients by delivering the highest quality service
whereby enabling them to maximize their time and resources to focus on
growing their business."

ABOUT FOUNDER:
The founder of Redwood Consulting is Mr. Virag Jain. He is having vast
experience of more than 16 years in Banking and Financial service
Industry (BFSI). During his 16 years of corporate career he has worked
with reputed brands like ICICI Bank Ltd, Kotak Bank Ltd and Reliance
Mutual Fund in the capacity of Regional Head and Regional Sales
Manager.
He has worked throughout his career in the hindi speaking belt of the
country and has a in-depth understanding of market dynamics and skills
and aptitude required at different level of recruitment in this belt.
Mr. Virag Jain was associated with BLP (Branch leadership Programe ) of
ICICI bank for three Years. During the tenure he was involved in training
of newly inducted Branch Manager and Branch Operations Manager. He
56

was given Honorary Professorship and Star Trainer

Award award by ICICI bank for his valuable contribution in training
and development of the employees.
He has won many awards and accolades during his 16 years of exciting
corporate career. He was awarded the prestigious ICICI bank DNA
award in 2008 for leadership traits shown in the area of Organizational
Capability, Collaboration and Sensitivity.
He is associated with many prestigious management institutes and keep
giving his valuable contribution as a visiting faculty and guest speaker in
important seminars and conference.

57

58

DATA ANALYSYS
.INVESTMENT AVENUE YOU PREFER ? (IF ALL THE APPLICABLE) .1
S.No.

Instruments

Respondent(%)

FIXED DEPOSIT

BANK DEPOSIT

40

MUTUAL FUND

16

POST OFFICE

36

PUBLIC PROVIDENT FUND

16

REAL ESTATE PROPERTY

16

GOLD & SILVER

32

LIFE INSURANCE

32

DEBENTURE

20

10

BOND

28

59

WHAT DO YOU CONSIDER THE MOST IMPORTANT PARAMETER .2

?WHILE INVESTING

S.No.

Topic

Percentage (%)

LIQUIDITY

LOW RISK

HIGH RETURN

68

TAX BENEFIT

32

INCOME & GROWTH

60

?WHAT ARE YOUR SAVING OBJECTIVES .3

S.No.

Topic

Percentage (%)

CHILDREN EDUCATION

20

RETIREMENT

20

HOME PURCHASE

20

CHILDREN MARRIAGE

40

HEALTH CARE

61

?AT WHICH RATE YOU WANT YOUR INVESTMENT TO GROW .6

A. STEADILY

B. (48%)

S.No.

C. FAST (52%)

Topic

Percentage (%)

STEADILY

AT AN AVERAGE RATE

48

FAST

52

62

?HOW OFTEN DO YOU MONITOR YOUR INVESTMENT .7

S.No.

Topic

Percentage (%)

DAILY

MONTHLY

64

OCCASIONALLY

36

63

?WHAT IS THE TIME PERIOD YOU PREFER TO INVEST .8

S.No.

Topic

Percentage (%)

SHORT-TERM (0-1YEAR)

MEDIUM-TERM (1-5YEARS)

44

LONG-TERM (<5 YEARS)

56

64

WHAT IS THE PERCENTAGE OF SAVINGS FROM YOUR TOTAL .9

?INCOME

S.No.

Topic

Percentage (%)

>10%

11% - 25%

68

26% - 50%

28

MORE THAN 50 %

65

CAN YOU TAKE RISK OF LOOSING YOUR PRINCIPLE INVESTMENT .10

?AMOUNT
A. YES (4%)
B. NO (96%)
...............PERCENTAGE

S.No.

C. IF YES THAN WHAT

Topic

Percentage (%)

YES

NO

96

66

?WHAT IS YOUR SOURCE OF INVESTMENT ADVISE .11

S.No.

Topic

Percentage (%)

NEWSPAPER

16

NEWS CHANNELS

56

FAMILY OR FRIENDS

ADVISOR & BROKERS

16

MAGAZINES

12

INTERNET

67

FINDINGS
Many of the investors are aware of mutual funds but most of their
perception towards them is not positive.
Investors are mainly concerned with the risk factors of mutual funds and
are not directing towards them.
The investors who have invested in mutual funds mainly go for it
because of the Liquidity matter and Tax exemption.
Most of the people dont know the advantages of mutual funds and the
various types of mutual funds.
There are nearly 1173 schemes of mutual funds offered by various
mutual fund houses, which an ordinary person is not aware.
A common investor basically looks for the Tax exemption and Safety &
security while investing.
Investors often feel that those people, who have surplus amount with
them and invest to avail Tax exemption, can do investing in mutual
funds.

68

69

SUMMARY
This report is an attempt to provide an analysis of the perception of an investor
towards mutual funds. However, what has been reported is only the tip of
iceberg in terms of data that are available.
However, my examinations suggests that employees are interested to
invest in mutual funds provided sufficiently educated and a know-how is
provided on its working. Though the self-employed are investing in mutual
funds and insurance, they are investing small amounts in them because they do
not want to take high risks.
Rewood Consulting should educate the people about the various
advantages of investing in mutual funds and create an awareness regarding
various investment options.
In conclusion, it is important to remember that the main purpose for
initiating the project is to analyze the perception of an ordinary investor
towards the mutual funds and the aspects that guide him to make investment
decisions. The study does not aim to advocate investments in mutual funds.

70

CONCLUSION

Mutual funds are still and would continue to be the unique financial tool in
the country. One has to appreciate the fact that every aspect of life as its periods
of high and lows. This has been the case with the stock markets. Why not apply
the same logic to mutual funds? Mutual funds have not failed in any country
where they worked with regulatory frame work. Their future is bright. The poor
performance of many mutual funds schemes may be mostly attributed to the
quality of personal involved and their matter of fund management.

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SUGGESTIONS
Make people aware of mutual funds by:
Arranging free seminars in different organizations about mutual fund
investments.
Arranging stalls in Public places is a good publicity.
More advertisements need to come to explain the various advantages of
mutual funds and even the various schemes offered by them.
What to expect from a financial advisor
The key for mutual fund investors is to define and recognize the value of
professional financial services, and then insist on getting that value. When
you pay a sales charge or a fee, what can you expect a professional to do for
you? Your advisor should at least:

Understand investor needs and help him formulate long-term investment

goals and objectives.
Before making specific recommendations, advisor should try to gain a
whole picture of investors past experience, lifestyle and goals, as well as his
other investments and current financial situation. When the investor
planning to retire, for example? Does the investor have life insurance? Does
he own real estate? How secured is his job?

Help the investor develop realistic expectations by discussing the risks and
reward so reach investment. Every investment choice has its strengths and
weaknesses, and investor should never feel less than fully informed. When
investor ask questions, or have doubts,
72

Investor should expect your financial advisor to answer honestly, and help
him develop a strategy that is both realistic and comfortable for him.

Match investors goals and objectives with appropriate mutual funds.

Investor should expect your advisor to make clear and specific
recommendations, and explain the reasons behind them in terms he can
understand. Of course, the advisor should be confident and well informed
about the management and portfolio strategies of any mutual funds
recommended.

Continually monitor investor portfolio and help you interpret performance.

Your advisor cannot influence or predict a fund's results. However, he or
she should discuss results with you and help you judge your progress. You
should feel that you can always ask your advisor, "How am I doing?"

Conduct regular reviews to ensure that your strategy continues to provide

optimal results for you.

One of the most valuable services your advisor can provide is to help you
"stay on course" with your investment program. But "staying on course"
long term does not necessarily mean staying put. Expect your financial
advisor to work with you to adjust your portfolio in response to any
significant change in your lifestyle, priorities, assets or responsibilities.

These are the basic services that investors should expect from their financial
advisors. Beyond the basics, many investors could use even more
specialized assistance, like advice on retirement plan distribution options,
setting up and servicing retirement plans for small businesses and selfemployed individuals, developing tax-advantaged strategies for children's
college education, insurance, estate, and trust planning; and year-end
mutual fund tax advice. If you need specialized services, there are many
financial advisors who can help you obtain the right investment mode.

73

BIBLIOGRAPHY
S.No. Name of the Author

Publisher

74

Page Nos.

Punithavathi
Pandyan
V.A.Avadhani

1
2

Securities Analysis and Portfolio 29,30,411&412

Management
Investment and Securities Markets in 427,428
India

MAGAZINES:
1. Business standard
2. Economic times
Marketing dictionary A. IVONAVIC
S.NO

WEBSITES

MONTH OF SEARCH

http:// www.karvy.com

May 2007

http:// www.amfiindia.com

May 2007

http:// www.ici.org

May2007

http:// www.google.com

May 2007

http:// www.moneycontrol.com

June 2007

http:// www.franklintempletonindia.com

June 2007

75

76

QUESTIONNAIRE
PERSONAL INFORMATION
A) Name:
B) Type of Business:
C) Address:
D) Telephone:

Mobile:

E) Fax:

Email:

OCCUPATION .1
( )A. SERVICE( )

( )D. HOUSE WIFE( )

B. BUSINESS( )

C. RETIRE

E. STUDENT

-INCOME .2
( ) A. LESS THEN 2.5 LAKH( )
( )C. 5 LAKH 10 LAKH( )

B. 2.5 LAKH - 5 LAKH

D. 10 LAKH & ABOVE

INVESTMENT AVENUE YOU PREFER ? ( TICK IF ALL THE .4

.APPLICABLE)
( )A. FIXED DEPOSIT( )

B. BANK( )

C. MUTUAL FUNDS

( )D. POST OFFICE SAVINGS( ) E. PUBLIC PROVIDENT FUND

( ) F. FOREX MARKET( )

G. REAL ESTATE (PROPERTY)

( )H.GOLD &SILVER( )
( )J. DEBENTURE( )

I. LIFE INSURANCE
K. BOND

WHAT DO YOU CONSIDER THE MOST IMPORTANT PARAMETER .5

?WHILE INVESTING
( )A. LIQUIDITY( )
( )D. TAX BENEFIT( )

B. LOW RISK( )
E. INCOME & GROWTH

......................................ANY OTHER

77

C. HIGH RETURN

?WHAT ARE YOUR SAVING OBJECTIVES .6

( )A. CHILDREN EDUCATION( )

B. RETIREMENT

C. HOMEPUCHASE

D. CHILDREN MARRIAGE

..........................................E. HEALTH CARE

OTHERS

?AT WHICH RATE YOU WANT YOUR INVESTMENT TO GROW .7

( )A. STEADILY( )

B. AT AN AVERAGE RATE( )

C. FAST

?HOW OFTEN DO YOU MONITOR YOUR INVESTMENT .8

( )A. DAILY( )

B. MONTHLY( )

C. OCCASIONALLY

?WHAT IS THE TIME PERIOD YOU PREFER TO INVEST .9

( )A. SHORT-TERM (0-1YEAR)( )

B. MEDIUM-TERM (1-5YEARS)

( )C. LONG-TERM (<5 YEARS)

WHAT IS THE PERCENTAGE OF SAVINGS FROM YOUR TOTAL .10

?INCOME
( )A. LESS THEN 10%( )

B. 11% - 25%( )

C. 26% - 50%

( )% D. MORE THAN 50

CAN YOU TAKE RISK OF LOSING YOUR PRINCIPLE INVESTMENT .11

?AMOUNT
...............A. YES

B. NO

C. IF YES THEN WHAT PERCENTAGE

?WHAT IS YOUR SOURCE OF INVESTMENT ADVICE .12

A. NEWSPAPER

B. NEWS CHANNELS

D. ADVISOR & BROKERS

E. MAGAZINES

78

C. FAMILY OR FRIENDS
F. INTERNET

79