A Study On Investor Preferences Towards Various Mutual Funds
A Study On Investor Preferences Towards Various Mutual Funds
A Study On Investor Preferences Towards Various Mutual Funds
2K7/PGPM/D52
(2007-09)
New Delhi
ACKNOWLEDGEMENT
1
I Thank Asia Pacific Institute of management Studies for giving me an
I would like to thank Mr. Purshottam Sharna for his valuable guidance
Kumar, Mr. Parbash, Mr. Fariyaad Hussain, Mr. Muniraj Singh and Many
more... without their support this project would not have been a
success.
Last but not the Least i would like to thank those person whose
Vikas Gaba
TABLE OF CONTENT
2
ACKOWLEDGEMENT
OBJECTIVE OF STUDY
INTRODUCTION
COMPANY’S PROFILE
RESEARCH METHODOLOGY
RESEARCH HYPOTHESIS
OBSERVATIONS
RESULTS
ANALYSIS
CONCLUSION
RECOMMENDATIONS
ABSTRACT
ANNEXURE
BIBLIOGRAPHY / WEBLIOGRAPHY
3
OBJECTIVE
Starting out as an industry with a single player, the UTI, in 1963, the
mutual fund industry in India has come a long way since then. Today,
Asset Under
Managemen
Category t
as on May
31 , 2008
Funds.
TO STUDY INVESTORS’ NEEDS i.e. how much risk can they afford, how
much returns they expect on their investment, for what time can they
4
invest and based on their profile, to study, what kind of funds should
To analyze different funds on the basis of their of their risk, returns they
give over different time periods & their return-risk ratio, so as to find
out which kind of funds (Equity, debt or sectoral funds) are suitable to
INTRODUCTION
5
Definition: Mutual Fund
option for the common man. A mutual fund provides for an opportunity
6
Structure of Mutual Funds
7
Sponsor
least 40% of the net worth of the Investment Managed and meet the
or liable for any loss or shortfall resulting from the operation of the
8
Trust
safeguard the interest of the unit holders and inter alia ensure that the
1996, the provisions of the Trust Deed and the Offer Documents of the
independent directors who are not associated with the Sponsor in any
manner.
company of the Mutual Fund. At least 50% of the directors of the AMC
are independent directors who are not associated with the Sponsor in
any manner. The AMC must have a net worth of at least 10 crore at all
times.
9
The AMC if so authorized by the Trust Deed appoints the Registrar and
statements to the unit holders. The Registrar and Transfer agent also
Mutual funds have been around for more than half a century but they
of Mutual Funds such as returns and risk factors and the Drivers of
Starting out as an industry with a single player, the UTI, in 1963, the
mutual fund industry in India has come a long way since then. Today,
Starting out as an industry with a single player, the UTI, in 1963, the
mutual fund industry in India has come a long way since then. Today,
10
landscape. The industry has gained enormously in size as reflected in its
Asset Under
Category Management
as on May 31 ,
2008
The journey of the industry has been nothing less than spectacular,
innovation to drive growth. This has not only helped the industry players
to tap the latent needs of the investors, but also enabled them to
Second, the need for greater market penetration has forced industry
11
their market share. Today, we see new channels and models of
its India debut, augurs well for the industry as not only these global
performances and investor services which will benefit the industry and
12
A host of things suggests that the industry is all set to enter a period of
some of the major factors which suggest that the industry's future is
bright. However, to gain size, and catch up with developed markets like
the US, the industry has to remove certain obstacles which pose
significant challenges.
The Flow Chart below describes broadly the working of a Mutual Fund
13
REVIEW
OF
LITERATURE
14
Research in mutual fund industry has grown to a considerable extent. A
number of key papers has been written exploring the different aspects
but still some areas are under study such as how to rate the different
how the investors making investment in Mutual Funds. What are the
issues.
The existing “Behavioural Finance” studies are very few and very little
15
Ippolito (1992) says that fund/scheme selection by investors is based
on past performance of the funds and money flows into winning funds
In India, one of the earliest attempts was made by NCAER in 1964 when
in 1996 analysed the structure of the capital market and presented the
SEBI – NCAER Survey (2000) was carried out to estimate the number
accordingly).
16
Kulshreshta (1994) offers certain guidelines to the investors in
share investment decisions, and reports that among the various factors,
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
Sujit Sikidar and Amrit Pal Singh (1996) carried out a survey with
the North Eastern region towards equity and mutual funds investment
portfolio. The survey revealed that the salaried and self employed
17
formed the major investors in mutural fund primarily due to tax
concessions. UTI and SBI schemes were popular in that part of the
country then and other funds had not proved to be a big hit during the
the AMCs. Their study reveals that brand image factor, though cannot
Since 1986, a number of articles and brief essays have been published
Rajan (1997), and the relationship between stage in life cycle of the
investors and their investment pattern was studied Raja Rajan (1998).
18
From the above review it can be inferred that Mutual Fund as an
study.
fund/scheme.
19
COMPANY
PROFILE
Group Overview
Pharmaceutical Financia
Health Care IT
s l
20
Religare, a Ranbaxy promoter group company, is one of India’s largest and fastest
growing is one of the leading integrated financial services institutions of India.
6 Regional offices
25 Zonal Offices
Among the largest Retail brokerage branch network, present beyond Tier-I and Tier-II
cities in India
Overseas presence established in London, with aggressive plans of straddling other parts of
the globe in this financial year.
Vision - To build Religare as a globally trusted brand in the financial services domain
and present it as the ‘Investment Gateway of India’
Mission - To provide financial care driven by the core values of diligence &
transparency
Brand Essence - Our Core essence is diligence and we are driven by ethical and
dynamic processes for wealth creation.
Name
The Religare name is paired with the symbol of a four-leaf clover. The four-leaf clover is
used to define the rare quality of good fortune that is the aim of every financial plan.
21
The first leaf of the clover represents Hope. The aspirations to succeed. The dream
of becoming. Of new possibilities. It is the beginning of every step and the
foundations on which a person reaches for the stars.
The second leaf of the clover represents Trust. The ability to place ones own faith
in another. To have a relationship as partners in a team. To accomplish a given
goal with the balance that brings satisfaction to all not in the binding but in the
bond that is built.
The third leaf of the clover represents Care. The secret ingredient that is the
cement in every relationship. The truth of feeling that undeJrlines sincerity and the
triumph of diligence in every aspect. From it springs true warmth of service and
the ability to adapt to evolving environments with consideration to all.
The fourth and final leaf of the clover represents Good Fortune. Signifying that rare
ability to meld opportunity and planning with circumstance to generate those often
looked for remunerative moments of success.
Hope. Trust. Care. Good fortune. All elements perfectly combine in the
emblematic and rare, four-leaf clover to visually symbolize the values that bind
together and form the core of the Religare vision.
22
Religare
Religare Religare Wealth
Securities Finvest Ltd Management
Ltd Religare
Services Ltd
Religare
Capital
Commodities Religare Enterprises
Markets Ltd
Ltd Ltd
Religare Religare
Ltd
Equity Broking
Depository
Reinsurance
Religare Capital Markets Limited -
Investment Banking
24
New Initiatives
Private Limited launched India’s first ever film fund - Vistaar Religare
50:50 Joint Venture between REL and Aegon for Asset Management
business in India.
25
AEGON Religare Life Insurance -
Life Insurance Company, Joint Venture between REL, Aegon and BCCL
Products
Equity
Arts Commodit
Initiative y
Investmen
Mutual
t
REL
Fund
Banking
Wealth
Advisory Insurance
Personal
Services
Credit
26
Religare Securities Limited (RSL) is a leading equity and securities firm in India.
The major activities and offerings of the company today are Equity broking, Depository
Participant Services, Portfolio Management Services, Institutional Brokerage & Research,
Investment Banking and Corporate Finance.
Client Interface
Retail Spectrum- To cater to a large number of retail clients by offering all products
under one roof through the Branch Network and Online mode
Mutual Funds
Insurance
Saving Products
Personal Credit
Personal Loans
27
Institutional Spectrum- To Forge & build strong relationships with Corporate Client
and Institutions
Investment Banking
Merchant Banking
Transaction Advisory
Corporate Finance
Arts Initiative
Retail Spectrum
28
Wide Reach Present in more than 1200 locations
base in 2006-07
Market Share Equity Broking: 4.5% - 5.5% of the
Market Turnover
Market Turnover
Turnover
PFS: 300
Insurance: 140
29
Personal Credit: 120
financial year
Key Facts
Aggressive growth has been observed in the client base for online
trading
trading
30
Rising Number of online clients
Mar-07
Feb-07
Jan-07
Dec-06
Nov-06
Oct-06
Sep-06
Aug-06
31
In $ mn Rising Turnover
PFS was started to target the rapidly expanding middle net worth
Rapid rollout of PFS Products offering, such as mutual funds, life and
solutions
March 2008
32
Product –Wise Clients
33
Concept Of
Mutual Funds
34
History (Global) of Mutual Funds
founded on March 21, 1924, and after one year had 200 shareholders
and $392,000 in assets. The entire industry, which included a few close-
The stock market crash of 1929 slowed the growth of mutual funds. In
response to the stock market crash, Congress passed the Securities Act
of 1933 and the Securities Exchange Act of 1934. These laws require
provides the guidelines that all funds must comply with today.
finally rise above its 1929 peak and by the end of the fifties there were
155 mutual funds with $15.8 billion in assets. In 1967 funds hit their
35
67 %, but it was done by cheating using borrowed money, risky options,
and pumping up returns with privately traded “letter stock. By the end
of the 60’s there were 269 funds with a total of $48.3 billion.
blossom. By the end of the 1960’s there were around 270 funds with
$48 billion in assets. The first retail index fund was released in 1976,
called the First Index Investment Trust. It is now called the Vanguard
500 Index fund and is one of the largest mutual funds ever with the in
As of April 2006, there are 8606 mutual funds that belong to the
The Mutual Fund industry started in India with the setting up of UTI in
follows:
First Phase-1964-87
was set up by the Reserve Bank of India and functioned under the
1978 UTI was de-linked from RBI and the Industrial Development Bank
36
of India (IDBI) took over the regulatory and administrative control in
place of RBI. The first scheme launched by UTI was Unit Scheme 1964.
At the end of 1998 UTI had Rs 6700 crore of assets under management.
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India. SBI Mutual fund was the first
Mutual Fund (Dec87). At the end of 1993, the mutual fund industry had
The third phase saw the entry of private and foreign sectors in mutual
fund industry in 1993 with Kothari pioneer mutual fund (now merged
with Franklin Templeton) being set up as the first private sector fund.
With the entry of private sector funds in 1993, a new era started in the
Indian Mutual Fund industry, giving the Indian investor 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
37
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
Regulation in 1996.
mutual funds.
In February 2003, following the repeal of the Unit Trust of India Act 1963
38
and under the rules framed by Government of India and does not come
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
March 2000 more than 76,000 Crores of Assets under Management and
with the setting up of a UTI Mutual Fund, confirming to the SEBI Mutual
different private sector funds, the mutual fund industry has entered its
39
Professional Management: Mutual Funds provide the services of
of the scheme.
reduces the risk because seldom do all stocks decline at the same time
Mutual Fund with far less money than you can do on your own.
paperwork and helps you avoid many problems such as bad deliveries,
Funds save your time and make investing easy and convenient.
of selected securities.
Low Costs: Mutual Funds are a relatively less expensive way to invest
40
Liquidity: In open-end schemes, the investor gets the money back
promptly at net asset value related prices from the Mutual Fund. In
prevailing market price or the investor can avail of the facility of direct
by the scheme, the proportion invested in each class of assets and the
convenience.
41
Well Regulated: All Mutual Funds are registered with SEBI and they
monitored by SEBI.
has to pay fund distribution costs, which he would not incur in direct
investing.
However this only means that there is a cost to obtain the benefits of
mutual fund services. This cost is often less than the cost of direct
investing.
42
No Tailor-Made Portfolios: Investing through mutual funds means
actually mean too much choice for the investors. He may again need
has made this certification compulsory for every mutual fund advisor
Taxes: During a typical year, most actively managed mutual funds sell
your fund makes a profit on its sales, you will pay taxes on the income
Cost of Churn: The portfolio of fund does not remain constant. The
on the volatility of the fund size i.e. whether the fund constantly
43
receives fresh subscriptions and redemptions. Such portfolio changes
have associated costs of brokerage, custody fees etc. which lowers the
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO
Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO
management.
Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and
1871 and is being represented in Canada, the US, the Philippines, Japan,
Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund
2008, the fund has assets of Rs. 41,426.64 crores under management.
44
Bank of Baroda Mutual Fund
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October
Management Company Limited is the AMC of BOB Mutual Fund and was
of Bank of Baroda Mutual Fund. As of May 2008, the fund has assets of
AMC is a joint venture between housing finance giant HDFC and British
30, 2000. It conducts the operations of the Mutual Fund and manages
time. As of Feb 2008, the fund has assets of Rs.46,291.97 crores under
management.
45
HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and
Mutual Fund. As of may 2008, the fund has assets of Rs. 17,617.11
ING Vysya Mutual Fund was setup on February 11, 1999 with the same
April 6, 1998. As of May 2008, the fund has assets of Rs. 8,608.29
Prudential ICICI Mutual Fund was setup on 13th of October 1993 with
two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company
formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI
46
1993. As of May 2008, the fund has assets of Rs.59,573.08 crores
under management.
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India
AMC of Sahara Mutual Fund. As of May 2008, the fund has assets of Rs.
State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund
to launch offshore fund, the India Magnum Fund with a corpus of Rs.
Mutual Fund has more than Rs. 29,492.97 Crores as AUM. Now it has an
Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The
sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment
Limited and its Tata Trustee Company Pvt. Limited. Tata Asset
47
Management Limited's is one of the fastest in the country with more
return profiles. It was the first company to launch dedicated gilt scheme
2003, manages the UTI Mutual Fund with the support of UTI Trustee
Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB),
State Bank of India (SBI), and Life Insurance Corporation of India (LIC).
The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset
Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and
48
Reliance Capital Trustee Co. Limited is the Trustee. It was registered on
June 30, 1995 as Reliance Capital Mutual Fund, which was changed on
March 11, 2004. Reliance Mutual Fund was formed for launching of
various schemes under which units are issued to the Public with a view
Management Company Pvt. Ltd. is the AMC which was incorporated with
Investors can buy or sell the Mutual Fund through their financial advisor
Diversified Equity schemes, Open end Sector Equity schemes, Open end
Hybrid schemes, Open end Tax Saving schemes, Open end Income and
Liquid schemes, Closed end Income schemes and Open end Fund of
49
Funds schemes to offer. As of May 2008, the fund has assets of Rs.
AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end
Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance
Trust Limited. Its AMC was incorporated on December 1, 1995 with the
name Escorts Asset Management Limited. As of May 2008, the fund has
50
Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30, 1994 with
Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital
Asset Management India (Pvt) Ltd. with the corporate office in Mumbai.
Benchmark Mutual Fund was setup on June 12, 2001 with Niche
Company Pvt. Ltd. is the AMC. As of May 2008, the fund has assets of
Canbank Mutual Fund was setup on December 19, 1987 with Canara
the AMC is in Mumbai. As of May 2008, the fund has assets of Rs.
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June
1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC
51
Mutual Fund was constituted as a Trust in accordance with the
business on 29th April 1994. The Trustees of LIC Mutual Fund have
the Investment Managers for LIC Mutual Fund. As of May 2008, the fund
52
Assets under Management:
53
TYPES OF MUTUAL FUNDS
Open-end
Funds that can sell and purchase units at any point in time are classified
not required to keep selling new units to the investors at all times but is
Closed-end Funds
Funds that can sell a fixed number of units only during the New Fund
the offer, buying and redemption of units by the investors directly from
positions:
can buy/sell units from/to each other. The trading is generally done at a
54
discount to the NAV of the scheme. The NAV of a closed-end fund is
Closed-end Funds may also offer "buy-back of units" to the unit holders.
In this case, the corpus of the Fund and its outstanding units do get
changed.
Many funds recover these expenses from the investors in the form of
load. These funds are known as Load Funds. A load fund may impose
charged to an investor at the time of his entry into a scheme. Entry load
Exit Load - Also known as Back-end load, these charges are imposed
on an investor when he redeems his units (exits from the scheme). Exit
of time.
55
Contingent Deferred Sales Charge (CDSC) - In some schemes, the
percentage of exit load reduces as the investor stays longer with the
No-load Funds
All those funds that do not charge any of the above mentioned loads are
Tax-exempt Funds- Funds that invest in securities free from tax are
Long term capital gains and dividend income in the hands of investors
are tax-free.
equity oriented funds are liable to pay tax on distribution income. Profits
56
units of an equity oriented fund is subject to Securities Transaction Tax
57
58
1. Equity Funds - Equity funds are considered to be the more risky
funds as compared to other fund types, but they also provide higher
invest in an equity fund should invest for long term i.e. for 3 years or
more. There are different types of equity funds each falling into
different risk bracket. In the order of decreasing risk level, there are
volatile and thus, are prone to higher risk than other equity funds.
that meet their criteria. Criteria for some speciality funds could be
Moving Consumer Goods) which is why they are more risky than
they are less risky than sector funds. However, foreign securities
funds are exposed to foreign exchange rate risk and country risk.
chip companies (less than Rs. 2500 crores but more than Rs. 500
60
risky.
investors.
diversified equity funds too are exposed to equity market risk. One
investor before the expiry of the lock-in period makes him liable to
pay income tax on such income(s) for which he may have received
61
match the performance of a specific stock market index. The
index. Equity index funds that follow broad indices (like S&P CNX
Nifty, Sensex) are less risky than equity index funds that follow
Narrow indices are less diversified and therefore, are more risky.
Value funds with a long-term time horizon as risk in the long term,
Funds. Debt funds are low risk profile funds that seek to generate fixed
generally less risky than equities, they are subject to credit risk (risk of
minimize the risk of default, debt funds usually invest in securities from
issuers who are rated by credit rating agencies and are considered to be
of "Investment Grade". Debt funds that target high returns are more
63
default by a debt issuer, is shared by all investors which further
debt funds are sector, specialized and offshore debt funds, funds
interest returns from these issuers. These funds are more volatile
and bear higher default risk, although they may earn at times
64
will meet its objectives or provide assured returns to investors, but
there can be funds that come with a lock-in period and offer
returns in the future. In the past, UTI had offered assured return
returns to investors in the future. UTI was not able to fulfill its
Fixed Term Plan Series - Fixed Term Plan Series usually are
than one year) that offer a series of plans and issue units to
plans are not listed on the exchanges. Fixed term plan series
India, these investments have little credit risk (risk of default) and
provide safety of principal to the investors. However, like all debt funds,
gilt funds too are exposed to interest rate risk. Interest rates and prices
of debt securities are inversely related and any change in the interest
direction.
However, even money market / liquid funds are exposed to the interest
rate risk. The typical investment options for liquid funds include
66
5. Hybrid Funds - As the name suggests, hybrid funds are those funds
investment horizon.
and bears less risk than a specialized commodity fund. "Precious Metals
Fund" and Gold Funds (that invest in gold, gold futures or shares of gold
7. Real Estate Funds- Funds that invest directly in real estate or lend
68
Funds. The objective of these funds may be to generate regular income
mutual fund. Exchange Traded Funds follow stock market indices and
are traded on stock exchanges like a single stock at index linked prices.
69
Risk Heirarchy of Different Mutual Funds - Thus, different mutual
should know the level of risks associated with these schemes before
70
Research Methodology
Primary research
Secondary research
71
Primary research:
A sample of 100 people from Religare’s clientele base, who had already invested in mutual
funds and those who were interested for investment in mutual funds, was taken from Delhi
& NCR region and they were asked to fill the questionnaire containing 10 questions which
indicated the factors affecting the investors’ decisions while investing in mutual funds.
Due to response error, responses of 20 respondents could not be taken into account. So the
final sample size is 80.
b) Secondary research:
A samples of top 15 mutual funds from each category of funds was taken and their 3
month, 6 month, 1 year returns were taken for the analysis of return as a factor and
similarly Beta ratio and Sharpe ratio’s were taken for the analysis of other factors.
Age
Source of income
Plans to retire
Returns expected
Number of dependents
Level of knowledge
Time of investment
Dependence on funds
So I applied Factor Analysis on the data collected, so as to find out which of these factors
are most critical and which are less critical.
72
Then as a result of factor analysis, the factor which came out to be mostly critical is risk
taking ability (as indicated from Age, Level of knowledge, Level of acceptable risk &
Willingness to stay during volatile times) and second most critical factor is return over a
given period of time (as indicated from plans to retire, returns expected & time of
investment) and third is future requirement of funds (as indicated from source of income
and no. of dependents).
Research
Hypothesis
73
Since risk taking ability (as indicated from Age, Level of knowledge, Level of acceptable
risk & Willingness to stay during volatile times) came out be the most critical factor and in
case of mutual funds it is indicated by Beta Factor, So for comparing risk in Equity and
Debt funds we assume the null hypothesis:
Now, second most critical Factor came out to be the returns over a given period of time (as
indicated from plans to retire, returns expected & time of investment). So we will compare
on the basis of their 3 month, 6 month, 1 year returns.
Finally, third most critical Factor came out to be the future requirement of funds (as
indicated from source of income and no. of dependents). For that matter Sharp Ratio of
Equity and Debt funds can be compared because it indicates the average returns given by
the fund over the risk-free rate per unit of market risk (standard deviation).
Observations
74
Beta factor of Equity and Debt funds are as shown below:
k
Reliance Diversified Power Sector Fund -
1 Growth 0.44
2 Taurus Libra Taxshield - Growth 0.33
3 DWS Investment Opportunity Fund – G 0.35
4 Reliance Regular Savings Fund – Growth 0.36
5 IDFC premier equity fund-Growth 0.41
6 ICICI Pru Infrastructure fund-Growth 0.36
Sundram BNP Paribasselect focus fund-
7 G 0.28
8 BOB Grpwth Fund- Growth 0.29
9 SBI magnum comma fund Growth 0.34
10 DWS Alpha Equity Fund- Growth 0.28
75
Ran Scheme Name Beta
k
1 DBS Chola Monthly Income Plan - Growth 0.79
2 PRINCIPAL Monthly Income Plan Plus – G 0.93
3 Birla Sun Life Income Plus - Growth 1.38
4 Birla Sun Life Income Fund - 54EA - G 1.05
5 Birla Sun Life Income Fund - 54EB - G 1.05
6 Birla Sun Life Income Fund - Growth 1.05
7 ING Income Fund - Regular Plan - Growth 0.31
Birla Sun Life Dynamic Bond Fund - Retail
8 - Growth 0.27
9 PRINCIPAL Monthly Income Plan - G 0.64
10 IDFC Dynamic Bond Fund - Plan A - G 1
Month
s%
1 Franklin Infotech Fund - Growth 19.44
2 UTI Growth Sector Fund - Pharma and 16.19
Healthcare - Growth
3 JM Healthcare Sector Fund - Growth 15.27
4 SBI Magnum Sector Umbrella - Pharma Fund-G 13.62
5 UTI Growth Sector Fund - Software - Growth 13.36
6 Reliance Pharma Fund - Growth 13.29
7 Franklin Pharma Fund - Growth 13.01
8 Tata Life Sciences and Technology Fund 11.75
9 PRINCIPAL Global Opportunities Fund – G 11.42
10 SBI Magnum Sector Umbrella - Infotech Fund 10.2
11 Taurus Libra Taxshield - Growth 9.46
12 Birla Sun Life International Equity Fund-G 8.13
13 ICICI Prudential Technology Fund - Growth 7.29
76
14 Franklin Asian Equity Fund - Growth 5.31
15 JM Emerging Leaders Fund - Growth 5.26
k Month
s%
1 Tata Fixed Income Portfolio Fund - Series B3 - 9.75
Retail - G
2 UTI Fixed Term Income Fund - Series II-Plan 16G 7.56
3 Franklin India International Fund 3.76
4 UTI Fixed Maturity Plan - Mar 08 - Harlf Yearly 2.81
Series - Retail – G
5 Reliance Fixed Horizon Fund 7 Series 4 Retail-G 2.75
6 Sundaram BNP Paribas Interval Fund - QS - Plan B 2.73
- Ret - G
7 ING Long Term Fixed Maturity Plan - I - Retail - G 2.72
8 Canara Robeco Income Scheme - Growth 2.71
9 DWS Money Plus Advantage Fund - Regular - 2.71
Growth
10 Lotus India Quarterly Interval Fund - Plan F - 2.69
Growth
11 UTI Fixed Income Interval Fund - Quarterly Plan I – 2.68
Regular-G
12 Tata Floating Rate Fund - Long Term - Growth 2.68
13 Tata Fixed Investment Plan 1 - Series A - Regular - 2.66
Growth
14 Lotus India Quarterly Interval Fund - Plan D - 2.65
Growth
15 Reliance Fixed Horizon Fund 7 - Series 3 - Retail - 2.65
77
Growth
Month
s%
1 UTI Spread Fund - Growth 4.83
2 HDFC Arbitrage Fund - Institutional - Growth 4.51
3 HDFC Arbitrage Fund - Retail - Growth 4.38
4 Lotus India Arbitrage Fund - Growth 4.37
5 JM Arbitrage Advantage Fund - Growth 4.3
6 ICICI Prudential Blended Plan - Option A - 4.15
Growth
7 Kotak Equity Arbitrage Fund - Growth 4.05
8 Benchmark Equity And Derivative 4.05
Opportunities Fund-G
9 IDFC Arbitrage Fund - Plan B (Institutional) - 4.03
Growth
10 SBI Arbitrage Opportunities Fund - Growth 3.98
11 IDFC Arbitrage Fund - Plan A (Regular) - 3.77
Growth
12 IDFC Fixed Maturity Arbitrage Fund - S1 - Plan 3.66
A-G
13 IDFC Fixed Maturity Arbitrage Fund - S1 - Plan 3.66
B-G
14 PRINCIPAL Global Opportunities Fund - Growth 2.31
78
15 Birla Sun Life International Equity Fund - Plan -1.16
A - Growth
k Month
s%
1 DBS Chola Monthly Income Plan - Growth 11.87
2 UTI Fixed Term Income Fund - Series II - Plan 16 8.22
(Feb 07) -G
3 Franklin India International Fund 7.83
4 ABN AMRO Interval Fund - Monthly Plan A - 6.39
Growth-Red
5 Birla Sun Life Dynamic Bond Fund - Retail - 5.88
Growth
6 Kotak Wealth Builder Series I - Growth 5.66
7 ING Income Fund - Regular Plan - Growth 5.63
8 ICICI Prudential Interval Fund II - Quarterly 5.45
Retail – G
10 LIC MF Fixed Maturity Plan - Series 22 - Growth 5.18
11 Sundaram BNP Paribas Interval Fund - QS - Plan 5.16
B - Ret - G
12 HDFC Fixed Maturity Plan - 367D (2) - Sep 2007 5.06
(6) Retail – G
13 LIC MF Fixed Maturity Plan - Series 32 ( 13 5.05
Months) – G
14 Lotus India Quarterly Interval Fund - Plan D - 5.05
79
Growth
15 UTI Fixed Income Interval Fund - Quarterly Plan I 5.02
- Regular - G
k 12
Month
s%
1 Reliance Diversified Power Sector Fund - 30.52
Growth
2 Taurus Libra Taxshield - Growth 22.26
3 DWS Investment Opportunity Fund - 20.18
Growth
4 Reliance Regular Savings Fund - Equity - 15.01
Growth
5 ICICI Prudential Infrastructure Fund - FII 14.41
Growth
6 IDFC Premier Equity Fund - Growth 13.78
7 ICICI Prudential Infrastructure Fund - 13.41
Growth
8 Sundaram BNP Paribas Select Focus - 13.14
Growth
9 BOB Growth Fund - Growth 12.61
10 SBI Magnum COMMA Fund - Growth 12.57
11 DWS Alpha Equity Fund - Growth 11.32
12 HSBC Equity Fund - Growth 10.51
13 PRINCIPAL Global Opportunities Fund - 10.48
Growth
80
14 Templeton India Equity Income Fund - 9.54
Growth
15 UTI Spread Fund - Growth 9.09
k 12
Month
s%
1 DBS Chola Monthly Income Plan - Growth 24.38
2 PRINCIPAL Monthly Income Plan Plus - Growth 12.63
3 Birla Sun Life Income Plus - Growth 12.28
4 Birla Sun Life Income Fund - 54EA - Growth 11.8
5 Birla Sun Life Income Fund - 54EB - Growth 11.8
6 Birla Sun Life Income Fund - Growth 11.8
7 ING Income Fund - Regular Plan - Growth 11.3
8 Birla Sun Life Dynamic Bond Fund - Retail - Growth 11.06
9 PRINCIPAL Monthly Income Plan - Growth 10.99
10 Sundaram BNP Paribas FTP - Series XIII - (30 10.89
Months) - Growth
11 LIC MF Fixed Maturity Plan - Series 22 - Growth 10.79
12 Sundaram BNP Paribas FTP - Series XII - (18 Months) 10.71
- Growth
13 IDFC Dynamic Bond Fund - Plan A - Growth 10.63
14 HDFC Fixed Maturity Plan - 24M - May 2007 (5) 10.47
Retail - Growth
15 JM Fixed Maturity Fund - Series IV - 15 Months Plan 2 10.28
- Growth
81
Sharpe ratio of Equity and Debt funds is as shown below:
Sharp
1 Growth
2 Taurus Libra Taxshield - Growth 0.96
3 DWS Investment Opportunity Fund - Growth 0.96
4 Reliance Regular Savings Fund - Growth 0.83
5 IDFC premeir equity fund-Growth 0.76
6 ICICI Pru Infrastructure fund-Growth 0.93
Sundram BNP Paribasselect focus fund- 1.13
7 Growth
8 BOB Grpwth Fund- Growth 0.91
9 SBI magnum comma fund Growth 0.92
10 DWS Alpha Equity Fund- Growth 0.96
Sharp
82
Growth
3 Birla Sun Life Income Plus - Growth 0.3
Birla Sun Life Income Fund - 54EA -
4 Growth 0.39
Birla Sun Life Income Fund - 54EB -
5 Growth 0.39
6 Birla Sun Life Income Fund - Growth 0.39
7 ING Income Fund - Regular Plan - Growth 0.21
Birla Sun Life Dynamic Bond Fund - Retail
8 - Growth 0.44
9 PRINCIPAL Monthly Income Plan - Growth 0.49
IDFC Dynamic Bond Fund - Plan A -
10 Growth 0.27
RESULTS
83
Testing of H1:
Variable 1 Variable 2
Mean 0.344 0.847
Variance 0.00283 0.122823
Observations 10 10
Hypothesized Mean Difference 0
df 9
t Stat -4.48732
P(T<=t) one-tail 0.00076
t Critical one-tail 1.83311
84
Therefore, null hypothesis is accepted i.e. beta of Equity funds is not greater than Debt
funds, which means Equity funds are more volatile than Debt funds.
Testing of H2 (a):
Ho: 3 month Average Returns (Equity funds) = 3 month Average Returns (Debt funds)
H1: 3 month Average Returns (Equity funds) > 3 month Average Returns (Debt funds)
Variable 1 Variable 2
11.5333333 3.56733333
Mean 3 3
16.0663809 4.51323523
Variance 5 8
Observations 15 15
Hypothesized Mean Difference 0
df 21
6.80091420
t Stat 5
P(T<=t) one-tail 5.01266E-07
1.72074287
t Critical one-tail 1
85
Therefore, null hypothesis is not accepted i.e. 3 month average Returns of Equity funds are
greater than Debt funds.
Testing of H2 (b):
Ho: 6 month Average Returns (Debt funds) = 6 month Average Returns (Equity funds)
H1: 6 month Average Returns (Debt funds) > 6 month Average Returns (Equity funds)
Variable 1 Variable 2
6.17933333 3.65933333
Mean 3 3
3.46984952 2.09814952
Variance 4 4
Observations 15 15
Hypothesized Mean Difference 0
Df 26
4.13615298
t Stat 9
0.00016376
P(T<=t) one-tail 1
1.70561790
t Critical one-tail 1
Therefore, null hypothesis is not accepted i.e. 6 month average Returns of Debt funds are
greater than Equity funds.
86
Testing of H2 (c):
Ho: 1 year Average Returns (Equity funds) = 1 year Average Returns (Debt funds)
H1: 1 year Average Returns (Equity funds) > 1 year Average Returns (Debt funds)
Variances
Variable 1 Variable 2
14.588666
Mean 67 12.12066667
32.584740
Variance 95 11.96939238
Observations 15 15
Hypothesized Mean
Difference 0
df 23
1.4320124
t Stat 2
0.0827955
P(T<=t) one-tail 47
1.7138715
t Critical one-tail 17
87
Therefore, null hypothesis is accepted i.e. 1 year average Returns of Equity funds are equal
to Debt funds.
Testing of H3:
H1: Sharpe Ratio (Equity funds) > Sharpe Ratio (Debt funds)
Variances
Variable 1 Variable 2
Mean 0.921 0.358
0.009743 0.00990666
Variance 333 7
Observations 10 10
Hypothesized Mean
Difference 0
Df 18
12.70068
t Stat 42
1.00668E-
P(T<=t) one-tail 10
1.734063
Therefore, null hypothesis is rejected i.e. on an average Sharpe Ratio of Equity funds is
greater than Debt funds.
88
ANALYSIS
Analysis of Hypothesis H1
From the Results of hypothesis H(1) it was found that Risk is more in
89
Risk is also considered as more in equity funds as compared to debt
funds due to many reasons. One of the major reason is that most of
this, there were already some sector funds in place with the mandate to
invest in the FMCG (fast moving consumer goods) and pharma sectors.
avoid sector funds, unless you have a view on the sector and know
exactly when to invest in it and exit from it. Sector funds are high risk
investment avenues and over the long term (3-5 years) they rarely
Thematic funds invest in a theme rather than in a single sector. So while the fund
manager’s investment options remained restricted to the theme, he still has several sectors
to choose from within that theme. A theme like infrastructure for instance, has several
related sectors like cement, steel, capital goods/engineering as also unrelated sectors like
banking and finance. When it comes to stock-picking, this gives the fund manager more
flexibility when he is managing a thematic fund as compared to a sector fund. We can’t
think of a single theme that is so enduring that it will make the fund manager forget every
other theme till the time that fund is in existence
90
A well-managed diversified equity which usually never invests more than 5% in a single
stock, compared to other which has even 31.9% in its leading stock . So these types of
funds which invest aggressively for higher returns are more risky as compared to the
equity diversified funds
The benchmark for evaluating the diversification of an equity fund’s stock portfolio is to
assess the concentration of assets in the top 10 stocks. If the top 10 stocks account for less
than 40% of net assets (which is also a global benchmark), the fund is well-diversified in
our view.
Such misconceptions that debt funds carry low risk catch out the investors. Consider a
situation when the oil price is galloping past $30 a barrel. The demand for dollars to pay
for oil imports pulls down the rupee value. The RBI, in all likelihood, will step in to
defend the rupee, and that means hiking short-term interest rates. Now, a hike in rates
means lower bond prices because of the inverse price-yield relationship (bond prices fall
when rates rise and prices rise when rates fall). A consequent drop in the NAV will hit the
unwary unit-holder where he sits.
Debt funds primarily face two types of risk. First of a fall in market price
Market risk
Consider the market risk. Bond prices, like all instruments, are
bond prices will fall when supply is relatively more than demand. This
typically happens when the rupee is falling sharply against the dollar, or
when the call rates are very high. At such times, banks, the biggest
excess supply of bonds in the market pulls down bond prices and,
Interest-rate risk
91
Debt funds also carry interest rate risk. This is the risk that bond prices
will fall because of a change in the interest rates. Interest rates have an
inverse relationship on the price of debt securities. If the rates rise, their
prices fall to adjust for the current yield, and vice versa.
short-term debt funds have the least impact on NAV es rise, and vice
than that in equity funds but the absolute risk is certainly not modest.
There are very few funds that have managed to buck the trend. ICICI
returns from which not only beat the market but also the Bombay Stock
Exchange’s index tracking the fast moving consumer goods stock over
the last three years. While the BSE FMCG Index climbed only 29 per
cent, the fund rose over 41 per cent over the same period. Rival funds
The information and technology sector funds are the only sets that have beaten both the
Sensex and the BSE IT Index over the last five years. This is not really hard to explain
given that the Indian stock market has all along been rather fond of tech stocks, barring a
few short intervals of indifference or rejection.
92
According to data on the performance of mutual funds and the sector indices sourced from
Value Research for the last three years, the two auto funds — from JM and UTI — on
offer, for instance, have not quite outperformed the BSE Auto index or the broader market
spectacularly. While, JM Auto Fund has yielded returns of 20 per cent over the last three
years, the UTI Auto Fund has barely given gains of 9 per cent to its investors. In sharp
comparison, the BSE Auto Index grew 20 per cent during the same period.
The Sensex, on the other hand, climbed almost 40 per cent in the last three years.
The story remains the same in the case of bank funds. The BSE Bankex rose 43 per cent in
the last three years. The only two bank funds available in the mutual fund market —
Reliance Banking and UTI Banking Sector — have underperformed the BSE Bankex.
While Reliance Banking grew by 38 per cent, UTI banking Sector fared only marginally
better with gains of 40 per cent. The mutual fund schemes built around the
pharmaceuticals sector too have failed to outdo either the broad market or the Bombay
Stock Exchange’s index for the pharmaceuticals sector over the last three years.
Funds dedicated to banking, automobiles and pharmaceuticals have generally taken big
hits, with FMCG and technology funds managing to scrape through relatively easily.
The figures speak for themselves. As on June 26, the three-month performance charts put
banking funds at a negative 19.6 per cent. Pharma and auto funds have delivered minus
17.89 per cent and minus 16.56 per cent respectively during this period.
In comparison, index funds have done decidedly better, with their average score being
minus 9.56 per cent. The `normal' broad-based funds, typically benchmarked against the
Nifty, are relatively worse off with minus 14.81 per cent. These numbers have been
collated by Value Research.
A small section in the sectoral category has turned in uninspiring performance even if
longer time-frame is considered, MF circles agree. Reliance Banking Fund, for instance,
has provided a negative 5.25 per cent on a one-year basis. This, when even the most
pedestrian performers among the diversified schemes have given at least 10 per cent -
except odd names such as Reliance Regular Savings Equity and Taurus Discovery Stock.
The latter, currently among the worst cases, has provided a meager 2.02 per cent on a one-
year basis.
93
Analysis Of Hypothesis H2 (B)
In the last 6 months Indian securities market faced a lot of shocks and
that is major reason that in the last six months equity funds
One another reason was that January- march 2008 quarter was the
worst quarter for equity funds in the last decade since January 2001.
94
Wrost Quarter for the Equity funds in a decade
On March 31, 2008, Indian mutual funds ended their worst quarter of the
decade. The average returns of almost all categories of equity funds had
their worst three months since January 2001, according to the quarterly
Funds in the key ‘Diversified Equity' category, which has the largest number
28.3 per cent. This was far worse than the previous worst of the decade,
Individual funds in the category lost between 16.2 per cent and 40.6 per cent
between January and March this year, during which BSE Sensex and the NSE
95
While equity funds registered staggering losses on an absolute basis, they
did substantially worse than their benchmark indices too. Of the 277 equity
were part of this study, only 35 outperformed their benchmarks while 242
failed to do so.
What's worse, of the 35 which beat the benchmark, a mere seven managed
to do so by a margin greater than five per cent. At the other end of the scale,
per cent.
Funds in the ‘diversified equity' category gained an average of 21.4 per cent
over the four quarters, with individual schemes' returns ranging from a gain
have reversed that position. Welcome to the new world of cash stash.
A look at the equity portfolios of March 2008 reveals that funds are on a
strict liquid diet. As on March 31, Sundaram BNP Paribas Capex had 30 per
cent of its assets in cash, followed by LICMF Growth with 29.47 per cent.
The cash position of these two schemes during the peak of bull run (January
2008) was 9 per cent for LICMF Growth and 7 per cent for that of Sundaram
96
BNP Paribas Capex.
7,859 crore, as against Rs 4,773 crore in January 2008. A total of 108 funds
33 saw a decline.
While sitting on cash protects the investor from a sharp downfall, it also
implies that you miss out on sudden upward spurt; a phenomenon which has
Soaring food prices are also stoking inflation in India, where more than half
the population of 1.1 billion survive on less than $2 a day. Food product
costs, including bread, salt, cooking oil and tea, jumped 14 percent in the
week to June 14 from a year earlier, according to today's report. Fuel price
inflation rose 16.4 percent in the week ended June 14 from a year earlier.
India on June 4 raised retail prices of fuels for the second time this year.
97
The index of manufactured products, which has a 64 percent weight in the
The FAO food price index, which includes national prices as well as those in
cross-border trade, suggests that the average index for 2007 was nearly 25
per cent above the average for 2006. Apart from sugar, nearly every other
food crop has shown very significant increases in price in world trade over
2007, and the latest evidence suggests that this trend has continued and
even accelerated in the first few months of 2008. The net result is that
globally the prices of many basic commodities have been rising faster than
1. There are more than just demand forces at work, although it is certainly
true that rising incomes in Asia and other parts of the developing world have
There is the impact of high oil prices, which affect agricultural costs directly
There is the impact of both oil prices and government policies in the US,
certain grains. , in 2006 the US diverted more than 20 per cent of its maize
98
production to the production of ethanol; Brazil used half of its sugarcane
production to make bio-fuel, and the European Union used the greater part
bio-fuel. This has naturally reduced the available land for producing food.
interest since 2004, but especially after the recent decline in stock markets
and in the value of the dollar. Investors in search of new investment targets
which is normally held responsible for all oil price increases, has repeatedly
asserted that oil has crossed the $100-a-barrel mark not because of a
since the past few years, the US financial sector has begun to turn its attention from currency and
stock markets to commodity markets. According to The Economist, about $260 billion has been
invested into the commodity market -- up nearly 20 times from what it was in 2003.
Coinciding with a weak dollar and this speculative interest of the US financial sector, prices of
commodities have soared globally.
And most of these investments are bets placed by hedge and pension funds, always on the
lookout for risky but high-yielding investments. What is indeed interesting to note here is that
unlike margin requirements for stocks which are as high as 50 per cent in many markets, the
margin requirements for commodities is a mere 5-7 per cent.
This implies that with an outlay of a mere $260 billion these speculators would be able to take
positions of approximately $5 trillion -- yes, $5 trillion! -- in the futures markets. It is estimated
that half of these are bets placed on oil.
99
Analysis for hypothesis H2(C):
month returns are same both for Equity and Debt funds.
In the last 12 months Indian securities market were very volatile. There were
many reasons for this volatility but the main impact was due to global cues.
2) Indian MFs are sitting on huge cash and waiting with patience to enter
A)Sub Prime Crisis - One of the major reasons for that was the impact of
Sub Prime crisis in the United States w The main channels through which a
global credit crunch and a recession in the US can affect India are: (i) a
markets; (ii) slowdown in exports of goods and services from India to the US;
Which not only impact the Indian markets as well as others in the Global
100
market.
When crisis (has) moved from the subprime mortgage market to the housing market, and now
the housing market to the credit market, there is impact upon India. There is impact in terms of
credit flows and financial flows.
ICICI Bank has lost as much as $264 million up until January due to its
exposure in the overseas credit derivatives markets, other banks are also
around $1 trillion (IMF estimates) of which the banks have so far written
Analysts note that the total mark-to-market losses of corporate India’s exposure in the foreign
exchange derivatives market could be in the region of $5 billion.
U.S. lenders have tightened their exposure to credit market. The Indian IT
industry, which derives about 65% of its revenues from the U.S. market, will
technology (IT) and business process outsourcing (BPO) industries may slip
down to 3-4 percent in growth rate in the current fiscal as against that of last
year. The major cause behind the slowdown would be uncertainty in the
101
global economy and frequent fluctuation in Dollar that play a major role in IT
rising above 6%. Although the central bank has pursued a tight monetary
India's inflation accelerated again in the week ended 14 June, hitting the
fastest pace in 13 years, and suggesting there may well be more interest
rate increases to come from the central bank. Wholesale prices rose 11.42
percent in the week to June 14, following an 11.05 percent rate in the
previous week.
102
South Asian countries are facing more serious problems associated with
global external shocks such as increasing oil and food prices, as well as
Recent domestic economic data in Feb 2008 clearly indicates that there are
During the last year, one of the major factors responsible for the negative
103
the adverse impact of high interest rate has brought down the growth of
growth.
FICCI observed that for the last two quarters of July-September and October-
generation and the capital good sector in the month of January 2008 is also a
cause for worry for the manufacturing sector. The slowdown in power
months, FICCI said. The current slowdown would make it difficult to increase
the share of manufacturing in our economy from the current 16% to 25%.
From the Results of hypothesis H(3) it was found that sharpe ratio is more in
104
Equity funds as compared to Debt funds.
evaluate the return of a fund with respect to risk. The calculation is the
return of the fund minus the "risk-free" rate divided by the fund's standard
deviation. The Sharpe ratio provides you with a return for unit of risk
measure.
strength of the mutual funds vis-à-vis one another in a better way. A mutual
fund may be ranked high both in terms of returns and risk-adjusted returns,
but the important thing is that the investor should be aware of the level of
risk. Also, performance in the scale of returns alone may not tally with the
without taking into account the risk aspect it is not possible to find out the
actual performance of any mutual fund. The risk return relationship proves
that the funds taking higher (lower) amount of risk should give higher (lower)
maximize returns at a particular level of risk. His expected returns from the
funds that are taking different level of risk are different. So, the fund
over and above the expected return of the funds at the level of risk
associated with it
105
Sharpe ratio takes into account total risk (market risk plus sector/stock risk).
The Sharpe ratio tells us whether a portfolio’s returns are due to smart
out if higher returns come with additional risk. The higher the ratio, the
106
Conclusion
Conclusion
From the factor analysis i found that risk ability including level of
knowledge, Age and investment during volatile times is the most important
During investment in mutual funds risk can be of any kind, in the case of
Equity funds risk can be of two types (i) Market Risk (ii) Sector risk. In equity
107
funds if we take the example of sector funds, thematic funds and
aggressively managed funds and on the other hand balanced funds and
Equity diversified funds, then the risk is more in the former type of equity
funds.
Similarly in case of Debt funds there are also two types of risk (i) Market risk
(ii) Interest rate risk. Market risk is due to the increase or decrease in
demand and supply of bonds in the debt market which affects the NAV of the
fund and Interest rate risk is due to the fluctuation of the interest rate in the
market because of inverse relationship with the yield. The interest rate risk
From the results of hypothesis H2(b) and H2(c) it is found that in the volatile
conditions in the global and domestic market debt funds done well in last six
In last six months equity funds did not perform well as compared to returns
in last three months equity funds, the major reason was that in last three
months the performance was little good due to some sector funds such as
Pharma and technology and other reason was that valuations are very high
From the results of hypothesis i can conclude that in a volatile period Debt
short term funds such as fixed term maturity plans and Floating rate funds
108
are better as compared Debt long term funds because these short term
regularly in short term securities such as short term bonds and money
market instruments.
It is being analysed that in the bullish market many of the investors get
influenced by the higher returns of the equity funds and invests in such
If i compare the three year returns of the Equity and Debt funds, it is being
analysed that equity funds perform very well as compared to debt funds. But
if i compare the volatility of equity and debt funds with their benchmarks
(Beta ratio), the equity funds are more volatile as compared to debt funds.
Recommendation
109
In Equity funds, Sector funds are suitable for those aggressive customers
who have the knowledge for that sector and can understand when to enter
As far as Equity diversified and tax planning are concerned, they can be
preferred by those aggressive customers who want to invest for long term
volatile times, even if a particular sector doesn’t perform well, others can
compensate for that. Moreover, since aggressive customers take more risk,
they get good returns for that since in long term equity funds give good
returns.
long term investment because these funds invest in equity and some portion
in debt and other instruments but it will be good for moderate customers if
asset allocation in equity funds is not more than 65% of the total portfolio.
In debt funds, income funds and Monthly income funds are preferred by
Quarterly basis to fulfil their needs because these funds provide regular
income and invest in fixed government securities, bonds and a small portion
110
in equity.
In volatile times, short term debt funds such as fixed term maturity funds
rates).
Abstract
Mutual Fund industry has witnessed a boom since 1990s. The Asset Under Management has
multiplied many times. Still there exist a lot of potential for the growth of industry. The income
level of urban & middle class people is increasing these days and these people are saving part of
their income to invest in profitable instruments. There are various number of ways in which you
can invest your money, including mutual funds, stocks, bonds. But no other investment vehicle
can offer you as wide an array of advantage as mutual funds.
In this project I have tried to find the most critical factors affecting the investors’ decisions while
investing in mutual funds and analyze various types of mutual funds so as to find out which type
of funds better serve the needs of investors.
111
Bibliography
Online Websites
WWW.Mutualfundina.com
www.thefinancialexpress.com
www.moneycontrol.com
www.valueresearchonline.com
www.religare.in
www.religaresecurities.com
WWW.thehindubusinessonline.com
WWW.businessstandard.com
112
WWW.capitalmarket.com
WWW.businessworld.in
WWW.hinduonnet.com
WWW.personalfn.com
WWW.businessgyan.com
WWW.indianrealtynews.com
WWW.siliconindia.com
Newspaper
Magzines
113
114
Appendices
Questionnaire
115
116
117
SPSS Results
118
Communalities
Initial Extraction
Age 1.000 .427
Income 1.000 .815
Retirement 1.000 .767
Returns 1.000 .834
Dependents 1.000 .692
Knowledge 1.000 .714
Risk 1.000 .828
Time 1.000 .608
Volatility 1.000 .731
Dependence 1.000 .806
Extraction Method: Principal Component Analysis.
119
Communalities
Initial Extraction
Age 1.000 .427
Income 1.000 .815
Retirement 1.000 .767
Returns 1.000 .834
Dependents 1.000 .692
Knowledge 1.000 .714
Risk 1.000 .828
Time 1.000 .608
Volatility 1.000 .731
Dependence 1.000 .806
Rotated Component Matrixa
Component
1 2 3 4
Age .409 .352 .247 -.275
Income .039 .073 .880 -.182
Retirement .332 .800 .102 -.077
Returns .464 .689 .295 .238
Dependents -.094 -.441 .503 .486
Knowledge .772 .055 -.339 .023
Risk .765 .314 .149 .347
Time -.064 .755 -.159 .090
Volatility .840 .077 .116 -.076
Dependence .088 .137 -.179 .864
Extraction Method: Principal Component Analysis.
120
121
122