Literature Review Of Mutual Funds In India 3z6z3g

International Journal of Research and Development - A Management Review (IJRDMR) ________________________________________________________________________________________________

Awareness and Knowledge of Mutual Fund among the Investors with Special Reference to Chennai – A Critical Study 1

S. Prasanna Kumar & 2S. Rajkumar

Research Scholar, R & D Centre, Dept. of Commerce, Bharathiar University, Coimbatore. Asst. Prof., Dept .of Commerce, Loyola College, Chennai. Asst. Prof. Department of management Studies, Pachaiyappas College, Chennai. Abstract:-In this study, it is discussed about the mutual fund knowledge and awareness among the investors with a special reference to Chennai city. It is difficult to selective group the investors in a sample as such the population of Chennai city is large in number. Compared to earlier days the investment options are changing from risk free to riskier investments. The analyses also shows that compared to earlier days the growth of investments in the stock market increased to significant level compared to other conventional investments which are of lesser risks and lower returns. The ignorance of investors about mutual fund coupled with aggressive selling by promising higher returns to the investors have resulted into loss of investors’ confidence due to inability to provide higher return. This necessitates the Asset Management Companies (AMCs) to understand the fund/scheme selection/switching behaviour of the investors to design suitable products to meet the changing financial needs of the investors. With this background a survey was conducted among 250 Mutual Fund Investors in Chennai to study the factors influencing the fund/scheme selection by the Investors. For analyzing the impact of knowledge and awareness of mutual fund done through SPSS, one way ANOVA analysis has been made. Hence, this study is made to evaluate the knowledge, general and variable effects about the investors’ perception and performance of investment avenues. Key Words: - Mutual Fund, Investors, awareness, knowledge, Returns & Risk.

bank agencies, intermediaries, etc. Mutual fund is structured around a fairly simple concept of mitigating the risk / loss by spreading the investments across various avenues which is achieved by pooling the investments. A mutual fund is a company that invests in a diversified portfolio of securities. People who buy shares of a mutual fund are its owners or shareholders. Their investments provide the money for a mutual fund to buy securities such as stocks and bonds. A mutual fund can make money from its securities in two ways: a security can pay dividends or interest to the fund or a security can rise in value. A fund can also lose money and drop in value. The company then manages the money on an ongoing basis for individuals and businesses. Mutual funds are an efficient way to invest in stocks, bonds, and other securities for three reasons: 1. The securities purchased are managed by professional managers. 2. Risk is spread out or diversified, because you have a collection of different stocks and bonds. 3. Costs usually are lower than what you would pay on your own, since the fund buys in large quantities.

II. REVIEW OF LITERATURE:

Vast numbers of studies have been conducted on the performance evaluation of mutual funds in India. Some of them are: Treynor (1965) presents a new way of It is widely believed that MF is a retail product designed viewing performance results. He attempted to rate the to target small investors, salaried people and others who performance of mutual funds on a characteristics line are intimidated by the stock market but, nevertheless, graphically. The steeper the line, the more systematic like to reap the benefits of stock market investing. At the risk or volatility a fund possesses. By incorporating retail level, investors are unique and are a highly various concepts, he developed a single line index, Tn, heterogeneous group. Hence, deg a general called Treynor index. The systematic risk is risk which product and expecting a good response will be futile, is common to all securities of the same class in the though UTI could do this nearly for three decades market. His index measures the risk of the (1964-1987) due to its monopoly in the industry. In the portfolio, where risk equals the difference second phase of oligopolistic competition (1987-1992), between the return of the portfolio and the riskless rate. the public sector banks and financial institutions entered The risk is related to the amount of systematic the field, but with the then existing boom condition, it risk assumed in the portfolio, the higher the value of Tn, was a smooth sailing for the industry. Investors’ gain the better the performance of fund. Sharpe (1966) their knowledge about mutual fund through explains in a modern portfolio theory context that the ments in televisions, newspapers, e-articles, expected return on an efficient portfolio and its ________________________________________________________________________________________________ ISSN (Print): 2319–5479, Volume-2, Issue–4, 2014 1

I. INTRODUCTION

International Journal of Research and Development - A Management Review (IJRDMR) ________________________________________________________________________________________________ associated risk (unsystematic risk) are linearly related. By incorporating various concepts he developed a Sharpe index. In this paper he attempted to rate the performance on the basis of the optimal portfolio with the risky portfolio and a risk-free asset is the one with the greatest reward-to-variability .The unsystematic risk is related to particular security due to inefficient management. Moreover he has examined 34 open-end mutual funds (period 1954-1963) and finds considerable variability in the Sharpe ratio, ranging from 0.78 to 0.43. He provides two potential explanations for the result that the cross-sectional variation is either random or due to high fund expenses or the difference is due to management skills. Rajeswari and Ramamoorthy (2001)have conducted the study titled "An Empirical Study On Factors Influencing The Mutual Fund/Scheme Selection By Retail Investors", to understand the factors influencing the fund selection behaviour of 350 mutual fund investors in order to provide some meaningful inferences for Asset Management Companies(AMC) to innovatively design the products. The analysis was done on the basis of product qualities, fund sponsor qualities and investor services using questions framed on a five point Likert scale. The evaluation was done by factor analysis and principal component analysis to arrive at the findings of the study which were as follows: the most important product quality was the performance of the fund followed by brand name of the scheme; sponsor related factor that given more importance by the investor was the expertise of the sponsor in managing money and finally the investor service that was considered important was the disclosures on investment objectives, methods and periodicity of valuation in ments. Singh and Vanita (2002)in the paper "Mutual Fund Investors' Perceptions and Preferences-A Survey" have examined the investors' preferences and perception towards mutual fund investments by conducted a survey of 150 respondents in the city of Delhi. The study has investigated in the following research issues: 1) the basic objectives form Vestments and average time horizon; 2) investment experiences; 3) risk, return, safety and diversification; 4) preferences of financial assets and investment schemes of mutual funds. The findings of the study were that the investors' preferred to invest in public sector mutual funds with an investment objective of getting tax exemptions and stayed invested for a period of 3-5 years and the investors evaluated past performance. The study further concludes by stating that majority of the investors were dissatisfied with the performance of their mutual fund and belonged to the category who held growth schemes. Acharya and Sidana (2007) attempted to classify hundred mutual funds employing cluster analysis and using a host of criteria like the 1 year total return, 2 year annualized return, 3 year annualized return, 5 year annualized return, alpha, beta, R-squared, Sharpe’s ratio, mean and standard deviation etc. The data is obtained from Value research online. They do find evidences of inconsistencies between the investment style / objective classification and the return obtained by the fund.

III. OBJECTIVES OF THE STUDY:1.

To evaluate the knowledge level of investors about mutual fund and its ;

2.

To evaluate the awareness level among investors;

3.

To find out how the investor is influenced to make investment in Mutual Fund;

RESEARCH METHODOLOGY:a.

Sample Design:-

The survey was conducted during the three months among 250 respondents as per simple random sampling. b.

Data Collection Method:-

The Primary data was collected by the researcher through Questionnaire. The secondary data was from Journals, Books, Magazines and few other websites. ANALYSIS & INTERPRETATIONS:Table No.1:- Demographic Factor of Investors (All respondents are tabulated on percentage basis) Demographic Factor No. of Respondents Age Group:a. Below 30 years b. 31 years - 40 years c. 41 years - 50 years d. Above 51 years Education Level : a. Under Graduate b. Post Graduate c. Professional Annual Income Level :a. Below INR 1,50,000 b. INR 1.5 Lakhs -INR 3 lakhs c. Above INR 3 Lakhs Employment Sector:a. Private Sector b Public Sector c. Self Employed

Mal e 197

Fema le 53

Tot al 250

(%)

66 58 51 22

12 18 17 6

78 76 68 28

31 30 28 11

51 18 10

15 5 1

165 57 28

66 23 11

19 32 28

13 8 0

80 100 70

32 40 28

43 18 18

20 0 1

158 45 47

63 18 19

100

Inference:The above table depicts the demographic factors where in the information is collected from male respondents on a majority basis on the perception that they would be more aware about mutual funds. Among the respondents, people having basic graduation who are interested to respond to the questionnaire are more in number. The income of respondents are scattered among the various income levels and 40% of respondents are found to be in the income level between INR 1.5 Lakhs to INR 3 Lakhs. Private sector employees are showing more interest to invest in mutual funds. Test of Hypotheses:

________________________________________________________________________________________________ ISSN (Print): 2319–5479, Volume-2, Issue–4, 2014 2

International Journal of Research and Development - A Management Review (IJRDMR) ________________________________________________________________________________________________ Hypothesis No.1:-

Inference:-

Ho – There is no significant difference between the investors’ age and the knowledge level about mutual fund.

The above table communicates the result with regarding to the calculated value of “F” test. The calculated “F” value is less than the tabulated value at 5% level of significance for v1 = 3, and V2 = 296 degrees of freedom. Hence, the null hypothesis is rejected and alternative hypothesis is accepted. It is proven from the analysis that there is a significant difference between the gender of the respondents and awareness about mutual fund.

H1 – There is significant difference between the investors’ age and the knowledge level about mutual fund. Table No 2: Statement Of Association Between The Investors’ Age And The Knowledge Level About Mutual Fund. ONE-WAY ANOVA TEST

Between

SUM OF

DEGREE

MEAN

SQUARES

OF FREEDOM

SQUARE

1.025

3

0.352

Groups Within

F

0.423 238.962

296

0.807

Ho – There is no significant difference between the investors’ income group and the knowledge level about mutual fund. H1 – There is significant difference between the investors’ income group and the knowledge level about mutual fund. Table No 4: Statement of Association between the Investors’ income group and the knowledge level about mutual fund. ONE-WAY ANOVA TEST

Groups Total

239.987

SUM OF SQUARE S

299

MEAN SQUARE

0.54

DEGREE OF FREEDO M 3.00

74.34

296.00

0.251

SIGNIFICANT VALUE: 0.737

Inference:The above table communicates the result with regarding to the calculated value of “F” test. The calculated “F” value is less than the tabulated value at 5% level of significance for v1 = 3, and V2 = 296 degrees of freedom. Hence, the null hypothesis is accepted and alternative hypothesis is rejected. It is proved that there is no significant difference between the investors’ age and the knowledge level about mutual fund. Therefore, it can be understood that the knowledge level of the investors associated with the respondent age. Hypothesis No.2:Ho – There is no significant difference between the investors’ age and the awareness about mutual fund. H1 – There is significant difference between the investors’ age and the awareness about mutual fund. Table No 3: Statement Of Association Between The Investors’ Age And Awareness About Mutual Fund. ONE-WAY ANOVA TEST SUM OF SQUARES Between Groups Within Groups Total

MEAN SQUARE

0.985

DEGREE OF FREEDO M 3.00

73.895

296.00

0.250

F

Between Groups Within Groups Total

0.181 0.72

74.88 299 SIGNIFICANT VALUE: 0.541

INFERENCE:The above table communicates the result with regarding to the calculated value of “F” test. The calculated “F” value is less than the tabulated value at 5% level of significance for v1 = 3, and V2 = 296 degrees of freedom. Hence, the null hypothesis is accepted and alternative hypothesis is rejected. There is a least significant difference between the means of the income group of investors and the knowledge level. Hypothesis No.3:Ho – There is no significant difference between the investors’ income group and the awareness about mutual fund. H1 – There is significant difference between the investors’ income group and the awareness about mutual fund. Table No 5: Statement of Association between the Investors’ income group and the awareness about mutual fund.

0.328 1.316

74.880 299 SIGNIFICANT VALUE: 0.269

F

ONE-WAY ANOVA TEST

Betwee n

SUM OF SQUARE S 1.40

DEGREE OF FREEDOM 3.00

MEAN SQUARE

F

0.465 1.8

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International Journal of Research and Development - A Management Review (IJRDMR) ________________________________________________________________________________________________ Groups Within Groups Total

IV. SUGGESTIONS

74 73.49

296.00

0.248

a.

Mutual fund companies may try to educate the investors to invest in mutual funds through regular awareness programs.

b.

Fund Managers should try to give clear information about the mutual fund and various schemes.

c.

Fund Agents may take steps to shrink the and conditions and can make them easily understandable to the prospective investors;

d.

Mutual Fund Agencies may spread the information about all the aspects of investing in mutual funds.

e.

Various schemes may be introduced to attract female respondents as the economy is leaning towards women’s financial empowerment.

74.89 299 SIGNIFICANT VALUE: 0.134

Inference:The above table communicates the result with regarding to the calculated value of “F” test. The calculated “F” value is less than the tabulated value at 5% level of significance for v1 = 3, and V2 = 296 degrees of freedom. Hence, the null hypothesis is rejected and alternative hypothesis is accepted. There is a significant difference between the income group of investors and awareness of mutual fund scheme. As all the investors are generally aware about such procedure and they are also aware product features that it is enforced by the sponsors.

V. CONCLUSION

FINDINGS OF THE STUDY:a.

In majority of the respondents the knowledge level is confined to good knowledge. Approximately 10% of the respondents do not have proper knowledge about Mutual funds.

b.

The respondents are well acquainted with mutual fund and many respondents do not know technical like ENTRY LOAD, EXIT LOAD, OPEN-ENDED & CLOSE-ENDED.

c.

Table 4 shows that more than 50% of respondents are educated about mutual funds through ments, friends and relatives.

d.

The respondents’ awareness level shows that many people have knowledge about Growth and Income Schemes rather than Balanced and Dividend Schemes.

e.

Many Respondents have clear knowledge about the potential advantages of investing in mutual funds.

f.

Bankers play the vital role in influencing the respondents to invest in mutual funds and they make the investor to invest in their banks mutual fund schemes.

In this survey, graduate respondents are chosen as they have approachable knowledge about mutual fund. The general knowledge & awareness level among the individual investors are so good. Mutual funds are cornering the maximum attention of the investors in today’s scenario be it individual or corporate investors. This is because of the reason that there is a perception amongst these investors that mutual funds give quick and more returns as compared to other avenues and instruments of investments. This is the most prominent factor for the acceptance and growth of mutual funds amongst the populace of India in recent times.

REFERENCES [1] Arnold L. Redman, N. S. Gullett, Herman Manakyan; “The Performance of Global And International Mutual Funds”; Journal of Financial and Strategic Decisions; Volume 13, No.1; 2000. [2] Chang, E.C. and W.C. Lewellen, “Market Timing and Mutual Fund Performance,” Journal of Business 57, 1984, pp. 57-72.

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