Final Project- Jaspreet

8/9/2019 Final Project- Jaspreet

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Study of SIP by business class and salaried class

STUDY OF SYSTEMATIC INVESTMENT PLAN BY

BUSINESS CLASS AND SALARIED CLASS

In partial fulfillment for the award of the degree of

Masters of Business Administration,

Punjab Technical University, Jalandhar

(2008-10)

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DECLARATION

This is to state that the Project titled STUDY OF SYSTEMATIC INVESTMENT

PLAN BY BUSINESS CLASS AND SALARIED CLASS is based on the original

work carried out by me and is being submitted towards partial fulfillment of the

requirement for the MBA program of the Punjab Technical University, Jalandhar. This

has not been submitted for the award of any other degree or diploma.

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ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude to all those who have

contributed significantly by sharing their knowledge and experience in the completion of

this project work.

I am greatly obliged to, for providing me with the right kind of opportunity and facilities

to complete this venture.

I am thankful to my faculty guide under whose able guidance this project work was

carried out. I thank her for her continuous support and mentoring during the tenure of the

project.

Finally, I would also like to thank all my dear friends for their cooperation, advice and

encouragement during the long and arduous task of carrying out the project and preparing

this project.

DATE

PLACE

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EXECUTIVE SUMMARY

The mutual fund industry is lot like the film star of the financial business. Though it is

perhaps the smallest segment of the industry it is also the most glamorous. In that it is ayoung industry where there are changes in the rules of the game everyday and there are

constant shifts and upheavals.

The mutual fund is structured around a fairly simple concept, the mitigation of rest

through the spreading of investment across multiple entities, which is achieved by the

pooling of a number of small investments into a large bucket. Yet it has been the subject

of most elaborate and prolonged regulatory effort in the history of the country.

This project is about the study of systematic investment plan (SIP) by business class and

salaried class. The objective of the study is found out the awareness of people towards the

investment options and which class preferred the SIP and the reasons behind their choice

towards the different options. In the end some suggestions have been included to increase

the demand of mutual funds and to remove the present problems facing by the mutual

fund industry.

For the collection of primary data a structured questionnaire was prepared as per research

objectives. Various statistical tools like Mean, Z-test and chi- square test of proportion

have been applied to test the various hypothesis set before conducting the study.

Management books and web sites have been used as the source of secondary data.

Questionnaires were filled by both the business class and salaried class residing in

Chandigarh and near by Chandigarh. It took me around two months to complete my

project starting from identifying the project and till the stage of analyzing the data and

preparing the project report.

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TABLE OF CONTENTS

5

SERIAL No. CONTENTS PAGE

No.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

ACKNOWLEDGEMENT

EXECUTIVE SUMMARYCOMPANY PROFILE

INTRODUCTION TO THE PROJECT

LITERATURE REVIEW

RESEARCH METHODOLOGY

ANALYSIS AND INTERPRETATION

FINDINGS OF THE STUDY

RECOMMENDATIONS

LIMITATIONS OF THE STUDY

CONCLUSION

REFERENCES

ANNEXURE

3

4

6 - 15

16 - 43

44 - 46

47 - 52

53 - 89

90

91

92

93

94

95 - 100


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COMPANY

PROFILE

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INTRODUCTION OF MAHINDRA FINANCE

The US $6.7 billion Mahindra Group is among the top 10 industrial houses in India.Mahindra & Mahindra is the only Indian company among the top three tractor

manufacturers in the world. Mahindra's Farm Equipment Sector has recently won the

Japan Quality Medal, the only tractor company worldwide to be bestowed this honour. It

also holds the distinction of being the only tractor company worldwide to win the Deming

Prize. Mahindra is the market leader in multi-utility vehicles in India. It made a milestone

entry into the passenger car segment with Logan.

With over 62 years of manufacturing experience, the Mahindra Group has built a strong

base in technology, engineering, marketing and distribution which are key to its evolution

as a customer-centric organization. The Group employs over 50,000 people and has

several state-of-the-art facilities in India and overseas.

M&M has entered into partnerships with international companies like Renault SA,

France, and International Truck and Engine Corporation, USA. Forbes has ranked the

Mahindra Group in its Top 200 list of the World's Most Reputable Companies and in the

Top 10 list of Most Reputable Indian companies. Mahindra has recently been honoured

with the Bombay Chamber Good Corporate Citizen Award for 2006-07.

M&M are one of Indias leading non-banking finance companies focused on the rural and

semi-urban sectors providing finance for Utility Vehicles (UVs), tractors and cars.They

are a subsidiary of Mahindra & Mahindra Limited, a leading tractor and UV manufacturer

with over 60 years experience in the Indian market.

The Group has a leading presence in key sectors of the Indian economy, including the

financial services, trade and logistics, automotive components, information technology,

infrastructure development and After-Market. In financial sector the goal of Mahindra

Finance is to be the preferred provider of retail financing services in the rural and semi-

urban areas of India, while their strategy is to provide a range of financial products and

services to our customers through our nationwide distribution network. They seek to

position their selves between the organized banking sector and local money lenders,

offering our customers competitive, flexible and speedy lending services.

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Mahindra Finance principally finance UVs used both for commercial and personal

purposes, tractors and cars. While they predominantly finance M&M UVs and tractors,

HISTORY OF MAHINDRA GROUP

Few groups can identify as closely with India's destiny and industrial progress as the

Mahindra Group. In fact, Mahindra is like a microcosm of India. Both were born around

the same time, had the same aspirations and both experienced the inevitable troughs and

crests in the journey towards their goals. And both continue to march on the path to

progress and global recognition.

The birth of Mahindra & Mahindra began when K.C. Mahindra visited the United Statesof America as Chairman of the India Supply Mission. He met Barney Roos, inventor of

the rugged 'general purpose vehicle' or Jeep and had a flash of inspiration: wouldn't a

vehicle that had proved its invincibility on the battlefields of World War II be ideal for

India's rugged terrain and its kutcha rural roads.

Mahindra Finance were incorporated on January 1, 1991 as Maxi Motors Financial

Services Limited and received certificate of commencement of business on February 19,

1991 . The name was changed to Mahindra & Mahindra Financial Services Limited on

November 3, 1992 . Mahindra Finance are registered with the RBI as an NBFC with

effect from September 4, 1998 under Section 45IA of the Reserve Bank of India Act

1934.

Key events in business history

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1993

Commenced financing of M&M UVs

1995

Opened first branch outside Mumbai, at Jaipur

1996

Commenced financing M&M dealers for purchase of tractors

1998

Launched pilot project for retail tractor financing

1999

Commenced tractor retail financing in rural and semi-urban areas

2001

Total Assets crossed Rs. 10 billion

2002

Commenced financing of non-M&M vehicles

Received Tier II debt from International Finance CorporationMade first securitisation transaction of Rs. 434.8 million2004

Received a long-term credit rating of AA+/Stable

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Opened a branch in Port Blair

Listing of non convertible debentures on BSE on the wholesale debt market

segment

Securitisation of tractor assets of Rs. 256.6 million2005

Tied up with HPCL

Made MIBL our wholly owned subsidiary

2006

Issued IPO

Tied up with Maruti

Launched marketing campaign

Reached a new benchmark with 400 branches

LOGO OF MAHINDRA FINANCE

VISION

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Their vision is to be the leading Rural Finance Company and continue to retain the

leadership position for Mahindra Products.

MISSION

Mahindra Finance will be recognised as the premier provider of financial services

on the basis of their contribution to sale of Mahindra range of vehicles, tractors,

services and help M&M protect its sale through availability of finance.

Mahindra Finance will specialise in financing products based on applications and

build on the competence developed in its focus area. It will target all segments of

vehicle financing and deploy the skills acquired through an in-depth understanding

of the chosen product market.

It will provide products and services tailored to the needs of M&M, our most

favoured customer, and always meet their needs. In case of demand-supply

mismatch of funds, we will do everything to find a solution.

Mahindra Finance will help M&M develop better products by providing first-hand

information received from the target market.

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STRENGTHS

The following are the key strengths of the Mahindra finance:

In-depth knowledge of the rural and semi-urban market

relationship with Mahindra & Mahindra

branch network

association with dealers

client base

loan approval and administration procedures

ability to borrow at competitive rates

Experienced Board and executive management team

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THE BOARD OF DIRECTORS OF MAHINDRA FINANCE

The Board of Directors of the Company has, as its members, eminent persons from

Industry, Finance, Investment and other branches of business, who bring diverse

experience and expertise to the Board.

The Company's current Board of Directors is as follows:

NAME DESIGNATION

Mr. Keshub Mahindra Chairman

Mr. Anand G. Mahindra Vice Chairman and Managing Director

Deepak Shantilal Parekh Director

Nadir Burjorji Godrej Director

M. M. Murugappan Director

Bharat Narotam Doshi Executive Director & Group ChiefFinancial Officer (Group CFO)

Arun Kumar Nanda Executive Director & Secretary

Narayanan Vaghul Director

Dr. Ashok Sekhar Ganguly Director

R. K. Kulkarni Director

Anupam Pradip Puri Director

Thomas Mathew T. Nominee of LIC

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PRODUCT PORTFOLIO OF MAHINDRA FINANCE

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Personalloans

Services

Investmentadvisory(mutualfunds)

Loans

Commercialvehicle

Buy usedvehicles

Refinance

Tractor loans

Utilityvehicle loans

Two-wheelerloans

Car loans

PRODUCTPORTFOLIO


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FUTURE PLANS OF MAHINDRA FINANCE

The financing arm of the $4.5 billion Mahindra Group, Mahindra and Mahindra

Financial Services Limited, is now looking to tap overseas markets with possible

ventures in the US and South Africa.

The company is planning to make entries into all the countries where the promoter

company Mahindra and Mahindra (M&M holds almost 70 per cent in the

company) has introduced its vehicles.

M&M is already present in the US in the tractor segment and also in South Africa

through vehicles like Scorpio and other pick-up vehicles.

With gross revenues of over Rs 840 crore (Rs 8.4 billion) logged in the last

financial year as compared with Rs 596 crore (Rs 5.96 billion) recorded in the

previous year, MMFSL is aiming to grow more robustly in the current fiscal too.

Ramesh Iyer, managing director, MMFSL, said, "We are aiming to keep up our

current CAGR of 35 per cent per annum for this fiscal. The company is planning

for launch in key markets like the US and South Africa and also where M&M will

have presence in future".

The company in India finances tractors, cars, utility vehicles, two wheelers, light

commercial vehicles, construction equipments and used cars through more 425branches across the country.

The company even has plans to finance heavy commercial vehicles in future.

MMFSL, has come out with the third quarter results. The company reported net

profit of Rs 25.6 crore (Rs 256 million) versus Rs 30.3 crore (Rs 303 million) in

the previous quarter.

Managing Director of the company, Ramesh Iyer, says that both, their auto

business as well as their tractor business grew 35-40%.

He says that cost of funds has moved up, which has impacted margins. Iyer added

that the firm plans to add 15-20 new branches in the next three months.

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INTRODUCTION

TO THE PROJECT

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Mutual Fund Industry

The mutual fund industry is India started in 1963 with the formation of Unit Trust of

India, at the initiative of the government of India and Reserve Bank of the India. The

history of mutual funds in India can be broadly divided into four distinct phases.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set

up by the Reserve Bank of India and functioned under the Regulatory and

administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from

the RBI and the Industrial Development Bank 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 1988 UTI had Rs.6,700 crores of assets under

management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

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 (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund

established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab

National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of

India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund

in June 1989 while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of

Rs.47,004 crores.

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Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual

fund industry, giving the Indian investors a wider choice of fund families. Also, 1993

was the year in which the first Mutual Fund Regulations came into being, under which

all mutual funds, except UTI were to be registered and governed. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the first private sector

mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive

and revised Mutual Fund Regulations in 1996. The industry now functions under the

SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual

funds setting up funds in India and also the industry has witnessed several mergers

and acquisitions. As at the end of January 2003, there were 33 mutual funds with total

assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets

under management was way ahead of other mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit

Trust of India with assets under 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 of Unit Trust of India, functioning

under an administrator and under the rules framed by Government of India and does

not come under the purview of the Mutual Fund Regulations.

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 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 the setting up of a UTI Mutual Fund,

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conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking

place among different private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. Erstwhile UTI was bifurcated into UTI

Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from

February 2003. The Assets under management of the Specified Undertaking of the

Unit Trust of India has therefore been excluded from the total assets of the industry as

a whole from February 2003 onwards.

GROWTH IN ASSETS UNDER MANAGEMENT OF

MUTUAL FUND INDUSTRY

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MUTUAL FUNDS OPERATION FLOW CHART

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 realised 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:

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ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organisational set

up of a mutual fund:

SEBI

The regulation of mutual funds operating in India falls under the purview of the authority

of the Securities and Exchange Board of India (SEBI). Any person proposing to set

up a mutual fund in India is required, under the Securities and Exchange Board of

India (Mutual Funds) Regulations, 1996 (Mutual Fund Regulations),to be

registered with the SEBI.

SPONSOR

The sponsor should contribute at least 40% to the net worth of the AMC. However, if any

person holds 40% or more of the net worth of an AMC shall be deemed to be a

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sponsor and will be required to fulfill the eligibility criteria specified in the Mutual

Fund Regulations.

TRUSTEES

The mutual fund is required to have an independent Board of Trustees, i.e. two thirds of

the trustees should be independent persons who are not associated with the sponsors

in any manner whatsoever. An AMC or any of its officers or employees are not

eligible to act as a trustee of any mutual fund.

ASSET MANAGEMENT COMPANY

The sponsor or the trustee are required to appoint an AMC to manage the assets of themutual fund. Under the Mutual Fund Regulations, the applicant must satisfy certain

eligibility criteria in order to quality to register with SEBI as an AMC.

MUTUAL FUND

Every mutual fund must be registered with SEBI and must be constituted in the form of a

trust in accordance with the provisions of the Indian Trust Act, 1882.

THE TRANSFER AGENTS

The role of a transfer agent is to collect data from distributors relating to daily purchases

and redemption of units.

CUSTODIAN

Only institutions with substantial organizational strength, service capability in terms of

computerization and other infrastructure facilities are approved to act as custodians.

The custodian must be totally delinked from the AMC and must be registered with

SEBI.

UNIT HOLDERS

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They are the parties to whom the mutual fund is sold. They are ultimate beneficiary of the

income earned by the mutual funds.

THEORETICAL FRAMEWORK OF THE STUDY

There are various investment options but before going into detail one must clear about the

difference between saving and investment.

SAVING AND INVESTMENT

Many of us use the words saving and investing interchangeably, but they are quite

different. Saving is storing money safely---such as in a bank or money market account---

we save for short-term needs such as upcoming expenses or emergencies. Typically, with

this kind of saving, we earn a low, fixed rate of return and we can withdraw or have

accesss to our money, easily. Investing is taking a risk with a portion of our savings. we

can buy stocks and bonds or mutual funds with the hope of realizing higher long-term

returns. Unlike bank savings, stocks and bonds have historically returned enough to

outpace inflation, but they can also decline in value from time to time.

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How Saving and Investing Differ

Saving Investing

Objective Short term needs Long-Term needs

Vehicles Used Bank or money market

Accounts, certificates

Of deposit (CD)

Stocks, bonds and

mutual funds

Risk None on balances (generally

Up to $100,000 per depositor)

Varies, depending on

on securities owned

In federally insured bank

accounts and CDs

Source of

Return

Interest paid on money

deposited

Interest and capital gains

(or losses), depending on

Securities owned

Key Benefit Money is safe and

Accessible

Returns have outpaced

inflation over the long term

Key Drawback Returns historically

Have not outpaced

Inflation over time

You could lose money if

Securities decline in

value

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Most medium- and long-term goals require more than saving, they require investing. Our

culture has become used to borrowing to reach goals, but if we borrow for everything we

can't afford, we will be using future income to repay loans and credit card debt. we can't

borrow for everything. we will still need a substantial down payment to purchase a home

or buy a car. And borrowing for some things, like retirement, doesn't make sense. In

broad sense Saving and investing both have a place in our future happiness. Investing has

a big advantage because we can choose ways that allow our money to compound over

time. How does our money compound? It depends on our investments, how much we

earn, how often compounding is calculated, and how long compounding has been

working for us.

Saving and investing allow us to make our hard-earned money work for us. Interest,

dividends, and capital gains build wealth over time. For example, $1000 invested in the

stock market at an average rate of 10.4 percent (Ibbotson Associates) will grow to:

$2,690 in 10 years

$4,411 in 15 years

$7.234 in 20 years

$19,457 in 30 years

DIFFERENT INVESTMENT SCHEMES

Stock Market

Commodity

Real Estate

Insurance

Government Securities

Mutual Funds

Post Office Deposits

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Arts and Antiques

Money Market Securities

STOCK MARKET

A stock market, or (equity market), is a private or public market for the trading of

company stock and derivatives of company stock at an agreed price; these are securities

listed on a stock exchange as well as those only traded privately.

COMMODITY MARKET

Commodity markets are markets where raw or primary products are exchanged. These

raw commodities are traded on regulated commodities exchanges, in which they are

bought and sold in standardized contracts.

INSURANCE

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to

another, in exchange for a premium. An insurer is a company selling the insurance.

GOVERNMENT SECURITIES

Government securities(G-secs) are sovereign securities which are issued by the ReserveBank of India on behalf of Government of India,in lieu of the Central Government's

market borrowing programme.

POST OFFICE DEPOSITS

A Post-Office Recurring Deposit Account (RDA) is a banking service offered by

Department of post, Government of India at all post office counters in the country. The

scheme is meant for investors who want to deposit a fixed amount every month, in order

to get a lump sum after five years. The scheme, a systematic way for long term savings, is

one of the best investment options for the low income groups.

MONEY MARKET SECURITIES

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Money Market securities are some of the safest and most liquid of all investments

available. Risk-averse investors that have a quick need for cash often find money market

securities a good investment choice. The money market itself operates through dealers,

Money Center Banks, and the Open Market Trading Desk at the New York Federal

Reserve Bank. The basic money market securities are:

Treasury bills Certificates of deposits

Money market funds Commercial papers

MUTUAL FUNDS

A mutual fund is a company that pools money from many investors and invests the moneyin stocks, bonds, short-term money-market instruments, or other securities or assets, or

some combination of these investments. The combined holdings the mutual fund owns are

known as its portfolio. Each share represents an investor's proportionate ownership of the

fund's holdings and the income those holdings generate. Legally known as an "open-end

company," a mutual fund is one of three basic types of Investment Company. The two

other basic types are closed-end funds and Unit Investment Trusts (UITs).

OTHER TYPES OF INVESTMENT SCHEMES

The two other basic types of investment companies are:

Closed-end funds which, unlike mutual funds, sell a fixed number of shares at one

time (in an initial public offering) that later trade on a secondary market; and

Unit Investment Trusts (UITs) which make a one-time public offering of only a

specific, fixed number of redeemable securities called "units" and which will terminate

and dissolve on a date specified at the creation of the UIT. "Exchange-traded funds"

(ETFs) are a type of investment company that aims to achieve the same return as a

particular market index. They can be either open-end companies or UITs. But ETFs are

not considered to be, and are not permitted to call themselves, mutual funds.

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DISTINGUISHING CHARACTERISTICS OF MUTUAL FUNDS:

Investors purchase mutual fund shares from the fund itself (or through a broker for

the fund), but are not able to purchase the shares from other investors on a

secondary market, such as the New York Stock Exchange or Nasdaq Stock

Market.

The price investors pay for mutual fund shares is the funds approximate per share

net asset value (NAV) plus any shareholder fees that the fund imposes at purchase

(such as sales loads).

Mutual fund shares are "redeemable." This means that when mutual fund investors

want to sell their fund shares, they sell them back to the fund (or to a broker acting

for the fund) at their approximate per share NAV, minus any fees the fund

imposes at that time (such as deferred sales loads or redemption fees).

Mutual funds generally sell their shares on a continuous basis, although some

funds will stop selling when, for example, they become too large.

The investment portfolios of mutual funds typically are managed by separate

entities known as "investment advisers" that are registered with the SEC.

KEY POINTS

Mutual funds are not guaranteed or insured by the FDIC or any other

government agency even if buying is done through a bank and the fund

carries the bank's name. Money can be loosening by investing in mutual funds.

Past performance is not a reliable indicator of future performance. So don't be

dazzled by last year's high returns. But past performance can help only to

assess a funds volatility over time.

All mutual funds have costs that lower the investment returns.

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ADVANTAGES OF MUTUAL FUNDS

Every investment has advantages and disadvantages. But it's important to remember that

features that matter to one investor may not be important to us. Whether any particular

feature is an advantage for us will depend on our unique circumstances. For some

investors, mutual funds provide an attractive investment choice because they generally

offer the following features:

Professional Management Professional money managers research, select, and

monitor the performance of the securities the fund purchases.

Diversification Diversification is an investing strategy that can be neatly

summed up as "Don't put all your eggs in one basket." Spreading the investments

across a wide range of companies and industry sectors can help lower the risk if a

company or sector fails. Some investors find it easier to achieve diversification

through ownership of mutual funds rather than through ownership of individual

stocks or bonds.

Affordability Some mutual funds accommodate investors who don't have a lot

of money to invest by setting relatively low dollar amounts for initial purchases,

subsequent monthly purchases, or both.

Liquidity Mutual fund investors can readily redeem their shares at the current

NAV plus any fees and charges assessed on redemption at any time.

DISADVANTAGES OF MUTUAL FUNDS

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Costs despite Negative Returns Investors must pay sales charges, annual fees,

and other expenses (which we'll discuss below) regardless of how the fund

performs. And, depending on the timing of their investment, investors may also

have to pay taxes on any capital gains distribution they receive even if the fund

went on to perform poorly after they bought shares.

Lack of Control Investors typically cannot ascertain the exact make-up of a

fund's portfolio at any given time, nor can they directly influence which securities

the fund manager buys and sells or the timing of those trades.

Price Uncertainty With an individual stock, investors can obtain real-time (or

close to real-time) pricing information with relative ease by checking financial

websites or by calling your broker. You can also monitor how a stock's price

changes from hour to hour or even second to second. By contrast, with a

mutual fund, the price at which you purchase or redeem shares will typically

depend on the fund's NAV, which the fund might not calculate until many hours

after you've placed your order. In general, mutual funds must calculate their NAV

at least once every business day, typically after the major U.S. exchanges close.

DIFFERENT TYPES OF FUNDS

When it comes to investing in mutual funds, investors have literally thousands of choices.

Before invest in any given fund, investors should decide whether the investment strategy

and risks of the fund are a good fit for them or not.. The first step to successful investing

is figuring out our financial goals and risk tolerance either on our own or with the help

of a financial professional. Once we know what we're saving for, when we'll need the

money, and how much risk we can tolerate, we can more easily narrow our choices.

Most mutual funds fall into one of three main categories money market funds, bond

funds (also called "fixed income" funds), and stock funds (also called "equity" funds).

Each type has different features and different risks and rewards. Generally, the higher the

potential return, the higher the risk of loss.

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Money Market Funds

Money market funds have relatively low risks, compared to other mutual funds (and

most other investments). By law, they can invest in only certain high-quality, short-term

investments issued by the U.S. government, U.S. corporations, and state and local

governments. Money market funds try to keep their net asset value (NAV) which

represents the value of one share in a fund at a stable $1.00 per share. But the NAV

may fall below $1.00 if the fund's investments perform poorly. Investor losses have

been rare, but they are possible.

Money market funds pay dividends that generally reflect short-term interest rates, and

historically the returns for money market funds have been lower than for either bond or

stock funds. That's why "inflation risk" the risk that inflation will outpace and erode

investment returns over time can be a potential concern for investors in money

market funds.

Bond Funds

Bond funds generally have higher risks than money market funds, largely because they

typically pursue strategies aimed at producing higher yields. Unlike money market

funds, the SEC's rules do not restrict bond funds to high-quality or short-term

investments. Because there are many different types of bonds, bond funds can vary

dramatically in their risks and rewards. Some of the risks associated with bond funds

include:

Credit Risk the possibility that companies or other issuers whose bonds are owned by

the fund may fail to pay their debts (including the debt owed to holders of their bonds).

Credit risk is less of a factor for bond funds that invest in insured bonds or U.S. Treasury

bonds. By contrast, those that invest in the bonds of companies with poor credit ratings

generally will be subject to higher risk.

Interest Rate Risk the risk that the market value of the bonds will go down when

interest rates go up. Because of this, we can lose money in any bond fund, including those

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that invest only in insured bonds or Treasury bonds. Funds that invest in longer-term

bonds tend to have higher interest rate risk.

Prepayment Risk the chance that a bond will be paid off early. For example, if

interest rates fall, a bond issuer may decide to pay off (or "retire") its debt and issue new

bonds that pay a lower rate. When this happens, the fund may not be able to reinvest the

proceeds in an investment with as high a return or yield.

Stock Funds

Although a stock fund's value can rise and fall quickly (and dramatically) over the short

term, historically stocks have performed better over the long term than other types of

investments including corporate bonds, government bonds, and treasury securities.

Overall "market risk" poses the greatest potential danger for investors in stocks funds.

Stock prices can fluctuate for a broad range of reasons such as the overall strength of

the economy or demand for particular products or services.

Not all stock funds are the same. For example:

Growth funds focus on stocks that may not pay a regular dividend but have thepotential for large capital gains.

Income funds invest in stocks that pay regular dividends.

Index funds aim to achieve the same return as a particular market index, such

as the S&P 500 Composite Stock Price Index, by investing in all or perhaps

a representative sample of the companies included in an index.

Sector funds may specialize in a particular industry segment, such as

technology or consumer products stocks.

HOW FUNDS CAN EARN MONEY

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Investors can earn money from their investment in three ways:

1. Dividend Payments A fund may earn income in the form of dividends and

interest on the securities in its portfolio. The fund then pays its shareholders nearly

all of the income (minus disclosed expenses) it has earned in the form of

dividends.

2. Capital Gains Distributions The price of the securities a fund owns may

increase. When a fund sells a security that has increased in price, the fund has a

capital gain. At the end of the year, most funds distribute these capital gains

(minus any capital losses) to investors.

3. Increased NAV If the market value of a fund's portfolio increases after

deduction of expenses and liabilities, then the value (NAV) of the fund and its

shares increases. The higher NAV reflects the higher value of your investment.

With respect to dividend payments and capital gains distributions, funds usually will give

a choice: the fund can send a check or other form of payment, or investors can have their

dividends or distributions reinvested in the fund to buy more shares (often without paying

an additional sales load).

FACTORS TO CONSIDER BEFORE INVESTING IN MUTUAL FUNDS

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Thinking about long-term investment strategies and tolerance for risk can help the

investors to decide what type of fund is best suited for them. But they should also

consider the effect that fees and taxes will have on their returns over time.

1. Degrees of Risk

All funds carry some level of risk. investors may lose some or all of the money they

invest their principal because the securities held by a fund go up and down in value.

Dividend or interest payments may also fluctuate as market conditions change. Mutual

funds offer a variety of schemes ranging from relatively safe debt funds like Magnum

Income Fund and gilt funds like Magnum Guilt Fund to very risky sectoral funds like

Magnum Sector Funds Umbrella. Investors can choose schemes best suited to their risk

appetite. Debt funds and gilt funds, which invest only in fixed-income instruments, are

relatively safe and offer returns equivalent to returns on pure Debt instruments, when held

for atleast a year. Sectoral funds, such as IT Funds, Pharma Funds, etc can offer very high

returns when the stock markets are bullish, but these are high risk products and can also

result in a loss on capital when the markets are bearish.

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2. Mutual Fund Fees and Expenses

As with any business, running a mutual fund involves costs. For example, there are costs

incurred in connection with particular investor transactions, such as investor purchases,

exchanges, and redemptions. There are also regular fund operating costs that are not

necessarily associated with any particular investor transaction, such as investment

advisory fees, marketing and distribution expenses, brokerage fees, and custodial, transfer

agency, legal, and accountants fees. Some funds cover the costs associated with an

individual investors transactions and account by imposing fees and charges directly on

the investor at the time of the transactions (or periodically with respect to account fees).

These fees and charges are identified in a fee table, under the heading "Shareholder Fees."

Funds typically pay their regular and recurring, fund-wide operating expenses out of fund

assets, rather than by imposing separate fees and charges on investors. (however, that

because these expenses are paid out of fund assets, investors are paying them indirectly.)

Although the SEC limits redemption fees to 2% in most situations but the Financial

Industry Regulatory Authority (FINRA), however, does impose limits on some fees.

35

RETURNS

Liquid funds

Debt funds

Balanced funds

Index funds

Equity funds

Sectoral funds

RISK


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Shareholder Fees

Sales Charge (Load) on Purchases the amount investors pay when they buy

shares in a mutual fund. Also known as a "front-end load," this fee typically goes

to the brokers that sell the fund's shares. Front-end loads reduce the amount of

their investment. For example, let's say a person have $1,000 and want to invest it

in a mutual fund with a 5% front-end load. The $50 sales load he must pay comes

off the top, and the remaining $950 will be invested in the fund. According to

NASD rules, a front-end load cannot be higher than 8.5% of his investment.

Purchase Feeanother type of fee that some funds charge their shareholders

when they buy shares. Unlike a front-end sales load, a purchase fee is paid to thefund (not to a broker) and is typically imposed to defray some of the fund's costs

associated with the purchase.

Deferred Sales Charge (Load) a fee investors pay when they sell their shares.

Also known as a "back-end load," this fee typically goes to the brokers that sell

the fund's shares. The most common type of back-end sales load is the "contingent

deferred sales load" (also known as a "CDSC" or "CDSL"). The amount of this

type of load will depend on how long the investor holds his or her shares and

typically decreases to zero if the investor holds his or her shares long enough.

Redemption Fee another type of fee that some funds charge their shareholders

when they sell or redeem shares. Unlike a deferred sales load, a redemption fee is

paid to the fund (not to a broker) and is typically used to defray fund costs

associated with a shareholder's redemption.

Exchange Fee a fee that some funds impose on shareholders if they exchange

(transfer) to another fund within the same fund group or "family of funds."

Account fee a fee that some funds separately impose on investors in

connection with the maintenance of their accounts. For example, some funds

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impose an account maintenance fee on accounts whose value is less than a certain

dollar amount.

Annual Fund Operating Expenses

Management Fees fees that are paid out of fund assets to the fund's investment

adviser for investment portfolio management, any other management fees payable

to the fund's investment adviser or its affiliates, and administrative fees payable to

the investment adviser that are not included in the "Other Expenses" category

(discussed below).

Distribution [and/or Service] Fees ("12b-1" Fees) fees paid by the fund out

of fund assets to cover the costs of marketing and selling fund shares and

sometimes to cover the costs of providing shareholder services. "Distribution fees"

include fees to compensate brokers and others who sell fund shares and to pay for

advertising, the printing and mailing of prospectuses to new investors, and the

printing and mailing of sales literature. "Shareholder Service Fees" are fees paid to

persons to respond to investor inquiries and provide investors with information

about their investments.

Other Expenses expenses not included under "Management Fees" or

"Distribution or Service (12b-1) Fees," such as any shareholder service expenses

that are not already included in the 12b-1 fees, custodial expenses, legal and

accounting expenses, transfer agent expenses, and other administrative expenses.

Total Annual Fund Operating Expenses ("Expense Ratio") the line of the

fee table that represents the total of a funds entire annual fund operating

expenses, expressed as a percentage of the fund's average net assets.

Even small differences in fees can translate into large differences in returns over time.

For example, if a investor invested $10,000 in a fund that produced a 10% annual

return before expenses and had annual operating expenses of 1.5%, then after 20 years

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he would have roughly $49,725. But if the fund had expenses of only 0.5%, then he

would end up with $60,858 an 18% difference.

Net Asset Value

"Net asset value," or "NAV," of an investment company is the companys total assets

minus its total liabilities. For example, if an investment company has securities and other

assets worth $100 million and has liabilities of $10 million, the investment companys

NAV will be $90 million. Because an investment companys assets and liabilities change

daily, NAV will also change daily. NAV might be $90 million one day, $100 million the

next, and $80 million the day after.

An investment company calculates the NAV of a single share (or the "per share NAV")

by dividing its NAV by the number of shares that are outstanding. For example, if a

mutual fund has an NAV of $100 million, and investors own 10,000,000 of the funds

shares, the funds per share NAV will be $10. Because per share NAV is based on NAV,

which changes daily, and on the number of shares held by investors, which also changes

daily, per share NAV also will change daily. Most mutual funds publish their per share

NAVs in the daily newspapers.

DIFFERENT INVESTMENT OPTIONS IN MUTUAL FUNDS

There are many investment options in mutual funds. These are:

SIP (Systematic Investment Plan)

Lump sum

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ZIP (Zoom Investment Plan)

STP (Systematic Transfer Plan)

Systematic Investment Plans

SIP is a method of investing a fixed /regular sum every month or every quarter. The

investment can be in the scheme of anyones choice as most mutual funds give this

facility for their schemes. In other words, instead of investing lump sum in one scheme

investor invest a smaller fixed amount every month or every quarter. His account gets

credited with proportionate units every month and he receives up-dated statements

reflecting his transactions.

For example: If your scheme of choice is, say, HDFC Top 200 or DSPML TIGER and

you want to invest Rs 1,00,000 in it. Instead of issuing a cheque of Rs100,000 at one go,

invest Rs 5000 every month for 20 months. This is systematic investment planning.

The biggest plus which SIP provides you with is regular disciplined savings.

For as little as Rs. 250* each month for 12 months or Rs. 500 every month for 6 months,

investor can purchase mutual fund units and avoid larger minimum investment amountsof over Rs. 1,000. Fixed amounts can be invested in Mutual Funds each month using

funds drawn automatically from their savings account regularly.

How to invest in SIPs?

The SIP option is available with all types of funds like equity, income or gilt.

An investor can avail the SIP option by giving post-dated cheques of Rs 500 or Rs

1,000 according to the funds policy.

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If an investor wants to put more than Rs 500 or Rs 1,000 in any given month he

will have to fill in a new a form for SIP intimating the fund that he is changing his

SIP structure. Also he will be allowed to change the SIP structure only in the

multiples of the SIP amount.

If an investor is investing in two different schemes of the same fund he can fill in a

common SIP form for all the schemes. However if the first holders in those

schemes are different than they will have to fill different SIP forms, as the first

holder has to sign on the form.

The investor can get out of the fund i.e. redeem his units any time irrespective of

whether he has completed his minimum investment in that scheme. In such a case

his post-dated cheques will be returned back to him.

BENEFITS OF SYSTEMATIC INVESTMENT PLAN

Over the last 12 months investors in equity markets have seen it all. From all time highs

of round 21,000 levels to dismal lows of round 13,000. A lot of investors who entered at

21,000 expecting the market to go even higher are very upset. Most investors cannot

really stomach the kind of volatility that is inherent in equity markets. At the end of the

day, investors who can take some risk are actually shunning equities only because they

entered equity markets at the wrong time. Systematic investment plans (SIPs) take care

of this problem. But market timing is not the only reason for you to plump for SIPs, there

are other advantages.

1. Light on the wallet

Given that average per capital income of an Indian is approximately only Rs 25,000 (i.e.

monthly income of Rs 2,083), a Rs 5,000 one-time entry in a mutual fund is still asking

for a lot (2.4 times the monthly income!). And mutual funds were never meant to be

elitist; far from it, the retail investor is as much a part of the mutual fund target audience

as the next high net worth investor (HNI). So if one cannot shell out Rs 5,000, thats not a

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huge stumbling block, SIP route trigger the mutual fund investment with as low as Rs 500

(in most cases).

2. Makes market timing irrelevant

If market lows give investor the jitters and make him wish him had never invested in

equity markets, then SIPs can help him blunt that depression. Most retail investors are not

experts on stocks and are even more out-of-sorts with stock market oscillations. But that

does not necessarily make stocks a loss-making investment proposition. Studies have

repeatedly highlighted the ability of stocks to outperform other asset classes (debt, gold,

property) over the long-term (at least 5 years) as also to effectively counter inflation. So if

stocks are such a great thing, why are so many investors complaining? Its because they

either got the stock wrong or the timing wrong. Both these problems can be solvedthrough an SIP in a mutual fund.

3. Helps to build for the future

Most of us have needs that involve significant amounts of money, like childs education,

daughters marriage, buying a house or a car. If we had to save for these milestones

overnight or even a couple of years in advance, we are unlikely to meet our objective

(wedding, education, house, etc). But if we start saving a small amount every

month/quarter through SIPs that is treated as sacred and that is set aside for some purpose,

we have a far better chance of making that down payment on our house or getting our

daughter married without drawing on our PF (provident fund).

4. Compounds return

The early bird gets the worm is not just a part of the jungle folklore. Even the early

investor gets a lions share of the investment booty vis--vis the investor who comes in

later. This is mainly due to a thumb rule of finance called compounding. According to a

study by Principal Mutual Fund if Investor Early and Investor Late begin investing Rs

1,000 monthly in a balanced fund (50:50 equity:debt) at 25 years and 30 years of age

respectively, Investor Early will build a corpus of Rs 8 m (Rs 80 lakhs) at 60 years, which

is twice the corpus of Rs 4 m that Investor Late will accumulate. A gap of 5 only years

results in a doubling of the investment corpus! That is why SIPs should become an

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investment habit. SIPs run over a period of time (decided by you) and help you avail of

compounding.

5. Lowers the average cost

SIPs work better as opposed to one-time investing. This is because of rupee-cost

averaging. Under rupee-cost averaging an investor typically buys more of a mutual fund

unit when prices are low. On the other hand, investor will buy fewer mutual fund units

when prices are high. This is a good discipline since it forces the investor to commit cash

at market lows, when other investors around him are wary and exiting the market.

Investors may even be pleased when prices fall because the fixed rupee investment would

now fetch more units.

BENEFIT OF SIP OVER LUMP SUM

There are many investors who like to park their money as a lump sum into an asset class

and forget about it. They don't want to worry about what's happening to it on a daily basis

as long as the investment earns them some returns in the long haul. That's not a bad idea

at all and the safer the instrument, the lesser are your worries about returns. But there is

another way this lumpsum can be used -- by investing a fixed sum at regular intervals.This method eliminates the need to time the market (making an entry or an exit) -- an area

where most investors are prone to go wrong. This method is commonly known as the

rupee cost averaging. Under this system, one need not worry about when and how much

to invest. A fixed sum of money can be invested regularly and over time it averages out

the costs.

For instance, if one were to buy units of a mutual fund -- by following rupee cost

averaging, the fixed amount of money will fetch more units when the net asset value of

the units are down, and vice versa. What one must remember here is that what price you

pay for a single unit does not matter but the average price at the end of purchase is what

holds and the returns are based on this average cost. This automatically falls in line with

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the age-old principle of buy low and sell high. Rupee cost averaging, of course, does not

inculcate the selling aspect. It only helps one average the cost of an asset purchase.

How it plans out

This helps in doing away with the volatility in the market since it smoothens out ups and

downs. A look at the table shows how investing regularly can fetch us more shares of a

stock through rupee cost averaging. In the above example, when investing in lump sum,the share price was Rs 20 -- meaning, we end up buying 500 shares. Instead, if one were

to invest Rs 1,000 every month for 10 months, the total number of shares purchased adds

up to 520, since these were bought at different price levels and the average cost of each

share comes down to Rs 19.6. And 520 shares would definitely fetch a higher return than

500 at the end of ten months.

43

Time(mths)

Fixed amountinvested (Rs)

Price pershare (Rs)

Sharespurchased

1 1000 20 50

2 1000 21 48

3 1000 24 42

4 1000 19 53

5 1000 16 63

6 1000 17 59

7 1000 16 63

8 1000 23 43

9 1000 18 56

10 1000 22 45

Total 10,000 19.6 520


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LITERATURE

REVIEW

Laurent Barras et al, has developed a simple technique that controls for

false discoveries, or mutual funds that exhibit significant alphas by luck alone.

Our approach precisely separates funds into (1) unskilled, (2) zero-alpha, and (3)

skilled funds, even with dependencies in cross-fund estimated alphas. We find

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that 75% of funds exhibit a zero alpha (net of expenses), consistent with the Berk

and Green (2004) equilibrium. Further, we find a significant proportion of skilled

(positive alpha) funds prior to 1996, but almost none by 2006. We also show that

controlling for false discoveries substantially improves the ability to find funds

with persistent performance

Olivier Scaillet et al, has develops a simple technique that properly

controls for false discoveries, or mutual funds that exhibit significant alphas by

luck alone, to evaluate the performance of actively managed U.S. domestic-equity

mutual funds during the 1975 to 2006 period. Our approach precisely separates

mutual funds into those having (1) unskilled, (2) zeroalpha, and (3) skilled fund

managers, net of expenses, even with cross-fund dependencies in estimated

alphas. This separation into skill groups allows several new insights. First, we

find that the majority of funds (75.4%) pick stocks well enough to cover their

trading costs and other expenses, producing a zero alpha, consistent with the

equilibrium model of Berk and Green (2004). Further, we find a significant

proportion of skilled (positive alpha) funds prior to 1996, but almost none by

2006, accompanied by a large increase in unskilled (negative alpha) fund

managersdue both to a large reduction in the proportion of fund managers withstockpicking skills and to a persistent level of expenses that exceed the value

generated by these managers. Finally, we show that controlling for false

discoveries substantially improves the ability to find funds with persistent

performance.

Kent Daniel et al, In managing mutual funds, stock selection appears to be

the main source of fees. The question then is whether the stock selection is good

enough to generate performance that compensates for those fees. This question

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has previously been considered by different authors and tests have been carried

out using various models. Most studies have concluded that mutual funds do not

have significant stock-picking ability. Although several studies have found

evidence of persistence in mutual fund performance, this persistence has been

attributed to either survival bias or benchmark errors. This article presents a

methodology for analysing fund performance using benchmarks that are based on

portfolio characteristics. This study is in the line with that of Grinblatt and

Titman (1989, 1993). The method developed by Grinblatt and Titman is quite

different from those employed in other studies. Instead of considering the actual

returns realised by funds, they study the performance of individual stocks held by

funds. This allows them to derive benchmarks that suit the investment styles of

the funds better. Moreover, it enables fund returns to be obtained without

deducting fees and transaction costs. The comparison with the benchmark is

therefore fairer, as benchmarks do not take these expenses into account. It is then

possible to see whether fund managers have any stock selection or timing

abilities.

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RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY

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The study is based on survey and fact finding enquiries with the business class and

salaried class people. The research is planned on such way as to give a clear picture of

respondents preference towards systematic investment plan inmutual funds.

The research is done so as to verify knowledge and to get the latest information which

cannot be got anywhere else.

OBJECTIVE OF THE STUDY

To study the preference of the customers among various investment options.

To study the awareness of Mutual funds among people in Chandigarh.

To study the most preferred options (Lump sum or SIP) in Mutual funds amongdifferent classes (business class and salaried class).

To study the factors affecting the purchasing of Mutual funds.

To study the volatility of market on the future of Mutual fund industry.

RESEARCH PROBLEM

The analysis and observation of systematic investment plan by business class and salaried

class.

RESEARCH DESIGN

Research design is both qualitative as well as quantitative.

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Qualitative Research

Qualitative research is used for investigating the reasons for human behavior. Under

qualitative research there is Attitude or Opinion research. This research is designed to

find out respondents preference towards different investment options.

The various factors which is analyzed through this research is :

What factors motivate people to invest in mutual funds?

Effect of market volatility on customers investment decision.

Quantitative Research

In quantitative research all the data are expressed in tabulated form and statistical tool are

applied.

SCOPE OF THE STUDY

The scope of the study is to know the perception of the consumers about different

investment options and the factors affecting their investment decisions. The study has its

practicability for Asset Management Companies to understand what kind of features

customers want in their fund schemes. The study will help in for creating an

understanding whether the business class is more interested in Systematic Investment Plan

or the salaried class and why?

DATA COLLECTION

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Primary data is a fresh data and the researcher as per its need collects it. Here in this

study, primary data is collected through

Questionnaire method

This was pretested before finally being used for the study. The questionnaire is framed

with closed ended, dichotomous, multiple choice, the Likert scale type and open ended

questions. Basically the questions were framed with the motive of extracting information

from the respondents to know their preference towards Lump sum or SIP.

Secondary data is pre collected data and is used for the research as per the needs in my

research the secondary data used is company profile and introduction of mutual fund

industry, data from websites and magazines.

SAMPLING TECHNIQUE

Sampling procedure

Random sample method : Data is collected by random sample method also known as

chance sampling or probability sampling. In this sampling each and every person in the

population has an equal chance of inclusion in the sample.

SAMPLE SIZE

Sample size of the research is 150 i.e. 150 respondents was contacted for the relevant

information and datas required.

AREA OF SURVEY

The area of survey for the study is of Chandigarh and Kurali, Kharar (Mohali). The basis

of selection is based on different classification such as occupation, age, income etc.

DATA USAGE

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For the analysis and interpretation only primary data is used. However for the conclusion

and recommendations both primary and secondary data along with verbal knowledge and

information obtained from respondents is used. The data collected from respondents is

analyzed with the simple observations and with the statistical tools like:

Mean value

Pie diagrams

Bar charts

Likert scale &

Hypothesis testing.(2, Z-test)

SUMMARY OF THE RESEARCH METHODOLOGY

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52

RESEARCH DESIGN QUALITATIVE RESEARCHQUANTITATIVE RESEARCH

PRIMARY SOURCEWebsiteMagazines

DATA COLLECTION SECONDARY SOURCEQuestionnaire

SAMPLING TECHNIQUE PROBABILITY SAMPLING

SAMPLE SIZE 150

AREA OF SURVEY CHANDIGARH & MOHALI

MEAN VALUEPIE GRAPHS

STATISTICAL TOOLS BAR CHARTSLIKERT SCALEHYPOTHESIS TESTING


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DATA ANALYSIS

&

INTERPRETATION

DATA ANALYSIS AND INTERPRETATION

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INCOME WISE SEGMENTATION OF THE SAMPLE

ANNUAL INCOME

BUSINESS CLASS SALARIED CLASS

1-1.5 LAKH 28% 30%

1.5-2.5 LAKH 40% 27%

2.5-3.5 LAKH 20% 40%

3.5-4.5 LAKH 12% 3%

2830

40

27

20

40

12

305

10

15

20

25

30

35

40

1.5 2.5 3.5 more than 4.5

business class

salaried class

INTERPRETATION

In this study large number of the salaried class (40%) comes in the income group of 2.5

lakh whereas 40% business class (40%) comes in the income group of 3.5 lakh.

Least no. of salaried class respondents come in the income group of 4.5 lakh.

And the income of the people largely affects their investment decisions.

1. What is your occupation?

OCCUPATION VALID FREQUENCY VALID

PERCENTAGE

54

ANNUAL INCOME IN LAKHS

C

O

U

N

T

COUNT IN PERCENTAGE


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BUSINESS CLASS 70 47%

SALARIED CLASS 72 48%

RETIRED 5 3%

HOUSE WIVES 3 2%

GRAPHICAL PRESENTATION

47%

48%

3% 2%

BUSINESS CLASS

SALARIED CLASS

RETIRED

HOUSE WIVES

INTERPRETATION

This study consists of 47% business class and 48% salaried class and the rest 3% retired

and 2% housewives.

The occupation of a person also affects their investment decisions.

. How much people invest money?

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VALUE TABLE VALID

FREQUENCY

VALID

PERCENTAGE

BUSINESS CLASS 49 44%

SALARIED

CLASS

66 56%


44%

56%

0%0%

business

classsalarie d class

INTERPRETATION

As compared to business class, most of the salaried class invests money in various

investment options. According to the survey, 56% salaried class and 44% business class

invests money. And rests of them are still planning to invest.

3.What kind of investor you are?

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INVESTOR BUSINESS CLASS SALARIED CLASS

RISK LOVER 40% 38%

RISK NEUTRAL 47% 40%

RISK AVERTER 13% 22%


40 38

4740

13

22

0

10

20

30

40

50

VALUE

IN

PERCENTAGE

risk lover risk neutral risk averter

INVESTORS

business class

salarie d class

INTERPRETATION

In this study it has been found that most of the business class is risk lovers whereas most

of the salaried class is risk averters; because high risk means high returns and

businessman usually wants more returns in short period of time whereas salaried class

wants their money to be safe.

4.In which options of investment you invest the money?

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a. FOR BUSINESS CLASS:

INVESMENT OPTIONS RESPONDENTS PERCENTAGE

MUTUAL FUNDS 56 80%NSC 24 35%

FD 21 30%

POST OFFICE SAVINGS 28 40%

IPO 31 45%

DIRECT STOCKEXCHANGE

35 50%

OTHERS 16 25%


80

3530

4045

50

20

0

1020

30

40

50

60

70

80

VALUE

IN

PE

RCENTAGE

MF NSC FD POS IPO DSE others

INVESTORS

business class

Analysis :

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56 32.5 23.5 552.25 16.99224 32.5 -8.5 72.25 2.22321 32.5 -11.5 132.25 4.06928 32.5 -4.5 20.25 0.62331 32.5 -1.5 2.25 0.06935 32.5 2.5 6.25 0.192

2 = 24.168

Applying 2 test, for degree of freedom (v) =6-1=5, 2 0.005 = 11.1

Here 2 = 24.168

H0: Let us make the hypothesis that there is no significant difference between O and

E.

H1: There is a significant difference between O and E.

Hence calculated value 2c > 2t ; 24.168>11.1

H0 is rejected and H1 is accepted

There is significance between our observed and expected frequency. So the hypothesis

holds bad.

b. FOR SALARIED CLASS:

59

O E O-E (O-E) 2 (O-E) 2/E


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MUTUAL FUNDS 54 75%

NSC 26 36%

FD 34 48%POST OFFICE SAVINGS 27 38%

IPO 37 51%

DIRECT STOCKEXCHANGE

29 40%

OTHERS 14 20%


75

36

48

38

51

40

20

0

10

20

30

40

50

60

70

80

VALUE

IN

PERCENTAGE

MF FD IPO others

INVESTORS

salaried class

Analysis:

60

O E O-E (O-E) 2 (O-E) 2

/E


61/101


54 34.5 19.5 380.25 11.021026 34.5 -8.5 72.25 2.094034 34.5 -0.5 0.25 0.0072

27 34.5 -7.5 56.25 1.630437 34.5 2.5 15.25 0.028929 34.5 -5.5 30.25 0.8768

2 = 15.6619

Applying 2 test, for degree of freedom (v) =6-1=5, 2 0.005 = 11.1

Here 2 = 15.6619

H0: Let us make the hypothesis that there is no significant difference between O andE.

H1: There is a significant difference between O and E.

Hence calculated value 2c > 2t ; 15.6619 >11.1

H0 is rejected and H1 is accepted

There is significance between our observed and expected frequency. So the hypothesisholds bad.

INTERPRETATION

Mutual funds are the most preferred investment options in business class and

salaried class but as compared to salaried class (75%) business class (80%) invest in

big quantities in mutual funds. After mutual funds business class invests in direct

stock exchange in big quantities whereas salaried class invests in initial public

offers in big quantities.

5. What is the motive of investment?

61


62/101



SHORT TERM GAINS 63% 29%

LONG TERM GAINS 37% 71%


FOR BUSINESS CLASS

63%

37%

0%

0%

SHORT TERM GAINS

LONG TERM GAINS

FOR SALARIED CLASS

62


63/101


29 %

71 %

0%

0%

SHORT TERM GAI

LONG TERM GAIN

INTERPRETATION

The study shows that business class and salaried class invests in the SIP for different

motives. The business class invests for speculative gains and salaried class invests in SIP

for the long term gains.

6. Why do you invest in mutual funds?

63


64/101


FACTORS BUSINESS CLASS SALARIED CLASS

EXPERTMANAGEMENT

85% 33%

TRANSPARENCY 38% 28%

LIQUIDITY 45% 30%

TAX BENEFITS 55% 85%

CONVENIENCE 30% 27%

HIGH RETURNS 70% 50%


85%

33%38%

28%

45%

30%

55%

85%

30%27%

70%

50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

EXPERT

MANAGEMENT

TAX BENEFITS

BUSINESS CLASS

SALARIED CLASS

INTERPRETATION

The study shows that most of the salaried class people (85%) invest in mutual funds

because of tax benefits. So taxes saving funds are more popular in salaried class.Whereas

most of the business class (85%) people invest in mutual funds because of expertmanagement and high returns. So business class people mostly invest in equity funds for

high returns.

7. In which investment scheme you invest?

64


65/101


A. FOR BUSINESS CLASS:


DEBT 31 45%

EQUITY 48 69%BALANCED 39 56%

TAX SAVINGS 28 40%


45

69

56

40

0

10

20

30

40

50

60

70

VALUE

IN

PERCENTAGE

debt balanced

INVEStMENT SCHEMES business class

B. FOR SALARIED CLASS:


65


66/101


DEBT 34 47%

EQUITY 31 43%

BALANCED 42 58%

TAX SAVING 52 71%

GRAPHICAL PRESENTATATION

47 43

58

71

010

20304050

607080

VALUEIN

PERCENTAG

DEBT BALANCED

INVESTMENT SCHEMESsalaried class

INTERPRETATION

The study shows that most of the business class (69%) invests in equity schemes because

they want high returns and they are risk lover. Whereas most of the salaried class (71%)

invests in tax saving schemes because they are risk averter.

Some investors are still waiting for the market stability for further investment.

8. In which option you prefer investing?

INVESTMENT

OPTIONS


66


67/101


LUMP SUM 75% 40%

SIP 69% 91%

ZIP 3% 2%

STP 15% 25%


75%

40%

69%

91%

3%2%

15%

25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

LUMP

SUM

SIP ZIP STP

BUSINESS CLASS

SALARIED CLASS

INTERPRETATIONThe study shows that 90% salaried class invests in SIP (systematic investment plan)

because They find it risk free option of investment.

And most of the business class (71%) invests in lump sum because of the

convenient way of the investment.

People are not much aware about the STP and ZIP.

Thus SIP is a major investment option in mutual funds.

9. Rank in the scale of 1-3 factors that influence you to go for SIP (1- most preferred,

2- preferred, 3- somewhat preferred)

67


68/101


a) FOR BUSINESS CLASS:

MOST

PREFERRED

PREFERRED SOMEWHAT

PREFERRED

LOW RISK 34 24 12

ANNUITYPAYMENT

18 28 24

CONVENIENCE 12 23 35

X f fx d fd fd2

1 34 34 -1 -34 34

2 24 48 0 0 0

3 12 36 1 36 36

118/70 = 1.685 1.000

X f fx d fd fd2

1 18 18 -1 -18 18

2 28 56 0 0 0

3 24 72 1 72 72

146/70 = 2.086 1.1339

X f fx d fd fd2

1 12 12 -1 -12 12

2 23 46 0 0 0

3 35 105 1 105 105

68

Low risk

Mean = fx/f Standard deviation


Annuit a ments


Convenienc


69/101


163/70 = 2.32 8 1.2928

INTERPRETATION

Among three factors, which has maximum mean, but in order to ascertain whether mean

difference between various factors is significant or not Z-Test has been prepared.

H0 Difference between maximum two mean insignificant.

H1 Difference between maximum two mean is significant.

Z-Test applied

Z-Test is applied to ascertain whether the mean difference between ANNUITY

PAYMENT and CONVENIECE is insignificant or not.

Mean of CONVENIENCE is maximum=2.328 and standard deviation=1.2928

Mean of ANNUITY PAYMENT is after that i.e. 2.086 and standard deviation=1.1339

1) Level of significance is 5% and level of confidence is 95%.

2) Hypothesis testing.

69


70/101


Null hypothesis Alternative hypothesis

H0: X1=X2 H0: X1X2

H0: X1X2 H0: X1X2

3) ZC=X1-X2 /S.E. = 1.1796

4) ZC


71/101


preference level of annuity payments

18

28

24most preferred

preferred

somewhat

preferred

CONVENIENCE

preference level of convenience

12

23

35

most preferred

preferred

somewhatpreferred

ANALYSIS: The above analysis shows that low risk is the most important factor among

business class while investing in SIP. Because in the volatilize market, SIP is the one of

the investment plan which covers the risk and gives better returns.

b) FOR SALARIED CLASS

71


72/101


MOST

PREFERRED

PREFERRED SOMEWHAT

PREFERRED

LOW RISK 20 29 23

ANNUITYPAYMENT

39 15 18

CONVENIENCE 34 19 19

X f fx d fd fd2

1 20 20 -1 -20 20

2 29 58 0 0 0

3 23 69 1 69 69

147/72 = 2.76 1.111

X f fx d fd fd2

1 39 39 -1 -39 39

2 15 30 0 0 0

3 18 54 1 54 54

123/72 = 1.7083 1.1365

X f fx d fd fd2

1 34 34 -1 -34 34

2 19 38 0 0 0

3 19 57 1 57 57

129/72 = 1.7917 1.1242

72

Low risk



Annuit a ments


Convenience


73/101


INTERPRETATION

Among three factors, which has maximum mean, but in order to ascertain whether meandifference between various factors is significant or not Z-Test has been prepared.

H0 Difference between maximum two mean insignificant.

H1 Difference between maximum two mean is significant.

Z-Test applied

Z-Test is applied to ascertain whether the mean difference between LOW RISK and

CONVENIECE is insignificant or not.

Mean of LOW RISK is maximum=2.0417 and standard deviation=1.111

Mean of CONVENIENCE is after that i.e. 1.7917 and standard deviation=1.1242

7) Level of significance is 5% and level of confidence is 95%.

8) Hypothesis testing.

Null hypothesis Alternative hypothesis

73


74/101


H0: X1=X2 H0: X1X2

H0: X1X2 H0: X1X2

9) ZC=X1-X2 /S.E. = 1.347

10) ZC


75/101


preference level of annuity payments

39

15

18 most preferred

preferred

somewhat

preferred

CONVENIENCE

preference level of convenience

34

19

19 most preferred

preferred

somewhat

preferred

ANALYSIS: The above analysis shows that annuity payment is the most important

factor among salaried class while investing in SIP. Because of the ECS system, people

find it the most convenient way of investment.

As compared to business class, salaried class people mostly preferred the SIP due to

convenience by the annuity payments whereas the business class preferred SIP due to

the low risk.

10. What is the medium of investment?

FOR BUSINESS CLASS

75


76/101


VALID FREQUENCY VALID PERCENTAGE

SELF TRADING 16 23%

BROKERS 49 70%

OTHERS 5 7%


23%

70%

7% 0%

SELF TRADING

BROKERS

OTHERS

FOR SALARIED CLASS

76


77/101


VALID FREQUENCY VALID PERCENTAGE

SELF TRADING 17 24%

BROKERS 53 74%

OTHERS 2 2%


24%

74%

2%0%

SELF TRADINGBROKERS

OTHERS

INTERPRETATION

The above tables show that on an average the people invest in mutual funds through the

brokers like Mahindra Finance and they find it easy and burden free investment.

11. What is the amount you usually invest in mutual funds?

a. FOR BUSINESS CLASS:

77


78/101


INVESTMENT OPTIONS VALID FREQUENCY VALID PERCENTAGE

LESS THAN 5,000 2 3%

5,000 20,000 13 19%

20,000 50,000 22 31%

MORE THAN 50,000 33 47%


3%19%

31%

47%

less than 5,000

5,000-20,000

20,000-50,000

more than

50,000

Analysis:

78


79/101


0 - 5 thousand 2 2.5 5

5 20 thousand 13 12.5 162.5

20 50 thousand 22 35 770

50 1 lakh 33 75 2475

Total 70 3412.5

Mean 48.75

INTERPRETATION

The above table shows that the average investment has been done by business class in

mutual funds is48.75 thousand.

b. FOR SALARIED CLASS:

79

x f m fm

8/9/2019 Final Proje

Documents

Final Project- Jaspreet