CHAPTER-1

INDUSTRY
PROFILE

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 INDUSTRY PROFILE
The concept of stock markets came to India in 1875, when Bombay Stock Exchange (BSE)
was established as ‘The Native Share and Stockbrokers Association', a voluntary non-profit
making association. BSE is the oldest in Asia. Presently India has about 10,000 listed
companies, the largest number of listed companies in the world. Besides BSE, India's other
major stock exchange is National Stock Exchange (NSE) that was promoted by leading
financial institutions and was established in April 1993. Today, these global stock exchanges
have become premier institutions and are highly efficient, computerized organizations that
have fostered the growth of an open, global securities market. Stock Exchanges are an
organized marketplace, both corporation or mutual organization, where members of the
organization gather to trade company stocks and other securities. The members may act either
as agents for their customers, or as principals for their own accounts. Stock exchanges also
facilitates for the issue and redemption of securities and other financial instruments including
the payment of income and dividends. The record keeping is central but trade is linked to
such physical place because modern markets are computerized. The trade on an exchange is
only by members and stock broker do have a seat on the exchange. The total number of Stock
Exchanges in India is 23.

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 BOMBAY STOCK EXCHANGE:

The origin of the Bombay stock exchange dates back to 1875. It was organized under the
name of “The Native Stock and Share Brokers Association” as a voluntary and non-profit
making association. It was recognized on a permanent basis in 1957. This premier stock
exchange is the oldest stock exchange in Asia. The objectives of the stock exchange are:

• To safeguard the interest of investing public having dealing on the exchange.

• To establish and promote honorable and just practices in securities transaction.
• To promote, develop and maintain well-regulated market for dealing in securities.
• To promote industrial development in the country through efficient resource
mobilization by the way of investment incorporates securities.

The trading system

In March 1995, the Bombay stock exchange has introduced screen based trading called
BOLT (BSE on-line trading). The Bolt is designed to get best bids and offers from jobbers'’
book as well the best buy and sell orders from the order book. Slowly the network is being
extended to other cities too. Now the Bolt has a nationwide network. Trading Work stations
are connected with the main computer at Mumbai through Wide Area Network (WAN). The
capacity of the Tandem Hardware of BOLT is 5, 00,000 traders per day. After getting
specific approval from SEBI, BOLT connections have been installed in Ahmadabad, Rajkot,
Pune, Vadodra and Calcutta.

BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is the
benchmark equity index that reflects the robustness of the economy and finance. At par with
international standards, BSE has been a pioneer in several areas. It has several firsts to its
credit even in an intensely competitive environment.

? First in India to introduce Equity Derivatives

? First in India to launch a Free Float Index

? First in India to launch US$ version of BSE Sensex

? First in India to launch Exchange Enabled Internet Trading Platform

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? First in India to obtain ISO certification for Surveillance, Clearing & Settlement

?'BSE On-Line Trading System’ (BOLT) has been awarded the globally
recognized the Information Security Management System standard
BS7799-2:2002.

? First to have an exclusive facility for financial training

? Moved from Open Outcry to Electronic Trading within just 50 days

An equally important accomplishment of BSE is the launch of a nationwide investor

awareness campaign - Safe Investing in the Stock Market - under which nationwide
awareness campaigns and dissemination of information through print and electronic medium
was undertaken. BSE also actively promoted the securities market awareness campaign of the
Securities and Exchange Board of India.

In 2002, the name The Stock Exchange, Mumbai, was changed to BSE. BSE, which had
introduced securities trading in India, replaced its open outcry system of trading in 1995,
when the totally automated trading through the BSE Online trading (BOLT) system was put
into practice. The BOLT network was expanded, nationwide, in 1997. BSE with its long
history of capital market development is fully geared to continue its contributions to further
the growth of the securities markets of the country, thus helping India increase its sphere of
influence in international financial markets

NATIONAL STOCK EXCHANGE

4
The National Stock Exchange (NSE) of India became operational in the
capital market segment on 3rd November, 1994 in Mumbai. The genesis of
the NSE lies in the recommendations of the Pherwani Committee (1991).
Apart from NSE, It had recommended for the establishment of National
Stock Market System also. Committee pointed out five major defects in
the Indian Stock Market.

The defects specified are:

1. Lack of liquidity in most of the markets in terms of depth and

breadth.
2. Lack of ability to develop markets for debt.
3. Lack of infrastructure facilities and outdated trading system.
4. Lack of transparency in the operations that affect investors’
confidence.
5. Outdated settlement system that are inadequate to cater to the
growing volume, leading to delays.
6. Lack of single market due to the inability of various stock
exchanges to function cohesively with legal stricture and regulatory
frame work. These factors led to the establishment of NSE.
The main objectives of NSE are as follows:

• To establish a nationwide trading facility for equities, debt

instruments and Hybrids.
• To ensure equal access to investors all over the country through
appropriate Communication network.
• To provide a fair, efficient and transparent securities market to
investors. Using an electronic communication network.
• To enable shorter settlement cycle and book entry settlement
system.
• To meet current international standard of securities market

5
REGULATORY FRAMEWORK
Securities Exchange Regulation Act,1956 establishes a three tier
regulatory structure for regulating functioning of stock exchanges.

 Ministry of Finance.
 Securities Board Exchange of India.
 Governing

6
COMPANY
PROFILE

7
 COMPANY PROFILE

KARVY

The karvy group was formed in 1983 in Hyderabad. Karvy rank among the top players in
almost all the fields it operates .Karvy computer share limited as India’s largest registrar and
a transfer agent with a client base nearly 500 blue chip corporate, managing over two crore
accounts. Karvy Stock Brokers Ltd.member of national stock exchange of India and Bombay
stock exchange ranks among the top 5 stock broker in India. With over 6, 00,000 active
accounts, it ranks among the top 5 Depository Participants in India registered with NSDL and
CSDL. Karvy comtrade, member of NSDEX and MCX ranks among the top 3 commodity
brokers in the country. Karvy insurance brokers are registered as a broker with IRDA and
ranks among the top 5 insurance agent in the country. Registered with AMFI as a corporate
agent, Karvy is also among the top mutual fund mobilize with over Rs. 5000 crore under
management. Karvy reality services which started in 2006 has quickely established itself as a
broker who adds value, in the reality sector. Karvy global offers niche off shoring services to
clients in the U.S. Karvy has 575 offices over 375 locations across India and overseas at
Dubai and Newyork. Over 9,000 highly qualified people staff Karvy.

8
Karvy stock broking ltd. (Ambala city) inception in feb. 2008. Karvy have present time till
have 1234 demat a/c activate and 9000 pan card registration.

Highest investment in karvy stock broking 12 lac,s .

 Karvy Stock Broking limited.

 Karvy Comtrade limited.

 Karvy Insurance Broking limited.

 Karvy Investors services limited.

 Karvy Reality (India) limited.

 Karvy Computer Share Pvt. Limited.

 Karvy Global Services Limited.

 Karvy Data Management Services Limited.

 Karvy Consultants limited.

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SERVICES OF KARVY

10
  STOCK BROKING SERVICES

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success
rate as a wealth management and wealth accumulation option. The difference between
unpredictability and a safety anchor in the market is provided by in-depth knowledge of
market functioning and changing trends, planning with foresight and choosing one& other
options with care. This is what we provide in our Stock Broking services. We offer services
that are beyond just a medium for buying and selling stocks and shares. Instead we provide
services which are multi dimensional and multi-focused in their scope. There are several
advantages in utilizing our Stock Broking services, which are the reasons why it is one of the
best in the country.

Our Stock Broking services are widely networked across India, with the number of our
trading terminals providing retail stock broking facilities. Our services have increasingly
offered customer oriented convenience, which we provide to a spectrum of investors, high-
net worth or otherwise, with equal dedication and competence. But true to our spirit, this
success is not our final destination, but just a platform to launch further enhanced quality
services to provide you the latest in convenient, customer-friendly stock management.

Over the years we have ensured that the trust of our customers is our biggest returns. Factors
such as our success in the Electronic custody business has helped build on our tradition of
trust even more. Consequentially our retail client base expanded very fast.Our foray into
commodities broking has been path breaking and we are in the process of converting existing
traders in commodities into the more organized mainstream of trading in commodity futures,
both as a trading and risk hedging mechanism.In the future, our focus will be on the emerging
businesses and to meet this objective, we have enhanced our manpower and revitalized our

11
knowledge base with enhances focus on Futures and Options as well as the commodities
business.

 DEPOSITORYPARTICIPANT

The onset of the technology revolution in financial services Industry saw the
emergence of Karvy as an electronic custodian registered with National Securities
Depository Ltd (NSDL) and Central Securities Depository Ltd (CSDL) in 1998.
Karvy set standards enabling further comfort to the investor by promoting paperless
trading across the country and emerged as the top 3 Depository Participants in the
country in terms of customer serviced.

Offering a wide trading platform with a dual membership at both NSDL and CDSL,
we are a powerful medium for trading and settlement of dematerialized shares. We
have established live DPMs, Internet access to accounts and an easier transaction
process in order to offer more convenience to individual and corporate investors. A
team of professional and the latest technological expertise allocated exclusively to our
demat division including technological enhancements like SPEED-e, make our
response time quick and our delivery impeccable. A wide national network makes our
efficiencies accessible to all.

 DISTRIBUTION OF FINANCIAL PRODUCT

The paradigm shift from pure selling to knowledge based selling drives the business
today. With our wide portfolio offerings, we occupy all segments in the retail
financial services industry.

A 1600 team of highly qualified and dedicated professionals drawn from the best of
academic and professional backgrounds are committed to maintaining high levels of
client service delivery. This has propelled us to a position among the top distributors for

12
 equity and debt issues with an estimated market share of 15% in terms of applications
mobilized, besides being established as the leading procurer in all public issues.

To further tap the immense growth potential in the capital markets we enhanced the scope of
our retail brand, Karvy – the Finapolis , thereby providing planning and advisory services to
the mass affluent. Here we understand the customer needs and lifestyle in the context of
present earnings and provide adequate advisory services that will necessarily help in creating
wealth. Judicious planning that is customized to meet the future needs of the customer deliver
a service that is exemplary. The market-savvy and the ignorant investors, both find this
service very satisfactory. The edge that we have over competition is our portfolio of offerings
and our professional expertise. The investment planning for each customer is done with an
unbiased attitude so that the service is truly customized. Our monthly magazine, Finapolis,
provides up-dated market information on market trends, investment options, opinions etc.
Thus empowering the investor to base every financial move on rational thought and prudent
analysis and embark on the path to wealth creation.

 Advisory Services

Under our retail brand ‘Karvy – the Finapolis', we deliver advisory services to a cross-
section of customers. The service is backed by a team of dedicated and expert
professionals with varied experience and background in handling investment
portfolios. They are continually engaged in designing the right investment portfolio
for each customer according to individual needs and budget considerations with a
comprehensive support system that focuses on trading customers' portfolios and
providing valuable inputs, monitoring and managing the portfolio through varied
technological initiatives. This is made possible by the expertise we have gained in the
business over the years. Another venture towards being investor-friendly is the
circulation of a monthly magazine called ‘Karvy - the Finapolis'. Covering the latest
of market news, trends, investment schemes and research-based opinions from experts
in various financial fields.

 PrivateClientGroup

13
 This specialized division was set up to cater to the high net worth individuals and
institutional clients keeping in mind that they require a different kind of financial
planning and management that will augment not just existing finances but their life-
style as well. Here we follow a hard-nosed business approach with the soft touch of
dedicated customer care and personalized attention.

For this purpose we offer a comprehensive and personalized service that encompasses
planning and protection of finances, planning of business needs and retirement needs and a
host of other services, all provided on a one-to-one basis.

Our research reports have been widely appreciated by this segment. The delivery and support
modules have been fine tuned by giving our clients access to online portfolio information,
constant updates on their portfolios as well as value-added advise on portfolio churning,
sector switches etc. The investment recommendations given by our research team in the cash
market have enjoyed a high success rate.

To empower the investor further we have made serious efforts to ensure that our research
calls are disseminated systematically to all our stock broking clients through various delivery
channels like email, chat, SMS, phone calls etc.

14
Financial Products Distribution Services

The paradigm shift from pure selling to knowledge based selling drives the business today.
With our wide portfolio offerings, we occupy all segments in the retail financial services
industry. A team of highly qualified and dedicated professionals drawn from the best of
academic and professional backgrounds are committed to maintaining high levels of client
service delivery. This has propelled us to a position among the top distributors for equity and
debt issues with an estimated market share of 15% in terms of applications mobilized, besides
being established as the leading procurer in all public issues.
To further tap the immense growth potential in the capital markets we enhanced the scope of
our retail brand, KARVY – the Finapolis, thereby providing planning and advisory services
to the mass affluent. Here we understand the customer needs and lifestyle in the context of
present earnings and provide adequate advisory services that will necessarily help in creating
wealth. Judicious planning that is customized to meet the future needs of the customer deliver
a service that is exemplary. The market-savvy and the ignorant investors, both find this
service very satisfactory. The edge that we have over competition is our portfolio of offerings
and our professional expertise. The investment planning for each customer is done with an
unbiased attitude so that the service is truly customized.Our monthly magazine, Finapolis,
provides up-dated market information on market trends, investment options, opinions etc.
Thus empowering the investor to base every financial move on rational thought and prudent
analysis and embark on the path to wealthcreation.

15
 INTRODUCTION
HISTORY OF MUTUAL FUND
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at
the initiative of the Government of India and Reserve Bank. The history of mutual funds in
India can be broadly divided into four distinct phases: -
First Phase – 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. 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 Can bank 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.
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.

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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, 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. As at the
end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores
under 421 schemes.

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INTRODUCTION
TO PROJECT

18
INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS
ASPECTS.
Mutual fund is a trust that pools the savings of a number of investors who share a common

financial goal. This pool of money is invested in accordance with a stated objective. The joint

ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. 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 appreciations

realized are shared by its unit holders in proportion 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. A Mutual Fund is an investment tool that allows small investors access to

a well- diversified portfolio of equities, bonds and other securities. Each shareholder

participates in the gain or loss of the fund. Units are issued and can be redeemed as needed.

The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and sectors

and thus the risk is reduced. Diversification reduces the risk because all stocks may not move

in the same direction in the same proportion at the same time. Mutual fund issues units to the

investors in accordance with quantum of money invested by them. Investors of mutual funds

are known as unit holders

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20
 ECONOMIC ENVIRONMENT

GROWTH OF MUTUAL FUND INDUSTRY IN INDIA

While the Indian mutual fund industry has grown in size by about 320% from March,
1993 (Rs. 470 billion) to December, 2004 (Rs. 1505 billion) in terms of AUM, the AUM of
the sector excluding UTI has grown over 8 times from Rs. 152 billion in March 1999 to $
148 billion as at March 2008.

Though India is a minor player in the global mutual fund industry, its AUM as a
proportion of the global AUM has steadily increased and has doubled over its levels in
1999.
The growth rate of Indian mutual fund industry has been increasing for the last few years. It
was approximately 0.12% in the year of 1999 and it is noticed 0.25% in 2004 in terms of
AUM as percentage of global AUM.
Some facts for the growth of mutual funds in India
• 100% growth in the last 6 years.
• Number of foreign AMC’s is in the queue to enter the Indian markets.
• Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required.
• We have approximately 29 mutual funds which is much less than US having
more than 800. There is a big scope for expansion.
• Mutual fund can penetrate rurals like the Indian insurance industry with simple
and limited products.
• SEBI allowing the MF's to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planners who can provide need based
Recent trends in mutual fund industry
The most important trend in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by the
nationalized banks and smaller private sector players.
Many nationalized banks got into the mutual fund business in the early nineties and got off to
a start due to the stock market boom was prevailing. These banks did not really understand
the mutual fund business and they just viewed it as another kind of banking activity. Few
hired specialized staff and generally chose to transfer staff from the parent organizations. The

21
performance of most of the schemes floated by these funds was not good. Some schemes had
offered guaranteed returns and their parent organizations had to bail out these AMCs by
paying large amounts of money as a difference between the guaranteed and actual returns.
The service levels were also very bad. Most of these AMCs have not TECHNOLOGICAL
ENVIRONMENT

IMPACT OF TECHNOLOGY
Mutual fund, during the last one decade brought out several innovations in their products and
is offering value added services to their investors. Some of the value added services that are
being offered are:
• Electronic fund transfer facility.
• Investment and re-purchase facility through internet.
• Added features like accident insurance cover, med claim etc.
• Holding the investment in electronic form, doing away with the traditional form of
Unit certificates.
• Cheque writing facilities.
• Systematic withdrawal and deposit facility.

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 ONLINE MUTUAL FUND TRADING
The innovation the industry saw was in the field of distribution to make it more easily
accessible to an ever increasing number of investors across the country. For the first time in
India the mutual fund start using the automated trading, clearing and settlement system of
stock exchanges for sale and repurchase of open-ended de-materialized mutual fund units.
Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP) were options
introduced which have come in very handy for the investor to maximize their returns from
their investments. SIP ensures that there is a regular investment that the investor makes on
specified dates making his purchases to spread out reducing the effect of the short term
volatility of markets. SWP was designed to ensure that investors who wanted a regular
income or cash flow from their investments.

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 MUTUAL FUNDS
Mutual funds are recognized as a mechanism of pooling together the investment of
unsophisticated investors and turn in the hands of professionally managed fund managers for
consistent return along-with capital appreciation. Money collected in this process is then
invested in capital market instrument such as shares, debentures and other securities.
Finally, unit holders in proportion of units owned by them share the income earned through
these investments and capital appreciation. Mutual funds put forward a way out to investors
to approach most schemes and get well-diversified portfolio because investors with small
savings neither have sufficient expertise nor have access to required diversification.
Mutual funds have already entered into a world of exciting innovative products. These
products are now tailor made to suit specific needs of investors. Intensified competition and
involvement of private players in the race of mutual funds have forced professional managers
to bring innovation in mutual funds. Thus, mutual funds industry has moved from
offering a handful of schemes like equity, debt or balanced funds to liquid, money market,
sector specific funds, index funds and gilt edged funds. Beside this recently mutual funds
have also introduced some special specific funds like children plans, education plans,
insurance linked plans, and exchange traded funds. The result is that over the time
Indian investors have started shifting towards mutual funds instead of traditional financial
avenues.
Diversification in mutual funds is coming up with many new faces and as a result Indian
mutual fund industry has been growing exceptionally well on the back of country’s booming
economy but still further mutual funds need to create more lucrative solutions to suit
investor’s expectations. The active involvement of mutual fund in economic development can
be witnessed from dominant presence of mutual funds in worldwide capital and money
market.
Although mutual funds industry is responding very fastly to dynamism in investor’s
perception towards rewards still they are continuously following this race in their endeavor to
differentiate their products responding to sudden changes in the economy. These acts of
innovation include both invention and diffusion that persist to address information
Asymmetries.

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Mutual funds as blessed with professional management use their diligent skills for efficient
resource allocation by making markets more efficient, bringing transparency and foremost
important risk management. Automated approaches designed by new technology and data
mining is helping AMC’s of mutual funds in strategic planning and investment
decision making by uncovering the hidden patterns and predict future trends and behavior in
financial markets.
Intensive global competition and ICT enabled tools are promoting more demanding investors
everyday. To satisfy the needs of investors’ mutual funds are designing more lucrative and
innovative tools considering the appetite for risk taking of individual investors. While
designing these innovative fund scheme AMCs mainly consider for risk return trade off and
after completely evaluating the various securities on various risk parameters new fund
scheme is launched that can satisfy the quest of every investor to maximize the returns.
Although risk and return are the two prime concerns for any mutual fund investment but
investor’s also go for sale charges, fund manager’s reputation, fund history,
management fees, clarity in disclosure, recommendation from media. So, whether it is a
winner’s game or loser’s game the trick is to access the level of risk that investor wishes to
assume and make certain that collection of assets fulfill their risk expectations. A successful
investor is one who strives to achieve not less than rate of return consistent with risk
assumed. Thus, it becomes imperative for the Mutual funds AMCs to judge the presence of
rationality in investment behavior.

25
2. Review of Literature
Mutual funds have already attracted the attention of global practitioners and academicians but
most of the existing research available is on either accelerating the return on funds or
comparing it with benchmark fund schemes. Few studies are available that focus on
investor’s objective and considering risk orientation of investors that has been categorized as:
2.1 Studies pertaining to Investor’s Rationality: Risk –Return trade off
Investors are generally more careful while making investment decision and presence of
rationality in every investor demands higher return at minimum risk but when markets are
efficient it is not possible to gain abnormal returns. Risk is generally, associated with various
applications differently but in common it means negative connotation such as harm
or loss or some undesirable action. Risk expressed by Kaplan and Garrick (1981)
demonstrates that risk involves a factor of uncertainty and potential loss that might be
incurred.
Émigré and Kim (2003) elucidate risk as .the trade-off that every investor has to make
between the higher rewards that potentially come with the opportunity and the higher risk that
has to be borne as a consequence of the danger.
Although different literature available on risk define it variedly but in common the word risk
refers to situations in which a decision is made whose consequences depend on the outcomes
of future events having known probabilities(Lopes,1987). Risk from a strategic management
perspective has been defined as one that is often taken as manager’s subjective judgment of
the personal or organizational consequences and it may result from a specific decision or
action. Beta has been accepted as most appropriate measure of risk that describe the slope of
any regression line .i.e it reveals the volatility of a stock relative to a market benchmark
(Sharpe 1966).
Uncertainty in investment decision prevails when Mutual fund AMCs skills and knowledge
fail to have proper access of decision relevant information due to complexity of financial
markets. This incapacity forces decision makers to adopt a simplified approach where risk is
considered to be exogenous variable. Extensive literature available has proved that since
Markowitz (1952) attempts have been made to resolve the conflicts of how decision makers
should choose among composite alternatives that combine stochastic outcome as he was
strongly in favor that choice for portfolio of securitiesis entirely different from securities that
an individual investor holds (Bernstein 1996). Risk averse behavior of investors

26
reflects the choice of investors to avoid risk or take negligible risk that means whenever an
individual investor is given option to go for guaranteed return with probability one which are
comparatively less than gambling return with probability less than one, chances are that he
may go for guaranteed return.
2.2 Studies relating to investment expectations
Huge literature available on predicting stock market returns has proved that generally
investors think high past stock market return predict high future return (De Bondt, 1993) even
though there is no support for such belief in the data (Fama 1988). Further, evidence by
Fisher and Stat man (2000) have shown that individual investor’s stock market return
Expectations are positively correlated with past returns. An attempt to relate stock expected
returns and interrelated attributes can be well traced from Asset pricing Model that explains
an assets expected return is positively related to its systematic market risk (Black 1972). The
crux of these models is that risky portfolio yields higher return.
Although majority of investors who invest in mutual fund themselves are not clear with the
objective and constraints of their investment but in addition to this most important critical gap
that exist in this process is lack of awareness about presence of risk elements in mutual fund
investment. The new marketing philosophy and strategies place special emphasis on
recognition of customer needs in an effort to provide high level of quality services (Harrison,
2000). Study by Laukkanen (2006) explains that varied attributes present in a product or
service facilitate customer’s achievement of desired end-state and the indicative facts of study
show that electronic services create value for customers in service consumption.
Return ambiguity and changes in risk perception of individual investor affect action taken in
risky financial market. In a more complex situation taking rational decision is undoubtedly
difficult but certainly not impossible. Computational complexities are not only the reason
why rationality assumption is challenged rather challenges also come from cognitive
reasoning (Anderson 1991) where question is how optima human beings are. A more realistic
notion of rationality is bounded rationality defined by Simon (Simon 1957) that property of
an agent who behaves in a manner that is nearly as optimal with respect to its goals as
resource will allow. Here resource includes processing power,
Algorithm and time available to the agent.

27
2.3 Studies relating to Financial Innovations in mutual funds
New financial product and market designs, improved computer and telecommunication
technologies and advances in theory of finance during past quarter century have led to
dramatic changes in structure of mutual fund industry.
Financial innovation is fighter promoted when the financial authorities recognize the
obsolescence of existing statutory framework and deregulate the essential part of it (Suzuki
1986).
Financial system of any country comprises of regulatory bodies, financial institutions,
financial products and financial markets and whenever the regulatory bodies try to interfee
and restrict the actions of financial intermediaries, to sustain their position in the financial
market, mutual funds (FMI) are required to come up with innovative and more lucrative
solutions. Wide literature available on financial innovations has proved that regulatory
restraints encourage innovations
(Ben-Horim, 1977).
Study by Kane (1978) has described the process of avoiding regulations, as “loophole
mining” which suggests that when regulatory constraints are so burdensome that large profits
can be made by avoiding them, financial innovations is more likely to occur. These financial
innovations may look for searching either entirely new product or making some structural
changes in already built financial products to focus on investor’s requirement. Financial
innovation in case of mutual funds is an ongoing process but innovation and success are not
parallel to each other. A large size of enterprise implies that product supported by adequate
innovation is more likely to yield greater return (Schumpeter 1950). Study contrast to this by
Scherer (1984) has suggested that smaller firms with only modest level of market power are
more likely to be rapid innovators.
Mutual fund managers have to use various investment styles depending upon investor’s
requirement. Most of the empirical evidences have shown that mutual fund investor’s
purchase decision is influenced by past performance (Patel,et al. 1992). Research study by
(Jones et al, 2007) has proved that a negative correlation exists between advertisements
And fund quality. A common investor may expect that mutual fund should opt strategies that
have been documented to produce superior returns in the past instead they follow to select
portfolios that don’t deviate markedly from market benchmarks (Lokonishok, Shleifer and
Vishny, 1997).

28
3. MF Service quality gaps: Loss Function
Investor’s satisfaction in case of mutual funds depends upon amount of trust and dependence
that an investor places with AMC and in turn the benefits that are actually delivered to them.
Although fund managers uses their expertise skills and diligence while investment but still
dissatisfaction prevail among the investors and their experiences show that majority of
mutual funds have shown underperformance in comparison to risk free return and reported
that mutual funds were not able to compensate them for additional risk they have taken by
investing in mutual funds (Anand, S. andMurugaiah, V.2004)
3.1 Ambiguity of Investor’s Expectations
Concept of investor satisfaction is gaining importance for every MF organization because in
addition to its contribution in a dominating way to the overall success of these organizations,
it also shows them roadmap to retain and grow their business. SERVQUAL expectations
have been variously defined as desires, wants, what a service provider should possess,
normative expectations, ideal standards, desired services and the level of service a customer
hopes to receive.
Zeithaml, V (1993) expressed satisfaction of individual investor comprise of a range of varied
parameters and is not easy to define but in general it means positive assessment. Where the
growing demand of investor’s expectation is following the way most of researcher admit the
fact that working of customer’s mind is a mystery which is difficult to solve (Dash, 2006).
Customer satisfaction is subjective and even difficult to measure. To draft an accurate picture
of customer satisfaction organizations should diligently use information – collecting tools and
market research that will finally enable an organization to identify critical elements of
customer satisfaction and further fine- tune their operations to achieve incremental
improvements. Significant gaps that exist between service expectations and perceptions is
right from the first step where AMCs are not found capable enough to translate investor’s
expectation, reason being financial intermediaries having inadequate knowledge and training
are not able to communicate the message to each player effectively.

3.2 Designing Gap

Given the financial and resource constraints, AMCs are under increasing pressure to design
services specifications in accordance to customer’s requirement. Lack of upward

29
communication from financial intermediaries to top management, inadequate commitment to
service quality, absence of goal setting, inappropriate standardization are few reasons that are
accountable for gaps that occur in designing of mutual fund services.
Minimizing risk and maximizing return are the two basic criteria that are given highest
weight age while designing services specifications, as a rational investor. The purpose of
designing quality services with improved quality from customer’s perspective is to discover
innovative ways that will provide value added services. Study by Ippolito (1992) documents
the reaction of investors to performance in mutual fund industry. His findings have shown
that poor relative performance results in investors shifting their assets into other funds.
Therefore investing in quality of a product should be considered important not only to sustain
reputation but to gain flow of profit that may come in the form of premium which investors
will be willing to pay on trusted funds. Mutual fund organizations need to be extremely
conscious at the time of designing and determining services standards. Service specifications
designed by AMCs should match with customer’s expected standards or with promised
standards.

30
CHAPTER-2
OBJECTIVES

31
 Objectives

 The main objective of this project is concerned with getting the opinion of people
regarding mutual funds and what they feel about availing the services of financial
advisors.
 I have tried to explore the general opinion about mutual funds. It also covers why/
why not investors are availing the services of financial advisors.
 To know the Purpose of investment.
 To know the perception about return.
 To know the perception about Risk
Scope of the study:

The research was carried on in the Northern Region of India. It is restricted to AMBALA. I
have visited people randomly nearby my locality, different shopping malls, small retailers
etc.

OBJECTIVES OF TRAINING

-To impact the basic knowledge and skills of the new entrant and enables them to perform
their jobs well
-To equip the employee to meet the changing requirements of the jobs and the organization
-To teach the employees the new technique and way of performing the job or operation
-To prepare the employees for higher level tasks and build up a second line of competent
managers.

32
 CHAPTER -3
RESEARCH
METHODOLOGY

33
 Research Methodology
In order to achieve the objective of developing an understanding about investor’s risk and
return perception towards mutual funds, a well structured questionnaire was designed.
Responses of individual investors were collected through filled questionnaire with pre
explained objectives of research. To reduce the complexity of data responses questionnaires
were distributed among those investors only who had prior experience of mutual fund
investment. For this purpose random sampling was ignored and selective Systematic
sampling was taken for consideration. For reliability of questionnaire 100 individual investors
were selected from different regions of Punjab, which included selective investors who were
Assumed to be having complete knowledge of financial environment, and further they were
Existing investors of mutual funds. Age constraint considered in this questionnaire was
minimum 18 years. Main focus of questionnaire was to obtain responses of individual
investors regarding how they evaluate mutual funds services in terms of return and risk on
their investment. Broad objectives of our research include:
E1: Evaluate Perception towards risk involved in mutual funds in comparison to other
financial avenues
E2: Evaluate Perception towards return from mutual funds in comparison to other financial
avenues.
E3: Identify critical gaps in mutual funds services towards transparency and disclosure
practices.
E4: Uncovering the hidden problems investors encountered with because of unprofessional
services of mutual funds.
E5: Understanding the willingness and ability to assume different levels of risk with varied
parameters.
E6: Evaluating investor’s perception towards risk volatility involved in mutual funds

34
 RESEARCH
Research methodology has a specific important role in research activities. A research
methodology is purely and simply the framework or plan for a study that guides the
collection and analysis of data. There are some method like primary data collection method
and secondary collection method.

TYPE OF RESEARCH

 Exploratory_Research_design
These_designs_are_the_first_step_to_start_any_research_&_is_absolutely_
essential_to_obtain_the_proper_definition_of_the_problem._It_helps_in_
classifying_the_concepts_of_the_study._The_major_emphasis_is_the_discoveryof_id
easand_ insights_by_studying_the_available_information.

 Descriptive_Research_Design
These_are_concerned_with_describing_the_characteristics_of_a_particulars_
phenomenon_in_detail_the_descriptive_study_requires_a_clear_specifications_of_

Who ,what, when,where,why_&_how_aspects_of_research.

The_methodology_adopted_to_achieve_the_project_objective_involved_
descriptive_research_method.

35
SOURCES_OF_DATA_COLLECTION

To_make_the_research_complete_it_is_very_necessary_to_have_useful_and_authentic_data
there_are_two_types_of_data_collection_sources.

PRIMARY_SOURCE_OF_DATA_COLLECTION

Primary_data_are_those_which_are_collected_afresh_&_for_the_first_time,&_this_
happens_tobe_original_in_character._Simple_well_drafted_questionnaire_was_
circulated_among_all_respondents_full_freedom_was_provided_to_an_
indvidual_to_answer_the_questions._

Personal_&_Telephonic_Interviews_&_observation_of_the_respondents_about_the_

various_ schemes_helped_in_completion_of_the_project.

SECONDARY_SOURCES_OF_DATA_COLLECTION

It is the data which has already been collected by someone or organization for someone or
organization for some other purpose or research study. The data for my studies have been
taken from various sources:

 Books
 Journals
 Magazines
 Internet sources
 Files

36
 SAMPLING PLAN

The study is based on the sampling method because up to some extent it is free from biasness.

 Sampling Size : 100

 Sampling Technique : Stratified Sampling

 Sampling Area : Ambala City

 Sampling Unit : Individual

37
 CHAPTER-4
ANALYSIS AND
DISCUSSION AND
INTERPERTATION

38
ANALYSIS AND DESCUSSION
Investor’s purchase decision for mutual funds is influenced by chain of factors, out of this
presence of risk and expected return being dominant one determines the direction where
investor should opt for a particular investment avenue. Once an investor finalizes a particular
investment avenue with calculated risk next factor accountable for his final decision is
quality of service delivered. In this research a structured questionnaire was prepared to seek
experiences of existing investors. These statements were analyzed and quantified on a 5 point
likert scale used especially to measure the risk perception towards various financial avenues.
Ranking and rating methodology was also followed to prioritize the investor’s preferences.
For convienence and better interpretation about different group of investor’s responses, three
Categories were designed in order of age that includes Aggressive investors, Active investors
and reflexive investors. On the basis of income investors were again categorized into four
classes that include basic investors i.e no-tax payer, Low tax payer i.e. investor’s in the
lowest tax bracket, high tax payers which include upper middle class and lastly wealthy
investors which include rich and financially stable investors.
Relationship of Investor’s Age and setting investment objectives
For the sake of convenient understanding total investors are divided into three categories in
relation to their age where investors below 30 years represent aggressive investors and active
investors represent middle age investors and lastly investors above 50years are represented
through reflexive investors. Data collected through questionnaire revealed that 41.4%
aggressive investors invest with objective of capital appreciation and 24.1% prefer to invest
for tax reduction. Active investors have got a hybrid of investment choices whereby 37.5%
prefer to invest with the objective of tax saving and 31.2% invest it for capital appreciation.
Opinion of reflexive investors is quite different from above two categories of investors, as
75% of them have given their preference for retirement benefits as main cause luring them
towards investment avenues. A study at aggregate level tested by chi-square test has shown
that investor’s age is a considerable determinant in setting investment objectives which is
significant at 1% level.
Relationship of investor’s Income and setting investment Objective
Income has also been considered as one of the important parameter that determines the
objective of investment. Basic investors having low level of income are found to be more
uncertain about future and 29.4% invest for future contingencies. Low taxpayers gave their
opinion for tax saving as main investment objective (34.8%) whereas 30.4%

39
admit capital appreciation as investment objective. Choice of high tax payers is also found
near to low tax payers where variance is only in terms of quantum as 50% investors support
capital appreciation as their broad objective and 33.3% opine for tax benefits. Opinion of
wealthy investors is entirely different from rest of the investors as all of them have objective
of capital appreciation as the broad investment objective. Chi-square is significant at 1% for
income level.
Investor’s Risk Perception Analysis
Presence of risk in any investment is a normal feature. Investor’s behavior in terms of their
willingness to accept risk depends upon their risk appetite or market sentiments that are
spread in the market at the time of investment. Moreover, investor’s knowledge and their
optimism about market volatility also influence their decision to select risky investment.
Table values depicting Average preference Scores (APS) reveals the fact that individual
investors admit capital market instruments i.e Shares as the most risky investment in
comparison to other investment avenues and mutual funds are opined to be next risky
investment. APS also reveals that Investors don’t deny the presence of risk in real estate but
level of risk admitted is moderate and Government securities are admitted to be the least
risky securities.
(1). Relationship of Investor’s income to risk Perception for Insurance
One of the objectives of study is to analyze risk perception of investors for mutual funds and
identify critical gaps that prevail in mutual funds restructuring. In order to identify these gaps
researcher is required to compare investors preference for various investment avenues and
identify which investor group prefer what sort of investment and reason out the positives of
those investment avenues which mutual fund organizations should involve while going for
financial innovations in their existed fund schemes.
Insurance as an investment preference of investors emerges for uncertainty of future.
Although Insurance is not considered as a most risky investment by majority of investors.
Data collected through survey reveals that 47.1% basic investors consider it as least risky
investment whereas 65.2% low taxpayers opine it as least risky investment. Fact is further
supported by the responses gathered from high-income group investors where 50% High
taxpayers give last ranking to risk involved in insurance and 56% wealthy investors also have
last preference for risk involved in insurance.
Going to aggregate level indicative facts exposed by survey prove that risk associated in
insurance investment is significant for income as a parameter of investment decision-making.

40
It is indicated by chi-square (61.484a), which is significant at 1% level of significance. Chi
square test shows that income status of investors and risk perception for insurance as an
investment avenue is not independent.
(2). Relationship of Investor’s income to risk Perception for government securities
Government securities are admitted as most secured securities and they have always been at
the foremost preference of those investors who want to play safe game. When compared with
other investment avenues nobody among the sample investor opined it as most risky
investment. Data collected through survey revealed that 41.2% basic investors rank it at
sixth position in terms of risk involved whereas 34.8% low tax payer support this position of
government securities in comparison to all other investment avenues. Further the fact is
supported by opinion of high taxpayers where even 50% of them strongly agree to the fact
that government securities are least risky investment and even they rank it at the sixth
position but outlook of wealthy investors reveal that 66.7% of them have their opinion that
government securities are least risky investment. Significance test as applied through chi
square test although government securities are considered to be risk free investment but still
income of investors and preference for government securities because of
risk association are closely related as indicated.

(3). Relationship of Investor’s income to risk Perception for Shares/Bonds

Risk and Return for any investment are parallel to each other. Higher the risk, higher the
return. Shares and bonds have been observed as the first preference of those investors who
are willing to take risk. Capital market instruments being most risky investment are expected
to yield above normal return that can be expected from any other investment avenue.
Data collected from survey has proved this hypothesis that income of investors and risk
perception for shares/bonds are related parameters of investment. 70.6% basic investors
admit capital market instrument as most risky investment and rank it as first risky investment.
62.6% low taxpayers also opine that maximum risk is involved in shares and debentures
when compared with other financial avenues whereas 100% high taxpayers and wealthy
investors consider it as most risky investment. This statement is further tested by chi square
test, which prove it to be significant at 1% level.

41
(4). Relationship of Investor’s income and Risk Perception for Mutual Funds
Responses collected from individual investors reveal the fact that reflection of risk on mutual
funds is not as high as it was in case of shares and bonds. Although risk perception for mutual
funds is also comparatively on higher side as 58.8% basic investors consider it as second
risky investment and 65.2% low taxpayers consider it at the same position.
Fact is further supported by the opinions of high taxpayers whereby 71.4% admit it as high
risk involved and 66.7% also opined the same. The hypothesis was further tested at chi-
square that shows that there is no close association of investor’s income and their risk
perception for mutual funds (X2=11.061a, df=18), which is not significant at 1% level.
Thus, results of above data analysis make it clear that majority of individual investors don’t
consider mutual funds as highly risky investment but on a ranking scale it is considered to be
on higher side when compared with other financialavenues.

(5). Investor’ Perception for investment Return from insurance

As discussed earlier investor’s preference for insurance is not because they are tempted by
the handsome return offered by insurance NBFCs but investors prefer to invest in mutual
funds to reduce their fear of uncertainty. Moreover the fact is proved from the responses
collected from individual investors when asked to rank investment avenues with return as
a parameter for their evaluation. Data collected expose the fact that 35.3% of basic investors
give their ranking as 5th and 23.5% investors have ranked it at 7th position. Among the low
tax payers 30.4% also have their opinion that it is least preferred investment in terms of
return as objective. Further ranking given by high tax payer investors also show that 66.7%
have their opinion for it as least preferred investment and 33.3% wealthy investors rank it as
moderately preferred investment avenue in terms of returns offered. Going to aggregate level
the indicative facts disclose that a close association exist between income status of investors
and their preference for insurance as an investment avenue which is proved by significance
level of chi square at 1% level.

(6). Investor’s Perception for Investment Returns from Government Securities

Government securities being risk free securities are not preferred by the investors who want
to gain above average return from their investments. Preference of government securities as
an investment avenue is because of investor’s choice to select securities that are completely
free from any uncertainty and volatility. Results of responses collected from survey expose

42
this fact that among the basic investors 29.4% rank it at 5th position and further 29.4% admit
it at 6th position which explains that investors have moderate preference for government
securities in terms of return as objective behind investment. Further data collected from
survey for low taxpayer also support this fact whereby 39.1% again rank it at 5th position and
50% high taxpayers rank it at 6th position when compared with other investment avenues.
Finally, wealthy investors have somewhat different perception for government securities
whereby 66.7% investors have least preference for government securities. Fact of aggregate
level when tested by chi-square has proved that a significant level of association exists
between investor’s income level and their perception for returns wise from government
securities.

(7). Investor’s Perception for Investment Returns from Shares/ Bonds

As observed by survey responses of the individual investor’s fact is clear that overall among
other investment avenues capital market instruments are at the priority of investors but level
of preference varies with different category/ level of income. Data responses of wealthy
investors reveal the fact that majority of them i.e 66.7% admit it as first preference
in terms of return as an investment objective. Among high tax payers 83.3% highly prefer
this investment avenue in comparison to other investment avenues. Responses of low
taxpayers do not reveal that these investors have absolute choice for capital market
instrument as 39.1% have first preference for shares and debentures whereas 26.1% have
second preference for capital market instruments. Basic investors also don’t support wealthy
investors to consider shared/bonds as first preference but 29.4% rank it at second or third
position in terms of return as investment objective.
Moving to aggregate level the fact is tested by chi-square which is significant at 1% level
indicate that association exists between income status of investors and their preference for
capital market instrument with return as objective.

(8). Investor’s Perception for Investment Returns from Mutual Funds

Mutual fund as an investment avenue is preferred by those investors who don’t want to take
complete risk of capital market volatility or those investors who want to rely on professional
knowledge of mutual funds AMCs. Survey results reveal the fact that very few investors rank

43
mutual funds as most preferred investment avenue and rank it at first position. Among basic investors
29.4% rank it at 2nd position and 23.5% put it at 3rd position whereby 47.8% low tax
payer admit it second preferred investment avenue in terms of return as an objective for
investment. Majority of high tax payers (66.7%) rank it at 3rd position compared to other
financial avenues. However, wealthy taxpayers also have their opinion of second position for
mutual funds in terms of return provided by this investment. Results of aggregate
level study are tested through chi square test that also proves that a significant relationship of
interdependence exist between income level of investors and their perception for investment
returns from mutual funds investment which is significant at 1% level.

44
 INTERPRETATION:
1. Personal details:-
(d). What are the required Qualification :-

Graduation/PG-50% Under Graduate-20% Others-30%

graduate /pg
under graduate
other

Interpretation:

As can be seen from figure most of the person in my research most of

people was graduate or pg level (50%) ,students(20%) and other(30%)
people also included.

45
 (e). Occupation. Pl tick (√)

Govt. Ser- Pvt. Ser-20% Business-30% Agriculture- Others-15%

20% 15%

Govt sec
pvt sec
Business
Agriculture
Other

Interpretation:

As can be seen from figure most of the person in my research most of people from
business occupation (30%)and also from govt. sec(20%) pvt sec(20%) agriculture
(15%)

46
 (f). What is your monthly income approximately? Pl tick (√).

Up to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001

Rs.10,000- 15000-15% 20,000-30% 30,000-20% and above-
20% 15%

up to 10000
up to 10001-15000
up to 15001-20000
up to 20001 -30000
up to 30000 avove

Interpretation :-

As can be seen from figure most of the person in my research reports the people with high
income from business background and govt. or pvt sec. and people with low income from
small shopkeeper

47
2. What kind of investments you have made so far?

a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

30-% 20% 25% 25%

saving a/c
fixed diposit
insurance
m utual fund

Interpretation :-

Most of people interested in two or more type of investment, people like to invest in mutual
fund but also with some of fixed deposit

48
3. While investing your money, which factor will you prefer?

(a) Liquidity-20% (b) Low Risk-30% (c) High Return- (d) Trust-20%
30%

liqudity
low ris k
high return
trus t

Interpretation :-

As can be seen from figure most of the person in my research reports the
people preferred low risk (30%) and high return(30%) while investing money invest on the
basis of trust(20%) and liquidity(20%)

49
4. Are you aware about Mutual Funds and their operations? Pl tick (√). Yes
70% No 30%

yes
no

Interpretation:-

As can be seen from figure most of the person in my research the people
know (70%) about mutual funds and their operation very
percentage(30%)people not know about it

50
 5. If yes, how did you know about Mutual Fund?

a. Advertisement- b. Friends-10% c. Banks -20% d. Financial Advisors-

50% 20%

advertis m ent
friend
bank s
financ ial advis ors

Interpretation :-

The most of people know about this from advertisement (5o %) and below it from
banks (20%)or financial advisor (20%)

6. Have you ever invested in Mutual Fund? Pl tick (√).

51
 Yes No
50% 50%

y es
no

Interpretation:-\

As can be seen from figure most of the person in my research the 50% people invested in
mutual funds and some think to invest in it

7. Are you know different option of invest in Mutual Funds

52
 Yes No
70% 30%

yes
no

interpretation :-

As can be seen from figure most of the person in my research most of people(70%) aware to
different option of invest in mutual funds

8. Are you aware about Lump Sum investment option of Mutual fund

53
 Yes No 30%
70%

yes
no

interpretation :-

As can be seen from figure most of the person in my research most of people(70%)
aware about lump sum investment option of mutual funds

9. Are you aware about SIP investment option of Mutual fund

54
 Yes 70% No 30

yes
no

interpretation :-

As can be seen from figure most of the person in my research most of people (70%)
aware about sip investment option of mutual funds

55
10.In your opinion which one is the best option of investment in mutual fund
(i) SIP 50%

(ii) Lump sum 50%

yes
no

Interpretation :-

As can be seen from figure in my research I found both the option of investment in
mutual funds accepted by people 50% preferred for sip and 50% preferred for lump sum
different option of invest in mutual funds.

56
 CHAPTER-5
SUGGESTIONS

I have done training in Karvy stock broking limited. During training I met different type of
customers regarding different activities like PAN information, Demat a/c statement, equity
sector information , mutual fund investment and so many other financial services. I have seen
mostly customer have a specific problem they are face in PAN card statement . They don’t
know the full knowledge if the pan card is not come a particular time period what will take
action next time again. Karvy stock broking ltd. Just give the website name and says find out
the PAN statement is particular site . I want to suggestion to Karvy please properly self
handle and solve the problem this in a specific way.

And secondly I want to give the suggestion to the Karvy when customer visited the Karvy
regarding in any financial services. So that Karvy member receive proper all the document in
any financial service time like IPO, mutual funds,demat a/c and so many other activities.
Because most of customers have not provide the specific documents during in any financial
services. So i suggesting to the Karvy members please receive all the formality in proper and
a systematic way for customer satisfaction and Karvy service.

57
CHAPTER-6
LIMITATIONS

58
 LIMITATIONS_OF_THE_STUDY

Due_to_constraints_of_time_&_resources_the_present_study_is_likely_to

suffer_from_certain_limitations_some_of_these_are_mentioned_so_that_study

can_be_understood_in_a_proper_respective:-

 Research_work_is_conducted_with_karvy.

 Area_covered_under_the_report_was_very_small.

 The_research_was_carried_out_in_a_short_period_of_6-7week as well asww

part_of_the_project_was_completed_within_the_given_time_frame.

 Some_of_the_respondents_of_the_survey_were_unwilling_to_give information.

 Chances_of_biasness_are_there_because_of_the_use_of_convenient_ sampling.

 Some_respondents_were_no_available_and_thus_needed_data_could_
not_be_found_Suggestions._

59
 Advantages of Investing Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are professional
managed, by well qualified professional. Investors purchase funds because they do not have
the time or the expertise to manage their own portfolio. A mutual fund is considered to be
relatively less expensive way to make and monitor their investments.

2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or

bonds, the investors risk is spread out and minimized up to certain extent. The idea behind
diversification is to invest in a large number of assets so that a loss in any particular
investment is minimized by gains in others.

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus
help to reducing transaction costs, and help to bring down the average cost of the unit for
their investors.

4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate
their holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other

available instruments in the market, and the minimum investment is small. Most AMC also
have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50
per month basis.

60
 Disadvantages of Investing Mutual Funds:

1. Professional Management- Some funds don’t perform in neither the market, as their
management is not dynamic enough to explore the available opportunity in the market, thus
many investors debate over whether or not the so-called professionals are any better than
mutual fund or investor himself, for picking up stocks.

2. Costs – The biggest source of AMC income, is generally from the entry & exit load which
they charge from investors, at the time of purchase. The mutual fund industries are thus
charging extra cost under layers of jargon.

3. Dilution - Because funds have small holdings across different companies, high returns
from a few investments often don't make much difference on the overall return. Dilution is
also the result of a successful fund getting too big. When money pours into funds that have
had strong success, the manager often has trouble finding a good investment for all the new
money.

4. Taxes - when making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-gain tax
is triggered, which affects how profitable the individual is from the sale. It might have been
more advantageous for the individual to defer the capital gains liability.

61
CHAPTER-7
CONCLUSION

62
 CONCLUSION
The present study endeavored to give a look on investor’s perceptions towards risk-return
trade off for mutual fund services. Understanding of investor’s expectations from mutual
funds has become necessary issue to study due to mutual funds inability to accelerate the
required pace of growth. Moreover, volatility influencing stock market movements is turning
most of investors to hold stocks with calculated risk, in the shape of mutual funds. Thus
mutual funds can prove to be most preferred financial avenue provided it is put forth before
investors in the desired form. Facts revealed in this study highlight the preferences of varied
inverters who desire to invest in mutual funds but also require some innovations and added
quality dimensions in existing services. The critical gaps identified in the study also provide
the key information input regarding the discrepancies in existing framework of mutual funds
which can be extremely beneficial to AMCs in designing more lucrative solutions to suit
investor’s expectations. Survey findings of this study have got significant managerial
implications that can be used by AMCs in restructuring their existing
practices and finally innovating new ways of service delivery.

63
 REFERENCE
REFERENCES
1. Data collected from websites:

• http://www.karvy.com/v2/showPage.asp?
page=depositoryServices.asp&t=RS
• https://nsdl.co.in/services/demat.php
• http://www.moneycontrol.com/mutualfundindia/
• http://www.moneycontrol.com/ipo/
• http://www.moneycontrol.com/india/bestportfoliomanager/s
tocks/mutualfunds/loginportfolio
• http://www.mutualfundsnavindia.com/

2. Data collected from books:

• Pandian Punithavathy, Security Analysis and Portfolio Management, Vikas

Publishing House Ltd, Introduction to Investment and Securities, Investment
Alternatives.

• Jordan Ronald J., Fischer Donald E., Security Analysis and Portfolio
Management, Sixth Edition, Introduction to securities, risk & return.

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QUESTIONNAIRE

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 QUESTIONNAIRE

A study of preferences of the investors for investment in mutual funds.

1. Personal Details:

(a). Name:-

(b). Add: - Phone:-

(c). Age:-

(d). Qualification:-

Graduation/PG Under Graduate Others

(e). Occupation. Pl tick (√)

Govt. Ser Pvt. Ser Business Agriculture Others

(g). What is your monthly income approximately? Pl tick (√).

Up to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001

Rs.10,000 15000 20,000 30,000 and above

2. What kind of investments you have made so far? Pl tick (√). All applicable.

a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund

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3. While investing your money, which factor will you prefer?

(a) Liquidity (b) Low Risk (c) High Return (d) Trust

4. Are you aware about Mutual Funds and their operations? Pl tick (√).

Yes No

5. If yes, how did you know about Mutual Fund?

a. Advertisement b. Friends c. Banks d. Financial Advisors

6. Have you ever invested in Mutual Fund? Pl tick (√).

Yes No

7. Are you know different option of invest in Mutual Funds

Yes No

8. Are you awarded about Lump Sum investment option of Mutual fund

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 Yes No

9. Are you awarded about SIP investment option of Mutual fund

Yes No

10.In your opinion which one is the best option of investment in mutual fund

(iii) SIP
(iv) Lump sum

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