CHAPTER-I

INTRODUCTION

Mutual funds industry is one of the important industries contributing to the country’s
financial and economic growth. Mutual fund is the tool through which helps to collect the
savings of the small investors and invests the same in the best performing funds in the capital
markets. The funds selected for investments are expected to yield high good returns with low
risks. Mutual Fund is one of the high yielding forms of investments among the various
investment opportunities available to the investors. India has a population of more than 1.3
billion but only less than 1.5% of the population invests in Mutual Funds. The size of mutual
funds industry is less than 8% of the India’s GDP and this proves the point that the industry is
not patronized by the people of India as compared to other modes of investment. The factors
related to this low performance of Mutual Fund industry in the rural areas can be attributed to
the perception of the villagers that this investment option is best suited only for the elite and
high income urban groups. In the recent times, mutual fund industry has started to focus on
rural investors and they try to cater to their needs & expectations. They follow all the norms
prescribed by the Government and Regulatory bodies with respect to the investment decisions.
This industry can spread its wings wide and large by including the rural population in the
mainstream investment arena. It can tap the rural savings and contribute well to then national
growth & development. There are very few companies in India which provide financial
empowerment to the rural masses. They try to offer best financial services to the people living
in semi urban and rural areas.
This study attempts to analyses the perception and satisfaction level among the investors
about mutual fund investments. This study would discuss level of perception of investors on the
various factors such as Awareness, Safety, Returns, Transparency, Tax benefits and Flexibility
on Availability of Various Schemes and Level of Satisfaction with the help of Primary data.

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Mutual Fund Investment is profitable:
Generally, all the investments are subject to certain market risks due to volatility in the
market; other economic conditions and certain investments in the equity market are of high
risks as well as fetch High return. But in the case of investments in Mutual funds, it will give
Moderate returns and Low risk compared to other Mode of investments. This is since mutual
funds are managed by professionally trained managers which ensures regular and profitable
returns to the investors in the long run.
I. Primary reasons for Investing Mutual FundInvestments:
Mutual Funds investments have eye-catching features compared to other investments
and it attracts a large number of investors due to
a) TaxBenefits
b) Regularincome
c) Low volatility
d) Liquidity
e) Professionallymanaged
f) Capitalappreciation
g) Cater to the need of investors
II. Sources of Information about Mutual FundInvestments
Mostly mutual fund information is available on the following sources
a) Advertisements in Internet
b) Advertisements in Television
c) Newspapers andMagazine
d) Friends
e) Mutual fundagency
f) Newschannel
g) Consultancy services
Tenure of Investment
All the investments require some time to grow. The best Return or Capital appreciations
are expected in the long-term funds rather than in short- term funds.
Expert suggestion to get a good return on funds is to hold funds for a longer period.

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Mutual fund investment Objectives:
Investors who play mutual fund investments
a. Retirementsecurity
b. Meetcontingencies
c. Taxsaving
d. CapitalAppreciation
e. Purchase ofAssets
Mutual fund Investments among various options:
A mutual fund is classified into various types mainly,
a. Longterm
b. Shortterm
c. MediumTerm
It is well known that long term funds will give good capital appreciation and good
returns, Medium-term funds give good returns to out beat the inflation, Short term funds are
used to give a low return, because of Market volatility.
Scheme of Mutual fund Investment:
The majority of investors fear to invest in the open-ended scheme when compared to
close- ended. It helps to come out of the risk when the market performs bad, has High liquidity
in Nature and there are no exitcharges.
Preference of selection of Mutual fund sector:
Basically in India, two sectors are providing Mutual fund services to investors such as
a. Publicsector
b. Private sector
Selection highly depends on the attitude of an investor., if an investor is highly
aggressive, he would be ready to go for private sector funds which provide a good return with
High risk. But public sector funds will be preferred by the aged group and other risk aversion
group ofinvestors.
Investments other than Mutual funds:
In India, especially Tamil Nadu consists of a heterogeneous group of investors,
inclining towards traditional investments methods such as

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 a. Gold
b. Land/Building
c. Insurance
d. Equity products
e. FD savings
f. Post office savings
Types of Mutual Fund:
In the mutual fund's industry there are many types of funds that are available of which
the main types of mutual funds are:
a. Equity funds: Equity fund is a fund that invests in stocks and they are also called
stock funds or equity securities. These funds aim to grow faster than money markets or fixed-
income funds, so there is usually a higher risk that one could lose money. Equity funds are
principally categorized according to investment style, such as income funds, value stocks,
large-cap stocks, mid-cap stocks, small-capstocks.
b. Debt funds: A debt fund or fixed income fund are less volatile than equity funds. It
is a fund that invests in bonds or debt securities. These funds buy investments that yield a fixed
rate of return like Government bonds, Corporate bonds,etc.
c. Balanced funds: Balanced funds are a mixture of Equity funds and Debt funds
which aim to achieve higher returns with a lower risk of losing money. These funds attract
investors who are looking for safety, income, and modest capitalappreciation.
d. Liquid funds: Liquid funds invest your money in very short term capital markets as
debt mutual funds. They invest in instruments up to a maturity period of 91days such as
Government securities, Treasury bills, Government bonds,etc.
e. Index funds: Index funds aim to track the performance of a specific index such as
the S&P 500. An index fund is said to provide broad market exposure, lower operating costs
with lower returns.
Investor’s choice through Sectorial/Hybrid funds
Among the various available types of mutual funds c=schemes. Most of the investors
believe that sectorial funds are performing well then all the other types of available funds.

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Famous/Top Performing sectorial funds are:
a. Bankingsector
b. ITsector
c. Constructionsector
d. Pharmaceuticalsector
e. Petroleumsector
Investor Preference on characteristics of funds:
In mutual funds, every fund will work or program in its way such as:
a. Growthoption
b. Dividendoption
Various research studies reveal that many young investors can tolerate risk. So, when
they are expecting aggressive returns, they highly prefer to invest in the growth option and
reinvest the dividend into the fund and grow as a hugeamount.
Reasons for not investing in Mutual Funds:
As we know that all the investments are subject to market risk and one cannot assure
that Mutual Fund investments always give some good returns or assured returns to the investors
all the times
The reasons are as follows
 Low return than Fixed Depositsinterest
 Returns are not out beating with an inflation rate
 Liquidity
 Highvolatility
 Credit ratingrisk
 Another Marketrisk
 Change in law which affects theBusiness
The investment strategy for Mutual fund investments:
✔ Risk Factor: Understand how much risk you're willing to take to reach your
financial goals understanding this is the key to choosing which type of mutual fund you will
eventually invest in. High-risk investments have the potential to provide the highest returns but
alsocome with the possibility that the invested capital could be lost.

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 ✔ Asset Allocation: After discovering your risk profile and narrowing down your
potential investments, you must decide which asset classes you wish to invest in. Stocks and
shares of companies are the first and most popular asset class among risk-takers - also called
equity - investments in this asset class usually carries a greater amount of risk and also the
potential for higher earnings. The second asset class is fixed-income securities or bonds and is
the most popular among risk-averse investors who prioritize the safety of their investments.
✔ Picking the right AMC: Choosing the right asset management company
(AMC)/fund house/bank/etc. can be as important as picking the right fund. Make sure that the
company through which you've chosen to invest has a proven track record and has a roster of
qualified and experienced fund managers - this will ensure that your money is handled by
capable professionals who have faced different market conditions in the past and can actively
manage your fund and keep it away fromdanger.
✔ Picking the right fund: Picking the right fund is a combination of understanding
your investment goals, risk profile, asset allocation, and the total investable corpus - and
matching those to mutual fund schemes (among thousands available) which can provide returns
in line with your goals. This is the most time consuming, but most rewarding part of the
process, as you will learn about different funds and the different unique features that some of
them offer. NEED FOR THE STUDY
In the developing scenario of the Indian Stock market, there are a variety of investment
options. Investors show different types of behavioral characteristics when they are involved in
investment actions like information search, evaluating investment avenues, reviewing and
identifying the best alternative investments made. These behavioral qualities might vary from
individual to individual. These behavioral qualities have a considerable impact on the investor's
decision. Therefore, studying behavioral traits is important for investment intermediaries who
offer investment instruments. However, the existing 'Behavioral Finance' studies on factors
influencing the selection criteria of mutual fund schemes are very few, and very little
information is available about investor perceptions, preferences, attitudes, and behavior. Yet
again, conceivably no attempt has been made to examine and compare the selection behavior of
Indian retail investors towards mutual funds particularly in the post-liberalization period. In this
environment, this study makes a sincere attempt to study the behavior of the investors in the
selection of Mutual fund schemes. Investors are exclusive and are a highly heterogeneous

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(mixed) group at the retail level. Hence, scheming a general product and expecting a good
reaction will be useless. It is widely believed that Mutual funds (Mutual Fund schemes) are
designed to cater to small investors, salaried people, and others who are anxious about the stock
market and would like to obtain the benefits of stock market investing. Despite this, the future
of mutual funds in India will be competitive not only from within the industry but also from
other financial products. All this in aggregate heightens the investor's confusion in the selection
of the investment products. Unless the mutual fund schemes are tailored to investors' changing
needs and unless investment companies understand the fund selection or switching activities of
the investors, the survival of funds will be difficult in the future. The study will help the
individuals to make a wise decision in investing their savings. This study also analyzes factors
such as whom to buy from and where to buy mutual funds, investor satisfaction level on mutual
funds, preference of investors in mutual fund investment, whether to invest in the public or
private sector. Furthermore, this study will help mutual fund companies to understand the
profile of Indian retail investors and their investment behavioral patterns.
SCOPE OF THE STUDY
The research design for the present study is descriptive, where the data is collected
through questionnaires. The data is gathered from the respondents residing in Chennai only.
The Primary data has been gathered relating to demographic, investment profile, and
information sources of the respondents. The study also covered the fund-related, fund sponsor,
service-related issues, and its impact on mutual fund investment. Further, the data also
collected on the statements related to awareness level on the availability of a variety of funds,
reasons for withdrawal, and further purchase of individualinvestors.
The study is confined to the factors which influence the investor's decision making and
awareness level on the availability of a variety of funds and satisfaction level of investors.
STATEMENT OF THE PROBLEM
The growth of the stock market is quite tremendous during the last decade because of
the outstanding performance of the corporate sectors and also due to well established SEBI
guidelines. The awareness level among the public about saving through proper channels has
also increased positively. The study has been undertaken in Chennai city only since it has a
heterogeneous group of investors Most of them have a conservative mindset about savings and
investment. They hold traditional methods of investing in gold, land, Insurance, FD, land close

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to their heart compared to other Stock market & mutual funds products. The study also aims at
examining the dimensions of the investor's perception in Chennai city towards mutual fund
investments on the following aspects:
 What is the level of Investor Awareness on Mutual Fund Investments?
 What are all the Investor Preferences on available schemes of Mutual Fund Investment?
 How does the Investors’ Decision making determine their satisfaction level in Mutual
fund Investments?
 What is the level of Investor Satisfaction from mutual fund investment?
RESEARCH OBJECTIVES:
The following objectives are framed to fill the research gaps.
I. To study the socio-economic profile of Mutual FundInvestors
II. To identify the complete Mutual Fund Investment details of theRespondents
III. To measure the awareness level of Mutual Fund Investors in their choice of different
Mutual FundSchemes
IV. To analyses the preferences of the Investors towards Mutual FundInvestments.
V. To examine Investment decision styles of Mutual Fund Investors in the StudyArea
VI. To measure the level of Satisfaction of Mutual FundInvestors
HYPOTHESIS:
I. There is no significant influence of Demographic & Investment details of Mutual fund
Investors on their level ofawareness
II. There is no significant influence of Demographic & Investment details of Mutual fund
Investors on their preference towards MutualFunds
III. There is no significant influence of Demographic and Investment details of Mutual fund
Investors on the Investment decisionstyles
IV. There is no significant influence of Demographic and Investment details of Mutual fund
Investors on the level ofsatisfaction
METHODOLOGY
The study is conducted using both analytical and descriptive type of methodology. The
study primarily depends on primary and secondary data.

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STUDY AREA
The study has been conducted in Chennai among the various investors; Chennai is one
of the major job providers in all the sectors. It consists of heterogeneous investors and different
income groups, age, qualifications, etc. Chennai has a fairly assorted urban economy. It is
mainly based on the business, financial services, software, automobile, hardware
manufacturing, healthcare industries, and other important industries including petrochemicals,
textiles, and apparel. Also, Chennai has been named as the Banking Capital of India, for its
energetic banking culture and trading. The city has been an important center for banking and
finance in the World Market. The city boasts of having a transaction volume that serves 1500
million people across the world through a back-office operation. At present, it is a home for
many large national levels and commercial banks and many regional and state-level co-
operative banks. Several large financial companies and insurance companies have control
center in Chennai. Prominent financial service institutions and various leading global banks
have back-office and development center operations in the city. The city serves as a major
backup center for the operations of many banks and financial services companies in the world.
Indian stock market is subject to market volatility and it leads to decreases or increases
in the price of the securities. Hence, this study has covered how the investor bearing such
volatility, focus on how they take decision when the market is sluggish, how their investment
pattern changes when the market performs well, and also analyses their preference of
investments among the various available avenues of investments. This helps to study the
"Investor's perception towards mutual fund investment".
SAMPLING SIZE AND DESIGN
The primary data was collected through a survey method among the various mutual
investors in Chennai city and secondary data has been extracted From SEBI & Stock
exchange Bulletins and other e-sources. The survey is conducted using a well-formulated
Questionnaire. Convenience Random Sampling is applied for generating data. Samples for
the study are selected systematically. 800 Questionnaires were distributed and 642 collected out
of which 520 completed questionnaires were found usable.
QUESTIONNAIRE DESIGN
The primary data was collected through a survey questionnaire. The respondents were
asked to give their opinion relating to the Four Aspects such as Investor Awareness, Investor

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Preference, Investor Decision Making, and Investor Satisfaction. The first part of the
Questionnaire comprises of Demographic factors with optional questions. The second part
includes statements relating to investor Awareness with Likert’s 5 point scale. The third part
consists of statements about Investor decision making. Some optional questions were included
along with rating questions. The fourth part of the Questionnaire is related to all relevant
statements and was included to derive responses. The fifth part comprises statements including
yes/no questions to arrive at general details along with some optional questions.
Scaling Technique in the Questionnaire
The questionnaire used had both optional type and Statements in Likert’s 5 point scale.
The responses of these sections are obtained from the various investors of Mutual funds in the
5 point scale, which ranges as follows:
5 – Strongly agree 4 – Agree 3 – Neutral 2 – Disagree 1 – Strongly Disagree
Secondary Data
Secondary data was collected from Journals, Magazines, Publications, Reports, Books,
Dailies, Periodicals, Articles, Research Papers, Websites, Company Publications, Manuals, and
Booklets.
Pilot Study
A pilot study was conducted to validate the questionnaire and to confirm the feasibility
of the study. The filled up Questionnaires were collected from 60 respondents and Cronbach’s
Alpha Criterion was applied to test the reliability. The value determined is 0.85 which proved
the reliability of the instrument. The quality of the questionnaire was ascertained and the test
showed high reliability. The variables considered for the analysis were satisfying the normal
probability distribution. Based on the pilot study, the questionnaire was modified suitably to
elicit responses from the sample group.
DATA ANALYSIS
The Statistical tools used for obtaining results are as follows:
The primary data collected are subjected to the statistical test, hence statistical analysis
was done using the SPSS version 21software packages. The statistical tools used for obtaining
result are as follows:

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 Percentage analysis: The demographic and opinion on various mutual fund investment
decisions have been described using percentage analysis. It not only gives the frequency of the
data but also the percentage of the group.
Parametric ‘t’ test: Has been used to identify the significant statistical difference
between mean values of the groups in depending factors such as Awareness Level, Safety,
Returns, Tax Benefits, and Transparency, and Flexibility. Along with a comparison between
the problems faced by investors with satisfaction from mutual fund investment.
Analysis of Variance (ANOVA): Has been used to identify significant statistical
difference among mean values of respective profile groups in depending factors such as
Awareness level, Safety, Returns, Tax benefits and Transparency and Flexibility for Perception
and Satisfaction level of Investors
Cross-tabulation: Has been used to identify the association between categorical
variables such as the association between clusters group of Preception with demographic
groups and Clusters group of Satisfaction groups with demographic groups of mutual fund
investors.
Cluster Analysis: Cluster Analysis is used to classify the sample units into
heterogeneous groups based on factors of Awareness level, Safety, Returns, Tax benefits and
Transparency and Flexibility among the mutual fund investors
Non-Parametric Chi-Square test: Non-Parametric Chi-Square test is applied to find
out the association between the Investor perception group concerning personal and investment
factors.
Linear Multiple Regression: Has been used to identify significant influence and
relationship among awareness, Safety, Returns, Transparency, Tax benefits, And Flexibility
with each factor of Investors Satisfaction from mutual fund investment.
Structural Equation Modeling: It has been used to construct a measurement model
through a theoretical model and check the influence of Awareness, Safety, Returns,
Transparency, Tax benefits, And Flexibility on overall satisfaction from mutual fund
investments.

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LIMITATIONS OF THE STUDY
The following limitations have been observed from the present study:
I. Perception of mutual fund investors' changes over the period, hence present findings
cannot be generalized over the period.
II. Investment sentiment of investors varies from person to person or from one
geographical part to other hence present out could not be generalized with other
geographical parts of the country.
III. It is hard to reach a wide range of respondents due to time and financial constrain.
IV. Limited accessibility to international journals and publications lemmatized this study to
selected variables. Hence broad selections of variables are not possible.
V. The sample size is not sufficient to cover all locality communities, religions, etc. Hence,
results are not fully supported for mutual fund satisfaction by investors.
VI. Investment is subjected to money and risk, hence investors to some aspects not
straightforward to provide information on some aspects.
11. CHAPTERISATION
The Thesis structure of the proposed study will be as follow:
Chapter I - It deals with the Introduction, Statement of the Problem, Objectives
of the Study, Methodology, Scope, and Limitations of the Study.
Chapter II - Sketches the review of related literature relevant to the present study.
Chapter III - Conceptual framework and Profile of Mutual funds industry.
Chapter IV - Analysis & Interpretation of data-I
Chapter V - Analysis & Interpretation of data-II
Chapter VI - Summary of Findings, Suggestions, And Conclusion– Scope for
further Study - Summaries all the results obtained through statistical
analysis to arrive at conclusions and to offer suggestions

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.

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