Attitude of Investor towards Mutual Fund: A Case Study of Retail Investors in District Yamuna Nagar, Haryana (India)

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1 48 Attitude of Investor towards Mutual Fund: A Case Study of Retail Investors in District Yamuna Nagar, Haryana (India) Rekha Rathore, HOD BBA Deptt., S.D. Institute of Management & Technology, Jagadhri Shelly, Assistant Professor, S.D. Institute of Management & Technology, Jagadhri Jaya, Assistant Professor, S.D. Institute of Management & Technology, Jagadhri ABSTRACT During past few years it is the most attracted option to make investment in stock market and mutual funds are the most preferred option. Mutual fund provides the benefits of specialized services such as good return, liquidity, reduced risk, expert supervision and management, investors protection, tax benefits etc. Retail investor can invest their money in mutual fund with less risk and high return. The individual character of retail investor across India and especially the study on small town retail investors has not been completely researched so far. The main purpose of doing this research is to know about Attitude of retail investor towards Mutual Fund in District Yamuna Nagar, Haryana (India). To achieve objectives the primary data has been collected through structured questionnaire. Secondary data has been collected from reports, books, journals, magazines, other published data and related websites. For collecting the primary information random sampling technique is used. The sample size restricted to 100 respondents of retail investors of Yamuna Nagar District. Chi square statistical technique is used to draw the result from the collected data. In this study the demographic factors like age, gender, education, occupation, income and savings of investors are studied towards mutual fund. Keywords: Attitude, Mutual Fund, demographic Factors, investors protection appreciation in their wealth. A Mutual Fund is a financial services organization that receives money and invests the same to earn returns on it, attempts to make it grow and agrees to pay the shareholder cash on demand for the current value of his investment. There are four basic mutual funds, including the bond or fixed income fund, the equity fund, the balanced fund, and the money market fund. Mutual Funds were started in England during 19 th century and in India first Mutual Fund was started in The first scheme launched by UTI was Unit Scheme Year 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 A new era started in the Indian mutual fund industry with the entry of private sector funds in 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 and the second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. INTRODUCTION: A Mutual Fund is an investment vehicle for the investors which pool their savings for investing in diversified portfolio of securities with the aim of attractive yields and

2 49 Mutual Fund Structure: Source: AMFI ( Association of Mutual Funds of India) Asset under Management (AMU) break-up for institutional and retail investors: *Institutional includes corporate, Banks/FIs and FIIs, Source: AMFI (Association of Mutual Funds of India) Asset under Management Assets under Management ($ billions) (unaudited) December 2012 November 2012 December 2011 % Change Last Month % Change YOY Total Assets under Management $ $ $ Mutual Fund Assets under Management $ $ 99.69$ Investors Group Mutual Funds 60.59$ 59.85$ 57.74$ Mutual Funds 40.40$ 39.60$ 39.14$ Sub-advisory, institutional 21.08$ 20.96$ 22.51$ 0.6 (6.4) Total 61.48$ 60.56$ 61.65$ 1.5 (.3) Mutual Funds 2.95$ 2.92$ 2.81$ Indian Middle class contribute to the growth of mutual funds; this growth will be based on the available investment options in the coming years. Large distributors and Independent Financial Advisors (IFAs) can collaborate to provide greater value-added services to a larger section of investors. HOW CAN INVESTORS PROTECT THEIR OWN INTEREST? Investors can protect their own interest by adopting the following: 1. Invest in a disciplined manner in mutual funds via SIPs and for long term purposes. 2. Financial planning should be followed in proper manner. 3 Start early and benefit from the power of compounding. 4. Opt for a higher equity allocation at a younger age and gradually reduce the same till Retirement. 6. For investors who are averse to choosing funds, ETF is the best option across asset classes to generate market linked returns RETAIL INVESTOR Retail investor is an individual who purchases securities for his or her own personal account rather than for an organization. Retail investors typically trade in much

3 50 smaller amounts than institutional investors such as mutual funds. Retail investing generally occurs through four channels: individual investors, retail brokers managed accounts, and investment clubs. Retail investors can be further divided into two categories of share ownership. 1. A Beneficial Shareholder is a retail investor who holds shares of their securities in the account of a bank or broker, also known as in Street Name. The broker is in possession of the securities on behalf of the underlying shareholder. 2. A Registered Shareholder is a retail investor who holds shares of their securities directly through the issuer or its transfer agent. Many registered shareholders have physical copies of their stock certificates. Investor Behavior Investor behavior are defined as how the investor judge, predict, analysis and review the procures for decision making which include invest psychology information gathering defining and understanding, research analysis. Thus the investor behavior is nothing else but the way or means by which the investor perceives all the investment factors, information and data and takes the appropriate decision by assuming all the factors like risk and return. REVIEW OF LITERATURE Bogle (1992) and Ippolito (1992) have suggested that the Consumers are selecting fund on the past performance. They also specified that investor invest in such a fund whose past performance was positive rather than negative for specific period of time. Raja (1998) examined several Consumers and found that there was impact of demographical variables such as age, gender, income etc. Lenard et al. (2003) empirically investigated investor s attitudes toward mutual funds. The results indicated that the decision to switch funds within a fund family was affected by investor s attitude towards risk, current asset allocation, investment losses, investment mix, capital base of the fund age, initial fund performance, investment mix, fund and portfolio diversification. The study reported that these factors were crucial to be considered before switching funds regardless of whether they invest in nonemployer plans or in both employer and non-employer plans. Bollen (2006) studied the dynamics of investor fund flows in a sample of socially screened equity mutual funds and compared the relation between annual fund flows & lagged performance in SR funds to the same relation in a matched sample of conventional funds. The result revealed that the extra-financial SR attribute serves to dampen the rate at which SR investors trade mutual funds. F. Yash Pal Davar and Suveera Gill (2007) in their paper on investment decision making revealed that the class of investors(undoubtedly) with growing age develop maturity and experience for making decisions about the usage of their surplus and available funds in the light of overall economic needs of the family. Walia and Kiran (2009) studied investor s risk and return perception towards mutual funds. The study examined investor's perception towards risk involved in mutual funds, return from mutual funds in comparison to other financial avenues, transparency and disclosure practices. The study investigated problems of investors encountered with due to unprofessional services of mutual funds. The study found that majority of individual investors doesn t consider mutual funds as highly risky investment. In fact on a ranking scale it is considered to be on higher side when compared with other financial avenues. The study also reported that significant relationship of interdependence exists between income level of investors and their perception for investment returns from mutual funds investment. K. Lashmana Rao (2011) made analysis of investor s perception towards mutual fund schemes, he made conclusion SEBI, AMFI, and IRDA should take appropriate steps to enhance Consumers knowledge for making more prudent decisions. Dhimen Jagdish bhai Jani et al. (2012) made analysis on the consumer s perception towards mutual fund as an investment option in Valsad city from Gujarat. The study revealed that Consumers perception was positive toward investment in mutual funds. Dimple et al (2012) revealed in their study quality of fund/scheme is the highly important factor considered by the selected mutual fund investors. This study also discovered that Investors related services are least important factor for the selected sampled investors. Findings of the study will have some useful managerial implications for the AMCs in their product designing, marketing and management of the fund and may also help in making cost effective strategic decisions and hence would be of interest to both existing and new mutual fund managers and individual investors RESEARCH METHODOLOGY This research study is descriptive in nature, related to Attitude of Investor towards Mutual Fund: A case study of Retail Investors in District Yamuna Nagar, Haryana (India). 100 Retail Investors were surveyed with the help of structured questionnaire through face to face contact. Convenient Sample method was used to collect primary data. The secondary data was collected from various magazines, Journals, published and unpublished reports, records and websites like AMFI, RBI related to topic. Different statistical tools can be used to interpret the data but keeping in mind the nature of data collected, Chi- Square has been used. SCOPE OF THE STUDY The research study undertaken does not probe too much about whether the respondents have a very fine insight into

4 51 mutual funds. The research involves only a general study related to the investment attitude of investors towards mutual funds. The research would reveal results regarding the investment attitude of various investors about mutual funds and thus in turn, helps the organization to identify the attitude of various investors and to improve the marketing of mutual funds. This study will provide help in financial planning of companies. It will be helpful to change the attitude of the retail investors. It will be helpful for investors to get more knowledge in further investment. HYPOTHESIS: H0: There is no association between Investor s attitude towards mutual fund and demographical factors. H1: There is association between Investor s attitude towards mutual fund and demographical factors. OBJECTIVES OF RESEARCH 1. To analyze the impact of various demographical factors (Age, Gender, Education, Occupation, income and savings) on Attitude of Retail Investor towards mutual fund. 2. To study and rank the factor having implications on Attitude of Retail Investor towards mutual fund. Data Analysis and Interpretation: Table:1 Association between Gender and investor s attitude Gender High Medium Low Total Male Female Total value is 5.99, calculated X 2 value is between Gender and investor s attitude.it is analysed that there is a positive relation between gender and attitude. 50% male and % females are highly associated towards mutual fund. Table : 2 Association between Education and investors' attitude Education High Medium Low Total Matric Graduation post Graduation Technical Qualification Total value is ; calculated X 2 value is between Education and investor s attitude. This study reveals that out of 100 respondents surveyed the education of respondents and their attitude towards mutual fund are significantly linked % of respondents of below secondary education, % of respondents who have completed higher secondary, 50% of graduates and % of respondents who have taken technical education have encouraging attitude towards mutual fund. Table: 3 Association between Occupation and investors' attitude Occupation High Medium Low Total Agriculture Self employed Private Employee Govt. Employee Total

5 52 value is , calculated X 2 value is between Occupation and investor s attitude. Table: 4 Association between Income and investors' attitude Income High Medium Low Total Less than 20, ,000-40, ,000-60, More than 60, Total value is ; calculated X 2 value is between Income and investor s attitude. Income level of the respondents and their attitude towards mutual fund are significantly linked % of respondents of below Rs income group, % of respondents of Rs income group, 37.5% of respondents of Rs income group. This study reveals that out of 100 respondents surveyed the saving level of the respondents and their attitude towards mutual fund are independent of each other. Table: 5 Association between Savings and investors' attitude Savings High Medium Low Total Less than 5, ,000-10, ,000-15, More than 15, Total value is ; calculated X 2 value is between Savings and investor s attitude. This study reveals the purpose of investment; out of 100 respondents surveyed 35% of the respondents are rational. Table: 6 Factor Affecting Investment Decision of Investors in Mutual Funds (Rank according to your preference) Factors I II III IV Total Return on investment Safety of Investment Capital Appreciation Full disclosure of information Affordability Favourable Credit rating Liquidity Tax Benefits Charges( Entry load, Exit load, Ex- partie) Regular Update

6 53 ** Weights are given to rank are as followed: Rank Weights Factors Respondents s % Rank Weighted Scores Return on investment Safety of Investment Capital Appreciation Full disclosure of Information Affordability Favorable Credit Rating Liquidity Tax Benefits Charges( Entry load, Exit load, Ex- 6 Partie) Regular Update CONCLUSION: The success of mutual fund is depending upon the knowledge of stock market. This study found that investors have positive attitude towards their investment made in mutual fund. Majority of investors prefer to invest in mutual fund to get maximum return with minimum risk,safty and many other factors. The study has helped the researcher gain real time knowledge and will help users to analyze the attitude of the investors. REFERENCES: [1] Bergstresser, D., Chalmer, J.M.R. and Tufano, P. (2009), Assessing The Cost and Benefits Broker Mutual Fund Industry, The Review of Financial Studies,Vol.22, pp [2] Capon, N., Fitzsimons, G. J. and Weingarten, R. (1994), Affluent Investors and Mutual Fund Purchase, International Journal of Bank Marketing, Vol.12, pp [3] Capon, N., Fitzsimons, G.J. and Prince, R.A. (1996), An Individual Level Analysis of the Mutual Fund Investment Decision, Journal of Financial Services Research, Vol.10, pp [4] Chakrabarti, A. and Rungta, H. (2000), Mutual Fund Industry in India: An In depth Look into the Problems of Credibility, Risk and Brand, The ICFAI Journal of Applied Finance, Vol.6, No.2, pp

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