Int. J. Mgmt Res. & Bus. Strat.

2013

R Padmaja, 2013
ISSN 2319-345X www.ijmrbs.com
Vol. 2, No. 2, April 2013
2013 IJMRBS. All Rights Reserved

A STUDY OF CONSUMER BEHAVIOR TOWARDS

MUTUAL FUNDS WITH SPECIAL REFERENCE TO
ICICI PRUDENTIAL MUTUAL FUNDS, VIJAYAWADA
R Padmaja1*

*Corresponding Author: R Padmaja, padmajapeddireddi@rediffmail.com

A mutual fund is a type of professionally-managed collective investment vehicle that pools money
from many investors to purchase securities. As there is no legal definition of mutual fund, the
term is frequently applied only to those collective investments that are regulated, available to the
general public and open-ended in nature. Mutual funds have both advantages and disadvantages
compared to direct investing in individual securities. Today they play an important role in household
finances. So the present study aims at consumer behavior towards mutual funds with special
reference to ICICI Prudential Mutual Funds Limited, Vijayawada. Data was collected through
primary and secondary sources. Primary data was collected through structured questionnaire.
Convenience sampling method was used to collect the data and entire study was conducted in
Vijayawada City. The study explains about investors awareness towards mutual funds, investor
perceptions, their preferences and the extent of satisfaction towards mutual funds. Some
suggestions were also made to increase the awareness towards mutual funds and measures
to select appropriate mutual funds to maximize the returns.
Keywords: Mutual funds, Customer perception, Consumer behavior

INTRODUCTION

operations in 1964 with the issue of units under

the scheme US-64. In India, mutual funds must
be registered with Securities Exchange Board of
India (SEBI) is the regulatory body for all the
mutual funds. The only exception is the UTI, since
it is a corporation formed under a separate Act of
Parliament. Mutual funds have both advantages
and disadvantages compared to direct investing
in individual securities. Today they play an important role in household finances. The first mutual

A mutual fund is a type of professionally-managed

collective investment vehicle that pools money
from many investors to purchase securities. As
there is no legal definition of mutual fund, the term
is frequently applied only to those collective
investments that are regulated, available to the
general public and open-ended in nature. Unit
Trust of India is the first mutual fund set up under
a separate act, UTI Act in 1963, and started its
1

Department of Business Management, Krishna University, Machilipatnam-521 001, Krishna District, AP.

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Int. J. Mgmt Res. & Bus. Strat. 2013

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funds were established in Europe in 1774. The

first mutual fund outside the Netherlands was the
Foreign & Colonial Government Trust, which was
established in London in 1868. Mutual funds were
introduced into the United States in the 1890s.
They became popular during the 1920s. These
early funds were generally of the closed-end type
with a fixed number of shares which often traded
at prices above the value of the portfolio. The first
open-end mutual fund with redeemable shares
was established on March 21, 1924.

oversight and ease of comparison. Mutual funds

have disadvantages as well, which include fees,
less control over timing of recognition of gains,
less predictable income and no opportunity to
customize. Top 10 mutual funds in India are ICICI
Prudential Top 100, Escorts Income Plan- Gro,
Reliance RSF Balanced, DSP Black Rock MIP
Fund, Escorts Liquid Plan Gr, Reliance Equity
Linked S, MOSt Shares NASDAQ 100, Baroda
Pioneer Gilt Fund, IDFC Nifty Fund Growth.
SEBI Guidelines Pertaining to Mutual Funds:
SEBI is the regulatory authority of MFs. SEBI has
the following broad guidelines pertaining to mutual
funds: They are MFs should be formed as a Trust
under Indian Trust Act and should be operated by
Asset Management Companies (AMCs). MFs
need to set up a Board of Trustees and Trustee
Companies. They should also have their Board
of Directors. The net worth of the AMCs should
be at least Rs. 5 cr.

MUTUAL FUNDS IN INDIA

In India mutual funds are divided in to balanced
funds, Income fund, Growth funds, Sector funds,
etc. Equity funds mainly consist of common
shares and stocks of companies listed in the
stock exchanges. They are considered risky but
are likely to give higher return in the longer run.
Fixed income funds: Also known as low risk
funds, these funds mainly invest in government
and corporate securities (debentures) with fixed
amount of returns, which are generally moderate.
Balanced funds are basically a combination of
both bonds and stocks, which involves moderate
to little risk. Hybrid funds include other investment
classes in their portfolio like gold apart from equity
and debt. Since April 2011, the mutual fund
industry clocked a 3% growth in its average Assets
Under Management (AUM) to touch Rs. 7.53 lakh
cr in August (month-on-month) on the back of
higher inflows into liquid and income funds. (Crisil
Report-September 2012). Mutual funds have
advantages compared to direct investing in
individual securities. These include increased
diversification, daily liquidity, professional investment management, ability to participate in investments that may be available only to larger
investors, service and convenience, government

AMCs and Trustees of a MF should be two

separate and distinct legal entities.
The AMC or any of its companies cannot act
as managers for any other fund.
AMCs have to get the approval of SEBI for its
Articles and Memorandum of Association.
All MF schemes should be registered with
SEBI. MFs should distribute minimum of 90% of
their profits among the investors. There are other
guidelines also that govern investment strategy,
disclosure norms and advertising code for mutual
funds.

NEED FOR STUDY

For retail investor who does not have the time
and expertise to analyze and invest in stocks and
bonds, mutual funds offer a viable investment
alternative. This is because mutual funds provide

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sampling. Sample size is 100 respondents and

sampling units include businessmen, Government servants, professional and retired Individuals. The secondary data was collected through
journals, magazines, books, company manuals,
websites, etc.

the benefit of cheap access to expensive stocks.

Mutual funds diversify the risk of the investor by
investing in a basket of assets. A team of
professional fund managers manages them with
in-depth research inputs from investment
analysts. Being institutions with good bargaining
power in markets, mutual funds have access to
crucial corporate information which individual
investors cannot access. So the present study
has taken up to know the extent of awareness
about mutual funds and to analyze the investors
perception towards mutual funds.

LIMITATIONS
1. Sample size was limited to 100 because of
limited time which is small to represent the
whole population.
2. The research was limited to Vijayawada city
only and if the same research would have been
carried in another city, the results may vary.

OBJECTIVES
1. To know about the extent of awareness about
mutual funds with special reference to ICICI
Prudential Mutual Funds, Vijayawada.

3. Sometimes the respondents because of their

business didnt able to concentrate while filling
up the questions. However the researcher
tried her level best to overcome the limitation
by explaining the importance of research.

2. To know about the preferences of investors

towards mutual funds with special reference
to ICICI Prudential Mutual Funds, Vijayawada.

DATA ANALYSIS AND

INTERPRETATION

3. To know about the perceptions of investors

towards mutual funds with special reference
to ICICI Prudential Mutual Funds, Vijayawada.

From Table 1, it is observed that 25% of all the

respondents fall under income group of less than

4. To know about the extent of satisfaction of

investors towards mutual funds with special
reference to ICICI Prudential Mutual Funds,
Vijayawada.

1,00,000, 65% of our total respondents fall under

income group of 1,00,001-2,00,000 and 10% of
our respondents fall under income group of
2,00,001-3,00,000.

METHODOLOGY

From Table 2, it is observed that out of the total

Research Design selected for this research is

descriptive design and the Universe is Vijayawada
City. Data was collected in two ways, i.e., Primary
data and Secondary data. The data collection
method used for collection of primary data was
survey method and the data collection instrument
used is structured questionnaire. The sampling
technique used is non probability convenience

respondents, 76 respondents are aware of

mutual funds and 24 respondents are not aware
of mutual funds.
From Table 3, it is observed that 68% of the
respondents invest in mutual fund and 32% of
total respondents were not invested in any mutual
fund.

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Table 1: Classification of Respondents Based on Income

S. No.

Income (In rupees)/Month

Number of Respondents

Percentage

1.

Less than 1,00,000/-

25

25

2.

1,00,001/-to 2,00,000/-

65

65

3.

2,00,001/- to 3,00,000/-

10

10

4.

3,00,001/- and Above

00

00

Total

100

Table 2: Classification of Mutual Funds Basing on the Awareness Towards Mutual Funds
S. No.

Aware/Not Aware

Number of Respondents

Percentage

1.

Yes

76

76

2.

No

24

24

Total

100

100

Table 3: Classification of Respondents Basing on Whether

they Invest/or Not Invest in Mutual Funds
S. No.

Investment

Number of Respondents

Percentage

1.

Yes

68

68

2.

No

32

32

100

100

Total

45% invest for the purpose of saving, 10% invest

for the purpose of wealth creation and 7% invest
for the purpose of risk diversification.

From Table 4, it is observed that 89% of the

respondents are interested in getting good
deduction from tax and 11% of respondents are
not interested in getting deduction from tax.

From the Table 8, it is observed that 3% of the

respondents get less than 5%, 65% of the
respondents get between 5%-10% returns. So
majority of the respondents get 5-10% returns.

From Table 5, it is observed that 76% of all the

respondents know mutual fund is a good instrument of tax saving and 24% of total respondents
did not that mutual fund is a good instrument of
tax saving.

From the Table 9, it is observed that 65% of all

the respondents prefer investment in equity fund,
11% of all the respondents prefer investment in Debt
fund, and remaining 24% of the respondents prefer
investment in balanced fund. So it can be concluded
that majority of the respondents are interested to
invest in equity funds.

From Table 6, it is observed that majority of

the responders prefer mutual funds as an
investment rather than other type of investment.
From the Table 7, it is observed that 20% of
the respondents invest for the purpose of high
return, 18% invest for the purpose of tax benefit,

From Table 10, it is observed that SBI magnum

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Table 4: Classification of Respondents Basing on Their Interest to get Deduction from Tax
S. No.

Interest

Number of Respondents

Percentage

1.

Yes

89

89

2.

No

11

11

Total

100

100

Table 5: Respondents Classification Basing on Whether They

Know/Not Know That Mutual Fund is a Good Instrument of Tax Saving
S. No.

Investment

Number of Respondents

Percentage

1.

Yes

76

76

2.

No

24

24

100

100

Total

Table 6: Classification of the Respondents Basing on the

Type of the Investments They Hold at Present
S. No.

Investment

Percentage

1.

Equity market

20

20

2.

Mutual fund

54

54

3.

Government bond

00

00

4.

Real estate

09

09

5.

Bank FD

48

48

6.

Post office

26

26

7.

Insurance

45

45

202

202

Total
Note:

Number of Respondents

Respondent invest in more than one instrument of saving.

Table 7: Classification of Respondents Basing on the Purpose they Invested in Mutual Funds
S. No.

Investment Purpose

Number of Respondents

Percentage

1.

High return

20

20

2.

Tax benefit

18

18

3.

Saving

45

45

4.

Wealth creation

10

10

5.

Risk diversification

100

100

Total

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Table 8: Classification of the Respondents Basing

on the Returns Receive From all their Investments
S. No.

Investment Returns (%)

Number of respondents

Percentage

1.

<5

03

03

2.

5-10

65

65

3.

10-15

20

20

4.

15-20

07

07

5.

>20

05

05

Total

100

100

Table 9: Classification of the Respondents Basing

on Their Preference Towards Different Types Of Mutual Funds
S. No.

Investment preference

Number of respondents

Percentage

1.

Equity fund

65

65

2.

Debt fund

11

11

3.

Balanced fund

24

24

100

100

Total

tax gain scheme gained more points when

compared with other plans.

From the Table 12, it is observed that wealth

maximization benefit is most preferred benefit by
the investors.

From the Table 11, it is observed that majority of

the respondents preferred to invest in three year period
mutual funds. It means majority of the respondents
preferred SBI magnum tax gain scheme.

From Table 13, it is observed that investor

prefer ICICI tax plan.

Table 10: Preference for the SIP Tax Plan of Various Companies
(Where 1 Point is For Most Preferred and 6 For Least Preferred)
S. No.

Investment in Various Company Tax Plan

Number of Points

Percentage

1.

SBI magnum tax gain scheme

545

26.0

2.

Kotak tax saver

198

09.4

3.

ICICI prudential tax plan

498

23.7

4.

Fidelity tax advantage fund

275

13.1

5.

Reliance tax saver fund

345

16.4

6.

HDFC tax saver

239

11.4

2100

100.0

Total

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Table 11: Preference for the Period of Investment of Systematic Investment Plan (SIP)
for your tax Saving (Where 1 is for Most Preferred and 4 is for Least Preferred)
S. No.

Investment time period

Number of points

Percentage

1.

Three year

316

31.6

2.

Five year

286

28.6

3.

Six year

275

27.5

4.

Seven year

123

12.3

Total

1000

100.0

Table 12: Preference for Benefits Offered Among Various AMC Tax Plan
of Mutual Funds (Where 1 is for Most Preferred and 5 is Least Preferred)
S. No.

Investment Benefits

Number of Points

Percentage

1.

Flexibility to investors

256

17.1

2.

Capital appreciation

323

21.5

3.

Tax free return

387

25.8

4.

Wealth maximization

389

25.9

5.

Small amount of investment

145

09.7

1500

100.0

Total

From the Table 14, it is observed that the people

in the age group of 20-30 years are more open to
mutual fund holding and equity market. The share
of mutual fund shows a decreasing trend as the
age increases. It is observed that in the latter age
groups, Life Insurance policies and Government
Securities and Bonds have an increasingly
preferred. Overall, Mutual Fund, Stock Market,
Bank Fixed Deposits and Life Insurance policies
are the most preferred holdings amongst all age
groups in the service category

Money in Real Estate. Business class people

focus more on high return with moderate security
of return. So majority of their investment is made
in Mutual Investment. Also comparing the options
the maximum is in Mutual Fund then come Equity
Market and at the third Position there are three
types of holding with similar preferences. They
are Post Office, Real Estate and Bank FD.
From the Table 16, it is observed that people
in the age category of 30-40 and 40-50 years have
a certain preference for equity holdings, mutual
fund, real estate. However these people are very
conscious for the assured return and security.

From the Table 15, it is observed that maximum

investment is made in 30-40 age group investors.
Also they are holding a diversified portfolio which
includes PPF, Postal Schemes, Fixed Deposit,
as well as Equity Schemes (Mut-ual fund, Stock
Market). Age group 25-40 holds investments in
Equity Market, Bank FD, and some also hold their

This category mostly consisting of retired

people and housewives and from Table 17, it has
been observed that preference for mutual fund is
low in this category. However Bank Fixed Depo-

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Table 13: Classification of Respondents Basing on the Preference

for Tax Saving Plan of ICICI Prudential Mutual Fund
S. No.

Investment Preference

Number of Respondents

Percentage

1.

Most preferred

12

12

2.

Favorably preferred

16

16

3.

Preferred

44

44

4.

Least preferred

11

11

5.

Not preferred

17

17

100

100

Total

Table 14: Age Wise Classification of Respondents Basing on Their Preference of Investment
S. No.

Service Class

20-30

30-40

40-50

50-60

> 65

Total

1.

Equity Market

12

2.

Mutual Fund

12

22

3.

Govt. Bonds

04

4.

Real Estate

01

5.

Bank F.D.

04

6.

Post office

01

7.

Life Ins.

06

Total

25

20

50

Table 15: Age Wise Break up of Business Class Respondents

S. No.

Business Class

20-30

30-40

40-50

50-60

> 65

Total

Equity Market

Mutual Fund

Govt. Bonds

Real Estate

Bank F.D.

Post office

Life Ins.

17

22

Total

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Table 16: Age Wise Break up of Professional Class Respondents

S. No.

Professional

20-30

30-40

40-50

50-60

> 65

Total

1.

Equity Market

2.

Mutual Fund

3.

Govt. Bonds

4.

Real Estate

5.

Bank F.D.

6.

Post office

7.

Life Ins.

Total

20

Table 17: Age Wise Break Up of Retired Class Respondents

S. No.

Retired

20-30

30-40

40-50

50-60

>65

Total

1.

Equity Market

2.

Mutual Fund

3.

Govt. Bonds

4.

Real Estate

5.

Bank F.D.

6.

Post office

7.

Life Ins.

Total

sits, Post Schemes, Life Insurance have the

greatest preference amongst people in this
category.

but investors between the age of 20-30 and 3040 years mostly prefer to invest in Mutual Fund.
From the Table 19, it is observed that investor
whose income is between 100001/- to 200000/- highly
prefer to invest in tax saving plan of Mutual Fund.

From the Table 18, it is observed that

investment in mutual funds is by all age groups

Table 18: Age Wise Break Up of Investment in Mutual Funds

S. No.

Attribute

20-30

30-40

40-50

50-60

> 65

Total

1.

Yes

18

36

15

76

2.

No

15

24

Total

20

37

16

10

17

100

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Table 19: Income Wise Break Up Of Investment

S. No.

>100,000

100001-200000

200001-300000

300001 and More

Total

1.

Yes

19

42

68

2.

No

23

32

Total

25

65

10

100

Table 20: Occupation Wise Break Up For Investment in Different Funds

S. No.

Service Class

Business Class

Professional

Retired

Total

1.

Equity Fund

35

11

17

02

65

2.

Debt Fund

01

07

01

02

11

3.

Balanced Fund

14

04

02

04

24

Total

50

22

20

100

Table 21: Occupation Wise Preference for ICICI Mutual Funds

S. No.

Service Class

Business Class

Professional

Retired

Total

1.

Most Preferred

12

2.

Favorably Preferred

16

3.

Preferred

32

44

4.

Least Preferred

11

5.

Not Preferred

17

50

22

20

100

Total

From the Table 20, it is observed that investors

in business class and professionals like to invest
in equity fund and balanced fund.

following suggestions were made in order to

From the Table 21, it is observed that investors

of service class, business and professional like
to invest in ICICI Tax saving plan, while retired
class are less likely to invest.

1. Increase awareness among investors: Many

increase the awareness among the people

especially the rural people.
investors are still restricting their choices to
the non-governmental options like gold and
fixed deposits even the market is flooded with
countless investment opportunities. This is

SUGGESTIONS

because of lack of awareness about mutual

funds which makes many investors restrict
their choice to traditional options like gold and
fixed deposits. So awareness relating to

Even though the mutual funds are good source

of income, the people lack awareness and
information towards mutual funds. So the

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mutual funds must be increased among the

CONCLUSION

investors to encourage them to invest in

Mutual funds are good source of returns for

mutual funds.

majority of households and it is particularly useful

2. Provide complete information relating to

for the people who are at the age of retirement.

mutual funds: Even among the investors who

However, average investors are still restricting

invest in mutual funds are unclear about how

their choices to conventional options like gold and

they function and how to manage them. So

fixed deposits when the market is flooded with

proper information must be provided to the

countless investment opportunities, with mutual

investors in order to increase the loyalty among

funds. This is because of lack of information about

the investors.

how mutual funds work, which makes many

3. Investors fee must be reduced by reducing

investors hesitant towards mutual fund invest-

paper work: Investors fee includes manage-

ments. In fact, many a times, people investing in

ment fee, distribution fee, distribution fee, and

mutual funds too are unclear about how they

administrative costs, etc., which are generally

function and how one can manage them. So the

deducted from the asset value. This can be

organizations which are offering mutual funds

possible if the investment is made without

have to provide complete information to the

agent and if the paper work is reduced.

prospective investors relating to mutual funds.

The government also has to take some measures

4. Better commission should be paid to Asset

to encourage people to invest in mutual funds

Management Companies: From the past 4-5

even though it is offering schemes like Rajiv

years the trust of investors on mutual funds is

Gandhi Equity Savings Scheme to the investors.

reduced because of the poor performance of

It is believed that some of these measures could

mutual funds in these years. So if better

lift the morale of the mutual fund industry which

commission is paid to Asset Management

has been crippled for the last three years.

Companies which are highly knowledgeable

and by motivating them we can improve the

REFERENCES

distribution system of mutual funds.

1.

5. Subsidized Investments to rural investors:

Investment Company Institute (2011), as

cited in Ignites, December 30.

Because of the issue of commercial viability,

2.

mutual funds were limited to major cities only.

Fink Matthew P (2008), The Rise of Mutual

Funds, Oxford University Press, p. 9.

So if mutual funds are offered to rural and semi

3.

urban investors at subsidized rates like

Pozen Robert and Hamacher Theresa

agricultural loans, the demand for mutual funds

(2011), The Fund Industry: How Your Money

increases in rural and semi urban areas also.

is Managed, John Wiley & Sons. pp. 5-7.

6. Advertising campaigns must be conducted in

rural areas to increase awareness among rural
investors.

4.

Pozen and Hamacher (2011), pp. 7-9.

5.

Pozen and Hamacher (2011), pp. 11-15.

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Int. J. Mgmt Res. & Bus. Strat. 2013

6.

R Padmaja, 2013

Rouwenhorst K Geert (2004), The Origins

of Mutual Funds, Yale ICF Working Paper

7.

No. 04-48, December 12, 2004), p. 5.

2011 Investment Company Fact Book,

Investment Company Institute. Retrieved
2011-08-02.

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