International Journal of Innovative Research & Studies ISSN NO : 2319-9725

AN EMPIRICAL STUDY ON INVESTORS’ PERCEPTION

TOWARDS MUTUAL FUND INVESTMENT WITH
REFERENCE TO ERODE DISTRICT, TAMIL NADU

P.Tamilselvan1 and Dr.R.Mohanraj2

1
(Research Scholar, Bharathiar University, Coimbatore, India)
2
(Assistant Professor & Head, Department of Business Administration,
Government Arts College (Autonomous), Kumbakonam, India)
Abstract:
Financial markets are continually becoming more efficient by providing more potential
solutions to the investors. Although mutual funds industry is vastly growing in the economy they
do face difficulties in differentiating their products to sudden changes in the economy. Thus, it
becomes crucial to understand and analyze investor’s perception and expectations, and disclose
certain extremely valuable information to support financial decision making of mutual funds.
Financial markets are becoming more exhaustive with financial products seeking new
innovations and to some extent innovations are also visible in designing mutual funds portfolio
but these changes need alignment in accordance with investor’s expectations. Thus, it has
become crucial to study mutual funds from a different angle, i.e, to focus on investor’s attitude
towards mutual fund investment that account for their dissatisfaction. Present research proposes
to identify the investor attitude towards mutual fund investment.
Keywords: Mutual Funds (MFs), Investor’s expectations, Portfolio risk, Return on Investment
(ROI)
Introduction

The progress of a nation is mainly predisposed by the financial market. The financial
resources are mobilized from savers and investors and allocated accordingly in the economy. In
India, the Reserve Bank of India (RBI) has proactively shaped the development of financial
markets. The development of financial market is done through RBI’s series of economic policy
reforms, market-determined interest and exchange rates, current account convertibility, monetary
policy dealing with price-based instruments, auction-based allocation in the government
securities market (GSM), and phased capital account. Such a closely scrutinized development of

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the financial market is crucial in an emerging and developing economy like India to avoid
financial instability (Gopinath, 2008)1. The financial markets have two major components:

 Money market
 Capital Market

Money market refers to the market where borrowers and lenders exchange short term
funds to make good their liquidity needs. Money market tools are generally financial claims that
have low risk, maturities under one year and high marketability. The capital market is a market
for financial reserves that are direct or indirect claims to capital. It is wider than the securities
market and embraces all forms of lending and borrowing. The capital market consists of the
complex institutions and mechanisms through which intermediate term funds and long-term
funds are united and made obtainable to business, government and individuals. The Capital
market also covers the process by which outstanding securities are transferred.

Mutual funds represent the most appropriate investment opportunity for the majority
investors. As financial markets become more sophisticated and complex, investors need a
financial liaison that provides the required knowledge and professional expertise on successful
investing. Hence mutual funds act as an intermediary in this regard.
Concept of Mutual Fund

The two major reasons why Indian securities are now progressively more regarded as
attractive to international investors are the relatively high returns compared with more developed
global markets as well as the low correlation with world markets.

Mutual fund is a trust that pools the savings of investors who share a common financial
goal. This pool of money is invested in harmony with a stated objective (Bansal, 1996; Singh,
2008). Varieties of mutual fund schemes are available to cater to the needs and expectations of
the investors since 1964 with the establishment of Unit Trust of India. There are masses of
benefits attached with investment in a mutual fund. The benefits are - Mutual funds provide
specialized management; provide benefit of diversification; provide easy liquidity; offer tax
advantages; offers smaller investment facility; high transparency; flexibility for investors;

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availability of choice of schemes; and are well regulated (Chandra, 2008; Sashikant, Abraham &
Bhargava, 2010; Tarun & Bodla, 2001)

Review of Literature

Walia Nidhi and Dr. Mrs. Kiran Ravi (2009) conducted a research on investor’s risk
perception in mutual funds investment. The research is identified the critical gap between the
existing frame work of mutual funds industry and extend to understand the need of redesigning
in mutual funds services. It is also identified the investor’s perception towards risk and
expectations towards return in mutual funds investment comparing with other investment.

Kumar Vipin and Preeti Bansal (2014) analyzed the investor’s behavior in mutual
funds. This study mentioned the number of factors that influenced the perception of investors’ in
mutual funds. This study identified that many of the investor’s not aware about the mutual funds
investment and still they are giving investment preference for bank deposit and post office
deposits etc... Also this study pointed out many of the mutual fund investor not investing money
not more than 3 years and the investor withdraw their investments which were not knowing
results. It was also identified that maximum number of investors not analyzing their investment
risk and they were depending on brokers and agency for investment.

Tarak Paul (2014) has conducted the study to find out the perception of the mutual fund
investors and perceived experience based on the investor’s communication perspective. The
study pointed out the investor’s communication is an important criterion for existence of strong
relationship between the retail investors’ level of perceived experience and their state of mental
accounting.

Umaya Salma Shajaha (2014) has conducted the study to identify the factors leading to
mutual funds investment. The factors are savings, liquidity, income, motivation, investment gain.
The study also pointed out active information to the investor is one of the important factors for
buying the mutual fund products.

Problem Statement
Mutual fund is the special investment choice where rigorous direct monitoring by
investor is not needed as mutual funds are best managed by professionals. Indian financial

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market is flooded with mutual fund schemes matching the expectations of investors. More than a
decade mutual fund is the most preferred investment avenue in India. Generally investors are
expecting more returns for their investments. But high returns are always having high risk
whereas return on investment from mutual fund schemes is comparatively low. Hence, the
investors are much dissatisfied with the returns. But certain mutual fund scheme fetches an
enhanced return, which the investors are not aware of. At times, the investors tremble to select an
appropriate fund and right scheme. This leads to investors’ ambiguity. The specific questions
which need to be addressed in this regard are:

 What are the factors influencing investment in Mutual Funds?

 What are the investors’ perceptions towards mutual fund investment?
Objectives of the study
The main objectives if the studies are:
1. To identify the investors choice between mutual funds and other investment avenues.
2. To identify the investors awareness and preferences towards mutual funds investment
3. To offer suitable suggestions to overcome the dissatisfaction level of mutual fund investors.

Limitations of the study

The study is conducted in Erode districts of Tamilnadu. So the respondents of the study

were restricted to 120 due to time and cost constraint. The findings of the study cannot be

generalized to investors of other market securities and also to investors of other districts. As the

study is based on subjective perceptions of the respondents, it is not totally free from errors. Care

has been taken to minimize the same.

Hypothesis of the study

The hypotheses formulated for the purpose of the study are as follows:
1. Investors’ prefer mutual fund investment higher than other investment options.
2. There is no significance difference between educational qualifications to awareness of
mutual fund schemes.

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3. There is no association between job category of respondents and various schemes of

invested mutual fund schemes gender vs. returns from mutual fund
4. There is no significance difference between age wise classification and Preference for
investment.

Research Methodology

This study is descriptive in nature based on survey method. The study aims at finding out

the attitude of the investors towards investment in mutual funds in Erode District. This study is

based mainly on primary sources. The primary data is collected from the investors of mutual

funds with help of the questionnaire. The secondary data are collected from the books, records

and journals. By adopting convenience sampling, 120 respondents are selected for this study.

The essential data were collected with the help of questionnaire. The data is collected from the

period of January 2018 to March 2018.. The samples covers the urban, rural and semi urban

areas of Erode district.

Tools Used:

The tools used for the analysis are percentage analysis, Garrett ranking, one way Anova.

Analysis and Intrepretation

Table 1.1
Descriptive Profile of the Sample
Percentage (% to
Variables Categories No. of Respondents total of that
category)

Male 86 72%
Gender
Female 34 28%

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International Journal of Innovative Research & Studies ISSN NO : 2319-9725

Up to 25 15 12.5%

26-35 25 21%

Age (in Years) 36 - 45 58 48%

46-55 15 12.5%

More than 56 7 6%

Married 90 75%

Marital Status Unmarried 30 25%

Up to Hsc 14 11%

Diploma 24 20%

Under Graduates 56 47%

Educational
Post Graduates (PG) 14 12%
Qualification

Others 12 10%

Private Employee 60 50%

Government Employee 40 33%

Self - employed 10 8%

Occupation Farmer 5 4%

Others 5 4%

Below 20,000 30 25%

20001 – 40,000 60 50%

Monthly Family
income (in Indian 40001 – 60,000 11 9%

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Rupees) 60001 – 80,000 10 8%

More than 80,000 10 8%

Below 10, 000 43 36%

10001 – 20,000 34 28%

20001 – 30,000 63 53%

Monthly savings (in
30001 – 40,000 12 10%
Indian Rupees)
More than 40,000 11 9%

Urban 66 55%
Locality of
respondents Semi – urban 44 37%
Rural 10 8%
TOTAL 120 100
Source: Primary Data
The above table describes the demographic statues of the respondents. Out of 120
samples, selected for the study, 72% of the respondents are male, 48% of the respondents belong
to the age group of 36- 45 years, 47% of them are graduates, 50% are private employees, 50% of
the respondents earn a monthly salary of Rs 20000 – 40000 and 53% save around Rs 20000 –
40000 and 55% of them belong to urban area.

Table: 1.2

Preference of Investment Avenue

Investment options Rank Order

Banks 1

Post Office 2

Insurance 4

Real Estate 6

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Gold/ Silver 5

Bonds 7

Mutual Funds 3

Source: Primary Data

The above table shoes that banks and Post office are preferred as number 1 and 2 choice
respectively by the respondents. Mutual funds are the 3 choice and bonds are having last choice
in terms of preference among various investment avenues.

Table 1.3
Awareness of Benefits of Mutual Funds

S.No. Awareness No. of respondents

1. Not AwarePrimary Data
Source: 42
2. Some Knowledge 64
3. Fully Aware 14
Total 120

Source: Primary Data

Out of total respondents 58% are having some knowledge of Mutual Funds. Only 18%
are confident to be fully aware about mutual funds.

Table 1.4

Relationship between Job Category of Respondents and Mutual Fund Investment Schemes

Value df Asymp. Sig. (2-sided)

Pearson Chi-Square 67.222a 8 .000

Likelihood Ratio 80.902 8 .000

Linear-by-Linear 1.273 1 .259

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Association

No. of valid cases 204

a. 3 cells (20.0%) have expected count less than 5. The minimum expected count is 2.08

Source: Primary Data

Since the significance (p) value being 15.507 is greater than the 0.05. Hence the null
hypothesis is accepted. Inference: There is no association between job category of respondents
and various schemes of invested mutual fund schemes gender vs. returns from mutual fund.

Table 1.5

Sum of
df Mean Square F Sig
Squares
(Combined) 5.817 4 1.454 1.285 .277
Between Unweighted 2.823 1 2.823
Groups Linear Term
4.244 1 4.244 2.495 .116
Weighted
Deviation 1.573 3 .524 3.751 .054
Within Groups 225.164 199 1.131 .463 .708
Total 230.980 204
Source: Primary Data

Since significance (p) value being 0.277, it is less than 0.05 Hence the null hypothesis is
accepted. Inference: There is no significance difference between age wise classification and
Preference for investment.

Conclusion

The mutual fund industry is growing at a tremendous pace. A large number of plans have
come up from different financial resources. With the stock markets oaring, the investors are
attracted towards mutual fund investments. Only a small segment of the investors retain in
Mutual funds and the main source sources of information they rely on are the financial advisors

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followed by advertisements in different media. The Indian investors generally invest over period
of 2-3 years. Also there is a tendency to invest in fixed deposits due to the security attached to it.
In order to excel and make mutual funds a success, companies still need to create awareness and
understand the psyche of the Indian customer.

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