GURU JAMBESHWAR UNIVERSITY

PROJECT SYNOPSIS OF EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR

THIRD PARTY PRODUCTS MUTUAL FUND

MBA (MARKETING)

SUBMITTED BY MAHESH RAHEJA

EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR

TITLE External influence on consumer behavior BRIEF OF THE PROJECT When someone asks me tell me some risk free investments which can generate good returns I get confused. Why? Because according to me there are a number of risks in investing and Im not sure which risk is he talking about? Warren Buffett Said Risk comes from not knowing what you are doing. So, lets try and identify various issues and risks associated with mutual funds. Raj a middle-class Indian man with strong family beliefs and cultural values had just moved to the financial capital of IndiaMumbai. He was a software engineer and had recently joined a big MNC. He had struggled all his life and this was his transition from middle-class to upper middle-class. He wanted to secure a future for his kids which he was deprived of. His salary was good but thanks to media and his general knowledge, he knew about inflation and importance of investment to secure a bright future for his kids. In the morning news daily he had read an article describing mutual funds, their returns and benefits, and now he started his in depth search about mutual funds. In our project, Ill be focusing on three external influencers affecting consumer choice and decision making process, i.e., culture, group and social class. I will also be focusing on whether the sellers are aware of these external influencers and how do they fine-tune their sales strategy accordingly. Finally, i will try to identify suggestions to which factors a customer as well as a seller should consider while investing and selling mutual funds. CONCEPT OF MUTUAL FUND These days you are hearing more and more about mutual funds as a means of investment. If you are like most people, you
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probably have most of your money in a bank savings account and your biggest investment may be your home. Apart from that, investing is probably something you simply do not have the time or knowledge to get involved in. You are not the only one. This is why investing through mutual funds has become such a popular way of investing. What is a Mutual Fund? Like most developed and developing countries the mutual fund fashion or you can say craze has been catching on in India. There are various reasons for this. Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation. And in addition to this a mutual fund brings the benefits of diversification and money management to the individual investor, providing an opportunity for financial success that was once available only to a select few. Understanding Mutual funds is easy as it's such a simple concept: a mutual fund is a company that pools the money of many investors -- its shareholders -- to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are professionally managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio - entitled to any profits when the securities are sold, but subject to any losses in value as well. For the individual investor, mutual funds provide the benefit of having someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. A mutual fund, by its very nature, is diversified -- its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify.
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A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest in equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc.

Mutual fund flow chart

Why invest in Mutual Funds. Investing in mutual has various benefits which makes it an ideal investment avenue. Following are some of the primary benefits. 1. Professional investment management One of the primary benefits of mutual funds is that an investor has access to professional management. A good investment manager is certainly worth the fees you will pay. Good mutual fund managers with an excellent research team can do a better job of monitoring the companies they have chosen to invest in. Mutual funds hire full-time, high-level investment professionals.
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The managers have real-time access to crucial market information and are able to execute trades on the largest and most cost-effective scale. When you buy a mutual fund, the primary asset you are buying is the manager, who will be controlling which assets are chosen to meet the funds' stated investment objectives. 2. Diversification The cliche, "don't put all your eggs in one basket" really applies to the concept of intelligent investing. A crucial element in investing is asset allocation. It plays a very big part in the success of any portfolio. However, small investors do not have enough money to properly allocate their assets. By pooling your funds with others, you can quickly benefit from greater diversification. Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of anyone security. Mutual fund unit-holders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities. 3. Affordability A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs. 500/-.Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market. 4. Convenience and Flexibility Investing in mutual funds has its own convenience. While you own just one security rather than many, you still enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. It also uses
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the services of a high quality custodian and registrar. Another big advantage is that you can move your funds easily from one fund to another within a mutual fund family. This allows you to easily rebalance your portfolio to respond to significant fund management or economic changes. 5. Liquidity With open-end funds, you can redeem all or part of your investment any time you wish and receive the current value of the shares. Funds are more liquid than most investments in shares, deposits and bonds. Moreover, the process is standardized, making it quick and efficient so that you can get your cash in hand as soon as possible. 6. Transparency Regulations for mutual funds have made the industry very transparent. You can track the investments that have been made on youR behalf and the specific investments made by the mutual fund scheme to see where your money is going. In addition to this, you get regular information on the value of your investment. As a unit holder, you are provided with regular updates, for example daily NAVs, as well as information on the fund's holdings and the fund manager's strategy. 7. Variety There is no shortage of variety when investing in mutual funds. You can find a mutual fund that matches just about any investing strategy you select. There are funds that focus on blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds. 8. Regulations. All mutual funds are required to register with SEBI (Securities Exchange Board of India). They are obliged to follow strict regulations designed to protect investors. All operations are also regularly monitored by the SEBI.
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9. Tax Benefits In case of Individuals and Hindu Undivided Families a deduction up to Rs. 9,000 from the Total lncome will be admissible in respect of income from investments Specified in section 80L, including income from units of the mutual fund. TYPES OF MUTUAL FUND SCHEMES

Getting a handle on what's under the hood helps you become a better investor and put together a more successful portfolio. To do this one must know the different types of funds that cater to investor needs, whatever the age, financial position, risk tolerance and return expectations. The mutual fund schemes can be classified according to both their investment objective (like income, growth, tax saving) as well as the number of units (if these are unlimited then the fund is an open-ended one while if there are limited units then the fund is close-ended). By Consitution 1. Open-ended schemes

Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units at NAV-related prices from and
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to the mutual fund on any business day. These schemes have unlimited capitalization, open-ended schemes do not have a fixed maturity, there is no cap on the amount you can buy from the fund and the unit capital can keep growing. These funds are not generally listed on any exchange. Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem units any time during the life of a scheme. Hence, unit capital of open ended funds can fluctuate on a daily basis. EG: SBI Bluechip Fund-Growth, Reliance Vision Fund. 2). Close ended schemes Close-ended schemes have fixed maturity periods (generally ranging from 3 to 15 years). Investors can buy into these funds during the period when these funds are open in the initial issue. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or sell units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit capital in closedended schemes usually remains unchanged. After an initial closed period, the scheme may offer direct repurchase facility to the investors. The market price of the units could vary from the NAV of the scheme due to demand and supply factors, investors' expectations and other market factors. EG: Franklin India Tax shield 97 & 98, Benchmark Split Capital Fund Class A. 3). Interval Schemes These funds combine the features of both open-ended and close-ended schemes where in the scheme is close-ended for the first couple of years and open-ended thereafter. Some schemes allow fresh subscriptions and redemption at fixed
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times every year (say every six months) in order to reduce the administrative aspects of daily entry or exit, yet providing reasonable liquidity. By Investment objectives Mutual fund schemes can be further classified based on their specific investment objective such as growth of capital, safety of principal, current income or tax exempt income. 1). Equity Schemes oriented

The aim of growth scheme is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of amount in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time. 2). Debt Schemes based

The aim of income scheme is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income schemes are ideal for capital stability and regular income. 3). Balanced/Hybrid Schemes The aim of balanced schemes is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not
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normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth .For eg: DSP ML Balanced Fund, Kotak Balanced Fund.

CURRENT STATUS OF THE PROJECT

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Research Problem The study is based on the problem to identify external influencers which affect consumer choice & decision making and also to identify whether sellers are aware of the impact of these influencers & whether they fine-tune their sales strategy/pitch accordingly. Research Objectives To identify external influencers affecting consumers choice & decision making process b) To identify whether sellers are aware of the impact of these influencers c) To identify sales strategy adopted by the sellers and find gaps
a)

Research Design The research study is Empirical and descriptive in nature Sample Size: Sample Type: Sample Criteria: Sampling Data Collection Technique: (Annexure 1 & II) Research based on: Data Collection mode Structured questionnaire is used to collect the information from both the investor and sellers. Questionnaires are enclosed in Annexure II and III Tools of Analysis Following tools are used to analyze the data
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50 Investors, Sellers Convenient Questionnaire Primary Sources

EXTERNAL INFLUENCE ON CONSUMER BEHAVIOR

Tabulation Comparative charts Limitations of the study It is based on primary data, which is difficult to obtain Some Questions like Income and Age may not have been responded authentically People generally hesitate to give true information regarding questions on investments.

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ANNEXURE I Questionnaire for Customers 1. Do you want to invest for good returns? a) Yes b) No 2. What is your present income? a) 60k to 2 lakh b) 2 Lakh to 5 lakh c) 5 to 10 lakh d) > 10 Lakh 3. For what purpose do you want to invest or already invested (Give ranks)? a) Dividend b) Liquidity c) Tax benefit d) Higher returns e) Safety f) Others 4. In which schemes you like to invest? a) Open ended Scheme b) Close ended Scheme 5. Where you have invested or want to invest? a) Stock Market b) Bonds c) Debentures d) Others 6. Which source would you refer to get the knowledge of the mutual funds? a) Newspaper b) Magazines c) TV d) Brokers
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e) Friends f) Family g) Others 7. How much risk you are willing to take? a) Low b) Moderate c) High d) Very high 8. How much return do you expect from stock market? a) 5% 10 % b) 10% - 20 % c) 20% -30% d) Above 30% 9. In which industry do you want to invest? (give ranks) a) Pharma b) IT c) FMCG d) Insurance e) Banking f) Manufacturing g) Telecommunication h) Others 10. Which factors do you consider before investing in a companys share? (Give ranks) a) Dividend b) Volume of trading c) Market capitalization d) Company mgt e) Return on equity f) Earnings per share g) P/ E ratio h) Others Name: Age: Marital Status: Occupation:
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ANNEXURE II Questionnaire for Sellers 1. What degree of volatility is acceptable to Muslim customers, while considering Mutual fund investments? a) Lowest Possible - The customer focusses on current income and stability in value, even if it means that his total returns are relatively small b) Low He is willing to accept occasional losses in value as long as his investments have some potential for growth over time c) Moderate The investor is willing to take moderate risk, as long as his investments have a greater potential for growth over time d) High He is willing to take substantial risk in pursuit of higher total returns
2. How often do your clients consult their friends

and/or relatives choice? a) Every time b) Often c) Rarely d) Never

before

making

an

investment

3. What are the primary incentives investing in mutual funds? a) High returns b) Dividends c) Tax benefits d) Liquidity e) Safety

for investors

4. Why does a chunk of your customer base resist investing in mutual funds? a) Bitter past experience b) Lack of knowledge c) Lack of confidence in service levels
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d) Difficulty in selection of scheme e) Inefficient investment advisors 5. What are the primary goals of investors while investing in mutual funds? a) Preserving the value of investments b) Generate regular cash inflows c) Moderate growth in the value of investments over time d) Substantial growth in the value of Investments 6. Do you consider the income level of your customers before suggesting them mutual funds? a) Yes b) No

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