A

Summer Training Report

On
“ MUTUAL FUND ”
at
SHAREKHAN LTD.

Submitted in partial fulfillment of the requirements of

Master of Business Administration (Finance)

Under The Guidance Of: Submitted By:

Mr. Abhishek Yadav Meghna Goyal

Mr. Mukesh MBA 3rd sem.
180101040017

HARYANA SCHOOL OF BUSINESS

GURU JAMBHESHWAR UNIVERSITY OF SCIENCE & TECHNOLOGY
HISAR (HARYANA)
SESSION 2018-2020
 Student undertaking
Certificate of originality
It is an original work carried out by me under the guidance of Mr. Mukesh . (Sharekhan LTD)
All respected guides, faculty member and other sources have been properly acknowledged and
the report contains no plagiarism.
To the best of my knowledge and belief the matter embodied in this project is a genuine work
done by me and it has been neither submitted for assessment to the university nor to any other
university for the fulfillment of the requirement of the course of study.

Meghna Goyal
Student name with signature
 ACKNOWLEDGEMENT

This project has been as a part internship required during the completion of PG program. I was
involved with SHAREKHAN LIMITED, Paschim Vihar, for 60 days, and I come across a lot of
people who put in their time and effort toward acclimatizing me to the workings of their
organizations.
I express my thanks to my company guide Mr. Mukesh , Mr. Abhishek yadav who motivated me
in all my efforts.
I would also like to thank Mr. Vikas(Branch manager) for supporting, guiding and encouraging
me during this project. I record my sincere thanks to him with deep gratitude.
I would also like to thanks our director provide me an opportunity to learn outside the classroom.
It was truly wonderfull learning experience. Last but not Least, I express my gratitude to the
entire staff of SHAREKHAN LIMITED.
These past 60 DAYS were of almost importance as they added value towards my path of
Knowledge. I would like to end this acknowledgement by thanking the customers and the people
at large with whom I have interacted during the course of my training.
 DECLARATION

This is to certify that I have completed a project titled “To study of analysis of portfolio
management services” under the guidance of MR. Mukesh in the partial fulfillment of the
requirement for the award of Master of Business Administration of Guru jameshwar university ,
Hisar. This is an original piece of work & I have not submitted it earlier elsewhere.
 PREFACE

This project report attempts to bring under one cover the entire hard work and dedicated put in
by me in the completion of the project work on MUTUAL FUND.
This project is intended for a wide audience. It will be useful to not only the students of
management, marketing but also to other people in the field of management practitioners who
want to understand and enrich their understanding of service quality.

I have expressed my experience and observation in my own simple way. I hope who gave
through it will find it interesting and worth reading. All constructive feedback is cordially
invited.

Table of Contents
Chapter 1: Introduction
1. About the Company (Formation, Vision, Mission, Objectives, Functions, Product & services,
Organizational Structure, SWOT Analysis)
2. Environmental Scanning –Political environment, Economic environment, Socio-Cultural
Environment, technological environment, environmental issues (Green environment) and Legal
environment.
3. Porters five forces model of competition –Michael Porter

Chapter 2: Research Methodology

1. Statement of the Problem
2. Objectives & Scope of Study
3. Managerial usefulness of study
4. Type of Research and research Design
5. Data Collection Methods
6. Limitations of Study

Chapter 3: Conceptual Discussion

1. Review of Literature (Discussion about the work done by others on similar issues and
published articles/books/research projects etc.)
2. Current Issues (From Newspaper, Journals –For Company and Industry)
3. History and Development of Company and Industry

Chapter 4: Data Analysis

1. Methods and techniques of data analysis (Questionnaire, Graphs, Statistical Methods, SPSS
etc.)
2. Primary Data Analysis
3. Secondary Data Analysis

Chapter 5: Findings and Recommendations

Chapter 6: Conclusions and Suggestions

Chapter – 1
 Introduction

• About the company

Share khan is one of the leading retail brokerage of BNP PARIBHAS which was running
successfully in the country. It is the retail brokering arm of the Mumbai based SSKI group,
which has over nine decades of experience in the stock broking business. Share khan offers
its customers a wide range of equity related services including trade execution on BSE,
NSE, Derivatives, depository services, online trading, investment advice, etc.

The firm online trading and investment site – www.sharekhan.com – was launched on
February 8, 2000. The site gives access to superior content and transaction facility to retail
customer across the country. Known for its jargon – free, investor friendly language and
high quality research, the site has a registered base of over five lakh customers. The number
of trading numbers currently stands at over 13+ lacs while online trading currently account
for just over 22 percent of the daily trading in stocks in India, share khan alone accounts for
65 percent of the volumes traded online.

The content rich and research oriented portal has stood out among its contemporaries
because of its steadfast dedication to offering customer best- of- breed technology and
superior market information. The objectives has been to let customer make informed
decisions and to simplify the process of investing in stocks.

On April 17, 2002 share khan launched speed trade, a net- based executable application that
emulates the broker terminals the broker terminals along with host of other information
relevant to the day traders. This was for the first time that a net – based trading station of this
caliber was offered to the traders. In the last six months speed trade has become a de facto
standard for the day trading community over the net.

Share khan’s ground network includes over 2090 branches in 675 cities in India,

Share khan has always believed in investing in technology to builds its business. The
company has used some of the best known names in the IT industry, Microsystems, oracle,
Microsoft, Cambridge technologies, Nexgenix, Vignette, Verisign financial technologies
India ltd, spider software Private ltd, to build its trading engine and content. The Morakhiya
family hold a majority stake in the company. HSBC, Intel and Carlyle are the other
investors.

With the legacy of more than 85 years in the stocks markets, the SSKI group ventured into
institutional broking and corporate finance 20 years ago. Presently SSKI is one of the
leading players in institutional broking and corporate finance activities. SSKI holds a
sizeable portion of the market in each of these segments. SSKI’s institutional broking arm
accounts for 7% of the market for foreign institutional portfolio investment and 5% of all
domestic institutional portfolio investment in the country. It has 60 institutional clients
spread over India, Far East, UK and US. Foreign institutional investors generate about 65%
of the Organizations revenue, with a daily turnover of over US$2 million. The corporate
finance section has a list of very prestigious clients has many ‘firsts’ to its credit, in terms of
the size of deal, sector tapped etc. the group has placed over US$ 1 billion in private equity
deals. Some of the clients include BPL cellular Holding, Gujarat pipavav, Essar, Hutchison,
planet Asia and shopper’s stop.

REASON TO CHOOSE SHARE KHAN LIMITED

Experience: SSKI has more than eight decades of trust and creditability in the Indian stock
market. In the Asia Money broker’s poll held recently, SSKI won the ‘Indis’s best broking
house for 2004’ award. Ever since it launched share khan as its retail broking division in
February 2000, it has been providing institutional – level research and broking services to
individual investors.

Technology: With our online trading account you can buy and sell shares in an instant from
any PC with an internet connection. You will get access to our powerful online trading tools
that will help you take complete control over your investment in shares.

Accessibility: share khan provides ADVICE, EDUCATION, TOOLS AND EXECUTION

services for investors. These services are accessible through our centers across the country.
(Over 588 locations in 148 cities) over the internet (through the websites
www.sharekhan.com) as well as over the voice tool.

Knowledge: In a business where the right information at the right time can translate into
direct profits, you get access to a wide range of information on our content – rich portal,
share khan. You will also get a useful set of knowledge-based tools that will empower you to
take informed decisions.

Convenience: You can call our Dial-N-Trade number to get investment advice and execute
your transactions. We have a dedicated call-centers to provide this service via a toll free
number 1800-22-7050 from anywhere in India.

Customer service: Our customer service team will assist you for any help that you need
relation to transaction, billing, demat, and other queries. Our customer service can be
contracted via a toll-free number, email or live chat on www.sharekhan.com.

Investment advice: Share khan has dedicated research teams of more than 30 people for
fundamental and technical research. Our analysts constantly track the pulse of the market
and provide timely investment advice to you in the form of daily research emails, online
chat, printed reports and SMS on your mobile phone.
 Benefits:
• Free depository account
• Secure order by voice tool Dial-n-trade
• Automated portfolio to keep track of the value of your actual purchases
• 24*7 voice tool access to your trading account
• Personalized price and account alerts delivered instantly to your cell phone and email
address
• Special personal inbox for order and trade confirmations
• Online customers service via web chat
• Anytime ordering

Sharekhan has tie up with the following Banks:

• HDFC bank

• Axis bank

• IDBI bank

• City bank

• Industrial bank

• Union bank of india

• ICICI bank

• Oriented bank of commerce

• Yes bank

• Bank of india

• Centurion bank

• State bank of india

• Federal bank.

COMPETITORS
 • India Bulls

• Motilal Oswal

• Religare

• Kotak securities

• ICIC Direct

• Anand Rathi

• India infoline

• Reliance money

• Angel broking

• 5 paisa.com

Vision
To be the best retail brokering brand in the retail business of stock market.
Mission
To educate and empower the individual investor to make better investment decision through
quality advice and superior service.

Achievement of share khan

• A wired company along with reliance, HII, Infosys, etc. by ‘business today’, January
2004 edition.
• It was awarded ‘top domestic brokerage house’ four times by Euro and Asia money.
• It was winner of ‘best financial websites’ award.
• India’s most preferred brokers within 5 years. “CNBC awaaz customer award 2005”.

TARGETS / TASKS
TARGETS
• To sell minimum 5 demat accounts worth Rs. 10000 for 2 months for sharekhan limited
at Delhi..
• To sell mutual funds of various companies through share khanlimited in Nagpur city
for 2 months.
 TASKS
• To collect the leads.
• To do the telecalling and take appointments.
• To attend the appointment on prescribed time.
• To tell the client about the company and its products.
• To tell the client about the advantages of opening a demat account with share khan
limited.
• To give the live demo of how the online terminal works.
• To convince the client to do online trading.
• To explain him the term and condition of the product.
• To convince the client to open demat account at share khan limited.
• By means of presentation explaining them how to trade online.
• To take signature of the client on the KYC (know your customer) form.
• To collect the document required to open a demat account.
• To fill up a KYC form for the customer.
• To install the software in the client computer.
• To make the client trade.
• To sell the mutual funds.
• To get the reference from the client.
• To conduct seminars in the bank and good companies.
• To submit the daily report of myself and of all the 6 people in my group to the company
guide.
Functions

• Providing a ready market.

• Providing a quoting market prices.
• Providing facility for working.
• Safeguarding activity for investors.
• Creating a discipline.
• Maintenance of liquidity.
• Promotion of the habit of saving.
• Refining and advising the industry.
• Promotion of capital formation
• Provides clearing house facility.

Products and services

 1. Equity and Derivative Trading
2. Depository services
3. Online Services
4. Commodity Trading
5. Dail n Trade
6. Portfolio Management
7. Share shops
8. Fundamental research
9. Technical research
10.Currency Trading
11.Ignite(education programme)
12.Loan against securities

Organizational culture
Culture of share khan is very good and healthy and all employees work effectively. If any change
happen in the company, it takes the advice and suggestion of the employees before and increase
the empowerment of the employees. The culture of the company focuses on team work and
creates an environment in which employees work together to reduce time, removes mistakes and
create good relation among the employees. For better organizational culture share khan has
created different types of policies which includes training, reward and recognition. The
environment has coordination between the employers and the employees

Organizational structure
There are around 30 employees in the Paschim Vihar branch. Share khan limited follows the line
structure. It is the simplest organizational structure. Following this organizational structure most
middle management level and their functions have been increased and they follow hierarchy. Its
shows the hierarchy of employees workiat share khan at different levels i.e. top level, middle
level and lower level. The top most position is the position of regional head (Mr. Amit pal
Singh). Every branch comes under regional. Then branch head, assistance branch manager, sales
manager, sales executives, and last is trainee. Despite the issue of the line structure the
organization benefitted most of the advantages to have so many branches and that is why they
opt customer preferences to invest and consult with them. Trainees have to report to their
concerned team.
The following diagram describes the structure of share khan in detailed manner. The structure
has been divided into sales and customers relationship department.
SHAREKHAN PROFILE
 Among the top three (3) branded retail services provides ( Rs.856 crs average daily
volume.
 No. 2 players in online business.
 Large network of branded broking outlets in the country servicing around 5,45,000
clients.

Head office
Sharekhan ltd. 10th floor , beta building, lodha ithink techno campus,off. JVLR, opp,
kanjumarg railway station, kanjurmarg(east

Mumbai-400 042, Maharashtra.

Telephone : 022-6115-0000.

Board of directors
JAIDEEP ARORA (CEO)

Key officials Designation

Mr. Jaideep Arora CEO

Mr. Kaliyan raman Online Sales Head
Mr. Jason Pandey and Mr. Pradeep DP Head
Mr. Nidhi Tiku Cluster Head
Mr. Maneet Rastogi Regional Sales Manager
Mr.Vikas sinha Branch Manager
SWOT ANALYSIS

Strength:
• Technology: It is the first company in online trading with a turnover of 40 crores and
more than 800 people working in the organization. It uses up to date technology.
• Facilities: Share khan provides multi - channel access to all its customers through a string
online presence with www.sharekhan.com, a call center based dial and trade facility.
Share khan provides online fund transfer facility.
• Research department: Share khan has dedicated research team for fundamental and
technical research that constantly track the pulse of the market and provide timely
investment. Gives advice free o cost having strike rate 70 – 80 %.
• Innovative company: Wide range of innovation in financial products.
• Competitor analysis: Intensive research on all industry sectors.
• Infrastructure: In shre khan they have string IT infrastructure.
• Large network: They have one of the largest network of branches across the country.
Weakness:
• Insufficient investment: localized presence due to insufficient investments from country
wide expansions.
• Lack of awareness: lack of awareness among customers because of non – aggressive
promotional strategies (print media, newspaper, etc.)
• Restricted areas: It is limited to urban areas.
Opportunities:
 • Improving technologies: India is the developing countries where technologies is changing
day to day which indicates that company has to chance to improve their technologies to
make it more advance and updated from the other competitors.
• Ever- increasing markets: Now a days people has more educated and professional and are
more interested in investing stocks. And earn more money. The share khan company has
been dynamic enough to move with the times and capture the opportunities that the
market gives from time to time.
• Education level: In India the literacy rate increase year to year means people get more
professional with the understanding of the stock market.
• It is the booming capital market, it can successfully launched new services and raise its
client base.
• It can easily tap the retail investors will small savings through promotional channels like
print media, electronic media, etc.
• Increasing usage of internet through broadband connectivity may boost a whole new
breed of investors for trading in securities.
• The sector is increasing.
Threats:
• New competitors: in the stock broking industries have a lot of companies like ICICI,
HDFC, Motilal Oswal and kotak etc. these are creating a lot of competition for large
players like share Khan Company and they are creating lots of confusion in the minds of
the clients about the services provided by the brokers.
• Technology based business: Online trading is totally based on technology which is quite
complex. It is a treat because uneducated people cannot use it. It is working properly and
is good but internet is not that safe.
• Aggressive promotional strategies by close competition may hamper share khan
acceptance by new clients.
• Lack of sufficient branch offices for speedy delivery of services.
• Other players are providing margin funds to investors on easy terms where as there is no
such facility in Share Khan.
• More and more players are venturing into this domain which can further reduce the
earnings of Share Khan.
• Stringent economic measures by Government and RBI.
• Entry of foreign finance firms in Indian market.
• Environmental scanning – political environment, economic environment,
socio-cultural environment, technological environment, environmental
issues and legal environment

Political environment:
• Taxation policy: If in the country the tax rates are high, it affects the market because
when people may more taxes they do not have sufficient amount to invest. If tax rate
is low then people pay minimum tax and invest more in the market.
• Foreign policy: Foreign policy affects the import and export of the country. If the
policy is restricted and complicated then export and import in the country become
difficult and it also affects the currency market.

Economic environment: If the economy is strong then people have jobs and money to
invest in share khan and if there is no money then how can they invest in share khan and
other companies. Not too many can companies can continue to grow when their economic
environments are clouding over.

Socio cultural environment: The Company may change various management strategies to
adapt to social trends. Customers who have different needs and wants may affect the
company. It is very difficult for the company to identify customer’s needs and satisfy them.
 Technological environment: Online trading is totally based on technology that is why
technology plays a very important role in share Khan Company. Client can access online
trading through internet for that they need internet connection facility. Furthermore,
technological shifts would affect costs, quality and lead to innovation and its affects online
trading of Share Khan.

Environmental issues: Environmental issues includes ecological and environment aspects

such as trend in the market. You must have heard analysts on CNBC talk about business
trend. An environment builds the platform on which Share Khan survives and grows. Share
Khan stock ideas present our best stock picks in today’s market. These investment ideas
come with the price target and time frame over which gains can be materialized.

Legal environment: Legal environment include discrimination law, consumer laws,

antitrust laws, SEBI rules and regulations, employment law these factors can affect Share
Khan Company, its costs and demand for its products. Rules and regulations set by SEBI
and RBI affects Share Khan and its clients. Share Khan has to follow all the rules and
regulations given by RBI and SEBI.

• Porter five forces model of competition – Michael porter

Competitors:
• ICICI Direct
 • HDFC securities
• 5 paisa.com
• Kotak securities limited
• Motilal Oswal securities limited
• Zarodha
• Angel broking

Buyers:
• Small investors
• Franchise / business
• Partners
• HNI’s
• MF companies
• HUF
• Institutional Investors

Suppliers:
• Web maintainers
• NSCL
• CSDL
• NSE
• BSE
• MCX
• NCDEX
Potential Entrant:
• Investments
• Various banks

Substitutes:
• Mutual funds
• Insurance
• Bank FD
• PPF
• Indian post RD
 INTRODUCTION TO TOPIC

A mutual fund is a financial intermediary that pools the savings of investors for collective
investment in a diversified portfolio of securities. A fund is “mutual” as all of its returns, minus
its expenses, are shared by the fund’s investors.
The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 defines a mutual
fund as a ‘a fund established in the form of a trust to raise money through the sale of units to the
public or a section of the public under one or more schemes for investing in securities, including
money market instruments’.
According to the above definition, a mutual fund in India can raise resources through sale of
units to the public. It can be set up in the form of a Trust under the Indian Trust Act. The
definition has been further extended by allowing mutual funds to diversify their activities in the
following areas:
 Portfolio management services
 Management of offshore funds
 Providing advice to offshore funds
 Management of pension or provident funds
 Management of venture capital funds
 Management of money market funds
 Management of real estate funds
A mutual fund serves as a link between the investor and the securities market by mobilising
savings from the investors and investing them in the securities market to generate returns.
Thus, a mutual fund is akin to portfolio management services (PMS). Although, both are
conceptually same, they are different from each other. Portfolio management services are offered
to high net worth individuals; taking into account their risk profile, their investments are
managed separately. In the case of mutual funds, savings of small investors are pooled under a
scheme and the returns are distributed in the same proportion in which the investments are made
by the investors/unit-holders.
Mutual fund is a collective savings scheme. Mutual funds play an important role in mobilising
the savings of small investors and channelising the same for productive ventures in the Indian
economy.
Benefits of Mutual Funds
An investor can invest directly in individual securities or indirectly through a financial
intermediary. Globally, mutual funds have established themselves as the means of investment for
the retail investor.
1. Professional management: An average investor lacks the knowledge of capital market
operations and does not have large resources to reap the benefits of investment. Hence, he
requires the help of an expert. It, is not only expensive to ‘hire the services’ of an expert
but it is more difficult to identify a real expert. Mutual funds are managed by professional
managers who have the requisite skills and experience to analyse the performance and
prospects of companies. They make possible an organised investment strategy, which is
hardly possible for an individual investor.
2. Portfolio diversification: An investor undertakes risk if he invests all his funds in a
single scrip. Mutual funds invest in a number of companies across various industries and
sectors. This diversification reduces the riskiness of the investments.
3. Reduction in transaction costs: Compared to direct investing in the capital market,
investing through the funds is relatively less expensive as the benefit of economies of
scale is passed on to the investors.
4. Liquidity: Often, investors cannot sell the securities held easily, while in case of mutual
funds, they can easily encash their investment by selling their units to the fund if it is an
open-ended scheme or selling them on a stock exchange if it is a close-ended scheme.
5. Convenience: Investing in mutual fund reduces paperwork, saves time and makes
investment easy.
6. Flexibility: Mutual funds offer a family of schemes, and investors have the option of
transferring their holdings from one scheme to the other.
7. Tax benefits Mutual fund investors now enjoy income-tax benefits. Dividends received
from mutual funds’ debt schemes are tax exempt to the overall limit of Rs 9,000 allowed
under section 80L of the Income Tax Act.
8. Transparency Mutual funds transparently declare their portfolio every month. Thus an
investor knows where his/her money is being deployed and in case they are not happy
with the portfolio they can withdraw at a short notice.
 9. Stability to the stock market Mutual funds have a large amount of funds which provide
them economies of scale by which they can absorb any losses in the stock market and
continue investing in the stock market. In addition, mutual funds increase liquidity in the
money and capital market.
10. Equity research Mutual funds can afford information and data required for investments
as they have large amount of funds and equity research teams available with them.

HISTORY
The history of mutual funds, dates back to 19th century Europe, in particular, Great Britain.
Robert Fleming set up in 1868 the first investment trust called Foreign and Investment Trust
which promised to manage the finances of the moneyed classes of Scotland by spreading the
investment over a number of different stocks. This investment trust and other investment trusts
which were subsequently set up in Britain and the US, resembled today’s close-ended mutual
funds. The first mutual fund in the US, Massachusetts Investors’ Trust, was setup in March 1924.
This was the first open-ended mutual fund.
The stock market crash in 1929, the Great Depression, and the outbreak of the Second World
War slackened the pace of growth of the mutual fund industry. Innovations in products and
services increased the popularity of mutual funds in the 1950s and 1960s. The first international
stock mutual fund was introduced in the US in 1940. In 1976, the first tax-exempt municipal
bond funds emerged and in 1979, the first money market mutual funds were created. The latest
additions are the international bond fund in 1986 and arm funds in 1990. This industry witnessed
substantial growth in the eighties and nineties when there was a significant increase in the
number of mutual funds, schemes, assets, and shareholders. In the US, the mutual fund industry
registered a ten fold growth in the eighties (1980-89) only, with 25% of the household sector’s
investment in financial assets made through them. Fund assets increased from less than $150
billion in 1980 to over $4 trillion by the end of 1997. Since 1996, mutual fund assets have
exceeded bank deposits. The mutual fund industry and the banking industry virtually rival each
other in size.
Growth Of Mutual Funds In India The Indian mutual fund industry has evolved over distinct
stages. The growth of the mutual fund industry in India can be divided into four phases: Phase I
(1964-87), Phase II (1987-92), Phase III (1992-97), and Phase IV (beyond 1997).
Phase I: The mutual fund concept was introduced in India with the setting up of UTI in 1963.
The Unit Trust of India (UTI) was the first mutual fund set up under the UTI Act, 1963, a special
act of the Parliament. It became operational in 1964 with a major objective of mobilising savings
through the sale of units and investing them in corporate securities for maximising yield and
capital appreciation. This phase commenced with the launch of Unit Scheme 1964 (US-64) the
first open-ended and the most popular scheme. UTI’s investible funds, at market value (and
including the book value of fixed assets) grew from Rs 49 crore in1965 to Rs 219 crore in 1970-
71 to Rs 1,126 crore in 1980-81 and further to Rs 5,068 crore by June 1987. Its investor base had
also grown to about 2 million investors. It launched innovative schemes during this phase. Its
fund family included five income-oriented, open-ended schemes, which were sold largely
through its agent network built up over the years. Master share, the equity growth fund launched
in 1986, proved to be a grand marketing success. Master share was the first real close-ended
scheme floated by UTI. It launched India Fund in 1986-the first Indian offshore fund for
overseas investors, which was listed on the London Stock Exchange (LSE). UTI maintained its
monopoly and experienced a consistent growth till 1987.
Phase II: The second phase witnessed the entry of mutual fund companies sponsored by
nationalized banks and insurance companies. In 1987, SBI Mutual Fund and Canbank Mutual
Fund were set up as trusts under the Indian Trust Act, 1882. In 1988, UTI floated another
offshore fund, namely, The India Growth Fund which was listed on the New York Stock
Exchange (NYSB). By 1990, the two nationalized insurance giants, LIC and GIC, and
nationalized banks, namely, Indian Bank, Bank of India, and Punjab National Bank had started
operations of wholly-owned mutual fund subsidiaries. The assured return type of schemes
floated by the mutual funds during this phase were perceived to be another banking product
offered by the arms of sponsor banks. In October 1989, the first regulatory guidelines were
issued by the Reserve Bank of India, but they were applicable only to the mutual funds
sponsored by FIIs. Subsequently, the Government of India issued comprehensive guidelines in
June 1990 covering all ‘mutual funds’. These guidelines emphasized compulsory registration
with SEBI and an arms length relationship be maintained between the sponsor and asset
management company (AMC). With the entry of public sector funds, there was a tremendous
growth in the size of the mutual fund industry with investible funds, at market value, increasing
to Rs 53,462 crore and the number of investors increasing to over 23 million. The buoyant equity
markets in 1991-92 and tax benefits under equity-linked savings schemes enhanced the
attractiveness of equity funds.
Phase III: The year 1993 marked a turning point in the history of mutual funds in India. Tile
Securities and Exchange Board of India (SEBI) issued the Mutual Fund Regulations in January
1993. SEBI notified regulations bringing all mutual funds except UTI under a common
regulatory framework. Private domestic and foreign players were allowed entry in the mutual
fund industry. Kothari group of companies, in joint venture with Pioneer, a US fund company,
set up the first private mutual fund the Kothari Pioneer Mutual Fund, in 1993. Kothari Pioneer
introduced the first open-ended fund Prima in 1993. Several other private sector mutual funds
were set up during this phase. UTI launched a new scheme, Master-gain, in May 1992, which
was a phenomenal success with a subscription of Rs 4,700 crore from 631akh applicants. The
industry’s investible funds at market value increased to Rs 78,655 crores and the number of
investor accounts increased to 50 million. However, the year 1995 was the beginning of the
sluggish phase of the mutual fund industry. During 1995 and 1996, unit holders saw an erosion
in the value of their investments due to a decline in the NA V s of the equity funds. Moreover,
the service quality of mutual funds declined due to a rapid growth in the number of investor
accounts, and the inadequacy of service infrastructure. A lack of performance of the public sector
funds and miserable failure of foreign funds like Morgan Stanley eroded the confidence of
investors in fund managers. Investors perception about mutual funds, gradually turned negative.
Mutual funds found it increasingly difficult to raise money. The average annual sales declined
from about Rs 13,000 . crore in 1991-94 to about Rs 9,000 crore in 1995 and 1996.
Phase IV: During this phase, the flow of funds into the kitty of mutual funds sharply increased.
This significant growth was aided by a more positive sentiment in the capital market, significant
tax benefits, and improvement in the quality of investor service. Investible funds, at market
value, of the industry rose by June 2000 to over Rs 1,10,000 crore with UTI having 68% of the
market share. During 1999-2000 sales mobilisation reached a record level of Rs 73,000 crore as
against Rs 31,420 crore in the preceding year. This trend was, however, sharply reversed in
2000-01. The UTI dropped a bombshell on the investing public by disclosing the NAV of US-
64-its flagship scheme as on December 28,2000, just at Rs 5.81 as against the face value of Rs
10 and the last sale price of Rs 14.50. The disclosure of NAV of the country’s largest mutual
fund scheme was the biggest shock of the year to investors. Crumbling global equity markets, a
sluggish economy coupled with bad investment decisions made life tough for big funds across
the world in 2001-02. The effect of these problems was felt strongly in India also. Pioneer m, JP
Morgan and Newton Investment Management pulled out from the Indian market. Bank of India
MF liquidated all its schemes in 2002. The Indian mutual fund industry has stagnated at around
Rs 1,00,000 crore assets since 2000-01. This stagnation is partly a result of stagnated equity
markets and the indifferent performance by players. As against this, the aggregate deposits of
Scheduled Commercial Banks (SCBs) as on May 3, 2002, stood at Rs 11,86,468 crore. Mutual
funds assets under management (AUM) form just around 10% of deposits of SCBs. The Unit
Trust of India is losing out to other private sector players. While there has been an increase in
AUM by around 11% during the year 2002, UTI on the contrary has lost more than 11% in
AUM. The private sector mutual funds have benefited the most from the debacle ofUS-64 of
UTI. The AUM of this sector grew by around- 60% for the year ending March 2002.

TYPES
I Open-Ended - This scheme allows investors to buy or sell units at any point in time. This does
not have a fixed maturity date.

1. Debt/ Income - In a debt/income scheme, a major part of the investable fund are channelized
towards debentures, government securities, and other debt instruments. Although capital
appreciation is low (compared to the equity mutual funds), this is a relatively low risk-low
return investment avenue which is ideal for investors seeing a steady income.
2. Money Market/ Liquid - This is ideal for investors looking to utilize their surplus funds in
short term instruments while awaiting better options. These schemes invest in short-term debt
instruments and seek to provide reasonable returns for the investors.
3. Equity/ Growth - Equities are a popular mutual fund category amongst retail investors.
Although it could be a high-risk investment in the short term, investors can expect capital
appreciation in the long run. If you are at your prime earning stage and looking for long-term
benefits, growth schemes could be an ideal investment.
4. Balanced - This scheme allows investors to enjoy growth and income at regular intervals.
Funds are invested in both equities and fixed income securities; the proportion is
 predetermined and disclosed in the scheme related offer document. These are ideal for the
cautiously aggressive investors.

II Closed-Ended - In India, this type of scheme has a stipulated maturity period and investors
can invest only during the initial launch period known as the NFO (New Fund Offer) period.

1. Capital Protection - The primary objective of this scheme is to safeguard the principal
amount while trying to deliver reasonable returns. These invest in high-quality fixed income
securities with marginal exposure to equities and mature along with the maturity period of the
scheme.

2. Fixed Maturity Plans (FMPs) - FMPs, as the name suggests, are mutual fund schemes with a
defined maturity period. These schemes normally comprise of debt instruments which mature in
line with the maturity of the scheme, thereby earning through the interest component (also called
coupons) of the securities in the portfolio. FMPs are normally passively managed, i.e. there is no
active trading of debt instruments in the portfolio. The expenses which are charged to the
scheme, are hence, generally lower than actively managed schemes.

III. Interval - Operating as a combination of open and closed ended schemes, it allows investors
to trade units at pre-defined intervals.

SCHEMES

Schemes according to Maturity Period: A mutual fund scheme can be classified into open-
ended scheme or close-ended scheme depending on its maturity period.

 Open-ended Fund/ Scheme: An open-ended fund or scheme is one that is available for
subscription and repurchase on a continuous basis. These schemes do not have a fixed
maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV)
related prices which are declared on a daily basis. The key feature of open-end schemes is
liquidity.
 Close-ended Fund/ Scheme: A close-ended fund or scheme has a stipulated maturity
period e.g. 5-7 years. The fund is open for subscription only during a specified period at
the time of launch of the scheme. Investors can invest in the scheme at the time of the
 initial public issue and thereafter they can buy or sell the units of the scheme on the stock
exchanges where the units are listed. In order to provide an exit route to the investors,
some close-ended funds give an option of selling back the units to the mutual fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at
least one of the two exit routes is provided to the investor i.e. either repurchase facility or
through listing on stock exchanges. These mutual funds schemes disclose NAV generally
on weekly basis.
 Growth / Equity Oriented Scheme The aim of growth funds is to provide capital
appreciation over the medium to long- term. Such schemes normally invest a major part
of their corpus in equities. Such funds have comparatively high risks. These schemes
provide different options to the investors like dividend option, capital appreciation, etc.
and the investors may choose an option depending on their preferences. The investors
must indicate the option in the application form. The mutual funds also allow the
investors to change the options at a later date. Growth schemes are good for investors
having a long-term outlook seeking appreciation over a period of time. 
 Income / Debt Oriented Scheme: The aim of income funds is to provide regular and
steady income to investors. Such schemes generally invest in fixed income securities
such as bonds, corporate debentures, Government securities and money market
instruments. Such funds are less risky compared to equity schemes. These funds are not
affected because of fluctuations in equity markets. However, opportunities of capital
appreciation are also limited in such funds. The NAVs of such funds are affected because
of change in interest rates in the country. If the interest rates fall, NAVs of such funds are
likely to increase in the short run and vice versa. However, long term investors may not
bother about these fluctuations. 
 Balanced Fund: The aim of balanced funds is to provide both growth and regular
income as such schemes invest both in equities and fixed income securities in the
proportion indicated in their offer documents. These are appropriate for investors looking
for moderate growth. They generally invest 40-60% in equity and debt instruments.
These funds are also affected because of fluctuations in share prices in the stock markets.
However, NAVs of such funds are likely to be less volatile compared to pure equity
funds.
 Money Market or Liquid Fund: These funds are also income funds and their aim is to
provide easy liquidity, preservation of capital and moderate income. These schemes
invest exclusively in safer short-term instruments such as treasury bills, certificates of
deposit, commercial paper and inter-bank call money, government securities, etc. Returns
on these schemes fluctuate much less compared to other funds. These funds are
appropriate for corporate and individual investors as a means to park their surplus funds
for short periods.
 Gilt Fund: These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due to change in
interest rates and other economic factors as is the case with income or debt oriented
schemes.
 Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in
the same weightage comprising of an index. NAVs of such schemes would rise or fall in
accordance with the rise or fall in the index, though not exactly by the same percentage
due to some factors known as "tracking error" in technical terms. Necessary disclosures
in this regard are made in the offer document of the mutual fund scheme.

Advantages

 Diversification: A single mutual fund can hold securities from hundreds or even
thousands of issuers. This diversification considerably reduces the risk of a serious
monetary loss due to problems in a particular company or industry.
 Affordability: You can begin buying units or shares with a relatively small amount of
money (e.g., $500 for the initial purchase). Some mutual funds also permits you to buy
more units on a regular basis with even smaller installments (e.g., $50 per month).

 Professional Management: Many investors do not have the time or expertise to manage

their personal investments every day, to efficiently reinvest interest or dividend income,
or to investigate the thousands of securities available in the financial markets. Mutual
 funds are managed by professionals who are experienced in investing money and who
have the education, skills and resources to research diverse investment opportunities.
 Liquidity: Units or shares in a mutual fund can be bought and sold any business day (that
the market is open), thus, providing investors with easy access to their money.
 Flexibility: Many mutual fund companies manage several different funds (e.g., money
market, fixed-income, growth, balanced, sector, index and global funds) and allow you to
switch between these funds at little or no charge. This enables you to change your
portfolio balance as and when your personal needs, financial goals or market conditions
change.

Disadvantages:

 When you invest in a mutual fund you place your money in the hands of a professional
manager. The return on your investment depends heavily on that manager’s skill and
judgment.
 Research has shown that few portfolio managers are able to out-perform the market.
Check the fund manager’s track record over a period of time when selecting a fund.
 Fees for fund management services and various administrative and sales costs can reduce
the return on your investment. These are charged, in almost all cases, whether the fund
performs well or not.
 Redeeming your mutual fund investment in the short-term could significantly impact
your return due to sales commissions and redemption fees.

MUTUAL FUNDS: THE COST

The costs involved with purchasing a mutual fund are not always as straightforward as buying a
share of stock. To buy stock, you simply pay your broker the agreed upon a. Mutual funds may
also involve a broker fee, but since these are professionally managed funds, there are other
expenses involved. The fees involved vary widely across the spectrum of mutual funds, and are
one of the biggest drawbacks to these kinds of investments. Sometimes fees are hidden or
obscured with complex language, and critics say often the average investor does not understand
everything that he or she is paying for. Mutual fund prospectuses are required to spell out their
fee schedule in one or more tables that must be updated each year.

Mutual fund fees can be broken down into two broad categories:

1. Ongoing annual fees to keep you invested in the fund.

2. Transaction fees paid when you buy or sell shares in a fund (also known as loads).

The Expense Ratio

The ongoing expenses of a mutual fund are often summarized by the expense ratio. This is
sometimes referred to as the management expense ratio (MER). These expenses are typically
paid for out of fund assets and not billed to investors directly – but by reducing the returns that
would’ve been received on those assets, fund investors still pay indirectly. These fees appear on
the prospectus under the heading “Annual Fund Operating Expenses.” The expense ratio varies
from fund to fund, but is typically composed of the following fees:

• Hiring Costs – Also known as the management fee, this cost is usually between 0.5% and 2%
of assets on average. While this may sound minimal, this fee is responsible for producing mutual
fund managers who remain among the nation’s top earners. Think about it for a second: 1% of
250 million (which is a small mutual fund) is $2.5 million a year for the portfolio manager! It's
true that paying managers is a necessary fee for the service they provide, but these fees are paid
regardless of the performance of the manager. Do high fees mean that a particular fund is high
quality or generates above average returns? Not quite. In fact, research has shown repeatedly that
portfolio managers simply aren’t able to beat the market on a regular basis – especially after
taking fees into account that drag down the investors’ returns. The SEC even states on its
website: "Higher expense funds do not, on average, perform better than lower expense funds."

• Distribution and Service (12b-1) Fees – The last part of the ongoing expense ratio (in the
United States) is known as the 12b-1 Fee. This expense goes toward paying brokerage
commissions and toward advertising and promoting the fund. When a portfolio manager buys or
sells holdings in the mutual fund, they incur transaction costs that are passed on to investors.
Funds that buy and sell frequently (that is, have a high turnover ratio) can rack up these fees
much more quickly than a less active fund. 12b-1 fees also cover marketing for the fund. That's
right, if you invest in a fund with a 12b-1 fee, you are paying for the fund to run commercials
and sell itself! According to the SEC, the size of 12b-1 fees that funds may pay is not limited in
general. But under FINRA rules, 12b-1 fees that are used to pay marketing and distribution
expenses (as opposed to shareholder service expenses) cannot exceed 0.75 percent of a fund’s
average net assets per year. “Service fees” fall under 12b-1 and are used for marketing material
or prospectuses sent to potential investors who inquire about the fund. These fees may not
exceed 0.25 percent.

• Account Fees – Account fees are maintenance fees usually charged on small shareholders of a
fund that fall below some minimum balance, usually a pre-set dollar amount.

• Other Expenses – “Other expenses” is a catchall category that includes anything that doesn’t
fit into the above categories. These may include shareholder service expenses that are not
included in the 12b-1 fees, custodial expenses, record keeping, legal expenses, accounting
expenses, transfer agent expense and other administrative expenses. Some funds are excellent at
minimizing these costs while others are not.

On the whole, expense ratios range from as low as 0.25% (usually for passive index funds) to as
high as 2% or more for active specialty strategies. The average equity mutual fund charges
around 1.3%-1.5%. You'll generally pay more for niche or international funds, which require
more expertise from managers or funds that trade in illiquid markets which imply greater
transaction costs.

Loads and Shareholder Fees

Loads are equivalent to sales commissions; they are fees that a fund uses to compensate brokers
or other marketers for selling you the mutual fund. Shareholder fees cover the other costs
associated with the transaction of buying or selling a mutual fund that are incurred directly by the
fund holder. These fees appear in the prospectus under the heading “Shareholder Fees.”

• Sales Loads – These fees or the broker’s commissions are usually charged either upon
purchase or else upon sale. Front-end loads are the most basic type of load: you pay the fee when
you purchase the fund. If you invest $1,000 in a mutual fund with a 5% front-end load, $50 will
pay for the sales charge, and $950 will be invested in the fund. Back-end loads (also known as
deferred sales charges) are paid upon selling fund shares and can be a bit more complicated. In
such a load structure, you pay the back-end load if you sell a fund within a certain time frame. A
typical example is a 6% back-end load that decreases to 0% in the seventh year. The load is 6%
if you sell in the first year, 5% in the second year, etc. If you don't sell the mutual fund until the
seventh year, you don't have to pay the back-end load at all.

Many mutual funds carry some combination of a front- and back-end load. Still other funds don’t
charge any up-front sales costs (or back-end) and are referred to as no-load mutual funds. A no-
load fund sells its shares without a commission or sales charge. Some in the mutual fund industry
will tell you that the load is the fee that pays for the service of a broker choosing the correct fund
for you. According to this argument, your returns ought to be higher because the professional
advice put you into a "better" fund. There is little to no evidence that shows a correlation
between load funds and superior performance. In fact, when you take these fees into account, the
average load fund performs worse than an otherwise equivalent no-load fund. Also, no-load fund
may charge fees that are not sales loads. For example, a no-load fund is permitted to charge
purchase fees, redemption fees, exchange fees, and account fees, none of which is considered to
be a "sales load."

• Redemption Fee – Redemption fees are charged by some mutual funds when investors sell
their fund shares (i.e. “redeem” them). This can be in addition to any back-end sales load, and is
considered a separate fee by regulators. Unlike a sales load, which is used to pay brokers, a
redemption fee is used to cover costs related with a shareholder’s redemption transaction and is
paid directly to the fund. The SEC limits redemption fees to 2%. Closely related are exchange
fees that some funds charge shareholder if they transfer to another fund within the same fund
family.

• Purchase Fee – This fee, like the redemption fee, it is a charge paid up front by an investor to
the fund itself to cover the cost of acquiring fund shares, and is not paid to a broker. It is
therefore not considered a sales load.
MUTUAL FUNDS: PICKING A MUTUAL FUND

With so many mutual funds to choose from, it may seem dizzying trying to select some to add to
your investment portfolio. While everybody’s individual situation will vary, it is always a good
idea to choose funds that reflect an investment strategy that you understand and that is
compatible with the rest of your portfolio, for example one that adds diversification. It is also
smart to pay attention to the fees and loads that should be paid as well as the fund’s overall
quality. Morningstar is a good resource for evaluating costs as, historical performance, strategy,
and overall quality.

Identifying Goals and Risk Tolerance

Before acquiring shares in any fund, you need to think about why you are investing. What are
your financial goals? Are long-term capital gains desired, or is a current income preferred? Will
the money be used to pay for college expenses, or to supplement a retirement that is decades
away? Identifying a goal is important because it will help you hone in on the right fund for the
task.

For example, for preserving cash for short-term goals, money market funds may be the right
choice, For goals that are just a few years into the future, bond funds may be appropriate. For
long-term goals, stocks funds may be the way to go.

Of course, you must also consider the issue of risk tolerance. Can you afford and accept dramatic
swings in portfolio value? If so, you may prefer stock funds over bond funds. Or is a more
conservative investment warranted? In that case, bond funds may be the way to go. Money
market funds, which are often equated with cash holdings, are the most risk averse choice.

The next question to consider include "are you more concerned about trying to outperform your
fund's benchmark index or are you more concerned about the cost of your investments?" If the
answer is "cost," index funds are likely the right choice for you.

Additional questions, to consider include how much money you have to invest, whether you
should invest in a lump sum or a little bit over time and whether taxes are a concern for you.
(Learn how to invest with a small amount of cash in How To Invest On A Shoestring Budget.)
Finding Funds
Finding a fund has been made easy with the advent of the internet. Nearly all mutual fund
companies have their own web sites, so a simple Google search for a particular fund or fund
family will turn up the right results. If you don't have a specific fund company already in mind,
you can run a search for terms like "no-load small cap fund" or large-cap value fund."

If you are interested in researching different possibilities, some online services can help.

 Morningstar and Kiplinger are two notable resources that carry a wide range of up-to-
date information, pricing, and research. The Mutual Fund Education Alliance (MFEA) is
the not-for-profit trade association of the no-load mutual fund industry, which has an easy
to use tool for searching for no-load funds. In addition to these comprehensive sources,
there are some niche sites to help find the right funds for you.
 Lipper Leaders is a Thomson Reuters company that evaluate funds based on five metrics,
called "Leaders:” total historical return; consistency of returns; preservation of capital;
expenses; and tax efficiency.
 MAX Funds has a trademarked “Fund-O-Matic Fund Screener” which makes finding
funds easy for people “without an advanced finance degree.”
 Fund Reveal use past returns but just not total returns; they use "average daily returns" to
help determine the fund management's capability or skill. This may help an investor dig
deeper to help predict future returns that can be impacted by the daily decisions made by
fund managers.

Many brokerages also offer mutual fund guides and research to their clients.

Buying into a Fund

Mutual funds can be purchased through a broker, banks, insurance agents, or financial planners,
who will usually receive a commission fee (load). Others can be bought straight from the fund
company – in fact, many no-load funds can be purchased directly. Some no-load funds are also
offered through brokers.
Mutual funds can often be purchased through low- or no-transaction fee programs that offer from
among many funds from various companies. Sometimes referred to as "fund supermarkets,"
these programs let you buy funds from many different companies and provide consolidated
record keeping that includes all purchases made through the supermarket, even if they are from
different fund families. Popular examples of such programs are Schwab's OneSource, Vanguard's
Fund Access, and Fidelity's Funds Network. Many large brokerages have similar offerings.

The Net Asset Value

When you have found the fund or funds that you want to buy, you should pay attention to the
price. Mutual fund shares are priced via their net asset value (NAV), which is a fund's assets
minus liabilities, or the value of a mutual fund. NAV per share is the value of one share in the
mutual fund, and it is the number that is quoted online or in newspapers’ financial sections. You
can think of NAV per share as the share price of a mutual fund. It fluctuates daily as the value of
individual fund holdings move and as the number of fund shares outstanding change.

When you buy mutual fund shares shares, you pay the current NAV per share plus any sales
front-end load. When you sell your shares, the fund will pay you NAV less any back-end load.
Many mutual funds are priced on the weighted average NAV of a given trading day, and all
transactions for that date will take place at that average.

MUTUAL FUNDS: HOW TO READ A MUTUAL FUND TABLE

What Do You Need?

The wealth of information available can be daunting. What do you really need to know? Where
can you go to find it? How much detail is too much? The answers to these questions largely
depend on how you plan to invest. If you are looking to day trade, for example, information
about daily pricing trends may be critical to your efforts. If you plan to buy and hold for decades,
long-term performance information, fund expense ratios, and the management team's history are
probably enough. Fund fact sheets and a copy of the fund's prospectus are available on most fund
company websites. These documents generally provide all the information long-term investors
require to make decisions.
Mutual fund data is easy to find and easy to read. The most common method of accessing the
information used to be via a mutual fund table in the newspaper, but now this information is
more commonly found online. (For more on finding the right information, check out Data
Mining For Investors.)

Online
Websites provide significantly more data about a given mutual fund than a fund table does.
Yahoo Finance, MSN Money and all of the major mutual fund companies provide robust
websites filled with fund information.

The following basic details are usually provided: fund name, net asset value, trade time (provides
date for last price), price change, previous close price, year-to-date return, net assets, and yield.
With a just a few clicks of the mouse you can also view historical prices, headlines news, fund
holdings, Morningstar ratings and more. (Learn how to use this data in Analyzing Mutual Funds
For Maximum Return.)

Newspaper Fund Table

By providing key data points, mutual fund tables give an overview of a mutual fund's
performance for the past 12 months in relation to its current price. They also provide insight into
how the fund's price per share has changed over the course of the most recent week. 

However, with the high prices of newsprint, declining readership, and increasing adoption of
technology, many newspapers are cutting back on the space allocated to mutual fund tables. This
is particularly true where smaller and less popular funds are concerned. Going online or calling
the fund company directly may be the only way to get information about these products.

RESEARCH METHOLOGY
Research Methodology, in a way, is a written strategy for conducting research. Research
Methodology is multi-dimensional. It takes into consideration not only the research methods but
also considers the logic behind the methods used and their relevance in the context of the study
and explains further why only a particular method or technique has been used. It also helps to
understand the assumption behind various techniques and criteria by which the researcher can
decide that certain techniques can be applied to certain problems and others cannot be. Thus, in
order to solve a research problem, it is requisite to design a research methodology for the
problem as the same may differ from problem to problem.
Research methodology used in the present study is discussed in this chapter. The present chapter
covers the statement of the problem, objectives of the study, hypotheses of the study, scope of
the study, research design, sample profile, data collection and data analysis tools, organization of
the study, significance of the study and limitations of the study.

RESEARCH DESIGN
The present research study is exploratory-cum-descriptive in nature. Exploratory research is
research conducted for a problem that has not been clearly defined. It often conducted to make
conceptual distinctions or posit an explanatory relationship. Exploratory research helps in
determining the best research design, data collection method and selection of subjects.
Exploratory research often relies on secondary research such as reviewing available literature
and/or data, or qualitative approaches. When the purpose of research is to gain familiarity with a
phenomenon or acquire new insight into it in order to formulate a more precise problem or
develop hypothesis, the exploratory studies is carried out. Hence, a need for an exploratory
research is felt to gain experience that will be helpful in formulative relevant hypothesis for more
definite investigation.
Descriptive research is used to describe characteristics of a population or phenomenon being
studied. It does not answer questions about how/ when/ why the characteristics occurred. Rather
it addresses various characteristics of the targeted population or situation being studied. The
characteristics used to describe the situation or population is usually some kind of categorical
scheme also known as descriptive categories. The description is used for frequencies, averages
and other statistical calculations. Often the best approach, prior to writing descriptive research, is
to conduct a survey investigation. Qualitative research often has the aim of description and
researchers may follow-up with examinations of observations and the implications of the
findings.

SAMPLE DESIGN
In this research study, non-probability convenience sampling has been used. A sample of 200
respondents has been used for collecting the response through well-structured questionnaire
(Annexure). The sample selected for this study includes businessperson, serviceman and
professional persons of Hisar district.
Data collection is the process of gathering and measuring information on targeted variables in an
established systematic fashion, which then enables one to answer relevant questions and evaluate
outcomes. Data collection is a component of research in all fields of study
including physical and social sciences, humanities, and business. While methods vary by
discipline, the emphasis on ensuring accurate and honest collection remains the same. The goal
for all data collection is to capture quality evidence that allows analysis to lead to the formulation
of convincing and credible answers to the questions that have been posed.
Primary Data
For studying the preference of mutual funds, primary data has been collected with the help of the
questionnaire. The sample is a convenience sample and constitutes 200 respondents. People from
different groups are included in the sample and categorized into male and female, different age
groups, different occupations with different income levels. The sample size of 200 is considered
because of the primary data is collected through direct interaction with the investors in the
offices of registrars.
Secondary data
The study has included scheme wise performance appraisal of various mutual funds. Data
pertaining to the performance of the funds were drawn from secondary sources through data
published by AMFI, mutualfundsindia.com,money control.com and
BSE.com,valueresearch.com, ici.org, mutual funds books, journals and websites of other mutual
funds.
Data Analysis & Interpretations Data collected is analysed with the help of table and inputs.

123
CHAPTER 5
DATA ANALYSIS AND INTERPRETATION
This chapter presents the findings and results of the analysis for meeting the objectives
of the study. Mutual fund performance has been investigated through Data Envelopment
Analysis (DEA) and logistic regression while investors’ behaviour has been examined
through ANOVA, Factor analysis, mean and ranking methods. Interpretation of the findings
and results of analysis have been discussed in detail in the present chapter.
5.1 PERFORMANCE OF MUTUAL FUNDS - DATA ENVELOPMENT
ANALYSIS (DEA)
Performance of the mutual fund schemes in terms of their efficiency has been
analysed by employing Data Envelopment analysis (DEA) technique in which the researcher
has used different attributes of mutual funds viz. LOAD, EXPENSE, RISK (β) and MINII as
input and SHARPE and ALPHA as output variables. In DEA, an input oriented model of
Variable Returns to Scale (VRS) has been employed. In this model, the researcher wants the
maximum proportional reduction in inputs that allows maintaining the current level of
outputs. This amount of input reduction is necessary for a DEA inefficient mutual fund
scheme to become DEA efficient. The input efficiency measure indicates whether the
investment had been using excessive inputs from an input minimization orientation for the
outputs achieved on the mutual fund schemes. To analyse the performance of mutual funds
through DEA, standard evaluation system, 2.1 versions has been used and all the necessary
results have been generated as efficiency scores, efficient peers (i.e., reference set) with
corresponding weights and target values (i.e., virtual inputs) for all the mutual fund schemes.
Five DEA runs have been performed for evaluation of performance of mutual funds in
terms of their efficiency. DEA Run 1 has been executed to indicate the efficiency for all the
119 sampled mutual fund schemes. To measure the performance in terms of efficiency of 48
equity oriented schemes, DEA run 2 has been carried out. For measuring the performance
efficiency of 30 income mutual fund schemes, DEA run 3 has been carried out. DEA run 4
and 5 have been performed for examining the efficiency of 23 balanced and 18 ELSS mutual
124
fund schemes respectively. The findings and their interpretation for each of the DEA run has
been discussed in detail in this section.
5.1.1 DEA RUN 1
DEA run 1 has been performed on all 119 sampled mutual fund schemes with
attributes like LOAD, EXPENSE, RISK (β) and MINII as input variables and SHARPE and
ALPHA as output variables. An efficiency score of one indicates that the scheme is efficient
in relation to other schemes being evaluated and lies on the efficient frontier. A score of less
than one indicates that the scheme is inefficient with respect to other schemes and lies far
from the efficient frontier. The farther from 1 the score is, less efficient is the scheme and lies
far off from the efficient frontier. After performing the DEA Run 1 on 119 mutual fund
schemes, 26 schemes are found to be DEA efficient and lie on the efficient frontier. These
schemes do not require a reduction in input attributes as they are deemed to be best as
compared to all others in the sample. Rest 93 mutual fund schemes are inefficient and lie
below the efficient frontier.
some of the mutual fund schemes have their efficiency score near to 1.00 as Birla Sun
Life Savings Fund-Retail Plan Growth (MF17) possesses efficiency score of 0.9964, DWS
Premier Bond Fund-Regular Plan Growth (MF29) possess an efficiency score of 0.9056,
HDFC Cash Management Fund-Savings Plan Growth (MF43) has an efficiency score of
0.9580. Kotak Flexi Debt-Regular Plan Growth (MF77) possesses an efficiency score as
0.9768 and LIC Nomura MF Bond Fund-Growth (MF81) has an efficiency score of 0.9213.
According to McMullen and Strong (1998), DMUs with efficiency score very near to 1.00 are
referred to as “near efficient” because they need only a minor adjustments in their inputs for
becoming efficient [114]. Therefore, MF17, MF29, MF43, MF77 and MF81 are the near
efficient mutual fund schemes.
On the other hand, some other mutual fund schemes as BNP Paribas Dividend Yield
Fund-Growth (MF1), Baroda Pioneer Balance Fund-Dividend (MF5), BNP Paribas Equity
Fund-Growth (MF2), Birla Sun Life Midcap Fund-Dividend (MF14) and LIC Nomura MF
Floater MIP-Growth (MF82) with an efficiency score of 0.4019, 0.5779, 0.4080, 0.3948 and
0.4908 respectively are much farther from being efficient and require huge changes in their
inputs to become efficient. In this way, 31 (26 percent) schemes are efficient or near efficient
and 88 (74 percent) are inefficient mutual fund schemes. Table 5.1 and table 5.2 lists the
125
efficient, near efficient and inefficient mutual fund schemes respectively which have been
found through DEA run 1.
Frequency distribution of the efficiency scores in intervals of 0.1 has been depicted in
table 5.3. From this table it can be seen that no mutual fund scheme possess the efficiency
score less than 0.30. Efficiency score of 13 mutual fund schemes (i.e., 10.92 percent) lie from
0.30 to 0.40. A majority of inefficient mutual fund schemes as 59 (i.e., 49.58 percent of the
total mutual fund schemes under study) possess the efficiency score between 0.40 and 0.50. 3
mutual fund schemes have been found possessing their efficiency score from 0.5 to 0.6. 3
mutual fund schemes have efficiency score between 0.6 and 0.7. Researcher has found 6
mutual fund schemes with efficiency score from 0.70 to 0.8. 4 mutual funds possess
efficiency score between 0.8 and 0.9. 31 mutual fund schemes possess the efficiency scores
between 0.9 and 1.0. Out of these 26 schemes are efficient with efficiency score as 1 and 5
schemes are near efficient with efficiency score between 0.9 and 1.0.
Table 5.1: Efficient and Near Efficient Mutual Fund Schemes (MFs) through DEA run 1
S. No. MFs Efficiency Score S. No. MFs Efficiency Score
1 MF3 1.00 17 MF78 1.00
2 MF4 1.00 18 MF79 1.00
3 MF22 1.00 19 MF80 1.00
4 MF23 1.00 20 MF84 1.00
5 MF31 1.00 21 MF89 1.00
6 MF34 1.00 22 MF94 1.00
7 MF35 1.00 23 MF101 1.00
8 MF39 1.00 24 MF108 1.00
9 MF46 1.00 25 MF111 1.00
10 MF49 1.00 26 MF112 1.00
11 MF50 1.00 27 MF17 0.9964
12 MF53 1.00 28 MF29 0.9056
13 MF58 1.00 29 MF43 0.9580
14 MF63 1.00 30 MF77 0.9768
15 MF71 1.00 31 MF81 0.9213
16 MF72 1.00
Note: Sample- 119 Mutual Fund Schemes
126
Table 5.2: Inefficient Mutual Fund Schemes (MFs) with score and peer group through DEA Run 1
MFs Efficiency Score Efficient Peers & Weights
MF1 0.4019 MF50(0.1964) MF84(0.0025) MF101 (0.5994) MF111(0.2017)
MF2 0.4080 MF50(0.1770) MF84(0.0012) MF101(0.6138) MF111(0.2079)
MF5 0.5779 MF50(0.3151) MF101(0.4935) MF111(0.1914)
MF6 0.4123 MF50(0.2313) MF101(0.6247) MF111(0.1441)
MF7 0.8454 MF46(0.6523) MF49 (0.1931) MF84 (0.0002) MF108(0.0681) MF111 (0.0864)
MF8 0.4272 MF50 (0.1947) MF84 (0.0066) MF101(0.6426) MF111(0.1561)
MF9 0.4579 MF50 (0.2843) MF101(0.7157)
MF10 0.4460 MF50 (0.0300) MF101(0.6920) MF111(0.2780)
MF11 0.4460 MF50 (0.0300) MF101(0.6920) MF111(0.2780)
MF12 0.4138 MF50 (0.1665) MF84 (0.0067) MF101(0.6154) MF111 (0.2113)
MF13 0.4138 MF50 (0.1666) MF84 (0.0068) MF101(0.6154) MF111 (0.2113)
MF14 0.3948 MF50 (0.4104) MF101 (0.5896)
MF15 0.4103 MF50 (0.3174) MF84 (0.0090) MF101(0.6045) MF111 (0.0691)
MF16 0.4762 MF46 (0.0776) MF101(0.6128) MF111(0.3096)
MF17 0.9964 MF84 (0.0897) MF108(0.8445) MF111(0.0657)
MF18 0.4066 MF50 (0.2171) MF84 (0.0001) MF101(0.6131) MF111 (0.1697)
MF19 0.4171 MF50 (0.1491) MF84 (0.0047) MF101(0.6257) MF111 (0.2205)
MF20 0.5521 MF46 (0.2073) MF84 (0.0130) MF101(0.5077) MF111 (0.2720)
MF21 0.4636 MF50 (0.2067) MF84 (0.0038) MF101(0.7203) MF111 (0.0692)
MF24 0.4975 MF50 (0.0047) MF84 (0.0001) MF101(0.7947) MF111 (0.2005)
MF25 0.4273 MF50 (0.2269) MF84 (0.0000) MF101(0.6546) MF111 (0.1184)
MF26 0.4398 MF50 (0.1473) MF84 (0.0038) MF101(0.6727) MF111 (0.1762)
MF27 0.4340 MF50 (0.2536) MF84 (0.0028) MF101(0.6630) MF111 (0.0806)
MF28 0.8209 MF46 (0.7052) MF58 (0.0958) MF111(0.1990)
127
MFs Efficiency Score Efficient Peers & Weights
MF29 0.9056 MF58 (0.8951) MF111(0.1049)
MF30 0.7010 MF46 (0.6483) MF101(0.0352) MF111(0.3166)
MF32 0.4336 MF50 (0.1206) MF84 (0.0028) MF101(0.6621) MF111 (0.2145)
MF33 0.4336 MF50 (0.1206) MF84 (0.0028) MF101(0.6621) MF111 (0.2145)
MF36 0.4472 MF50 (0.1826) MF84 (0.0062) MF101(0.6834) MF111 (0.1279)
MF37 0.4359 MF50 (0.2506) MF84 (0.0048) MF101(0.6631) MF111 (0.0815)
MF38 0.4081 MF50 (0.3603) MF84 (0.0045) MF101(0.6082) MF111 (0.0271)
MF40 0.4336 MF50 (0.1323) MF84 (0.0056) MF101(0.6571) MF111 (0.2050)
MF41 0.3965 MF50 (0.3602) MF101(0.5931) MF111(0.0467)
MF42 0.4152 MF50 (0.2388) MF84 (0.0064) MF101(0.6187) MF111 (0.1361)
MF43 0.9580 MF80 (0.3271) MF108(0.6729)
MF44 0.4483 MF46 (0.0173) MF84 (0.0008) MF101(0.6640) MF111 (0.3179)
MF45 0.4387 MF50 (0.0960) MF101(0.6774) MF111(0.2266)
MF47 0.4108 MF50 (0.3202) MF101(0.6215) MF111(0.0583)
MF48 0.4338 MF50 (0.1727) MF84 (0.0075) MF101(0.6541) MF111 (0.1657)
MF51 0.4779 MF50 (0.0001) MF84 (0.0004) MF101(0.7550) MF111 (0.2445)
MF52 0.4496 MF50 (0.1781) MF84 (0.0075) MF101(0.6858) MF111 (0.1286)
MF54 0.7493 MF58 (0.7493) MF80 (0.1703) MF108(0.0804)
MF55 0.4578 MF50 (0.0176) MF101(0.7156) MF111(0.2668)
MF56 0.4229 MF50 (0.1468) MF84 (0.0019) MF101(0.6423) MF111 (0.2089)
MF57 0.8263 MF46 (0.2574) MF58 (0.5496) MF111(0.1930)
MF59 0.3989 MF50 (0.3917) MF101(0.5978) MF111(0.0105)
MF60 0.4478 MF50 (0.1577) MF84 (0.0067) MF101(0.6836) MF111 (0.1520)
MF61 0.4814 MF50 (0.2134) MF84 (0.0039) MF101(0.7558) MF111 (0.0269)
MF62 0.4562 MF50 (0.0340) MF101(0.7124) MF111(0.2536)
128
MFs Efficiency Score Efficient Peers & Weights
MF64 0.4261 MF50 (0.1198) MF84(0.004) MF101(0.6449) MF111(0.2312)
MF65 0.7354 MF46 (0.7030) MF101(0.0053) MF111(0.2917)
MF66 0.4053 MF50(0.1696) MF84(0.0012) MF101(0.6084) MF111(0.2209)
MF67 0.3997 MF50(0.2149) MF84(0.0033) MF101(0.5933) MF111(0.1885)
MF68 0.3943 MF50(0.2580) MF84(0.0045) MF101(0.5806) MF111(0.1570)
MF69 0.4013 MF50(0.2114) MF84(0.0074) MF101(0.5892) MF111(0.1920)
MF70 0.7649 MF46(0.7070) MF101(0.0573) MF111(0.2357)
MF73 0.3964 MF50(0.2329) MF101(0.5928) MF111(0.1743)
MF74 0.6163 MF46(0.1543) MF101(0.7547) MF111(0.0910)
MF75 0.3939 MF50(0.2733) MF101(0.5878) MF111(0.1390)
MF76 0.3943 MF50(0.2711) MF84(0.0003) MF101(0.5880) MF111(0.14068)
MF77 0.9768 MF80(0.9269) MF101(0.0689) MF108(0.0043)
MF81 0.9213 MF46 (0.2327) MF58(0.6799) MF111(0.0874)
MF82 0.4908 MF50(0.0034) MF101(0.7816) MF111(0.2151)
MF83 0.4010 MF50(0.2105) MF84(0.0006) MF101(0.6008) MF111(0.1881)
MF85 0.3933 MF50(0.2969) MF101(0.5866) MF111(0.1166)
MF86 0.3979 MF50(0.2656) MF84(0.0015) MF101(0.5930) MF111(0.1398)
MF87 0.4045 MF50(0.2624) MF84(0.0005) MF101(0.6081) MF111(0.1290)
MF88 0.4140 MF50(0.2038) MF84(0.0060) MF101(0.6172) MF111(0.1730)
MF90 0.4498 MF50(0.1774) MF84(0.0085) MF101(0.6842) MF111(0.1299)
MF91 0.4252 MF50(0.3331) MF84(0.0029) MF101(0.6452) MF111(0.0188)
MF92 0.4194 MF50(0.3496) MF84(0.0013) MF101(0.6365) MF111(0.0126)
MF93 0.4337 MF50(0.2662) MF84(0.0085) MF101(0.6521) MF111(0.0733)
MF95 0.4054 MF50(0.3042) MF101(0.611) MF111(0.0850)
MF96 0.4091 MF50(0.2800) MF84(0.0013) MF101(0.6160) MF111(0.1028)
129
MFs Efficiency Score Efficient Peers & Weights
MF97 0.7664 MF50(0.5167) MF101(0.1066) MF111(0.3767)
MF98 0.5962 MF50(0.6630) MF101(0.2769) MF111(0.0601)
MF99 0.4675 MF50(0.2426) MF84(0.0031) MF101(0.7295) MF111(0.0249)
MF100 0.7850 MF50(0.5378) MF101(0.1140) MF111(0.3482)
MF102 0.4180 MF50(0.2350) MF84(0.0025) MF101(0.6315) MF111(0.1310)
MF103 0.4085 MF50(0.1985) MF101(0.6171) MF111(0.1844)
MF104 0.4167 MF50(0.1458) MF84(0.0040) MF101(0.6262) MF111(0.2240)
MF105 0.3970 MF50(0.2724) MF84(0.0003) MF101(0.5934) MF111(0.1339)
MF106 0.4146 MF50(0.1555) MF84(0.0074) MF101(0.6159) MF111(0.2212)
MF107 0.4007 MF50(0.2808) MF84(0.0002) MF101(0.6009) MF111(0.1181)
MF109 0.4204 MF50(0.2762) MF84(0.0027) MF101(0.6360) MF111(0.0851)
MF110 0.3986 MF50(0.2420) MF84(0.0063) MF101(0.5858) MF111(0.1659)
MF113 0.6624 MF50(0.3420) MF101(0.3299) MF111(0.3281)
MF114 0.6560 MF50(0.3414) MF101(0.3248) MF111(0.3338)
MF115 0.8527 MF50(0.5323) MF101(0.1411) MF111(0.3266)
MF116 0.3921 MF50(0.2979) MF84(0.0004) MF101(0.5833) MF111(0.1183)
MF117 0.4110 MF50(0.1730) MF84(0.0085) MF101(0.6066) MF111(0.2119)
MF118 0.4727 MF50(0.2498) MF101(0.7453) MF111(0.0049)
MF119 0.4752 MF50(0.2341) MF101(0.7504) MF111(0.0156)
Note: Sample- 119 Mutual Fund Schemes
130
Table 5.3: Efficiency Score Frequencies of DEA run 1
Score frequencies No. of Schemes % in Sample
up to 0.10 0 0
0.10+ to 0.20 0 0
0.20+ to 0.30 0 0
0.30+ to 0.40 13 10.92
0.40+ to 0.50 59 49.58
0.50+ to 0.60 3 2.52
0.60+ to 0.70 3 2.52
0.70+ to 0.80 6 5.04
0.80+ to 0.90 4 3.36
0.90+ to 1.00 31 26.05
Note: Sample: 119 Mutual Fund Schemes
Peer Group and Virtual Inputs
After identifying the efficient and inefficient mutual fund schemes, the next step is to
make improvements in the performance of inefficient mutual fund schemes. In other words,
inefficient mutual fund schemes must gain efficiency by moving to the efficient frontier. To
gain efficiency, reductions are required in the inputs that can be achieved by following some
efficient mutual fund units in a particular weight. That is, for each inefficient mutual fund
scheme, there exists a set of efficient scheme called reference set or efficient peers group by
following which inefficient scheme might gain efficiency level. The peer mutual fund
schemes acts as role models for the inefficient schemes, as they have achieved 100 percent
efficiency in similar conditions as that of inefficient schemes. The percentage influence of
each peer mutual fund scheme indicates its proportion that is required in linear combination to
form the DEA target values called the virtual inputs.
Efficient peer group set with their corresponding weight i.e., lambda values for all the
inefficient mutual fund schemes have been provided in table 5.2. From this table we can see
that for the inefficient mutual fund scheme, BNP Paribas Dividend Yield Fund-Growth
(MF1), efficient peers are HDFC Long Term Advantage Fund-Growth (MF50), Principal
Debt Opportunities Fund Conservative Plan-Regular Plan Growth (MF84), Sahara Income
Fund-Growth (MF101) and Tata Tax Saving Fund-Growth (MF111) with their corresponding
weights as 0.1964, 0.0025, 0.5994 and 0.2017 respectively. Therefore, in order to gain
efficiency, MF1 should follow 19.64 percent of MF50, 0.25 percent of MF84, 59.94 percent
131
of MF101 and 20.17 percent of MF111. Each efficient mutual fund scheme such as MF3 and
MF4 has an efficiency score of 1.00 and do not require following the input pattern of any
other mutual fund scheme. Also, for each inefficient mutual fund scheme, the sum of weights
of the entire efficient peer adds up to one. In this way, the efficient peers with corresponding
weights have been found out for all the inefficient mutual fund schemes.
From the efficient peer group and their corresponding weights, the necessary reduction
required in the inputs of all the inefficient mutual fund schemes for achieving efficiency has
been found out. These inputs values to be achieved after the necessary reduction in inputs are
known as virtual inputs or target values. That is, an inefficient mutual fund scheme can
achieve efficiency by acquiring a particular set of inputs, called the virtual input set or target
values. The virtual inputs or target values for all the 93 inefficient mutual fund schemes have
been depicted in table 5.4. Explanation for the calculation of virtual inputs from efficient peer
group has been explained below with the help of inefficient mutual fund scheme, MF1.
Table 5.4: Virtual Inputs/ Target Values through DEA Run 1
MFs LOAD (%) EXPENSE (%) RISK, β (%) MINII (%)
MF1 0.00 (100) 1 (59.81) 0.36 (59.81) 2009.51 (59.81)
MF2 0.00 (100) 0.99 (59.2) 0.31 (59.2) 2040.19 (59.2)
MF5 0.00 (100) 1.13 (42.21) 0.42 (42.21) 1733.74 (42.21)
MF6 0.00 (100) 0.93 (58.77) 0.33 (58.77) 2061.71 (58.77)
MF7 0.85 (15.46) 0.68 (15.46) 0.03 (15.46) 4952.01 (99.01)
MF8 0.00 (100) 0.91 (57.28) 0.49 (57.28) 2136.19 (57.28)
MF9 0.00 (100) 0.69 (54.21) 0.39 (57.74) 2289.31 (54.21)
MF10 0.00 (100) 0.96 (55.4) 0.11 (55.4) 2229.93 (55.4)
MF11 0.00 (100) 0.96 (55.4) 0.11 (55.4) 2229.93 (55.4)
MF12 0.00 (100) 0.99 (58.62) 0.46 (58.62) 2068.91 (58.62)
MF13 0.00 (100) 0.99 (58.62) 0.46 (58.62) 2068.88 (58.62)
MF14 0.00 (100) 0.84 (60.52) 0.53 (61.3) 1973.92 (60.52)
MF15 0.00 (100) 0.87 (58.97) 0.69 (58.97) 2051.74 (58.97)
MF16 0.08 (92.24) 0.98 (52.38) 0.07 (52.38) 2381.11 (52.38)
MF17 0.00 (0) 0.5 (0.36) 2.72 (0.36) 8927 (10.73)
MF18 0.00 (100) 0.96 (59.34) 0.32 (59.34) 2033.2 (59.34)
MF19 0.00 (100) 0.99 (58.29) 0.38 (58.29) 2085.47 (58.29)
MF20 0.21 (79.27) 0.88 (44.79) 0.45 (44.79) 2760.44 (44.79)
MF21 0.00 (100) 0.74 (53.64) 0.42 (53.64) 2317.76 (53.64)
MF24 0.00 (100) 0.77 (50.25) 0.08 (50.25) 2487.3 (50.25)
MF25 0.00 (100) 0.87 (57.27) 0.32 (57.27) 2136.64 (57.27)
132
MFs LOAD (%) EXPENSE (%) RISK, β (%) MINII (%)
MF26 0.00 (100) 0.89 (56.02) 0.35 (56.02) 2198.91 (56.02)
MF27 0.00 (100) 0.82 (56.6) 0.44 (56.6) 2170.24 (56.6)
MF28 0.8 (19.9) 0.7 (17.91) 0.03 (17.91) 4104.67 (17.91)
MF29 0.9 (10.49) 1.07 (45.23) 0.03 (9.44) 4527.76 (9.44)
MF30 0.65 (35.17) 0.9 (29.9) 0.04 (29.9) 3505.18 (29.9)
MF32 0.00 (100) 0.94 (56.64) 0.29 (56.64) 2167.89 (56.64)
MF33 0.00 (100) 0.94 (56.64) 0.29 (56.64) 2167.88 (56.64)
MF36 0.00 (100) 0.83 (55.28) 0.46 (55.28) 2236.17 (55.28)
MF37 0.00 (100) 0.82 (56.41) 0.49 (56.41) 2179.37 (56.41)
MF38 0.00 (100) 0.84 (59.19) 0.61 (59.19) 2040.67 (59.19)
MF40 0.00 (100) 0.93 (56.64) 0.39 (56.64) 2168.03 (56.64)
MF41 0.00 (100) 0.88 (60.35) 0.47 (60.35) 1982.71 (60.35)
MF42 0.00 (100) 0.92 (58.48) 0.53 (58.48) 2075.8 (58.48)
MF43 0.00 (0) 0.42 (4.2) 0.04 (4.2) 8364.36 (16.36)
MF44 0.02 (98.27) 1.01 (55.17) 0.1 (55.17) 2241.43 (55.17)
MF45 0.00 (100) 0.94 (56.13) 0.18 (56.13) 2193.38 (56.13)
MF47 0.00 (100) 0.85 (58.92) 0.43 (58.92) 2053.82 (58.92)
MF48 0.00 (100) 0.9 (56.62) 0.49 (56.62) 2168.93 (56.62)
MF51 0.00 (100) 0.86 (52.21) 0.09 (52.21) 2389.28 (52.21)
MF52 0.00 (100) 0.83 (55.04) 0.49 (55.04) 2248.15 (55.04)
MF54 0.75 (25.07) 0.8 (25.12) 0.03 (25.07) 5402.05 (94.6)
MF55 0.00 (100) 0.93 (54.22) 0.09 (54.22) 2289.09 (54.22)
MF56 0.00 (100) 0.96 (57.71) 0.29 (57.71) 2114.54 (57.71)
MF57 0.81 (19.3) 1.02 (17.37) 0.03 (17.37) 4131.64 (17.37)
MF59 0.00 (100) 0.84 (60.11) 0.51 (60.11) 1994.48 (60.11)
MF60 0.00 (100) 0.85 (55.22) 0.45 (55.22) 2239.22 (55.22)
MF61 0.00 (100) 0.66 (51.86) 0.43 (51.86) 2406.99 (51.86)
MF62 0.00 (100) 0.92 (54.38) 0.11 (54.38) 2280.96 (54.38)
MF64 0.00 (100) 0.97 (57.39) 0.33 (57.39) 2130.48 (57.39)
MF65 0.7 (29.7) 0.84 (26.46) 0.04 (26.46) 3676.76 (26.46)
MF66 0.00 (100) 1.01 (59.47) 0.3 (59.47) 2026.27 (59.47)
MF67 0.00 (100) 1 (60.03) 0.41 (60.03) 1998.32 (60.03)
MF68 0.00 (100) 0.99 (60.57) 0.49 (60.57) 1971.59 (60.57)
MF69 0.00 (100) 1 (59.87) 0.53 (59.87) 2006.31 (59.87)
MF70 0.71 (29.3) 0.72 (23.51) 0.04 (23.51) 3824.65 (23.51)
MF73 0.00 (100) 0.99 (60.36) 0.33 (60.36) 1982.05 (60.36)
MF74 0.15 (84.57) 0.51 (38.37) 0.07 (38.37) 3081.3 (38.37)
MF75 0.00 (100) 0.97 (60.61) 0.37 (60.61) 1969.4 (60.61)
MF76 0.00 (100) 0.97 (60.57) 0.38 (60.57) 1971.27 (60.57)
MF77 0.00 (0) 0.52 (2.32) 0.04 (2.32) 4883.79 (2.32)
133
MFs LOAD (%) EXPENSE (%) RISK, β (%) MINII (%)
MF81 0.91 (87.43) 0.87 (37.2) 0.03 (7.87) 4606.55 (7.87)
MF82 0.00 (100) 0.8 (50.92) 0.08 (50.92) 2453.91 (50.92)
MF83 0.00 (100) 0.99 (59.9) 0.32 (59.9) 2004.77 (59.9)
MF85 0.00 (100) 0.95 (60.67) 0.4 (60.67) 1966.39 (60.67)
MF86 0.00 (100) 0.96 (60.21) 0.41 (60.21) 1989.48 (60.21)
MF87 0.00 (100) 0.93 (59.55) 0.38 (59.55) 2022.48 (59.55)
MF88 0.00 (100) 0.95 (58.6) 0.48 (58.6) 2069.96 (58.6)
MF90 0.00 (100) 0.83 (55.02) 0.52 (55.02) 2248.92 (55.02)
MF91 0.00 (100) 0.79 (57.48) 0.53 (57.48) 2125.94 (57.48)
MF92 0.00 (100) 0.79 (58.06) 0.5 (58.06) 2097.13 (58.06)
MF93 0.00 (100) 0.82 (56.63) 0.62 (56.63) 2168.33 (56.63)
MF95 0.00 (0) 0.89 (59.46) 0.41 (59.46) 2026.96 (59.46)
MF96 0.00 (0) 0.9 (59.09) 0.42 (59.09) 2045.5 (59.09)
MF97 0.00 (100) 1.76 (23.36) 0.64 (23.36) 766.36 (23.36)
MF98 0.00 (100) 1.27 (40.38) 0.8 (40.38) 1192.35 (40.38)
MF99 0.00 (100) 0.69 (53.25) 0.43 (53.25) 2337.53 (53.25)
MF100 0.00 (100) 1.72 (21.5) 0.66 (21.5) 785.01 (21.5)
MF102 0.00 (100) 0.9 (58.2) 0.41 (58.2) 2090.07 (58.2)
MF103 0.00 (100) 0.97 (59.15) 0.29 (59.15) 2042.61 (59.15)
MF104 0.00 (100) 0.99 (58.33) 0.35 (58.33) 2083.65 (58.33)
MF105 0.00 (100) 0.95 (60.3) 0.38 (60.3) 1984.8 (60.3)
MF106 0.00 (100) 1 (58.54) 0.47 (58.54) 2073.01 (58.54)
MF107 0.00 (100) 0.93 (59.93) 0.39 (59.93) 2003.34 (59.93)
MF109 0.00 (100) 0.86 (57.96) 0.46 (57.96) 2102.17 (57.96)
MF110 0.00 (100) 0.98 (60.14) 0.53 (60.14) 1993.03 (60.14)
MF113 0.00 (0) 1.45 (33.76) 0.45 (33.76) 1324.72 (33.76)
MF114 0.00 (0) 1.46 (34.4) 0.45 (34.4) 1311.96 (34.4)
MF115 0.00 (100) 1.67 (14.73) 0.66 (14.73) 852.68 (14.73)
MF116 0.00 (100) 0.95 (60.79) 0.42 (60.79) 1960.32 (60.79)
MF117 0.00 (100) 1 (58.9) 0.52 (58.9) 2054.84 (58.9)
MF118 0.00 (0) 0.66 (52.73) 0.35 (52.73) 2363.34 (52.73)
MF119 0.00 (0) 0.66 (52.48) 0.33 (52.48) 2375.88 (52.48)
Note: Figures in parenthesis represent the percentage decrease require in the original value
of inputs
For MF1, the original values of inputs LOAD, EXPENSE, RISK and MINII are 1, 2.5,
0.9044 and 5000 respectively (Annexure B). Target values of these inputs or the virtual inputs
are 0.00, 1.00, 0.36 and 2,009.51 respectively which can be achieved by a decrease of 100.00
percent in the original value of LOAD and 59.81 percent each in the original values of
134
EXPENSE, RISK and MINII (Table 5.4). Efficient peer group of MF1 is, MF50 (0.1964),
MF84 (0.0025), MF101 (0.5994) and MF111 (0.2017), (as per table 5.3). The virtual inputs
from the efficient peer group have been calculated as,
LOAD: 0.1964 × (LOAD of MF50) + 0.0025 × (LOAD of MF84) + 0.5994 × (LOAD
of MF101) + 0.2017 × (LOAD of MF111)
= 0.1964 × (0) + 0.0025 × (0) + 0.5994 × (0) + 0.2017 × (0)
= 0 (decrease of 100 percent in the original value)
EXPENSE: 0.1964 × (EXPENSE of MF50) + 0.0025 × (EXPENSE of MF84) +
0.5994 × (EXPENSE of MF101) + 0.2017 × (EXPENSE of MF111)
= 0.1964 × (1.55) + 0.0025 × (0.3783) + 0.5994 × (0.3450) + 0.2017 × (2.4417)
= 1.00 (decrease of 59.81 percent in the original value)
RISK, β: 0.1964 × (RISK of MF50) + 0.0025 × (RISK of MF84) + 0.5994 × (RISK of
MF101) + 0.2017 × (RISK of MF111)
= 0.1964 × (1.173) + 0.0025 × (29.8824) + 0.5994 × (0.0768) + 0.2017 × (0.0649)
= 0.36 (decrease of 59.81 percent in the original value)
MINII: 0.1964 × (MINII of MF50) + 0.0025 × (MINII of MF84) + 0.5994 × (MINII
of MF101) + 0.2017 × (MINII of MF111)
= 0.1964 × (500) + 0.0025 × (5000) + 0.5994 × (3000) + 0.2017 × (500)
= 2009.5 (decrease of 59.81 percent in the original value)
Taking one more example, of inefficient scheme Birla Sun Life Midcap Fund
Dividend, MF14, the original values of the inputs LOAD, EXPENSE, RISK β and MINII are
1, 2.1267, 1.3613 and 5000 respectively (Annexure B). MF14 has a reference set of efficient
peers as HDFC Long Term Advantage Fund-Growth (MF50) and Sahara Income Fund-
Growth (MF101) with their corresponding weights as 0.4104 and 0.5896 respectively (Table
5.3). The virtual inputs or the target values for this mutual fund scheme MF14, are:
LOAD: 0.4104 × (LOAD of MF50) + 0.5896 × (LOAD of MF101)
= 0.4104 × (0) + 0.5896 × (0) = 0 (No Change)
EXPENSE: 0.4104 × (EXPENSE of MF50) + 0.5896 × (EXPENSE of MF101)
= 0.4104 × (1.55) + 0.5896 × (0.35) = 0.636 + 0.206
= 0.842 (reduction of 60.52 percent in the original value)
RISK, β: 0.4104 × (RISK of MF50) + 0.5896 × (RISK of MF101)
135
= 0.4104 × (1.173) + 0.5896 × (0.077) = 0.481 + 0.045
= 0.53 (reduction of 61.3 percent in the original value)
MINII: 0.4104 × (MINII of MF50) + 0.5896 × (MINII of MF101)
= 0.4104 × (500) + 0.5896 × (3000) = 205.2 + 1768.8
= 1974 (reduction of 60.52 percent in the original value)
Thus, the target values or virtual inputs for all the mutual fund schemes have been
studied. In this way, the reduction required in the inputs and the target values or virtual inputs
have been found out so that the inefficient mutual fund schemes may attain efficiency.
Efficient mutual fund schemes as MF49, MF50 or MF108 with efficiency score as 1.00 do not
need to follow any other scheme and hence these efficient schemes do not have any peer
group and target/virtual inputs. The input values of these mutual fund schemes are perfect and
need not any change.
5.1.2 DEA RUN 2
DEA run 2 has been performed on 48 Equity oriented mutual fund schemes in the
sample to analyse their performance in terms of efficiency. 13 mutual fund schemes came out
to be DEA efficient with efficiency score as 1 and the rest 35 have been found to be DEA
inefficient out of which 13 are near efficient. Therefore 26 (54 percent) are efficient or near
efficient and 22 (46 percent) are inefficient schemes. Table 5.5 and 5.6 depicts the efficient,
near efficient and inefficient equity mutual fund schemes. Out of 26 efficient Equity mutual
fund schemes, only one scheme i.e., Canara Robeco Equity Diversified fund-Dividend
(MF22) was efficient in DEA Run 1 too. In other words we can say that except MF22, all
other efficient mutual fund schemes from DEA Run 2 were found to be inefficient in DEA
Run 1. Also, the efficiency score of 22 inefficient Equity mutual fund schemes is much higher
in DEA Run 2 as compared to their efficiency score from DEA Run 1. As, DSP Blackrock
India TIGER Fund Regular Plan-Growth (MF27) and Principal Large Cap Fund-Growth
(MF88) possess an efficiency score of 0.8819 and 0.9195 in DEA Run 2. Whereas, their
efficiency scores from DEA Run 1 was 0.4340 and 0.4140 respectively. This implies that,
when only Equity oriented schemes have been analysed among themselves with the available
set of inputs and outputs, their efficiency is much better as compared to when these schemes
were analysed with the whole set of sample mutual fund schemes.
136
The researcher has presented the frequency distribution of the efficiency scores in
intervals of 0.1 in table 5.7. From this table, the researcher has observed that no Equity mutual
fund scheme possess the efficiency score below 0.7. Whereas, in DEA Run 1, 78 (65.54
percent) mutual fund schemes came out to be with efficiency scores as below 0.7. 19 mutual
fund schemes (39.58 percent) have efficiency score from 0.8 to 0.9. Most of the schemes i.e.,
26 (54.17 percent) possess efficiency score from 0.9 to 1 out of these 13 schemes are efficient
with efficiency score as 1.0 and 13 (=26-13) mutual fund schemes are near efficient with
efficiency score between 0.9 and 1.0. Whereas in DEA Run 1, only 5 mutual fund schemes
were near efficient.
Table 5.5: Efficient and Near Efficient Equity Mutual Fund Schemes (MFs) through DEA Run 2
S. No. Mutual Fund Schemes (MFs) Efficiency Score
1 MF2 1.00
2 MF15 1.00
3 MF22 1.00
4 MF48 1.00
5 MF60 1.00
6 MF61 1.00
7 MF64 1.00
8 MF90 1.00
9 MF93 1.00
10 MF95 1.00
11 MF96 1.00
12 MF100 1.00
13 MF117 1.00
14 MF6 0.9820
15 MF8 0.9551
16 MF9 0.9648
17 MF12 0.9628
18 MF13 0.9632
19 MF36 0.9818
20 MF37 0.9145
21 MF42 0.9167
22 MF69 0.9360
23 MF88 0.9195
24 MF91 0.9337
25 MF99 0.9625
26 MF106 0.9898
137
Table 5.6: Inefficient Mutual Fund Schemes (MFs) with score and peer group through DEA Run 2
MFs
Efficiency
Score
Efficient Peers and Weight
MF1 0.8925 MF61(0.0361) MF64(0.7220) MF96(0.1075) MF100(0.1343)
MF6 0.9820 MF61(0.0853) MF64(0.8743) MF95(0.0180) MF100(0.0225)
MF8 0.9551 MF22(0.0499) MF48(0.6181) MF60(0.2228) MF90(0.0477) MF96(0.0449)
MF117(0.0167)
MF9 0.9648 MF61(0.9045) MF64(0.0162) MF95(0.0352) MF100(0.0441)
MF12 0.9628 MF22(0.0414) MF60(0.5924) MF90(0.1806) MF95(0.0372) MF117(0.1484)
MF13 0.9632 MF22(0.0409) MF60(0.5843) MF90(0.1804) MF96(0.0368) MF117(0.1576)
MF14 0.7830 MF22(0.2412) MF61(0.5418) MF95(0.2170)
MF27 0.8819 MF22(0.1312) MF61(0.5984) MF64(0.1410) MF95(0.1181)
MF36 0.9818 MF22(0.0202) MF60(0.7337) MF61(0.1458) MF90(0.0360) MF93(0.0461)
MF96(0.0182)
MF37 0.9145 MF22(0.0950) MF60(0.1799) MF61(0.3734) MF90(0.1151) MF93(0.1512)
MF96(0.0855)
MF38 0.8724 MF22(0.1418) MF61(0.2627) MF93(0.4679) MF96(0.1276)
MF41 0.7709 MF22(0.2015) MF61(0.5098) MF95(0.2291) MF100(0.0597)
MF42 0.9167 MF22(0.0926) MF48(0.4382) MF90(0.1275) MF93(0.1865) MF96(0.0833)
MF117(0.0719)
MF47 0.8485 MF61(0.5373) MF64(0.1217) MF95(0.1515) MF100(0.1894)
MF59 0.7882 MF22(0.2353) MF61(0.5529) MF95(0.2118)
MF67 0.8600 MF22(0.1556) MF60(0.2440) MF64(0.4604) MF96(0.1400)
MF68 0.8890 MF22(0.1233) MF60(0.7657) MF95(0.1110)
MF69 0.9360 MF15(0.1525) MF22(0.0712) MF90(0.6008) MF96(0.0640) MF117(0.1115)
MF75 0.8696 MF61(0.1392) MF64(0.5674) MF95(0.1304) MF100(0.1630)
MF76 0.8612 MF61(0.1597) MF64(0.5280) MF96(0.1388) MF100(0.1735)
MF85 0.8367 MF61(0.2590) MF64(0.3737) MF95(0.1633) MF100(0.2041)
MF86 0.8282 MF61(0.2794) MF64(0.3341) MF96(0.1718) MF100(0.2147)
MF87 0.8912 MF61(0.2304) MF64(0.5248) MF95(0.1088) MF100(0.1360)
138
MFs
Efficiency
Score
Efficient Peers and Weight
MF88 0.9195 MF22(0.0895) MF60(0.5220) MF90(0.1381) MF96(0.0805) MF117(0.1699)
MF91 0.9337 MF22(0.0736) MF60(0.4959) MF61(0.3643) MF95(0.0663)
MF92 0.8399 MF22(0.1779) MF61(0.6619) MF95(0.1602)
MF98 0.8800 MF22(0.7200) MF61(0.0516) MF93(0.1084) MF95(0.1200)
MF99 0.9625 MF22 0.0417) MF61 (0.9208) MF96 (0.0375)
MF102 0.8786 MF61 0.3961) MF64 (0.3308) MF96 (0.0562) MF96(0.0652) MF100(0.1517)
MF105 0.8668 MF61 (0.1917) MF64 (0.5085) MF95 (0.1333) MF100(0.1666)
MF106 0.9898 MF22 (0.0113) MF60 (0.5096) MF90 (0.0999) MF96(0.0102) MF117(0.3690)
MF107 0.8668 MF6 (0.2671) MF64 (0.4333) MF96 (0.1332) MF100(0.1665)
MF109 0.8404 MF22 (0.1774) MF60 (0.1136) MF61 (0.4799) MF64(0.0694) MF96(0.1596)
MF110 0.8864 MF15 0.0268) MF22 (0.1263) MF90 (0.2643) MF96(0.1137) MF117(0.4690)
MF116 0.8159 MF61 0.2913) MF64 (0.2944) MF95 (0.1841) MF100(0.2302)
Note: Figures in parenthesis represent the weight for each efficient mutual fund scheme
139
Table 5.7: Distribution of efficiency Score through DEA Run 2
Score frequencies No. of Schemes
up to 0.10 0
0.10+ to 0.20 0
0.20+ to 0.30 0
0.30+ to 0.40 0
0.40+ to 0.50 0
0.50+ to 0.60 0
0.60+ to 0.70 0
0.70+ to 0.80 3
0.80+ to 0.90 19
0.90+ to 1.00 26
Peer Group and Virtual Inputs
Every inefficient scheme has a scope of improvement in their performance to conquer
efficiency. Inefficient Equity mutual fund schemes may also achieve the efficiency level by
following their efficient peer mutual fund schemes in a particular weight. To become
efficient, the inefficient mutual fund schemes would either have to achieve the same levels of
inputs as one of the efficient peer scheme or it would have to achieve input in some linear
combination of the efficient peer schemes. This efficient peer group for each inefficient
Equity mutual fund scheme has been depicted in table 5.6. For example, inefficient mutual
fund scheme Kotak Contra-Dividend (MF75), has efficient peer group as ICICI Prudential
Index Fund-Growth (MF61), ICICI Prudential Top 100 Fund-Growth (MF64), SBI Blue Chip
Fund-Dividend (MF95) and SBI Magnum Multiplier plus Fund-Growth (MF100) with
corresponding weights as 0.1392, 0.5674, 0.1304 and 0.1630 respectively. By following its
efficient peers in their corresponding weights, these inefficient mutual fund schemes may
attain target values or virtual inputs and might attain efficiency.
As from table 5.8, inefficient mutual fund scheme MF75, by following its efficient
peer group (given in table 5.7) may attain its target values or virtual inputs as 0.87 for LOAD,
2.13 for EXPENSE, 0.83 for RISK, β and 4,347.93 for MINII. For achieving these desired
virtual inputs, a reduction of 13.04 percent is required in the original value of all the inputs
(Annexure B). The virtual inputs for all the 48 Equity mutual fund schemes have been
depicted in table 5.8.
140
Table 5.8: Virtual Inputs/ Target Values through DEA Run 2
MFs LOAD (%) EXPENSE(%) RISK, β (%) MINII (%)
MF1 0.89 (10.75) 2.23 (10.75) 0.81 (10.75) 4462.66 (10.75)
MF6 0.98 (1.8) 2.2 (1.8) 0.78 (1.8) 4910.18 (1.8)
MF8 0.96 (4.49) 2.03 (4.49) 1.08 (4.49) 4775.56 (4.49)
MF9 0.96 (3.52) 1.45 (3.52) 0.89 (3.52) 4823.81 (3.52)
MF12 0.96 (3.72) 1.98 (17.07) 1.07 (3.72) 4813.79 (3.72)
MF13 0.96 (3.68) 1.99 (16.87) 1.07 (3.68) 4816.12 (3.68)
MF14 0.78 (21.7) 1.67 (21.7) 0.92 (32.31) 3914.83 (21.7)
MF27 0.88 (11.81) 1.67 (11.81) 0.89 (11.81) 4409.6 (11.81)
MF36 0.98 (1.82) 1.83 (1.82) 1.01 (1.82) 4909.19 (1.82)
MF37 0.91 (8.55) 1.72 (8.55) 1.03 (8.55) 4572.45 (8.55)
MF38 0.87 (12.76) 1.79 (12.76) 1.16 (21.68) 4361.93 (12.76)
MF41 0.77 (22.91) 1.71 (22.91) 0.92 (22.91) 3854.71 (22.91)
MF42 0.92 (8.33) 2.03 (8.33) 1.17 (8.33) 4583.38 (8.33)
MF47 0.85 (15.15) 1.76 (15.15) 0.88 (15.15) 4242.32 (15.15)
MF59 0.79 (21.18) 1.66 (21.18) 0.92 (27.45) 3941.15 (21.18)
MF67 0.86 (14) 2.11 (15.44) 0.88 (14) 4299.83 (14)
MF68 0.89 (11.1) 1.93 (22.66) 0.99 (20.54) 4445 (11.1)
MF69 0.94 (6.4) 1.98 (20.82) 1.23 (6.4) 4679.79 (6.4)
MF75 0.87 (13.04) 2.13 (13.04) 0.83 (13.04) 4347.93 (13.04)
MF76 0.86 (13.88) 2.11 (13.88) 0.83 (13.88) 4306.03 (13.88)
MF85 0.84 (16.33) 2.02 (16.33) 0.85 (16.33) 4183.68 (16.33)
MF86 0.83 (17.18) 1.99 (17.18) 0.86 (17.18) 4141.16 (17.18)
MF87 0.89 (10.88) 2.05 (10.88) 0.83 (10.88) 4455.89 (10.88)
MF88 0.92 (8.05) 2.01 (12.92) 1.06 (8.05) 4597.28 (8.05)
MF91 0.93 (6.63) 1.73 (6.63) 0.95 (23.1) 4668.71 (6.63)
MF92 0.84 (16.01) 1.59 (16.01) 0.91 (23.29) 4199.26 (16.01)
MF98 0.88 (12) 1.87 (12) 0.98 (27.54) 1760.07 (12)
MF99 0.96 (3.75) 1.42 (3.75) 0.89 (3.93) 4812.37 (3.75)
MF102 0.88 (12.14) 1.9 (12.14) 0.86 (12.14) 4393.2 (12.14)
MF105 0.87 (13.32) 2.08 (13.32) 0.83 (13.32) 4333.77 (13.32)
MF106 0.99 (1.02) 2.1 (12.8) 1.11 (1.02) 4949 (1.02)
MF107 0.87 (13.32) 2.01 (13.32) 0.84 (13.32) 4334.1 (13.32)
MF109 0.84 (15.96) 1.71 (15.96) 0.92 (15.96) 4201.84 (15.96)
MF110 0.89 (11.36) 2.17 (12.23) 1.18 (11.36) 4431.76 (11.36)
MF116 0.82 (18.41) 1.98 (18.41) 0.86 (18.41) 4079.29 (18.41)
Note: Figures in parenthesis represent the percentage decrease required in the original values
of inputs
141
5.1.3 DEA RUN 3
DEA run 3 has been performed on 30 Income mutual fund schemes from the sample
to analyse their performance in terms of efficiency. 9 Income schemes came out to be DEA
efficient with efficiency score as 1.00. Rest 21 schemes are DEA inefficient with efficiency
score as less than 1 out of which 7 are near efficient with efficiency score between 0.9 and 1.
Therefore, 16 (53 percent) Income schemes are efficient or near efficient and 14 (47 percent)
are inefficient. Table 5.9 and 5.10 provides the detail of efficient, near efficient and inefficient
Income schemes along with their efficiency scores.
Out of 16 efficient Income schemes, 14 were efficient in DEA Run 1 also. However,
the efficiency score of 14 inefficient Income schemes is slightly high in DEA run 3 as
compared to DEA run 1. Hence, there is modest increase in the efficiency of Income mutual
fund schemes when they have been analysed separately from the whole sample of mutual
fund schemes. As Canara Robeco Income-Growth (MF24), possess efficiency score of 0.5956
in DEA run 3 and 0.4975 in DEA run 1. Therefore, efficiency score of MF24 has increased by
0.0981 (0.5956 – 0.4975) in DEA run 3 as compared to DEA run 1. Also, DSP Blackrock
Short Term Fund-Growth (MF28) and JM Short Term Fund Regular Plan-Growth (MF74)
posses an efficiency score of 0.9040 and 0.6467 in DEA run 3 and 0.8209 and 0.6163 in DEA
run 1. Thus mutual fund schemes MF28 and MF74 experienced an increase of 0.0831 (0.9040
– 0.6467) and 0.0304 (0.8209 – 0.6163) respectively in their efficiency score.
Frequency distribution of the efficiency scores in intervals of 0.1 has been depicted in
table 5.11. From this table it can be observed that no scheme possess efficiency score as less
than 0.50 and 7 mutual fund schemes as MF10, MF11, MF24, MF51, MF55, MF62 and
MF82 have efficiency score between 0.5 to 0.6. Two schemes as MF16 and MF74 are with
efficiency scores between 0.6 and 0.7 and one mutual fund scheme as MF54 is with efficiency
score between 0.7 and 0.8.
Four schemes as Birla Sun Life Dynamic Bond Fund Retail Plan-Growth (MF7),
DWS Short Maturity Fund-Growth (MF30), IDFC Super Saver Income Fund STP-Growth
(MF65) and ING Short Term Income Fund-Growth (MF70) possess efficiency score between
0.8 and 0.9. 16 mutual fund schemes are with efficiency scores between 0.9 and 1.0 out of
which 9 are efficient with efficiency score as 1.0 and Seven Income schemes (=16-9) as Birla
Sun Life Savings Fund Retail Plan-Growth (MF17), DSP Blackrock Short Term Fund MF142
Growth (MF28), DWS Premier Bond Fund Regular Plan-Growth (MF29), HDFC Cash
Management Fund Savings Plan-Growth (MF43), ICICI Prudential Blended Plan Plan AGrowth
(MF57), Kotak Flexi Debt Regular Plan-Growth (MF77) and LIC Nomura MF Bond
Fund-Growth (MF81) possess efficiency score between 0.9 and 1.0.
Table 5.9: Efficient and Near Efficient Income Mutual Fund Schemes (MFs) from DEA Run 3
S. No. Mutual Fund Schemes Efficiency Score
1 MF3 1.0000
2 MF31 1.0000
3 MF46 1.0000
4 MF49 1.0000
5 MF58 1.0000
6 MF80 1.0000
7 MF84 1.0000
8 MF101 1.0000
9 MF108 1.0000
10 MF17 0.9975
11 MF28 0.9040
12 MF29 0.9557
13 MF43 0.9580
14 MF57 0.9121
15 MF77 0.9768
16 MF81 0.9632
Peer Group and Virtual Inputs
Inefficient mutual fund schemes may improve their performance and achieve
efficiency by following its efficient peer groups in corresponding weights. Efficient Peer
group of all inefficient Equity schemes has been presented in table 5.10. As efficient peer
group with corresponding weights for Birla Sun Life MIP Wealth 25 Plan-Growth (MF10) is
DWS Tax Saving Fund-Growth (MF31) and Sahara Income Fund-Growth (MF101) with their
corresponding weights as 0.0652 and 0.9348 respectively. That means MF10 may achieve
efficiency by adopting 6.52 percent inputs of MF31 and 93.48 percent inputs of MF101. As a
result, the virtual inputs, LOAD, EXPENSE, RISK, β and MINII of MF10 are 0.00, 0.50, 0.14
and 2,837.04 respectively. For attaining these virtual inputs, a reduction of 100.00, 76.97,
43.26 and 43.26 percent is required in original values of LOAD, EXPENSE, RISK (β) and
MINII respectively (Annexure B). The desired target values or virtual inputs for all inefficient
Equity mutual fund schemes have been presented in table 5.12.
143
Table 5.10: Inefficient Mutual Fund Schemes (MFs) with score and peer group through DEA Run 3
MFs Efficiency Score Efficient Peers and Weights
MF7 0.8848 MF46 (0.5513) MF49 (0.3334) MF84 (0.0003) MF108 (0.1149)
MF10 0.5674 MF31 (0.0652) MF101 (0.9348)
MF11 0.5674 MF31 (0.0652) MF101 (0.9348)
MF16 0.6061 MF49 (0.0149) MF84 (0.0004) MF101 (0.9847)
MF17 0.9975 MF84 (0.0899) MF108 (0.9101)
MF24 0.5956 MF31 (0.0092) MF84 (0.0005) MF101 (0.9903)
MF28 0.9040 MF46 (0.0102) MF58 (0.7498) MF101 (0.24)
MF29 0.9557 MF58 (0.8892) MF101 (0.1108)
MF30 0.8279 MF46 (0.135) MF49 (0.0704) MF58 (0.3642) MF101 (0.4304)
MF43 0.9580 MF80 (0.3271) MF108 (0.6729)
MF51 0.5970 MF31 (0.0067) MF84 (0.0008) MF101 (0.9925)
MF54 0.7493 MF58 (0.7493) MF80 (0.1703) MF108 (0.0804)
MF55 0.5848 MF31 (0.0307) MF84 (0.0005) MF101 (0.9688)
MF57 0.9121 MF46 (0.0352) MF58 (0.745) MF101 (0.2198)
MF62 0.5706 MF31 (0.059) MF84 (0.0003) MF101 (0.9407)
MF65 0.8543 MF46 (0.1097) MF58 (0.526) MF101 (0.3644)
MF70 0.8639 MF46 (0.4303) MF49 (0.0227) MF58 (0.2066) MF101 (0.3403)
MF74 0.6467 MF49 (0.1168) MF84 (0.0001) MF101 (0.8832)
MF77 0.9768 MF80 (0.9269) MF101 (0.0688) MF108 (0.0043)
MF81 0.9632 MF49 (0.1846) MF58 (0.7233) MF101 (0.0921)
MF82 0.5905 MF31 (0.0189) MF101 (0.9811)
Note: Figures in parenthesis represent the weight for each efficient mutual fund scheme.
144
Table 5.11: Distribution of efficiency Scores through DEA Run 3
Score frequencies No. of Schemes
up to 0.10 0
0.10+ to 0.20 0
0.20+ to 0.30 0
0.30+ to 0.40 0
0.40+ to 0.50 0
0.50+ to 0.60 7
0.60+ to 0.70 2
0.70+ to 0.80 1
0.80+ to 0.90 4
0.90+ to 1.00 16
Table 5.12: Virtual Inputs/ Target Values through DEA Run 3
MFs LOAD (%) EXPENSE (%) RISK, β (%) MINII (%)
MF7 0.88 (11.52) 0.72 (11.52) 0.04 (11.52) 5574.52 (98.89)
MF10 0 (100) 0.5 (76.97) 0.14 (43.26) 2837.04 (43.26)
MF11 0 (100) 0.5 (76.97) 0.14 (43.26) 2837.04 (43.26)
MF16 0.01 (98.51) 0.37 (82.24) 0.09 (39.39) 3030.65 (39.39)
MF17 0 (0) 0.36 (27.61) 2.72 (0.25) 9550.51 (4.49)
MF24 0 (100) 0.37 (76.34) 0.1 (40.44) 2977.94 (40.44)
MF28 0.76 (24) 0.77 (9.6) 0.04 (9.6) 4520.03 (9.6)
MF29 0.89 (11.08) 0.85 (56.66) 0.03 (4.43) 4778.38 (4.43)
MF30 0.57 (43.04) 0.63 (51.18) 0.05 (17.21) 4139.28 (17.21)
MF43 0 (0) 0.42 (4.2) 0.04 (4.2) 8364.36 (16.36)
MF51 0 (100) 0.36 (79.9) 0.11 (40.3) 2984.82 (40.3)
MF54 0.75 (25.07) 0.8 (25.12) 0.03 (25.07) 5402.05 (94.6)
MF55 0 (100) 0.42 (79.37) 0.12 (41.52) 2924.12 (41.52)
MF57 0.78 (21.98) 0.76 (38.22) 0.04 (8.79) 4560.31 (8.79)
MF62 0 (100) 0.48 (75.97) 0.14 (42.94) 2853.05 (42.94)
MF65 0.64 (36.44) 0.62 (45.23) 0.04 (14.57) 4271.27 (14.57)
MF70 0.66 (34.03) 0.42 (55.3) 0.04 (13.61) 4319.37 (13.61)
MF74 0.12 (88.32) 0.51 (38.62) 0.07 (35.33) 3233.7 (35.33)
MF77 0 (0) 0.52 (2.32) 0.04 (2.32) 4883.79 (2.32)
MF81 0.91 (9.21) 1.01 (27.32) 0.03 (3.68) 4815.87 (3.68)
MF82 0 (100) 0.39 (76.12) 0.09 (40.95) 2952.71 (40.95)
Note: Figures in parenthesis represent the percentage decrease required in the original
value of inputs
145
5.1.4 DEA RUN 4
DEA Run 4 analyses 23 Balance mutual fund schemes in the sample for their
performance efficiency. Out of 23 mutual fund schemes, 9 schemes as MF20, MF21, MF40,
MF44, MF52, MF97, MF113, MF114 and MF115 came out to be efficient with efficiency
score 1. 14 schemes are inefficient with efficiency score as less than 1 out of which 6 schemes
are near efficient. Therefore, 15 (65 percent) are efficient or near efficient and 8 (35 percent)
are inefficient Balance schemes. Table 5.13 and 5.14 provides the efficient, near efficient and
inefficient Balance mutual fund schemes.
All of the efficient schemes in DEA run 4 were inefficient during DEA run 1.
Moreover, the efficiency score of 8 inefficient balanced schemes in DEA run 4 is much higher
than their efficiency score in DEA run 1. As DSP Blackrock Balanced Fund-Growth (MF26)
posses the efficiency scores of 0.8816 and 0.4398 in DEA run 4 and DEA run 1 respectively.
That means efficiency score of MF32 is higher by a value of 0.4418 (0.8816 – 0.4398) in
DEA run 4 as compared to DEA run 1. Similarly efficiency score is higher by a value of
0.5167 (0.9503 - 0.4336) for FT India Balanced Fund-Dividend (MF32), by a value of 0.3724
(0.7688 - 0.3964) for JM Balanced Fund-Growth (MF73) and by a value of 0.3644 (0.7790 -
0.4146) for Principal Debt Opportunities Fund Conservative Plan Regular Plan-Growth
(MF83) in DEA run 4 as compared to DEA run 1. Similarly, the difference in efficiency level
of all the inefficient balanced schemes in DEA run 4 may be observed from table 5.14 and
table 5.10. That means balanced schemes came out to be more efficient when analysed among
themselves only as compared to when analysed with the whole sample of mutual fund
schemes.
Further, frequency distribution of the efficiency scores in interval of 0.1 has been
depicted in table 5.15. No mutual fund scheme is with efficiency score below 0.70. Three
schemes as ING Balanced Fund-Dividend (MF66), JM Balanced Fund-Growth (MF73) and
Principal Balanced Fund-Growth (MF83) possess efficiency scores between 0.7 and 0.8. Five
mutual fund schemes as Birla Sun Life'95 Fund-Dividend (MF18), DSP Blackrock Balanced
Fund-Growth (MF26), ICICI Prudential Balanced Fund-Growth (MF56), Tata Balanced
Fund-Dividend (MF103) and Tata Balanced Fund-Growth (MF104) have efficiency score
between 0.8 and 0.9.
146
Table 5.13: Efficient and Near Efficient Balanced Mutual Fund Schemes (MFs) from DEA Run 4
S. No. MFs Efficiency Score
1 MF20 1.0000
2 MF21 1.0000
3 MF40 1.0000
4 MF44 1.0000
5 MF52 1.0000
6 MF97 1.0000
7 MF113 1.0000
8 MF114 1.0000
9 MF115 1.0000
10 MF5 0.9686
11 MF19 0.9080
12 MF25 0.9807
13 MF32 0.9503
14 MF33 0.9503
15 MF45 0.9694
15 Balance mutual fund schemes have their efficiency scores between 0.9 and 1.0 out
of which 9 schemes are efficient with efficiency scores as 1.0 and 6 (=15-9) schemes as
Baroda Pioneer Balance Fund-Dividend (MF5), Birla Sun Life'95 Fund-Growth (MF19), DSP
Blackrock Balanced Fund-Dividend (MF25), FT India Balanced Fund-Dividend (MF32), FT
India Balanced Fund-Growth (MF33) and HDFC Children Gift Fund Savings Plan-Growth
(MF45) are near efficient with efficiency score between 0.9 and 1.0. That means when only
balanced schemes have been analysed, most of these schemes (65.22 percent) are efficient or
near efficient and rest 34.78 percent schemes are with efficiency scores between 0.7 and 0.9.
147
Table 5.14: Inefficient Mutual Fund Schemes (MFs) with score and peer group through DEA Run 4
MFs
Efficiency
Score
Efficient Peers and Weights
MF5 0.9686 MF20 (0.3293) MF44(0.1393) MF113 (0.0314) MF115 (0.5)
MF18 0.8080 MF20 (0.4531) MF44(0.2588) MF113 (0.192) MF115 (0.096)
MF19 0.9080 MF21 (0.0346) MF40(0.7392) MF44 (0.0697) MF52 (0.0185) MF97 (0.046)
MF114 (0.092)
MF25 0.9807 MF20 (0.0632) MF44(0.3666) MF52 (0.5412) MF97 (0.0096) MF113 (0.0193)
MF26 0.8816 MF21 (0.6666) MF44(0.1558) MF114 (0.1184) MF115 (0.0592)
MF32 0.9503 MF20 (0.0371) MF44(0.4814) MF52 (0.4069) MF97 (0.0249) MF113 (0.0497)
MF33 0.9503 MF21 (0.0369) MF44(0.4813) MF52 (0.4071) MF97 (0.0249) MF114 (0.0497)
MF45 0.9694 MF21(0.2677) MF44(0.6865) MF114(0.0306) MF115(0.0153)
MF56 0.8502 MF21 (0.4399) MF44(0.3353) MF114 (0.1498) MF115 (0.0749)
MF66 0.7913 MF20(0.349) MF44(0.3379) MF113 (0.2087) MF115 (0.1044)
MF73 0.7688 MF21 (0.4254) MF44(0.2278) MF114 (0.2312) MF115 (0.1156)
MF83 0.7790 MF21 (0.4176) MF44(0.2509) MF114 (0.221) MF115 (0.1105)
MF103 0.8203 MF20 (0.4001) MF44(0.3303) MF113 (0.1797) MF115 (0.0899)
MF104 0.8673 MF21 (0.0448) MF40(0.1021) MF44 (0.2873) MF52 (0.3667) MF97 (0.0663)
MF114 (0.1327)
Note: Figures in parenthesis represent the weight for each efficient mutual fund scheme.
148
Peer Group and Virtual Inputs
Efficient peer group or reference set for all the inefficient balanced schemes has been
found out and provided in table 5.14 along with their weights. An inefficient scheme may
become efficient by acquiring the inputs of its efficient peer group in the percentage of their
corresponding weight and acquiring the desired target values or virtual inputs. For example,
HDFC Children Gift Fund Savings Plan-Growth (MF45) may become efficient by adopting
26.77 percent inputs of Canara Robeco Balance-Growth (MF21), 68.65 percent inputs of
HDFC Children Gift Fund Investment-Growth (MF44), 3.06 percent inputs of Templeton
India Children’s Asset Plan Gift Plan-Growth (MF114) and 1.53 percent as of UTI Balanced
Fund-Growth (MF115). By following this efficient peer group, target values or virtual inputs
of MF45 are LOAD as 0.97, EXPENSE as 2.07, RISK (β) as 0.4 and MINII as 4847.23. For
acquiring these target values a reduction of 3.06 percent is required in the original values of
these inputs (Annexure B).
Target values or virtual inputs for all the inefficient balanced mutual fund schemes
from DEA run 4 have been provided in table 5.16. For example, target values or virtual inputs
LOAD, EXPENSE, RISK and MINII for Birla Sun Life'95 Fund-Dividend (MF18) are 0.81,
1.91, 0.63 and 4,039.92 respectively. Original value for these inputs was 1, 2.37, 0.78 and
5000 respectively. Therefore, in all these inputs a reduction of 19.20 percent is required for
achieving these target values.
Table 5.15: Distribution of efficiency Scores through DEA Run 4
Score frequencies No. of Schemes
up to 0.10 0
0.10+ to 0.20 0
0.20+ to 0.30 0
0.30+ to 0.40 0
0.40+ to 0.50 0
0.50+ to 0.60 0
0.60+ to 0.70 0
0.70+ to 0.80 3
0.80+ to 0.90 5
0.90+ to 1.00 15
149
Table 5.16: Virtual Inputs/ Target Values through DEA Run 4
MFs LOAD (%) EXPENSE (%) RISK, β (%) MINII (%)
MF5 0.97 (3.14) 1.89 (3.14) 0.7 (3.14) 2905.84 (3.14)
MF18 0.81 (19.2) 1.91 (19.2) 0.63 (19.2) 4039.92 (19.2)
MF19 0.91 (9.2) 2.15 (9.2) 0.82 (9.2) 4539.83 (9.2)
MF25 0.98 (1.93) 1.99 (1.93) 0.75 (1.93) 4903.59 (1.93)
MF26 0.88 (11.84) 1.79 (11.84) 0.7 (11.84) 4407.9 (11.84)
MF32 0.95 (4.97) 2.06 (4.97) 0.63 (4.97) 4751.32 (4.97)
MF33 0.95 (4.97) 2.06 (4.97) 0.63 (4.97) 4751.34 (4.97)
MF45 0.97 (3.06) 2.07 (3.06) 0.4 (3.06) 4847.23 (3.06)
MF56 0.85 (14.98) 1.93 (14.98) 0.59 (14.98) 4250.87 (14.98)
MF66 0.79 (20.87) 1.98 (20.87) 0.58 (20.87) 3956.41 (20.87)
MF73 0.77 (23.12) 1.92 (23.12) 0.64 (23.12) 3844.07 (23.12)
MF83 0.78 (22.1) 1.93 (22.1) 0.63 (22.1) 3894.96 (22.1)
MF103 0.82 (17.97) 1.95 (17.97) 0.59 (17.97) 4101.49 (17.97)
MF104 0.87 (13.27) 2.06 (13.27) 0.74 (13.27) 4336.54 (13.27)
Note: Figures in parenthesis represent the percentage decrease required in the original values
of inputs
5.1.5 DEA RUN 5
DEA run 5 has been performed for 18 ELSS mutual fund schemes to measure their
performance in terms of efficiency and all of these came out to be efficient with efficiency
score as 1.0. Table 5.17 lists down the efficient ELSS mutual fund schemes. Out of these 18
schemes, 16 schemes were efficient in DEA run 1 also. However, efficiency score of MF118
is higher by a value of 0.5273 (1–0.4727) and efficiency score of MF 119 is higher by a value
of 0.5248 (1–0.4752) in DEA run 5 as compared to DEA run 1. Except these two mutual fund
schemes, rest 16 ELSS schemes were efficient in DEA run 1 too. This implies that, when
analysed among themselves only, ELSS mutual fund schemes also came out to be more
efficient as compared to when analysed with the whole sample of mutual fund schemes.
150
Table 5.17: Efficient ELSS Mutual Fund Schemes from DEA Run 5
S. No. Mutual Fund Schemes (MFs) Efficiency Score
1 MF4 1.0000
2 MF23 1.0000
3 MF34 1.0000
4 MF35 1.0000
5 MF39 1.0000
6 MF50 1.0000
7 MF53 1.0000
8 MF63 1.0000
9 MF71 1.0000
10 MF72 1.0000
11 MF78 1.0000
12 MF79 1.0000
13 MF89 1.0000
14 MF94 1.0000
15 MF111 1.0000
16 MF112 1.0000
17 MF118 1.0000
18 MF119 1.0000
All the ELSS schemes are DEA efficient, but further improvement based upon the
slack values is possible in certain schemes. Slack values are the unnecessary expenditure in
inputs that can be avoided without sacrificing the efficiency. 9 schemes out of 18 have the
slack values in inputs EXPENSE and RISK (β). However, no slack values have been obtained
for inputs LOAD and MINII. Slack values and the target values or virtual inputs for all the 18
ELSS schemes have been depicted in table 5.18. For example, BNP Paribas Tax Advantage
Plan-Growth (MF4) has a slack value of 0.39 for the input EXPENSE. This means a further
improvement in the performance of this scheme is possible by reducing original value of input
EXPENSE i.e., 2.47 (Annexure B) by a value of 0.39 (15.62 percent).
Thus, the target value or virtual input EXPENSE for MF4 is 2.08 (2.47–0.39).
Similarly the slack values of inputs EXPENSE and RISK (β) for ING Tax Savings Fund-
Dividend (MF71) are 0.54 and 0.01 respectively. This indicates a reduction of 0.54 and 0.01
is required in the original values of these inputs and therefore, the target values or virtual
inputs EXPENSE and RISK β are 1.96 (2.50–0.54) and 1.26 (1.27–0.01) respectively.
151
Table 5.18: Virtual Inputs/ Target Values from DEA Run 5
MFs
Slack Values Virtual Inputs
EXPENSE RISK (β) EXPENSE (%) RISK, β (%)
MF4 0.39 0.00 2.08 (15.62) 0.96 (0.00)
MF71 0.54 0.01 1.96 (21.75) 1.26 (0.95)
MF72 0.54 0.04 1.96 (21.75) 1.26 (2.76)
MF78 0.26 0.00 2.03 (11.52) 1.09 (0.00)
MF79 0.53 0.02 1.96 (21.28) 1.26 (1.55)
MF89 0.36 0.00 2.01 (15.08) 1.14 (0.00)
MF112 0.31 0.00 2.11 (12.67) 1.07 (0.00)
Note: Figures in parenthesis represent the percentage decrease require in the original value
CONCLUSION OF DEA ANALYSIS
From the DEA analysis, the researcher has found that, percentage of inefficient
schemes except near efficient mutual fund schemes is highest when the whole sample has
been analysed followed by income, equity, balance and ELSS mutual fund schemes. These
findings have been presented in table 5.19. From this table, the percentage of efficient mutual
fund schemes is highest for ELSS followed by balance, equity and income. Percentage of
efficient mutual fund schemes is lowest when the whole sample is taken for analysis.
Further in DEA Run 2, out of 26 efficient Equity mutual fund schemes, only one was
efficient in DEA Run 1 also and the efficiency score of 22 inefficient schemes is much higher
in DEA Run 2 as compared to DEA Run 1. In the same manner, out of 16 Income schemes in
DEA Run 3, 14 were efficient in DEA Run 1 also. The efficiency score of all the 14
inefficient Income schemes is much higher in DEA Run 3 as compared to DEA Run 1 also.
When Balance mutual fund schemes have been analysed separately, all the 15 efficient
Balance schemes were inefficient during DEA Run 1. Moreover, the efficiency score of 8
inefficient schemes is much higher in this Run as compared to DEA Run 1. In case of ELSS,
out of the total 18, 16 were efficient in DEA Run 1 also. Hence, when analysed separately
within a particular type, mutual fund schemes are performing much efficiently as compared to
when the whole sample set has been analysed.
Therefore, the null hypothesis, H0 that the sample mutual fund schemes do not perform
efficiently has been rejected partially.
152
Table 5.19: Summary of results for efficiency score
DEA
Runs
Sample
Schemes
Efficient and Near Efficient
No. (Percent)
Inefficient except near efficient
No. (Percent)
1 119 Total 31 (26) 88 (74)
2 48 Equity 26 (54) 22 (46)
3 30 Income 16 (53) 20 (47)
4 23 Balance 15 (65) 8 (35)
5 18 ELSS 18 (100) 0 (0)
Further, along with providing the efficiency score of each mutual funds scheme, DEA
compares each inefficient mutual fund scheme with efficient one and thus has identified an
efficient peer group and a set of target inputs or virtual inputs to be followed by each
inefficient scheme, in order to achieve efficiency. From virtual or target inputs, the researcher
has obtained the reduction required in original value of each input i.e., load fee (LOAD),
expense ratio (EXPENSE), risk (RISK β) and minimum initial investment (MINII) for the
entire inefficient mutual fund scheme. Also, by examining the mean of reduction required in
each input, the source or sources of inefficiency has also been identified. Table 5.20 presents
the interpretation of virtual inputs or target values.
Table 5.20: Cause for Inefficiency (Reduction Requirement in Inputs)
DEA
Runs
AV. REDUCTION REQUIRED (%) & MEAN TARGET VALUE
Sample
Schemes
LOAD EXPENSE RISK (β) MINII
1 119 Total 88.04% (0.09) 40.35% (1.07) 39.31% (0.70) 40.18% (2,395.5)
2 48 Equity 8.41% (0.88) 9.55% (1.95) 9.62% (0.98) 8.06% (4,364)
3 30 Income 52.53% (0.33) 33.89% (0.65) 16.09% (1.17) 21.86% (4,677)
4 23 Balance 8.13% (0.84) 7.42% (1.99) 7.42% (0.69) 7.42% (3,936)
5 18 ELSS 0 6.65% (1.95) 0.29% (1.03) 0
From this table, when all the 119 mutual funds have been taken, reduction requirement
in LOAD is highest with mean as 88.04. However, EXPENSE, RISK (β) and MINII need
almost equal diminution with mean as 40.35, 39.31 and 40.18 respectively. Hence the major
cause of inefficiency has been the load fee charged by the mutual fund companies followed by
expense ratio, minimum initial investment and risk in terms of beta. When only equity
oriented schemes have been analysed, all the inputs need to be reduced by almost same
153
percentage however, the reduction required is quite low. In case of income mutual fund
schemes, load fee is the major cause of inefficiency. As all the ELSS schemes are efficient,
based on the slack values, a minor diminution might be done in expense ratio and risk in
terms of beta.
5.2 PERFORMANCE OF MUTUAL FUNDS- LOGISTIC
REGRESSION MODEL
Stage-two analysis through logistic regression has been performed to investigate the
variations in DEA efficiency scores caused by mutual fund’s attributes as age (LAGE), asset
size (ASSETS), asset ratio (ASSETR), past performance (LSHARPE) and risk, σ (RISK)
using the following equation:
Logit(p) = a + b1 LAGE + b2 ASSETS + b3 ASSETR + b4 LSHARPE + b5 RISK.......(ix)
Where, p = the probability that mutual fund is efficient,
a = constant of the equation,
b1, b2, b3, b4 and b5 are the coefficient of predictor i.e., independent variables,
Equation (ix) has been estimated using efficiency scores of 119 sample mutual fund schemes
obtained in DEA run 1. Dependent variable is 1 if the mutual fund scheme is efficient, 0
otherwise. The results have been discussed below:
i. Block 0; Beginning Block
This block presents results with only the constant without including any coefficients
relating to LAGE, ASSETS, ASSETR, LSHARPE and RISK are entered into the equation.
Logistic regression compares this model with a model including all the independent variables
to determine whether the latter model is more appropriate. The classification table (table 5.21)
below suggests that if nothing is known about dependent variables and speculation of a
mutual fund scheme being inefficient has been done then it would be correct 70.6 percent of
the time.
154
Table 5.21: Classification Table (Block 0)
Observed
Predicted
Efficiency Score
Percentage Correct
01
Score 0
1
Overall Percentage
84
35
0
0
100.0
0.0
70.6
Note: *Constant is included in the model, *the cut value is 0.5
Next it has been analysed as whether each independent variable has improved the
model or not and same has been done in table 5.22, namely variables not in the equation.
LAGE, ASSETR and LSHARPE possess a score of 5.166 (p = 0.023), 4.831 (p = 0.028) and
5.746 (p = 0.017) respectively. Their p value is smaller than 0.05 and thus is significant at 95
percent level of confidence. Hence these three variables significantly contribute to the model
and if included would increase the predictive power of the model. On the other hand score for
ASSETS is 0.856 with p value as 0.355 and for RISK score is 2.486 with p value as 0.115
those being greater than 0.05 is not significant at 95 percent confidence level. Therefore, these
two variables do not significantly contribute to the predictive power of the model. However
overall statistics of the model is significant (p = 0.004) at 95 percent level of confidence.
Table 5.22: Variables not in the Equation
Independent Variables Score df p
LAGE 5.166 1 0.023
ASSETS 0.856 1 0.355
ASSETR 4.831 1 0.028
LSHARPE 5.746 1 0.017
RISK 2.486 1 0.115
Overall Statistics 17.142 5 0.004
ii. Block 1; Enter
In the second step, all the independent variables as LAGE, ASSETS, ASSETR,
LSHARPE and RISK have been included in the model for analysis. From the classification
table generated in this step (table 5.23), by adding all the independent variables, accuracy
level has increased to 79.8 from earlier 70.6 (table 5.19). Therefore, model with all the
independent variables has been termed as the best fitting model.
155
Table 5.23: Classification Table (Block 1)
Observed
Predicted
Efficiency Score
Percentage Correct
01
Score 0
1
Overall Percentage
81
21
3
14
96.4
40.0
79.8
Note: *Constant is included in the model, *The cut value is 0.5
As the inclusion of independent variables has increased the accuracy level therefore,
best fitting model with all the independent variables appears good, also its model fit and
significance has been evaluated from model Chi square.
Model chi-square
Overall significance of the model has been tested using the Model Chi square. Null
hypothesis tested in relation to the overall fit of the model is:
H0: The model with only constant is a good fitting model.
H1: The model with only constant is not a good fitting model (i.e. the independent variables
have a significant effect).
Difference between –2LL for the best-fitting model and –2LL for the null hypothesis
model (in which only constant has been included and all the b values are set to zero) is
distributed like chi squared, with degrees of freedom equal to the number of independent
variables. From table 5.24 below, model chi square has 5 degrees of freedom with a value of
24.548 and a probability, p of 0.00. Thus, it indicate that the model with only constant has a
poor fit and independent variables do have a significant effect and create essentially a best
fitting model.
Table 5.24: Omnibus Tests of Model Coefficients
Chi-Square df p
Step 24.548 5 0.00
Block 24.548 5 0.00
Model 24.548 5 0.00
156
Therefore, it has been determined as independent variables do have a significant
effect. Further, out of five independent variables (i.e., LAGE, ASSETS, ASSETR, LSHARPE
and RISK), how many are significant one has been analysed in table 5.25 namely variables in
the equation as:
Table 5.25: Variables in the Equation
B Wald df p Exp (B)
LAGE -1.284 3.967* 1 0.046 0.277
ASSETS -0.112 0.791 1 0.374 0.894
ASSETR -1.607 5.292* 1 0.021 0.201
LSHARPE 3.039 5.142* 1 0.023 20.879
RISK 0.396 0.530 1 0.467 1.486
Constant 3.582 3.564 1 0.059 35.943
Note: * means significant at 95 percent level of confidence
B values are the logistic coefficients used to create a predictive equation similar to the
b values in the linear regression. This coefficient, B values is negative for LAGE (-1.284),
ASSETS (-0.112) and ASSETR (-1.607) implying that these variables are negatively related
to efficiency score and an increase in any of these, leads to decrease in the efficiency score of
the mutual fund schemes. On the other hand, B coefficient is positive as 3.039 for LSHARPE
and 0.396 for RISK implying that these variables are positively related to efficiency score and
an increase in any one of these leads to an increase in the efficiency score. Significance level
for independent variables has been checked through Wald statistics. Wald statistics has a
chisquare
distribution. Its value for LAGE is 3.967 (p=0.046), ASSETR is 5.292 (p=0.021) and
LSHARPE is 5.142 (p=0.023) that are significant at 95 percent level of confidence. It implies
that, these three independent variables contribute significantly to the model. However, for
ASSETS and RISK, Wald statistics is 0.791 (p=0.374) and 0.530 (p=0.467) respectively, that
is not significant at 95 percent level of confidence and hence these two variables do not
contribute significantly to the model. Therefore, ASSETS and RISK do not have any
significant impact on the efficiency score of the mutual fund schemes.
The extent to which these variables influence the odds ratio i.e., degree of their impact
on dependent variable or efficiency score of the mutual fund schemes has been measured by
Exp(B) column in Table 5.25. If the value in this column exceeds 1, then the odds of an
outcome occurring increase on the other hand, if the figure is less than 1 then any increase in
the independent variable leads to a drop in the odds of the outcome occurring. The EXP(B)
157
value associated with the significant independent variables LAGE is 0.277 implying that if
LAGE increases by one unit then scheme is 0.277 times likely to be efficient. As a result,
chances for efficiency of mutual fund scheme decreases which is also supported by B
coefficient as it is negative for LAGE. Similarly, by increasing ASSETR through one unit,
chances of being less efficient are there as EXP(B) value is 0.201. Also, B coefficient is
negative for this independent variable. However, for LSHARPE, EXP(B) value is 20.879
implying that on increasing the LSHARPE by one unit, scheme is 20.879 times more likely to
be efficient. This result is supported by B coefficient as it is positive for LSHARPE.
Therefore, null hypotheses, H0a i.e., age of the mutual fund schemes is not related to
their efficiency, H0c i.e., asset ratio of the mutual fund schemes is not related to their
efficiency and H0d i.e., past performance of the mutual fund schemes is not related to their
efficiency have been rejected as these three attributes are significantly related to the efficiency
of the mutual fund schemes While age and asset ratio of the mutual fund schemes are
negatively related to their efficiency, the past performance is positively related with their
efficiency. On the other hand, null hypotheses, H0b i.e., asset size of the mutual fund schemes
is not related to their efficiency and H0e i.e., risk of the mutual fund schemes is not related to
their efficiency have been rejected as these two attributes are not significantly related to the
efficiency of the mutual fund schemes. Summarization of the results of hypothesis has been
presented in Annexure G.
5.3. ANALYSIS OF INVESTORS’ BEHAVIOUR
The current study also analyses the investors’ behaviour as one of its objectives is to
study the behaviour of Indian individual investors towards the investment of their savings and
the other is to study their (investors’) perception towards the investment in mutual funds. For
fulfilling these objectives, behaviour of investors towards mutual funds and other investment
options have been analysed and a comparative analysis of mutual funds with respect to other
investment options has been performed with the help of primary data. The data was collected
from two types of investors i.e., mutual fund investors (MFI) and non mutual fund investors
(NMFI). The researcher has obtained final response from 218 MFI and 222 NMFI. Table 5.26
represents the demographic profile of respondents.
The researcher has divided demographic data into six broad categories viz., annual
income, annual savings, age of investors, gender, qualification and profession.
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Table 5.26: Demographic Distribution
CATEGORY NO. OF RESPONDENTS PERCENTAGE
1 ANNUAL INCOME (Rs.)
i Less than 3,00,000 67 15.00%
ii 3,00,000 to 5,00,000 101 23.00%
iii 5,00,000 to 8,00,000 163 37.00%
iv More than 8,00,000 109 25.00%
2 ANNUAL SAVINGS (Rs.)
i Less than 50,000 59 13.00%
ii 50,000 to 1,00,000 113 26.00%
iii 1,00,000 to 1.50,000 119 27.00%
iv More than 1,50,000 149 34.00%
3 AGE (Yrs.)
i Less than 30 yrs. 125 28.00%
ii 31 to 40 yrs. 175 40.00%
iii 41 to 50 Yrs. 117 27.00%
iv More than 50 Yrs. 23 5.00%
4 GENDER
i Male 265 60.00%
ii Female 175 40.00%
5 QUALIFICATION
i Under Graduate 13 3.00%
ii Graduate 64 15.00%
iii Post Graduate 145 33.00%
iv Professional Qualification 218 49.00%
6 PROFESSION
i Private Sector Employee 175 40.00%
ii Government Employee 134 30.00%
iii Business 42 10.00%
iv Professional 89 20.00%
Note: Total number of respondents is 440
After analysing the data, researcher has found that around 62 percent investors of the
sample are having annual income as more than Rs. 5 lakhs and 25 percent investors’ annual
income is more than Rs. 8 lakhs. The researcher has also found that around 87 percent
investors invest more than Rs. 50,000 per annum while the annual savings of 61 percent
investors is more than Rs. 1 lakhs. Also 95 percent investors of the sample are below 50 years
of age and 40 percent of them are in the age bracket of 31 to 40 years. 60 percent of the
respondents are male and rest 40 percent are female. Researcher has found that 97 percent of
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the respondents possess qualification as graduation or higher than that. 49 percent of the
respondents are professionally qualified. Further 70 percent of the respondents are either
private sector employees or government employees and only 10 percent of the respondents
run their own business.
The duration of investment has been analysed in table 5.27. It has been found that
investors invest for different time period for different purposes. They make certain
investments for short term, for medium term and also for long term. The percentage of
investment duration has been calculated taking into consideration all the options picked up by
the respondents as shown in table 5.27. The researcher has been found that the most preferred
time period for investment is long term as most of the respondents i.e., 42 percent invest for
long term period i.e., more than 5 years. Next preferred time period for investment is medium
term as 35 percent respondents invest for medium term i.e., 1 to 5 years while short term is
the least preferred time period for investment as only 23 percent respondents invest for a
period less than one year.
Table 5.27: Number of investors according to Investment Period
Investment Period
Short term
(Less than 1 yr.)
Medium term
(1 to 5 yrs.)
Long term
(More than 5 yrs.)
% of Respondents 23 35 42
5.3.1 INVESTMENT OPTIONS
One of the objectives of the study is to analyse the behaviour of investors towards
various investment options and to study their perception towards the investment in mutual
funds. To achieve these objectives, investors have been asked about the different investment
options in which they currently invest and top three options as per the current investment
amount. The researcher has also asked the investors to identify top three investment options
that will be preferred by them in future if their savings increases. The findings are given in
table 5.28. It was found that most of the investors invest in fixed deposits (FDs) followed by
real estate, mutual funds (MFs), gold/e-gold, post office /national saving certificate (PO/
NSC), public provident fund (PPF), shares, bonds and insurance. Therefore, maximum
number of investors invests in fixed deposits currently. Mutual funds are on the third rank as
per the number of investors investing in them. Also, most of the investors did not consider
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insurance as an investment option and therefore, it was least opted by them. Currently
maximum amount is invested in real estate followed by gold, FDs, shares, mutual funds, PPF,
PO/ NSC, bonds and insurance. Thus, researcher has found that mutual funds have got fifth
rank in terms of amount of investment. For preferred investment option in future, investors
have given first rank to shares followed by real estate and gold. Mutual funds are the fourth
preferred investment option followed by PPF, bonds and insurance. FDs and PO/NSC are the
least preferred investment options.
From the table 5.28, maximum number of investors have opted FDs as one of the
investment options but as per the current investment amount, these are on third rank. Also,
rank of FDs for future preference is very low as eight. After FDs, most of the investors have
chosen real estate as an investment option. Current investment in real estate is maximum and
it is also second preference for future. On the basis of number of investors mutual funds are
on the third rank, but for current and preferred investment amount, the same is on fifth and
fourth place respectively. Gold/ e-gold is on fourth rank on the basis of number of investors.
But on the basis of current investment amount, it is on second rank and for future preference
this investment avenue occupies third position after shares and real estate. PO/NSC possesses
fifth rank as per the number of investors but the current investment amount in this avenue is
on seventh place and it is the least preferred investment option for the future. Ranking of PPF
as per the number of investors, current investment amount and future preference is almost
same as sixth, fifth and sixth respectively. Number of investors for shares is less on seventh
rank however, the current investment amount in it is high on fourth number and it is the most
preferred investment option for future. Investors for bonds are much less on eighth rank but
the current investment amount and future preference for it lies on eighth and sixth rank
respectively. For insurance, the number of investors and current investment amount is least on
ninth rank however it is the sixth preference for the future.
Also it is evident from the table 5.28 that the number of investors are high for FDs, but
the currently the amount of investment is highest in real estate. Also for future highest
preferred option are shares. In the same way, investors investing in shares are less i.e., on
seventh rank but current amount invested on seventh rank is for PO/ NSC whereas, insurance
and FDs are the least preferred for future. In this way the researcher has found that if for some
investment option number of investors is highest it does not ensure that the amount of
investment is also high in it or it is also the highest preference for the future.
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Table 5.28: No. of Investors for each Avenue and their current and preferred investment options
Further, the investors were also asked that how they make their investments. The
results of this parameter have been shown in table 5.29. It was found that majority of the
investors i.e., 40 percent take the help of financial advisor or broker for their investment while
40 percent of investors told that they prefer to make investment on their own. A very few i.e.,
13 percent investors invest with the help of family and friends.
Table 5.29: Method of investment
Investment Method Financial Advisor/ Broker Self Family & Friends
% of Respondents 47 40 13
PARAMETERS FOR SELECTING INVESTMENT OPTIONS
Investors look at various parameters such as return, risk, liquidity, tax savings and
procedural understanding of investment options for taking the decision of investment.
Therefore, respondents were asked to rate each investment option on five parameters viz.
return, risk, liquidity, tax savings and procedural understanding on the scale of 1 to 5, where
1, 2, 3, 4 and 5 stands for very low, low, moderate, high and 5 very high respectively. The
descriptive statistics of these scores has been provided in the table 5.30.
S.
No.
Option
Ranking as per
No. of Investors
Ranking as per
amount of investment
Ranking as per future
preference of investors
Score Rank Score Rank Score Rank
1 FD 293 1 267 3 25 8
2 Insurance 114 9 98 9 44 7
3 P O/ NSC 173 5 128 7 17 9
4 Gold/e- gold 185 4 415 2 647 3
5 Bonds 134 8 103 8 54 6
6 PPF 168 6 200 6 75 5
7 Real Estate 255 2 746 1 736 2
8 MFs 218 3 206 5 143 4
9 Shares 139 7 228 4 749 1
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Table 5.30: Descriptive Statistics for Five Parameters of Investment Options
Investment
Options
Description Return Risk Liquidity
Tax
Saving
Procedural
Understanding
FDs
Score Sum 895 504 1810 1838 2124
Score Mean 2.03 1.15 4.11 4.18 4.83
Std. Dev. 0.66 0.35 0.71 0.64 0.39
Insurance
Score Sum 504 1340 884 2130 906
Score Mean 1.15 3.05 2.01 4.84 2.06
Std. Dev. 0.35 0.55 0.54 0.38 0.71
PO/NSC
Score Sum 906 513 1354 1798 1812
Score Mean 2.06 1.17 3.08 4.09 4.12
Std. Dev. 0.62 0.37 0.65 0.68 0.63
Gold/ e-gold
Score Sum 1826 890 905 525 1384
Score Mean 4.15 2.02 2.06 1.19 3.15
Std. Dev. 0.58 0.67 0.59 0.40 0.65
Bonds
Score Sum 1378 892 1364 1362 1360
Score Mean 3.13 2.03 3.10 3.10 3.09
Std. Dev. 0.65 0.66 0.65 0.66 0.67
PPF
Score Sum 1367 516 916 1812 2151
Score Mean 3.11 1.17 2.08 4.12 4.89
Std. Dev. 0.68 0.38 0.70 0.71 0.31
Real Estate
Score Sum 2134 1368 520 1814 906
Score Mean 4.85 3.11 1.18 4.12 2.06
Std. Dev. 0.36 0.57 0.39 0.47 0.41
MFs
Score Sum 1823 1819 1825 1364 900
Score Mean 4.14 4.13 4.15 3.10 2.05
Std. Dev. 0.45 0.42 0.45 0.56 0.46
Shares
Score Sum 2155 2159 1808 912 522
Score Mean 4.90 4.91 4.11 2.07 1.19
Std. Dev. 0.30 0.29 0.45 0.47 0.39
Ranking of nine investment options as FDs, insurance, PO/NSC, gold/e-gold, bonds,
PPF, real estate, Mutual funds and shares on the basis of five parameters i.e., return, risk,
liquidity, tax savings and procedural understanding has been depicted in table 5.31.
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Table 5.31: Rank for Investment Options as per the Investors’ Perception on Five Parameters
Investment
Options
Rank as per score mean
Return Risk Liquidity Tax Saving
Procedural
Understanding
FDs 8 8 2 2 2
Insurance 9 4 7 1 6
PO/ NSC 7 7 4 4 3
Gold/e- gold 3 6 6 7 4
Bonds 5 5 3 5 5
PPF 6 7 5 3 1
Real Estate 2 3 8 3 6
MFs 4 2 1 5 7
Shares 1 1 2 6 8
Note: 1 denotes the highest and 9 denotes the lowest rank
i. RETURN
Return is the profit generated from investment. In other words, it is the capital
appreciation in the investment. The researcher has found that the score mean for parameter
return is highest for shares (4.9) followed by real estate (4.85) and gold (4.15) which means as
per investors’ perception, shares are the highest return giving investment option followed by
real estate and gold. Mutual funds with mean score 4.14, lie on the fourth rank as per the
investors’ perception for return. Score mean for Bonds is 3.13 and they hold fifth rank, public
provident funds and post office savings/national saving certificate with score mean as 3.11
and 2.06 respectively, lies on sixth and seventh rank. The researcher has found that investors
do not consider fixed deposits and insurance as return oriented investment options, that is why
they have given least scores to these i.e., eighth and ninth respectively. Therefore, the
researcher can say that investors consider shares, real estate, gold/e-gold and mutual funds as
highest return giving investment options. Bonds and public provident funds are perceived as
moderate on the return parameter. The lowest return has been considered for post office
savings/ national saving certificate, fixed deposits and insurance.
ii. RISK
Risk is the uncertainty of return associated with any investment i.e., it is the possibility
that the actual return on an investment will be different from its expected return. Towards
risk, investors perceive that shares are the most risky investment avenue with score mean as
4.91. Mutual funds (4.13) and real estate (3.11) have been ranked second and third
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respectively. Insurance, bonds and gold/e- gold with score mean as 3.05, 2.03 and 2.02
respectively, are on the fourth, fifth and sixth rank. The score mean of public provident funds,
post office savings/ national saving certificate and fixed deposits is 1.17, 1.17 and 1.15
respectively. Therefore, investors perceive that risk involved in the investment of public
provident funds and post office savings/ national saving certificate is same and these hold the
seventh rank among all the nine investment options. Also, fixed deposits have been perceived
as the least risk bearing Investment Avenue. Therefore, as per the investors’ perception,
shares, Mutual funds and real estate are the highest risk bearing investment options. Risk
involved in the investment of insurance, bonds and gold/e-gold has been perceived as
moderate whereas, public provident funds, post office savings/ national saving certificate and
fixed deposits have been perceived as the lowest risk bearing investment options.
iii. LIQUIDITY
Liquidity is the ability of an investment option to be converted into cash quickly
without any price discount. According to the investors, mutual funds are the highest liquid
investment option among all with score mean as 4.15. Shares and fixed deposits with scores
mean as 4.11 lie on the second position on this parameter. Bonds (3.10), post office savings/
national saving certificate (3.08) and Real estate (2.08) hold third, fourth and fifth status
respectively followed by gold/e-gold and insurance with score mean as 2.06 and 2.01
respectively. Real estate (1.1.8) has been perceived as the least liquid investment opportunity
and it lie on the eighth rank. Therefore, from the analysis the researcher has found that mutual
funds and shares are the highest liquid investment options. Bonds, post office savings/
national saving certificate and public provident funds are the moderate investment avenue on
liquidity and gold/e-gold, insurance and real estate have been considered as the least liquid
investment option.
iv. TAX SAVINGS
There are certain investment options that provide tax benefit for investors as these are
deductible from taxable income while calculation of Income Tax. According to investors’
perception, insurance is the highest tax saving investment option with score mean as 4.84
followed by fixed deposits with score mean as 4.18. Public provident funds and real estate
have been considered equal on this parameter with mean score as 4.12 and hence, these
investment options lie on the third rank. post office savings/ national saving certificate with
mean score as 4.09, hold the fourth status. Mutual funds and bonds have been perceived
165
almost same on tax savings with score mean as 3.10 and hence, these investment options hold
the fifth position. Score mean for shares and gold/e- gold is 2.07 and 1.19 respectively and
these hold the sixth and seventh rank respectively. Therefore, investors perceive insurance,
fixed deposits, public provident funds and real estate as the most tax saving avenue. Post
office savings/ national saving certificate, bonds and mutual funds have been perceived as
moderate whereas, shares and gold/ e gold have lied as lowest on tax saving parameter.
v. PROCEDURAL UNDERSTANDING
Procedural understanding for any investment option stands for the clarity in the
procedure while investing in it. The researcher has found that among investors, procedural
understanding is highest for public provident funds with score mean as 4.89. Fixed deposits
(4.83), post office savings/ national saving certificate (4.12), gold/e-gold (3.15) and bonds
(3.09) have attained second, third, fourth and fifth rank respectively among all investment
avenues. Perception for the insurance and real estate is almost same on procedural
understanding with score mean as 2.06. Procedural understanding for mutual funds (2.05) and
shares (1.19) is quite low and these investment avenues attain seventh and eighth rank
respectively on this parameter. Therefore, investors possess maximum clarity in procedure of
investment for public provident funds, fixed deposits and post office savings/ national saving
certificate. Procedural clarity for the investment in gold/e- gold, bonds and real estate is
moderate. However, procedural understanding for the investment in mutual funds and shares
is least among investors.
Further, for each parameter i.e., return, risk, liquidity, tax saving and procedural
understanding, the nine investment options have been classified into three categories as
highest, moderate and lowest on the basis of their ranking. Investment options possessing
ranks from first to third lie in highest category, from fourth to sixth lie in moderate one while
those on seventh, eighth and ninth rank lie in the lowest category. The same has been
represented in table 5.32. Researcher can say that the sequence of investment options from
most risky to least risky is almost same as that for most return oriented to least return
oriented. In other words, the investment options as shares, mutual funds and real estate have
been considered as highest risk bearing and also the most lucrative from return perspective.
Similarly, investment avenues as post office savings/ national saving certificate and fixed
deposits have been perceived as least risky as well as least return generating investment
avenues. On the other hand, investment avenues as shares, mutual funds and gold/e-gold with
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high and moderate category for return and risk lack in procedural understanding. Also, post
office savings/ national saving certificate, fixed deposits and public provident funds with
lowest return and risk possess highest procedural understanding among investors.
Table 5.32: Classification of investment options based on different parameters
PARAMETER HIGHEST MODERATE LOWEST
Return
Shares, real estate and
gold/ e-gold
mutual funds, bonds and
PPF
PO/ NSC, fixed
deposits and
Insurance
Risk
Shares, mutual funds
and real estate
Insurance, bonds and
gold/e-gold
PPF, PO/ NSC and
fixed deposits
Liquidity
Mutual funds, shares,
fixed deposits and
bonds
PO/ NSC, PPF and
gold/e-gold
Insurance and real
estate
Tax Saving
Insurance, fixed
deposits, PPF and real
estate
PO/ NSC, bonds, mutual
funds and shares
Gold/ e-gold
Procedural
Understanding
PPF, fixed deposits and
PO/ NSC
Gold/e-gold, bonds and
insurance and real estate
mutual funds and
shares
COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES
Among all the nine investment options taken for the study, the researcher has found
that mutual funds lie on the fourth rank on the parameter return. These are considered having
high risk and are on second rank on this parameter. However, investors perceive that mutual
funds are highest liquid investment options among all and have attained first rank on liquidity
parameter. Whereas, it has not been perceived as a good tax saving Investment Avenue by the
investors and on this parameter, they attain fifth rank. Also, procedural clarity for the
investment in mutual funds is quite low and it has lied on the seventh rank on this parameter.
In this way, perception of individual investors towards investment options has been
analysed on the basis of their parameters. As discussed above, perception for each parameter
is highest for some investment options, moderate for others and lowest for some others. For
example, perception for the return is highest for shares, real estate, gold/ e gold and mutual
funds, moderate for bonds and public provident funds and lowest return for post office
savings/ national saving certificate, fixed deposits and insurance by the investors. It might be
possible that there is no significant difference between these investment options on the
parameter return. If it is so then, return is considered almost same by the investors for fixed
167
deposits, insurance, post office savings/ national saving certificate, gold/ e-gold, bonds, public
provident funds, real estate, mutual funds and shares. The same case might be there with other
parameters also as risk, liquidity, tax savings and procedural understanding. Therefore, this
matter of huge concern has been explored as whether there is a significant difference in the
perception of investors for return, risk, liquidity, tax savings and procedural understanding on
all the nine investment options or not. The same has been analysed through Analysis of
Variance (ANOVA) and has been discussed below.
ANALYSIS OF VARIANCE (ANOVA)
One way ANOVA has been conducted to test the difference in perception of investors
on five parameters as return, risk, liquidity, tax savings and procedural understanding for nine
investment options as fixed deposits, insurance, post office savings/ national saving
certificate, gold/e-gold, bonds, public provident funds, real estate, mutual funds and shares.
Hypothesis tested for the same is,
H0: There is no significant difference in the perception of investors for return, risk,
liquidity, tax savings and procedural understanding for nine investment options.
From the table 5.33, depicting ANOVA (Analysis of Variance) it can be observed that
the F ratios for return, risk, liquidity, tax saving and procedural understanding are quite high
as 1350.0, 1673.0, 782.3, 937.0 and 1356.0 respectively with p value as 0.00 that is
statistically significant at 95 percent significance level. Thus, the null hypothesis is rejected
and it can be interpreted that the perception of investors differs significantly for five
parameters on nine investment options. In other words, return of at least one of the nine
investment options is significantly different from the returns of the other investment options.
In the same way, risk, liquidity, tax savings and procedural understanding of at least one of
the nine investment options is significantly different from that of other investment options.
Table 5.33: ANOVA (Analysis of Variance) on five parameters
S. No. Parameters F Ratio p
1 Return 1350.0 0.00
2 Risk 1673.0 0.00
3 Liquidity 782.3 0.00
4 Tax Savings 937.0 0.00
5 Procedural Understanding 1356.0 0.00
Note: *Degree of freedom (D.F.) associated with variance between the groups is 8 (9-1 = 8)
and with variance within groups is 3951 [9*(440 - 1) = 3951].
168
However, from the table 5.33, it cannot be specified that exactly between which
investment options this difference in the score means lies. For example, whether there is a
significant difference between the returns of fixed deposits and insurance or fixed deposits
and shares or between all the nine investment options. To answer this question, a Post-hoc
analysis has been done. Post-hoc test is conducted after knowing that a significant difference
lies among the means compared. The Post Hoc comparisons has been done using Tukey
"honestly significant difference (HSD)" test. In this, the score mean of each investment option
has been compared one by one with the scores mean of all other investment options and their
significance level has been checked. This exercise has been performed for all the five
parameters separately. From the Tukey test, homogenous subsets (HS) of the investment
options have been obtained. These are the subsets with investment options that do not possess
any significant difference between their score means regarding the perception of any
parameter. Multiple comparison and HS for all the parameters viz. return, risk, liquidity, tax
saving and procedural understanding have been discussed below in detail.
i. RETURN
a. Multiple Comparisons
Table 5.34 indicates the result of Tukey test for the parameter return. First, the return
score mean of fixed deposits has been compared with that of other eight investment options.
The difference between the return score means of fixed deposits and insurance is 0.8853 with
p value as 0.00 which is significant at 95 percent level of confidence. That means there is a
significant difference between the investors’ perception about the returns of fixed deposits
and insurance. The difference between the score mean of fixed deposits and post office
savings/ national saving certificate is 0.0275 with p value as 1. This is insignificant at 95
percent level of confidence implying that there is no significant difference between the score
means of fixed deposits and post office savings/national saving certificate. Similarly, the
return score mean of fixed deposits and gold/e-gold, bonds, public provident funds, real
estate, mutual funds and shares differ by 2.1193, 1.1009, 1.0734, 2.8211, 2.1101 and 2.8670
respectively with p value as 0 which is significant at 95 percent level of confidence. It implies
that the returns of fixed deposits are significantly different from the returns of gold/e-gold,
bonds, public provident funds, real estate, mutual funds and shares. Therefore, the researcher
has found that there is a significant difference between fixed deposits and other investment
options except post office savings/national saving certificate with respect to return.
169
Second, comparing the return score mean of insurance with other investment options it
is found that the difference in its score mean from fixed deposits, post office savings/ national
saving certificate, gold/e- gold, bonds, public provident funds, real estate, mutual funds and
shares is 0.8853, 0.9128, 3.0046, 1.9862, 1.9587, 3.7064, 2.9954 and 3.7523 respectively.
This is significant at 95 percent level of confidence (p=0) and hence a significant difference
lies between the return score mean of insurance from other eight investment options. Third,
the difference in the return score mean of post office savings/ national saving certificate and
fixed deposits is 0.0275 that is not significant at 95 percent level of confidence (p=1)
implying that no significant difference lies between the score mean of these two investment
options. However, the return score mean of post office savings/national saving certificate
differs significantly from that of gold/e-gold (2.0917), bonds (1.0734), public provident funds
(1.0459), real estate (2.7936), mutual funds (2.0826) and shares (2.8395) with p value as 0.
On comparing the return score mean of gold/e-gold with other investment options, the
researcher has found that it differs significantly at 95 percent level of confidence (p=0) from
that of fixed deposits (2.1193), insurance (3.0046), post office savings/national saving
certificate (2.0918), bonds (1.0184), public provident funds (1.0459), real estate (0.7018) and
shares (0.7477). However, its score mean differs from mutual funds by 0.0091 that is not
significant at 95 percent level of confidence (p=1).
Fifth, difference between the score mean of bonds from fixed deposits, insurance, post
office savings/ national saving certificate, gold/e-gold, real estate, mutual funds and shares is
1.1009, 1.9862, 1.0734, 1.0184, 1.7202, 1.0092 and 1.7661 respectively that is significant at
95 percent level of confidence (p=0). However, its return score mean does not differ
significantly from that of bonds and public provident funds (0.0275). Hence the return of
bonds is significantly different from all investment options considered in the study except
public provident funds. The return score mean of public provident funds is significantly
different from that of fixed deposits, insurance, post office savings/national saving certificate
and gold/e-gold, real estate, mutual funds and shares with a difference of 1.0734, 1.9587,
1.0459, 1.0459, 1.7477, 1.0367 and 1.7936 respectively (p=0). Also, the difference in the
return score mean of public provident funds and bonds is 0.0275 that is not significant at 95
percent level of confidence (p=1). Seventh, the difference in the return score means of real
estate from fixed deposits, insurance, post office savings/national saving certificate, gold/egold,
bonds, public provident funds and mutual funds are 2.8211, 3.7064, 2.7936, 0.7018,
1.7202, 1.7477 and 0.7110 respectively with (p=0) and hence are statistically significant at 95
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percent level of confidence. However, its return score mean differs from shares by 0.0459
(p=0.99) that is not statistically significant at 95 percent level of confidence. It implies that
the return of real estate differs significantly from all investment options except shares.
The return score mean of mutual funds significantly differs from fixed deposits
(2.1101), insurance (2.9954), post office savings/ national saving certificate (2.0826), bonds
(1.0092), public provident funds (1.0367), real estate (0.7110) and shares (0.7569) with a p
value as 0. However, its return score differs from that of gold/e-gold by 0.0092 (p=1) and
hence is not significant at 95 percent level of confidence. Ninth, the return score mean of
shares is significantly different from that of fixed deposits (2.8670), insurance (3.7523), post
office savings/national saving certificate (2.8395), gold/e-gold (0.7477), bonds (1.7661),
public provident funds (1.7936) and mutual funds (0.7569) with a p value as 0. However its
score mean differs from that of real estate by 0.0459 that is not significant at 95 percent level
of confidence (p=0.99) and hence no significant difference lies between the return of these
two investment avenues. In this way, from the multiple comparison of nine investment
options on the score mean of return the areas of significant and insignificant differences has
been obtained. By compiling the above result, homogenous subsets of the investment options,
which do not possess significant difference in the return mean scores, have been formed.
b. Homogenous subsets (HS)
Table 5.35 represents five homogenous subsets (HS) for the parameter return. The first
HS contain only insurance. It implies that investors consider that the return obtained from
insurance is totally different from that of other investment options as fixed deposits, post
office savings/national saving certificate, gold/e-gold, bonds, public provident funds, real
estate, mutual funds and shares. Second HS possess fixed deposits and post office
savings/national saving certificate. Therefore, investors perceive that the return gained by
investing in these two investment options is almost same and different from the rest. Third HS
consists of public provident funds and bonds. Investors perceive that the investment in these
two investment options leads to almost same return. Mutual funds and gold/e-gold make up
the fourth HS and return achieved from these investment avenues is perceived almost same by
the investors. In the same way, Real estate and Shares compose fifth HS and therefore,
investors perceive that the returns are almost same from these two investment options. In this
way, the researcher has obtained five HS from nine investment options for the parameter
return.
171
Table 5.34: Post Hoc Test (Tukey HSD); Parameter: RETURN
(I)
FDs
(J) Investment Options Insurance PO/NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 0.8853* -0.0275 -2.1193* -1.1009* -1.0734* -2.8211* -2.1101*
-2.8670*
p 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00
(I)
Insurance
(J) Investment Options FDs PO/ NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference -0.8853* -0.9128* -3.0046* -1.9862* -1.9587* -3.7064* -2.9954*
-3.7523*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(I)
PO/ NSC
(J) Investment Options FDs Insurance Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 0.0275 0.9128* -2.0917* -1.0734* -1.0459* -2.7936* -2.0826* -2.8395*
p 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(I)
Gold/egold
(J) Investment Options FDs Insurance PO/ NSC Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 2.1193* 3.0046* 2.0918* 1.0184* 1.0459* -0.7018* 0.0091 -0.7477*
p 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00
(I) Bonds (J) Investment Options FDs Insurance PO/NSC Gold/e-gold PPF Real Estate MFs
Shares
(I-J) Mean Difference 1.1009* 1.9862* 1.0734* -1.0184* 0.0275 -1.7202* -1.0092* -1.7661*
p 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00
(I)
PPF
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds Real Estate MFs Shares
(I-J) Mean Difference 1.0734* 1.9587* 1.0459* -1.0459* -0.0275 -1.7477* -1.0367* -1.7936*
p 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00
172
(I) Real
Estate
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF M Fs Shares
(I-J) Mean Difference 2.8211* 3.7064* 2.7936* 0.7018* 1.7202* 1.7477* 0.7110* -0.0459
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.99
(I)
MFs
(J) Investment Options FDs Insurance PO/NSC Gold/e-gold Bonds PPF Real estate Shares
(I-J) Mean Difference 2.1101* 2.9954* 2.0826* -0.0092 1.0092* 1.0367* -0.7110* -0.7569*
p 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00
(I)
Shares
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF Real estate M Fs
(I-J) Mean Difference 2.8670* 3.7523* 2.8395* 0.7477* 1.7661* 1.7936* 0.0459 0.7569*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.99 0.00
Note: * means significant at 95 percent level of confidence
Table 5.35: Homogeneous Subsets; Parameter RETURN
HOMOGENEOUS SUBSETS
(HS)
HS1 HS2 HS3 HS4 HS5
INVESTMENT OPTIONS Insurance
Fixed deposits
and PO/NSC
Public provident
funds and bonds
Mutual funds and
gold/e-gold
Real estate and
shares
173
ii. RISK
a. Multiple Comparisons
Result of Tukey test for the parameter risk has been indicated in table 5.36. Multiple
comparisons have been performed nine times for all the nine investment options separately.
First, the risk score mean of FDs has been compared with all other eight investment options.
Its difference is 1.8991, 0.8762, 0.8807, 1.9633, 2.9862 and 3.7615 respectively from that of
insurance, gold/e-gold, bonds, real estate, MFs and shares which is statistically significant at
95 percent level of confidence (p=0) implying that its risk score mean is significantly different
from the score means of these investment options. Further, the difference in the risk score
mean of FDs from PO/NSC and public provident funds are 0.0184 and 0.0275 respectively
which is statistically insignificant (p=1). Therefore, the risk score of FDs is not significantly
different from these two investment options. Second, the risk score mean of insurance is
significantly different from that of FDs (1.8991), PO/NSC (1.8807), gold/e-gold (1.0229),
bonds (1.0184), public provident funds (1.8716), MFs (1.0872) and shares (1.8624) with p as
0. However, it do not differ significantly with that of real estate (0.0642, p=0.91).
Third, on comparing the risk score mean of PO/NSC from that of other investment
options, the researcher has found that its difference from score mean of insurance, gold/egold,
bonds, real estate, MFs and shares is 1.8807, 0.8578 0.8624, 1.9450, 2.9679 and 3.7431
respectively that is statistically significant at 95 percent level of confidence (p=0). However,
it is not significantly different from that of FDs (0.0184) and public provident funds (0.0092)
with a p value as 1. Fourth, the the risk score mean of gold/e-gold differs significantly from
that of FD (8762), insurance (1.0230), PO/NSC (0.8578), public provident funds (0.8486),
real estate (1.0872), MFs (2.1101) and shares (2.8853) with p as 0. However, it does not differ
significantly from bonds with a value of 0.0046 (p=1).
Fifth, the risk score mean of bonds significantly differs from that of FDs (0.8807),
insurance (1.0184), PO/ NSC (0.8624), public provident funds (0.8532), real estate (1.0826),
MFs (2.1055) and shares (2.8807) with p as 0. However it does not possess significant
difference from gold/e-gold (0.0046) with p as 1. Sixth, the risk score mean of public
provident funds differs from that of insurance, gold/e-gold, bonds, real estate, MFs and shares
by 1.8716, 0.8486, 0.8532, 1.9358, 2.9587 and 3.7339 respectively, (p=0) which is
statistically significant at 95 percent level of confidence. However, its risk score mean differs
174
from FDs and PO/NSC by 0.0275 and 0.0092 respectively which is not statistically significant
(p=1). Seventh, on comparing the risk score mean of real estate with other investment options,
the researcher has found that it possess significant difference from FDs (1.9633), PO/NSC
(1.9450), gold/e-gold (1.0872), bonds (1.0826), public provident funds (1.9358), MFs
(1.0230) and shares (1.7982) with p as 0. However, its risk score mean does not differ
significantly from insurance (0.0642) with p as 0.91. Eight, on comparing the risk score mean
of MFs from other investment options, researcher has found that it differs significantly from
FDs (2.9862), insurance (1.0872), PO/ NSC (2.9679), gold/e-gold (2.1101), bonds (2.1055),
public provident funds (2.9587), real estate (1.0229) and shares (0.7752) with a p value of 0.
It implies that risk score mean of MFs differs significantly from all other investment options.
Similarly, the difference in the score mean of shares with that of FDs, insurance, PO/NSC,
gold/e-gold, bonds, public provident funds, real estate and MFs is 3.7615, 1.8624, 3.7431,
2.8853, 2.8807, 3.7340, 1.7982 and 0.7752 respectively (p=0) that is statistically significant at
95 percent level of confidence. It implies that the risk of shares is significantly different from
the rest eight investment options.
In this manner, with the help of multiple comparisons of nine investment options,
vicinity for significant and insignificant differences of risk score means has been obtained. By
compiling the above result, homogenous subsets of the investment options, which do not
possess significant difference in the risk score mean, have been formed.
b. Homogenous subsets (HS)
For the parameter risk, five homogeneous subsets (HS) from the nine investment
options have been obtained (table 5.37). First HS include public provident funds, PO/NSC
and FDs. Investors perceive that the risk involved in the investment of these three avenues is
almost equal. The second HS possess bonds and gold/e-gold implying that investors consider
risk involved in the investment of these two investment options is also approximately same
and different from that of public provident funds, PO/NSC, FDs, real estate, insurance, MFs
and shares. Real estate and insurance comprise of the third HS. Therefore, risk implicated in
the investment of these two is on the same level. The fourth HS consists of MFs only. That
means investors consider the risk drawn in MFs unique and totally different from all other
investment options. Similarly, shares compose the fifth HS and hence risk implicated from the
investment in shares is perceived as distinctive and different from all other investment options
as public provident funds, PO/NSC, FDs, bonds, gold/e-gold, real estate, insurance and MFs.
175
Table 5.36: Post Hoc Test (Tukey HSD); Parameter: RISK
(I)
FDs
(J) Investment Options Insurance PO/NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference -1.8991* -0.0184 -0.8762* -0.8807* -0.0275 -1.9633* -2.9862* -3.7615*
p 0.00 1.00 0.00 0.00 1.00 0.00 0.00 0.00
(I)
Insurance
(J) Investment Options FDs PO/ NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 1.8991* 1.8807* 1.0229* 1.0184* 1.8716* -0.0642 -1.0872* -1.8624*
p 0.00 0.00 0.00 0.00 0.00 0.91 0.00 0.00
(I) PO/
NSC
(J) Investment Options FDs Insurance Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 0.0184 -1.8807* -0.8578* -0.8624* -0.0092 -1.9450* -2.9679* -3.7431*
p 1.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00
(I)
Gold/egold
(J) Investment Options FDs Insurance PO/ NSC Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 0.8762* -1.0230* 0.8578* -0.0046 0.8486* -1.0872* -2.1101* -2.8853*
p 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00
(I) Bonds (J) Investment Options FDs Insurance PO/NSC Gold/e-gold PPF Real Estate MFs
Shares
(I-J) Mean Difference 0.8807* -1.0184* 0.8624* 0.0046 0.8532* -1.0826* -2.1055* -2.8807*
p 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00
(I)
PPF
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds Real Estate MFs Shares
(I-J) Mean Difference 0.0275 -1.8716* 0.0092 -0.8486* -0.8532* -1.9358* -2.9587* -3.7339*
p 1.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00
176
(I) Real
Estate
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF M Fs Shares
(I-J) Mean Difference 1.9633* 0.0642 1.9450* 1.0872* 1.0826* 1.9358* -1.0230* -1.7982*
p 0.00 0.91 0.00 0.00 0.00 0.00 0.00 0.00
(I)
MFs
(J) Investment Options FDs Insurance PO/NSC Gold/e-gold Bonds PPF Real estate Shares
(I-J) Mean Difference 2.9862* 1.0872* 2.9679* 2.1101* 2.1055* 2.9587* 1.0229* -0.7752*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(I)
Shares
(J) Investment Options FD Insurance PO/ NSC Gold/e-gold Bonds PPF Real estate M Fs
(I-J) Mean Difference 3.7615* 1.8624* 3.7431* 2.8853* 2.8807* 3.7340* 1.7982* 0.7752*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Note: * means significant at 95 percent level of confidence
Table 5.37: Homogeneous Subsets; Parameter RISK
HOMOGENEOUS SUBSETS
(HS)
HS1 HS2 HS3 HS4 HS5
INVESTMENT OPTIONS
Public provident
funds, PO/NSC and
fixed deposits
Bonds and gold/egold
Real estate and
insurance
Mutual funds Shares
177
iii. LIQUIDITY
a. Multiple Comparisons
The researcher has indicated the result of Tukey test for the parameter liquidity in
table 5.38. Multiple comparisons have been performed nine times for all the nine investment
options separately. First, the difference between liquidity score mean of FDs from insurance
(2.1055), PO/NSC (1.0367), gold/e-gold (2.0596), bonds (1.0138), PPF (2.0321) and real
estate (2.9312) is significant at 95 percent level of confidence (p=0). However, its score mean
differs from mutual funds and shares by 0.0321 and 0.0046 respectively that is insignificant at
95 percent level of confidence (p=1). Second, the liquidity score mean of insurance differs
from FDs, PO/NSC, bonds, real estate, mutual funds and shares with a value of 2.1055,
1.0688, 1.0917, 0.8257, 2.1376 and 2.1009 respectively that are significant at 95 percent level
of confidence (p=0). Further, its score mean does not differ significantly from gold/e-gold
(0.0459) and PPF (0.0734) with p values as 0.99 and 0.93 respectively.
Third, on comparing the the liquidity score mean of PO/NSC with other eight
investment options, researcher has found that it differs significantly from FDs (1.0367),
insurance (1.0688), gold/e-gold (1.0229), PPF (0.9954), real estate (1.8945), mutual funds
(1.0688) and shares (1.0321) with p as 0. However, it does not differ significantly from bonds
(0.0229) with p value as 1. In a similar manner, liquidity score mean of gold/e-gold is
significantly different from that of FD (2.0596), PO/NSC (1.0229), bonds (1.0459), real estate
(0.8716), mutual funds (2.0917) and shares (2.0551) with p as 0. However, it differs from
insurance and PPF by 0.0459 (p=0.99) and 0.0275 (p=1) respectively that is not significant at
95 percent level of confidence. It implies that liquidity score means of gold/ e gold does not
differ significantly from these two investment options.
The researcher has found that the liquidity score mean of bonds differs significantly
from FDs (1.0138), insurance (1.0917), gold/e-gold (1.0459), PPF (1.0184), real estate
(1.9174), mutual funds (1.0459) and shares (1.0092) with p as 0. However, it does not differ
significantly from PO/NSC (0.0229) with p as 1. Sixth, the difference in the mean score of
PPF with that of FDs, PO/NSC, bonds, real estate, mutual funds and shares is 2.0321, 0.9954,
1.0184, 0.8991, 2.0642 and 2.0275 respectively that is significant at 95 percent level of
confidence (p=0). However, the difference is insignificant from the liquidity score mean of
insurance (0.0734) and gold/e-gold (0.0275) with p value as 0.93.
178
Seventh, on comparing the liquidity score mean of real estate from other investment
options, the researcher has found that it significantly differs from the score mean of FDs
(2.9312), insurance (0.8257), PO/NSC (1.8945), gold/e-gold (0.8716), bonds (1.9174), PPF
(0.8991), mutual funds (2.9633) and shares (2.9266) with p as 0 implying that the liquidity
score mean of real estate are significantly different from all other investment avenues. Eight,
the liquidity score mean of mutual funds differs from that of insurance, PO/NSC, gold/e-gold,
bonds, PPF and real estate with a value of 2.1376, 1.0688, 2.0917, 1.0459, 2.0642, and 2.9633
that is significant at 5 percent confidence level with a p as 0. However, it does not differ
significantly from that of FDs (0.0321) and shares (0.0367) with a p value as 1.00 and 0.99
respectively. Ninth, liquidity score mean of shares significantly differs from that of insurance
(2.1009), PO/NSC (1.0321), gold/e-gold (2.0551), bonds (1.0092), PPF (2.0275) and real
estate (2.9266) with p as 0. However, it does not differ significantly from that of FDs (0.0046)
and mutual funds (0.0367) with p value as 1.00 and 0.99 respectively.
In this manner, from the multiple comparison of nine investment options on the score
mean of liquidity, researcher has obtained the areas of significant and insignificant differences
on nine investment options viz. FDs, insurance, PO/ NSC, gold/ e gold, bonds, PPF, real
estate, mutual funds and shares. By compiling the above result, homogenous subsets of these
investment options, which do not possess significant difference in the liquidity score means,
have been formed.
b. Homogenous subsets (HS)
Result for the Tukey test on the parameter liquidity has been described in the table
5.39. From the nine investment options, the researcher has obtained four homogeneous
subsets (HS) on the parameter liquidity. The first HS consists of only real estate implying
that, investors perceive the liquidity of real estate unique and totally different from all other
investment options viz., PPF, gold/e-gold, insurance, bonds, PO/NSC, mutual funds, FDs and
shares. The second HS comprises of PPF, gold/e-gold and insurance. It means, investors
consider the liquidity of PPF, gold/e-gold and insurance as almost identical. Bonds and
PO/NSC embrace the third HS and hence, investors recognise these two investment avenues
almost same on the parameter liquidity. Fourth HS comprises of mutual funds, FDs and shares
and investors perceive them on the same level for the parameter liquidity. That is, investors
recognise that these three investment options are almost equally liquid.
179
Table 5.38: Post Hoc Test (Tukey HSD); Parameter: LIQUIDITY
(I)
FDs
(J) Investment Options Insurance PO/NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 2.1055* 1.0367* 2.0596* 1.0138* 2.0321* 2.9312* -0.0321 0.0046
p 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.00
(I)
Insurance
(J) Investment Options FDs PO/ NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference -2.1055* -1.0688* -0.0459 -1.0917* -0.0734 0.8257* -2.1376* -2.1009*
p 0.00 0.00 0.99 0.00 0.93 0.00 0.00 0.00
(I) PO/
NSC
(J) Investment Options FDs Insurance Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference -1.0367* 1.0688* 1.0229* -0.0229 0.9954* 1.8945* -1.0688* -1.0321*
p 0.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00
(I)
Gold/egold
(J) Investment Options FDs Insurance PO/ NSC Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference -2.0596* 0.0459 -1.0229* -1.0459* -0.0275 0.8716* -2.0917* -2.0551*
p 0.00 0.99 0.00 0.00 1.00 0.00 0.00 0.00
(I)
Bonds
(J) Investment Options FDs Insurance PO/NSC Gold/e-gold PPF Real Estate MFs Shares
(I-J) Mean Difference -1.0138* 1.0917* 0.0229 1.0459* 1.0184* 1.9174* -1.0459* -1.0092*
p 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00
(I)
PPF
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds Real Estate MFs Shares
(I-J) Mean Difference -2.0321* 0.0734 -0.9954* 0.0275 -1.0184* 0.8991* -2.0642* -2.0275*
p 0.00 0.93 0.00 1.00 0.00 0.00 0.00 0.00
180
(I) Real
Estate
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF M Fs Shares
(I-J) Mean Difference -2.9312* -0.8257* -1.8945* -0.8716* -1.9174* -0.8991* -2.9633*
-2.9266*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(I)
MFs
(J) Investment Options FDs Insurance PO/NSC Gold/e-gold Bonds PPF Real estate Shares
(I-J) Mean Difference 0.0321 2.1376* 1.0688* 2.0917* 1.0459* 2.0642* 2.9633* 0.0367
p 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.99
(I)
Shares
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF Real estate M Fs
(I-J) Mean Difference -0.0046 2.1009* 1.0321* 2.0551* 1.0092* 2.0275* 2.9266* -0.0367
p 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.99
Note: * means significant at 95 percent level of confidence
Table 5.39: Homogeneous Subsets; Parameter LIQUIDITY
HOMOGENEOUS SUBSETS
(HS)
HS1 HS2 HS3 HS4
INVESTMENT OPTIONS Real estate PPF, Gold/e-gold and
Insurance
Bonds and PO/NSC Mutual funds, FDs and
Shares
181
iv. TAX SAVING
a. Multiple Comparisons
Result of multiple comparisons from Tukey test for the parameter tax saving has been
indicated in table 5.40. First, the tax saving score mean of FDs has been compared with all
other eight investment options. The difference in the tax saving score means of FDs is
significant from that of insurance (0.6560), gold/e-gold (2.9862), bonds (1.0872), mutual
funds (1.0826) and shares (2.1101) with a p value as 0. Hence, there is a significant difference
between tax saving score means of FDs from these above mentioned investment options.
However, its score mean is not significantly different from that of PO/NSC (0.0963) and PPF
(0.0642) with p values as 0.7 and 0.96 respectively.
Second, tax saving score mean of insurance differs from that of FDs, PO/NSC, gold/egold,
bonds, PPF, real estate, mutual funds and shares by a value of 0.6560, 0.7523, 3.6422,
1.7431, 0.7202, 0.7156, 1.7385 and 2.7661 respectively that is significant at 95 percent level
of confidence (p=0). It implies that the tax saving score mean of insurance is significantly
different from all other investment options. Third, on comparing the tax saving score mean of
PO/NSC with other investment avenues, researcher has found that it differs significantly from
that of insurance (0.7523), gold/e-gold (2.8899), bonds (0.9908), mutual funds (0.9862) and
shares (2.0138) with p as 0. However, it is significantly indifferent from that of FDs (0.0963),
PPF (0.0321) and real estate (0.0367) with values as 0.70), 1.00 and 0.99 respectively. Fourth,
difference in the tax saving score mean of gold/e-gold from FDs, insurance, PO/NSC, bonds,
PPF, real estate, mutual funds and shares is 2.9862, 3.6422, 2.8899, 1.8991, 2.9220, 2.9266,
1.9037 and 0.8762 respectively that is significant at 95 percent level of confidence (p=0).
Therefore, its tax saving score mean differs from all other investment options.
Fifth, the researcher has found that the tax saving score mean of bonds differs
significantly from that of FDs (1.0872), insurance (1.7431), PO/NSC (0.9908), gold/e-gold
(1.8991), PPF (1.0229), real estate (1.0275) and shares (1.0229) with p value as 0. However,
it does not differ significantly from mutual funds (0.0046, p=1). Sixth, tax saving score mean
of PPF is significantly different from that of insurance (0.7202), gold/e-gold (2.9220), bonds
(1.0229), mutual funds (1.0184) and shares (2.0459) with p value as 0. Further, its difference
from FDs, PO/NSC and real estate are 0.0642, 0.0321 and 0.0046 respectively that is not
statistically significant at 95 percent level of confidence.
182
Seventh, on comparing the tax saving score means of real estate with other eight
investment options, the researcher has found that it differs significantly from that of insurance
(0.7156), gold/e-gold (2.9266), bonds (1.0275), mutual funds (1.0229) and shares (2.0505).
However, it is not significantly different from FDs (0.0596), PO/NSC (0.0367) and PPF
(0.0046) with p values as 0.97, 0.99 and 1 respectively. In a similar manner, the tax saving
score mean of mutual funds differs significantly from that of FDs (1.0826), insurance
(1.7385), PO/NSC (0.9862), gold/e-gold (1.9037), PPF (1.0184), real estate (1.0229) and
shares (1.0275) with p value as 0. However, it does not differ significantly from that of bonds
(0.0046) with p value as 1. Ninth, difference in the tax saving score mean of shares from that
of FDs, insurance, PO/NSC, gold/e-gold, bonds, PPF, real estate and mutual funds is 2.1101,
2.7661, 2.0138, 0.8762, 1.0229, 2.0459, 2.0505 and 1.0275 respectively that is statistically
significant at 95 percent level of confidence (p=0) and hence its tax saving score mean differs
significantly from all other investment.
In this way, with the help of multiple comparisons between nine investment options,
vicinity for significant and insignificant differences of tax saving score means have been
obtained. By compiling the above result, homogenous subsets of the investment options,
which do not possess significant difference in their tax saving score mean have been formed.
b. Homogenous subsets (HS)
Result for the Tukey test on the parameter tax saving has been described in the table
5.41. On this parameter, five homogeneous subsets (HS) have been formed from the nine
investment options. The first HS consists of only gold/e-gold implying that, investors perceive
the tax saving of gold/e-gold unique and totally different from all other investment options
viz., FDs, insurance, PO/NSC, bonds, PPF, real estate, mutual funds and shares. Similarly,
shares comprise of the second HS and hence investors consider the tax saving from this
investment avenue different from all others. Mutual funds and bonds comprise the third HS
implying that investors recognise these two investment avenues almost same on the parameter
of tax saving. The fourth HS consist of FDs, real estae, PPF and PO/NSC implying that
investors perceive them on the same level for this parameter. Insurance form the fifth HS and
hence investors recognise tax saving from this investment avenue unique and different from
all others viz. FDs, PO/NSC, gold/e-gold, bonds, PPF, real estate, mutual funds and shares.
183
Table 5.40: Post Hoc Test (Tukey HSD); Parameter: TAX SAVING
(I)
FDs
(J) Investment Options Insurance PO/NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference -.6560* 0.0963 2.9862* 1.0872* 0.0642 0.0596 1.0826* 2.1101*
p 0.00 0.70 0.00 0.00 0.96 0.97 0.00 0.00
(I)
Insurance
(J) Investment Options FDs PO/ NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 0.6560* 0.7523* 3.6422* 1.7431* 0.7202* 0.7156* 1.7385* 2.7661*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(I) PO/
NSC
(J) Investment Options FDs Insurance Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference -0.0963 -0.7523* 2.8899* 0.9908* -0.0321 -0.0367 0.9862* 2.0138*
p 0.70 0.00 0.00 0.00 1.00 0.99 0.00 0.00
(I)
Gold/egold
(J) Investment Options FDs Insurance PO/ NSC Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference -2.9862* -3.6422* -2.8899* -1.8991* -2.9220* -2.9266* -1.9037*
-0.8762*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(I) Bonds (J) Investment Options FDs Insurance PO/NSC Gold/e-gold PPF Real Estate MFs
Shares
(I-J) Mean Difference -1.0872* -1.7431* -0.9908* 1.8991* -1.0229* -1.0275* -0.0046 1.0229*
p 0.00 0.00 0.00 0.00 0.00 0.00 1.00 0.00
(I)
PPF
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds Real Estate MFs Shares
(I-J) Mean Difference -0.0642 -0.7202* 0.0321 2.9220* 1.0229* -0.0046 1.0184* 2.0459*
p 0.96 0.00 1.00 0.00 0.00 1.00 0.00 0.00
184
(I) Real
Estate
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF M Fs Shares
(I-J) Mean Difference -0.0596 -0.7156* 0.0367 2.9266* 1.0275* 0.0046 1.0229* 2.0505*
p 0.97 0.00 0.99 0.00 0.00 1.00 0.00 0.00
(I)
MFs
(J) Investment Options FDs Insurance PO/NSC Gold/e-gold Bonds PPF Real estate Shares
(I-J) Mean Difference -1.0826* -1.7385* -0.9862* 1.9037* 0.0046 -1.0184* -1.0229* 1.0275*
p 0.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00
(I)
Shares
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF Real estate M Fs
(I-J) Mean Difference -2.1101* -2.7661* -2.0138* 0.8762* -1.0229* -2.0459* -2.0505*
-1.0275*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Note: * means significant at 95 percent level of confidence
Table 5.41: Homogeneous Subsets; Parameter TAX SAVING
HOMOGENEOUS SUBSETS
(HS)
HS1 HS2 HS3 HS4 HS5
INVESTMENT OPTIONS Gold/e-gold Shares Mutual funds and
Bonds
FDs, Real estate,
PPF and PO/NSC
Insurance
185
v. PROCEDURAL UNDERSTANDING
a. Multiple Comparisons
Result of multiple comparisons from Tukey test for the parameter procedural
understanding has been indicated in table 5.42. First, the researcher has compared the
procedural understanding score mean of FDs with that of all other eight investment options.
Its difference is statistically significant from the score mean of insurance (2.7661), PO/NSC
(0.7064), gold/e-gold (1.6789), bonds (1.7339), real estate (2.7660), mutual funds (2.7798)
and shares (3.6376) with p value as 0. Hence procedural understanding score means of FDs
are significantly different from these above mentioned investment options. However, it does
not differ significantly from that of PPF (0.0642) with p value as 0.94.
Second, difference in the score mean of insurance from FDs, PO/NSC, gold/e-gold,
bonds, PPF and shares is 2.7661, 2.0596, 1.0872, 1.0321, 2.8303 and 0.8716 respectively that
is statistically significant at 95 percent level of confidence (p=0). However it does not differ
significantly from that of real estate (0) and mutual funds (0.0138) with p value as 1. Third,
on comparing the score mean of PO/NSC with other investment avenues, researcher has
found that its difference from that of FDs, insurance, gold/e-gold, bonds, PPF, real estate,
mutual funds and shares is 0.7064, 2.0596, 0.9725, 1.0275, 0.7706, 2.0596, 2.0734 and
2.9312 respectively that is significant at 95 percent level of confidence (p=0). Hence its score
mean differs significantly from all the other investment avenues. Fourth, the score mean of
gold/e-gold differ significantly from that of FDs (1.6789), insurance (1.0872), PO/NSC
(0.9725), PPF (1.7431), real estate (1.0872), mutual funds (1.1009) and shares (1.9587) with p
value as 0 and does not differ significantly from that of bonds (0.0551) with p as 0.98.
Fifth, difference between the score mean of bonds from that of FDs, insurance, PO/
NSC, PPF, real estate, mutual funds and shares is 1.7339, 1.0321, 1.0275, 1.7982, 1.0321,
1.0459 and 1.9037 respectively that is significant at 95 percent level of confidence (p=0).
However it does not differ significantly from that of gold/e-gold (0.0551) with p value as
0.98. Sixth, on comparing the score mean of PPF with other investment options, the
researcher has found that it is significantly different from that of insurance (2.8303), PO/NSC
(0.7706), gold/e-gold (1.7431), bonds (1.7982), real estate (2.8303), mutual funds (2.8440)
and shares (3.7018). Further, its difference from FDs is 0.0642 that is not statistically
186
significant at 95 percent level of confidence (p=0.94) and hence no significant difference lies
between the procedural understanding of these two investment avenues.
Seventh, score means of real estate differs significantly from that of FDs (2.7661),
PO/NSC (2.0596), gold/e-gold (1.0872), bonds (1.0321) and shares (0.8716) with p as 0.
However it does not differ significantly from that of insurance (0.00) and mutual funds
(0.0138) with p as 1. In a similar manner on comparing the score mean of mutual funds from
other investment options, the researcher has found that it is significantly different from that of
FDs (2.7798), PO/NSC (2.0734), gold/e-gold (1.1009), bonds (1.0459), PPF (2.8440) and
shares (0.8578) with p as 0. However, its score mean does not differ significantly from that of
insurance (0.0138) and real estate (0.0138) with p as 1. Ninth, the procedural understanding
score mean of shares differs significantly from all other investment options as FDs (3.6376),
insurance (0.8716), PO/NSC (2.9312), gold/e-gold (1.9587), bonds (1.9037), PPF (3.7018),
real estate (0.8716) and mutual funds (0.8578) with p value as 0.
In this way, with the help of multiple comparisons between nine investment options,
area for significant and insignificant differences of procedural understanding score means
have been obtained. By compiling the above result, homogenous subsets of the investment
options, which do not possess significant difference in the perception for procedural
understanding, have been obtained.
b. Homogenous subsets (HS)
Result for the Tukey test on the parameter procedural understanding has been
described in the table 5.43. On this parameter, five homogeneous subsets (HS) have been
formed from the nine investment options. First HS consists of only shares implying that,
investors’ procedural understanding for the investment in gold/e-gold is unique and totally
different from all other investment options viz., FDs, insurance, PO/NSC, bonds, PPF, real
estate, mutual funds and shares. Mutual funds, insurance and real estate comprise of the
second HS and hence investors recognise the procedural understanding for these three
investment avenues at similar level. Bonds and gold/e-gold comprise the third HS. Therefore,
investors consider these two investment avenues almost same on this parameter. Fourth HS
consists of PO/NSC implying that investors’ procedural understanding for the investment in
this avenue is distinctive and different from all others. Fifth HS comprise of FDs and PPF
and hence investors’ procedural understanding for these two investment avenue is similar.
187
Table 5.42: Post Hoc Test (Tukey HSD); Parameter: PROCEDURAL UNDERSTANDING
(I)
FDs
(J) Investment Options Insurance PO/NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 2.7661* 0.7064* 1.6789* 1.7339* 0.0642 2.7660* 2.7798* 3.6376*
p 0.00 0.00 0.00 0.00 0.94 0.00 0.00 0.00
(I)
Insurance
(J) Investment Options FDs PO/ NSC Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 2.7661* 2.0596* 1.0872* 1.0321* 2.8303* 0 0.0138 0.8716*
p 0.00 0.00 0.00 0.00 0.00 1.00 1.00 0.00
(I) PO/
NSC
(J) Investment Options FDs Insurance Gold/e-gold Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 0.7064* 2.0596* 0.9725* 1.0275* 0.7706* 2.0596* 2.0734* 2.9312*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(I)
Gold/egold
(J) Investment Options FDs Insurance PO/ NSC Bonds PPF Real Estate M Fs Shares
(I-J) Mean Difference 1.6789* 1.0872* 0.9725* 0.0551 1.7431* 1.0872* 1.1009* 1.9587*
p 0.00 0.00 0.00 0.98 0.00 0.00 0.00 0.00
(I)
Bonds
(J) Investment Options FDs Insurance PO/NSC Gold/e-gold PPF Real Estate MFs Shares
(I-J) Mean Difference 1.7339* 1.0321* 1.0275* 0.0551 1.7982* 1.0321* 1.0459* 1.9037*
p 0.00 0.00 0.00 0.98 0.00 0.00 0.00 0.00
(I)
PPF
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds Real Estate MFs Shares
(I-J) Mean Difference 0.0642 2.8303* 0.7706* 1.7431* 1.7982* 2.8303* 2.8440* 3.7018*
p 0.94 0.00 0.00 0.00 0.00 0.00 0.00 0.00
188
(I)
Real
Estate
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF M Fs Shares
(I-J) Mean Difference 2.7661* 0 2.0596* 1.0872* 1.0321* 2.8303* 0.0138 0.8716*
p 0.00 1.00 0.00 0.00 0.00 0.00 1.00 0.00
(I)
MFs
(J) Investment Options FDs Insurance PO/NSC Gold/e-gold Bonds PPF Real estate Shares
(I-J) Mean Difference 2.7798* 0.0138 2.0734* 1.1009* 1.0459* 2.8440* 0.0138 0.8578*
p 0.00 1.00 0.00 0.00 0.00 0.00 1.00 0.00
(I)
Shares
(J) Investment Options FDs Insurance PO/ NSC Gold/e-gold Bonds PPF Real estate M Fs
(I-J) Mean Difference 3.6376* 0.8716* 2.9312* 1.9587* 1.9037* 3.7018* 0.8716* 0.8578*
p 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Note: * means significant at 95 percent level of confidence
Table 5.43: Homogeneous Subsets; Parameter PROCEDURAL UNDERSTANDING
HOMOGENEOUS SUBSETS
(HS)
HS1 HS2 HS3 HS4 HS5
INVESTMENT OPTIONS Shares MFs, Insurance and
Real estate
Bonds and Gold/egold
PO/NSC Fixed deposits and
PPF
189
SUMMARY OF ANNOVA
Analysis of the presence of a significant difference in investors’ perception for return,
risk, liquidity, tax savings and procedural understanding for nine investment options has been
performed by employing Analysis of Variance (ANOVA) and it has been found that a
significant difference lies in the perception of investors for these parameters on nine
Investment Avenue. However, for each of the parameter, investors have considered some of
the investment options similar to each other and these investment options form the
homogenous subsets represented by HS. These HS for all the five parameters have been
presented in table 5.44.
Table 5.44: Summary of Homogenous Subsets
Homogeno
us Subsets
(HS)
PARAMETERS
Return Risk Liquidity Tax Saving Procedural
Understanding
HS1
Shares &
Real estate
Shares MFs, FDs &
Shares
Insurance PPF & FDs
HS2
Gold/e-gold
& MFs
MFs Bonds &
PO/NSC
FDs, Real
estate, PPF
& PO/NSC
PO/NSC
HS3
Bonds &
PPF
Real Estate &
Insurance
PPF, Gold/egold
&
Insurance
MFs &
Bonds
Gold/e-gold &
Bonds
HS4
PO/NSC &
FDs
Bonds &
Gold/e-gold
Real Estate Shares Insurance,
Real Estate &
MFs,
HS5
Insurance PPF,
PO/NSC &
FDs
Gold/e-gold Shares
The researcher has found that in case of return, shares and real estate give equally high
return. Also, as per investors’ opinion shares and real estate are top two return generating
investment options (table 5.31). By the interpretation of table 5.31 and 5.44, gold/e-gold and
mutual funds have been perceived similar on this parameter. The same has been found out as
per the ranking for return as these two have obtained third and fourth rank for this parameter.
Bonds and PPF that lie on fifth and sixth rank respectively have been considered as same
return giving avenues. PO/NSC and FDs have been recognised as similar return generating
190
options and these are seventh and eighth rank holders on this parameter. Most of the investors
do not consider insurance as an investment option and therefore, it lies on the last i.e., ninth
rank as a return generating investment avenue. Also, insurance only comprise the fifth HS and
is considered distinct from all the rest investment avenues as per the parameter return.
Similar kind of results have been found on other parameters viz., risk, liquidity, tax
saving and procedural understanding and the same has been presented in table 5.44.
5.3.2 INVESTMENT IN MUTUAL FUND SCHEMES
In the next stage of study for investors’ behaviour, it has been found out that in which
mutual fund schemes, MFI have been investing. For fulfilling this purpose, investors were
asked to specify as out of Income, Growth, Balanced, ELSS/Tax Saving Funds, Index Funds,
Gold ETF, Sector Funds or any other scheme, in which they invest. The data has been
compiled in table 5.45. The researcher has found that Growth oriented mutual fund schemes
are most popular among the investors as around 37 percent investors have been investing in
these schemes. Income and Balance mutual fund schemes are popular on the second and third
rank as around 23 and 22 percent investors respectively are investing in them followed by
Sector funds, ELSS, Gold ETF and Index funds with 7, 5, 4 and 2 percent investors
respectively. No investor reports for any other kind of mutual fund schemes except the above
mentioned for investment.
Further, the researcher has asked all the MFI to indicate top three mutual fund
schemes as per the amount invested in them. In the questionnaire, they were asked to mark 1
for highest investment, 2 for moderate investment and 3 for lowest investment. For the
analysis purpose, the scores have been given as follows: highest investment as 3, moderate
investment as 2 and lowest investment as 1. Highest score mean has been obtained for Growth
oriented schemes (0.8670) followed by Income (0.6881), Balanced (0.6743), Sector (0.2431),
ELSS (0.1789), Gold ETF (0.0968) and Index funds (0.0872). The same can be verified by
seeing the Asset under Management (AUM) of various schemes.
191
Table 5.45: Respondents investing in seven types of Mutual Fund Schemes
MF Schemes % of Investors Score Mean Rank
Growth 37% 0.8670 1
Income 23% 0.6881 2
Balanced 22% 0.6743 3
Sector Funds 7% 0.2431 4
ELSS 5% 0.1789 5
Gold ETF 4% 0.0968 6
Index Funds 2% 0.0872 7
Note: *1 denotes the highest and 7 denotes the lowest rank as per the investment amount
5.3.3 CHARACTERISTICS INFLUENCING INVESTMENT DECISION
In this section, the characteristics of mutual fund schemes and their importance in
investment decisions have been studied. The researcher has asked investors to give their
opinion about these characteristics in their investment decision. They were asked to rate them
from 1 to 5 where, 1 means very low, 2 stands for low, 3 for moderate, 4 for high and 5
indicate very high. These characteristics have been labelled from Ch1 to Ch11 as:
Ch1: Past performance of mutual fund
Ch2: Current NAV of mutual fund
Ch3: Rating by a research agency/ Newspaper/ Magazine
Ch4: Reputation of the mutual fund Company
Ch5: Mutual Fund manager
Ch6: Portfolio of the scheme (percent of investment in different companies)
Ch7: Exit load (fee charged at the time of selling of units)
Ch8: Availability of tax benefits
Ch9: Turnover of the mutual fund scheme (sales during the period)
Ch10: Asset size/ total capital of the mutual fund scheme
Ch11: Mutual fund is Indian or Foreign fund
192
First, the researcher has calculated the score mean for all the characteristics to earmark
comparatively important one as per investors’ opinion. Table 5.46 presents the score sum,
score mean and rank for all the 11 characteristics of the mutual fund schemes. As per the
score mean, highest significance has been attached with the reputation of mutual fund
Company followed by rating of the mutual fund scheme, past performance and exit load.
Other characteristics like portfolio of the scheme, tax benefits associated with the scheme,
asset size and current NAV of the scheme have occupied next three positions on significance
hierarchy. It is however peculiar to note that the characteristics as whether mutual fund is
Indian or Foreign, their turnover and manager of the mutual fund have been given least
importance by the investors and possess last three positions in hierarchy in that order.
Table 5.46: Importance of the Characteristics of mutual funds in choosing them
CHARACTERISTICS OF MUTUAL
FUNDS
SCORE
SUM
SCORE
MEAN
RANK
Past Performance 956 4.39 3
Current NAV 647 2.97 8
Rating 993 4.62 2
Reputation of the mutual fund Company 1007 4.56 1
M F manager 306 1.40 11
Portfolio of the scheme 804 3.69 5
Exit Load 814 3.73 4
Availability of the tax benefits 720 3.30 6
Turnover 393 1.80 10
Asset Size 653 3.00 7
Whether mutual fund is Indian or Foreign 579 2.66 9
Note: 1 and 11 denotes the highest and lowest rank for mutual fund scheme’s characteristics.
FACTOR ANALYSIS
In the above section, the characteristics of the mutual fund schemes that are of
paramount importance for mutual fund companies and policy makers from the investors’
perspective have been analysed. However, for making it more beneficial it was important to
cluster some of the characteristics and identify imperative areas to focus upon for improving
the performance of mutual funds. Therefore, important factors from the eleven characteristics
discussed above have been deducted. With the help of Factor Analysis, a number of variables
can be represented into a set of smaller hypothetical variables. Thus, complex and diverse
193
relationship that exists among the set of observed characteristics of mutual funds has been
simplified through factor analysis. This has been done by exploring common dimensions or
factors that link together the apparently unrelated characteristics and consequently providing
insight into the underlying structure of the data.
The KMO (Kaiser-Meyer-Olkin) and Bartlett’s test have been conducted to measure
sampling adequacy and the results have been represented in table 5.47. KMO measure of
sampling adequacy is an index for comparing the magnitude of observed correlation
coefficients with that of partial correlation coefficients and its value should be greater than or
equal to 0.05. In table 5.47, the researcher has shown the KMO measure as 0.79 indicating
that the sample is adequate for performing factor analysis. Bartlett’s test, another indicator of
the strength of the relationship among variables is used to test the null hypothesis as:
H0: The variables in the population correlation matrix are not correlated.
H1: The variables in the population correlation matrix are correlated with each other.
The observed significance level is 0.00 that is much smaller than 0.05 and hence null
hypothesis that the variables are not correlated with each other has been rejected. Therefore, it
could be inferred that the strength of relationship among variables is strong and factor
analysis might be performed.
Table 5.47: KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy 0.79
Bartlett's Test of Sphericity
Approx. Chi-Square 191.46
df 55
Sig. 0.00
Note: Significance at 95 percent has been checked
i. Number of Factors
Next step in the process was to decide about the number of factors to be derived.
While using Principal Component analysis, a rule of thumb has been applied and number of
factors have been chosen equal to the number of ‘Eigen values’ with greater than unity and
the same were calculated with the help of software SPSS. The component matrix so formed
was further rotated orthogonally using Varimax Rotation Algorithm and the results have been
194
depicted in table 5.48. Total variance accounted for by all the factors with Eigen value greater
than 1 was 60.43 percent and remaining variance was explained by other factors. By
considering the factor loadings, all the factors were loaded on five factors (Table 5.48).
Factor loadings of all the variables/ characteristics on each of the five factors have
been depicted in the table 5.48 and all the loadings with a value greater than one have been
earmarked with bold font. Last column depicts the communalities, h2 i.e., the sum of squares
of factor loadings of a variable on all the factors. Eigen value (sum of squares of the factor
loading on a factor) is greater than one for all the five factors. The total variance accounted
for by factors with Eigen value greater than one was 60.43 percent and the remaining variance
was explained by other factors.
Table 5.48: Rotated Component Matrix
CHARACTERISTICS F1 F2 F3 F4 F5 h2
Ch1 .109 -.305 0.455 -0.418 0.362 0.618
Ch2 -.186 .198 0.632 -.050 -.323 0.581
Ch3 -.033 .084 -0.703 -.137 -.071 0.526
Ch4 .008 -.083 .075 .207 -0.594 0.409
Ch5 -.060 .044 .039 0.364 0.703 0.634
Ch6 0.876 .069 -.065 .113 -.039 0.791
Ch7 0.877 .057 .044 -.071 .043 0.781
Ch8 .106 -.090 .026 0.840 -.041 0.727
Ch9 .079 0.806 .217 .001 -.052 0.705
Ch10 .032 0.673 -.245 -.028 .185 0.549
Ch11 0.332 -.090 -.194 -0.380 -.164 0.327
Eig. Value 1.72 1.27 1.26 1.24 1.16 6.648
Cum. Var. percent 15.61 27.19 38.64 49.91 60.43
Note: Extraction Method is Principal Component Analysis
ii. Naming the Factors
All the five factors extracted have been given names on the basis of variables included
in each case. The factors F1 through F5 have been named as:
F1: Structure
F2: Size
F3: Performance
F4: Outlook/ Status
F5: Professional Expertise
195
Structure of these five factors has been discussed individually in detail as below:
a. STRUCTURE (F1)
The rotated matrix has revealed this factor as the most important with highest Eigen
value among all as 1.72. In total, three variables have been loaded on this factor. The
variables composing this factor with their labels and factor loadings are given in table 5.49.
This table reveals that the variable ‘Exit Load’ has got the highest loading of 0.877, which has
been closely followed by the variable ‘Portfolio of the scheme’ (0.867). The last variable
‘mutual fund is Indian or Foreign’ has a factor loading of 0.332. The loading pattern of first
two variables reveals an association among the variables as exit load and portfolio of the
scheme. The variable ‘mutual fund is Indian or foreign’, with a much lower loading of 0.332
as compared to above two again represents the structure of the mutual fund schemes.
Therefore, it possesses a correlation with other two variables loaded on this factor.
Factor F1, describes various considerations in the investors’ mind that are taken into
account for making decision regarding the investment in mutual fund schemes. This factor
portrays the concern by investors for structure of the mutual funds. It means perception for a
better structure of the mutual fund scheme plays a very important role in making the
investment decision in them.
Table 5.49: Variables in Factor Structure
Labels Variables Loadings
CH7 Exit load 0.877
CH6 Portfolio of the scheme 0.867
CH11 Mutual Fund is Indian or Foreign 0.332
b. SIZE (F2)
The second important factor representing investors’ perception has been the ‘Size’ of
the mutual fund schemes. Present study has revealed this factor with Eigen value of 1.27. Two
variables as turnover and asset size have been loaded on this factor. Different constituents of
this factor with their labels and loadings have been presented in Table 5.50.
This table reveals that the variable ‘Turnover’ has got higher loading of 0.806 than
other variable ‘Asset Size’ having loading of 0.673. This factor describes various aspects of
196
investors’ consideration regarding the size of mutual funds. The loading pattern on this factor
reveals an association among two variables included which reveals that turnover and asset
size are the two important factors in to consideration for the size of the mutual fund scheme.
Table 5.50: Variables in Factor Size
Labels Variables Loadings
CH9 Turnover 0.806
CH10 Asset Size 0.673
c. PERFORMANCE (F3)
The third important factor of investors’ perception about the mutual funds is
‘Performance’ of the mutual fund schemes with an Eigen value of 1.26 as shown in the
rotated matrix. In total, three variables have been loaded on this factor (Table 5.51).
Table 5.51 reveals that the variable ‘Rating’ of a mutual fund scheme has obtained the
maximum loading value (0.703) on this factor, followed by ‘Current NAV’ of the mutual fund
scheme (0.632). The third variable ‘Past performance’ of the mutual fund scheme has a
loading of 0.455*. The researcher has revealed that the highest loading to the variable Rating
(CH3) on this factor depicts that investors recognise rating given by research agencies,
newspapers or magazines as much reliable source for judging the performance of mutual fund
schemes. Investors also relate the current NAV of the mutual fund schemes with their
performance. Also, investors perceive that current or future performance of the mutual fund
schemes is related to their past performance. Hence these three variables as rating, current
NAV and past performance of the mutual fund scheme influence investors’ perception
regarding their performance.
Table 5.51: Variables in Factor Performance
Labels Variables Loadings
CH3 Rating 0.703
CH2 Current NAV 0.632
CH1 Past Performance 0.455*
197
d. INVESTORS’ OUTLOOK (F4)
The fourth important factor that has emerged from the analysis with Eigen value 1.24
is Investors’ Outlook for mutual fund schemes. In total, three variables have been loaded on
this factor. The variables along with labels and load values have been arranged in the table
5.52 below.
It is the ‘Tax benefits’ available from the mutual fund schemes that has been highly
loaded (0.840) on this factor. However, two other variables as ‘Past Performance’ and ‘mutual
fund is Indian or Foreign’ are also sharing its load with loadings as 0.418* and 0.380*
respectively. The table 5.52 points out that tax benefits associated with the mutual fund
schemes have a high bearing on investors’ outlook for it. However, perception for their
outlook regarding the mutual funds is also influenced by its past performance and status i.e.,
mutual fund is Indian or foreign.
Table 5.52: Variables in Factor Outlook/ Status
Labels Variables Loadings
CH8 Tax Benefits 0.840
CH1 Past Performance 0.418*
CH11 Mutual Fund is Indian or Foreign 0.380*
e. PROFESSIONAL EXPERTISE (F5)
Last important factor that has been assigned Eigen value as 1.16 is the ‘Professional
Expertise’. Two variables have been loaded on this factor. Table 5.53 depicts the labels and
loading values of both the variables. It is the variable, mutual fund manager, that is highly
loaded on this factor with a loading of 0.703 but reputation of the mutual fund Company also
shares its load with loading value as 0.594.
Factor F5, describes investors’ preference for mutual fund investment because of the
professional expertise of fund managers as apparent from the table 5.53, showing loading
value of 0.703 to the variable ‘Mutual Fund manager’. Moreover, investors consider that a
company achieve good reputation because of the expert manager for managing its investment
issues and hence the variable ‘Reputation’ of the mutual fund company has been included in
this factor with a loading of 0.594.
198
Table 5.53: Variables in Factor Professional Expertise
Labels Variables Loadings
CH5 Mutual fund Manager 0.703
CH4 Reputation 0.594
To sum up the above discussion, investors’ perception for taking decision of investing
in any mutual fund scheme is built up by its structure, size, performance, outlook or status and
the professional expertise, the schemes are boast with. A compiled result of the above analysis
has been provided in the table 5.54 that explains five factors and the variables included along
with their loadings.
Table 5.54: Factors from Characteristics of Mutual Funds
Structure
(F1)
Size (F2) Performance (F3)
Outlook / Status
(F4)
Professional
Expertise (F5)
Portfolio
(0.867)
Turnover
(0.806)
Past Performance*
(0.455)
Past Performance*
(0.418)
Reputation
(0.594)
Exit Load
(0.877)
Asset Size
(0.673)
Current NAV
(0.632)
Tax Benefits
(0.840)
MF Manager
(0.703)
MF is Indian
or Foreign*
(0.332)
Rating
(0.703)
MF is Indian or
Foreign*
(0.380)
5.4 REASONS FOR NON INVESTMENT IN MUTUAL FUNDS
Majority of the number of mutual funds so far, have not been able to come up to the
expectations of investors. To study why investors do not intend to invest in mutual funds, they
were asked to rate the factors responsible for non investment in mutual funds according to
their importance level. In the questionnaire, respondents had to rate these factors on a five
point scale where, rating 1 means very low, 2 means low, 3 stands for moderate, 4 represents
high and 5 means very high. The six factors that have been rated by the respondents are less
return, high risk, management cost, no control over portfolio, lack in procedural clarity and
lack of awareness. Results for the NMFI’s perception behind not investing in mutual funds
have been compiled in table 5.55.
199
From table 5.55, management cost has the highest score mean of 4.44 followed by less
return with a score mean of 3.91, lack in procedural clarity for the investment in mutual funds
with score mean as 3.51 and high risk involved in this investment avenue with a score mean
of 3.08. Factors as no control over the portfolio of mutual funds and not aware of mutual
funds as an investment option possess low score means as 2.36 and 1.54 respectively.
Therefore from the score mean it is clear that, management cost charged by mutual funds is
the biggest cause that holds back NMFI from investment in this avenue. NMFI were very
much concerned for the high management charges by mutual fund.
Next biggest hurdle is less return that many of the mutual fund schemes have been
giving in the past years. Hence, investors were not taking them as a good investment mode.
Also, respondents were not clear and comfortable with the procedure for investment in mutual
funds and therefore, they had not invested in these. Apart from the above three discussed
reasons, investors are worried about the high risk involved in the investment of mutual funds.
Most of the investors consider that mutual funds are highly risky for investment
purpose. Also, investors feel that after investment in this avenue they will be having no
control over the portfolio of their scheme. It is totally mutual fund manager’s decision as
where their money would be invested. In last, many of the NMFI were not even aware that
mutual funds are some investment options and have never explored to invest in these.
Table 5.55: Factors behind Non Investment in Mutual Funds
Factors Responsible for Non Investment Score Sum Score Mean Rank
Less Return 869 3.91 2
High Risk 683 3.08 4
Management Cost 986 4.44 1
No Control over Portfolio 523 2.36 5
Lack in Procedural Clarity 780 3.51 3
Not Aware of mutual fund as an Investment Option 341 1.54 6
Note: 1 denotes the highest and 6 denotes the lowest rank
200
5.5 STEPS TO MOTIVATE INVESTMENT TOWARDS MUTUAL
FUNDS
From the above discussion, major reasons for not investing in mutual funds are much
clear. The next challenge for mutual fund companies and policy makers is to find some
remedial measures as how the NMFI might be motivated for investment in mutual funds. To
analyse this problem, investors were asked to indicate the steps they would like to be taken by
the mutual fund companies and policy makers which may motivate them towards investment
in this investment avenue. For fulfilling this purpose, respondents were asked to indicate these
steps by rating them on five point scale from 1 to 5 where, 1 stands for very low, 2 is for low,
3 is for moderate, 4 represents high and 5 indicate very high. Various steps analysed were
training programme, experts advise, strong regulations, information about government
regulations and strong grievance mechanism. The researcher has compiled these results in
table 5.56. Strong grievance mechanism is most needed with score mean as 4.95 followed by
strong and expert advice regulation with score mean of 4.08 and 4.04 respectively.
Information of Govt. regulations possesses a score mean of 3.07 and training programme
carries score mean of 2.05.
Results from the table 5.56 indicate that strong grievance mechanism is most
demanded for enhancing the investment in mutual funds. This is because most of the NMFIs
have no trust on mutual fund companies and concerned authorities in case of any grievance.
Also, most of the respondents do not have confidence for investment in mutual funds because
they feel that working of mutual funds is as per their convenience in absence of strong
regulations and hence they accept that strong regulations might inspire them towards
investment in this investment avenue. Expert advice regarding the mutual fund schemes may
also augment its investment. However, information of government regulations and training
programme for the investors might help a little towards investment in mutual funds.
Table 5.56: Steps to Motivate Investment towards Mutual Funds
Steps to Inspire NMFI Score Sum Score Mean Rank
Training Programme 456 2.05 5
Expert Advise 897 4.04 3
Strong Regulations 905 4.08 2
Information of Govt. Regulations 681 3.07 4
Strong Grievance Mechanism 1099 4.95 1
Note: 1 denotes the highest and 5 denotes the lowest ranks

FINDINGS

 In Hisar, 70% of respondents invests their money and 30% respondents don’t invests
their money.
 15% investors invests 0-5% of their income and 20% investors invests 5-10% of their
income while 30% investors invests 10-15% of their income While 35% of the investors
invests 15-20% of their income.
 10% investors invests in post office while 20% investors invests in Real estate.30%
investors invests in Shares while 25% investors invests in Silver and 15% investors
invests in Gold.
 30% investors invests for 0 to 1 year while 10% investors invests for 1 to 3 year and 15%
investors invests for 3 to 5 year and 45% investors invests for 5 to 8 year.
  20% investors finds information from TV. 25% investors finds information from Post
office .While 20% investors finds information from Bank. Whereas 15% the investors
finds information from Internet and 20% the investors finds information from Agent.
 25% investors invests for Monthly period while 15% investors invests quaterly and 10%
investors invests half yearly and 50% investors invests yearly.
 30% investors considers expert advice while 20% investors considers family member
advice and 25% investors takes self decision while 25% investors considers friends
advice.
 20% respondents choses Open Ended while 25% choses Closed Ended and 20% choses
Liquid Fund whereas 15% choses Growth Fund and 20% choses Regular Income Fund.

CONCLUSION
 Running a successful Mutual Fund requires complete understanding of the peculiarities
of the Indian Stock Market and also the psyche of the small investors.
This study has made an attempt to understand the financial behaviour of Mutual Fund
investors in connection with the preferences of Brand (AMC), Products, Channels etc. I
observed that many of people have fear of Mutual Fund. They think their money will not
be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related
terms. Many of people do not have invested in mutual fund due to lack of awareness
although they have money to invest. As the awareness and income is growing the
number of mutual fund investors are also growing.

 "Brand" plays important role for the investment. People invest in those Companies
 where they have faith or they are well known with them. There are many AMCs in
Punjab but only some are performing well due to Brand awareness. Some AMCs
are not performing well although some of the schemes of them are giving good return
because of not awareness about Brand.

 Distribution channels are also important for the investment in mutual fund. Financial
Advisors are the most preferred channel for the investment in mutual fund. They can
change investors' mind from one investment option to others. Many of investors directly
invest their money through AMC because they do not have to pay entry load. Only those
people invest directly who know well about mutual fund and its operations and those have
time.

References

Websites:
 http://www.scribd.com/doc/31134020/Share-khan
 www.slideshare.net/gandhichintan/project-report-of-share-khan
 www.sharekhan.com/stock-market/company.../company-
snapshot.htm
 www.sharekhan.com/AboutUs/AboutUs.htm
 www.bloomberg.com/research/stocks/private/snapshot.asp?
privcaold.
 www.Sharekhan.com/businesspartner/howtopartner.aspx
 www.Sharekhan.com/Brochures/74/PMSProductHome.htm
 www.Sharekhan.com/stock-market/company.../company-
snapshot.htm