Project Report on Mutual Fund Awareness in Mumbai 2024-2025 PDF

PROJECT REPORT ON A STUDY ON AWARENESS ABOUT THE MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY. SUBMITTED TO THE UNIVERSITY OF MUMBAI IN PARTIAL FULFILLMENT OF THE AWARD OF THE DEGREE OF MASTER OF COMMERCE (BANKING...

PROJECT REPORT ON A STUDY ON AWARENESS ABOUT THE MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY. SUBMITTED TO THE UNIVERSITY OF MUMBAI IN PARTIAL FULFILLMENT OF THE AWARD OF THE DEGREE OF MASTER OF COMMERCE (BANKING AND FINANCE) SEMESTER III 2024 - 2025 SUBMITTED BY MR. SHIVAM SURESH RAJPUT ROLL NO: - 2416544 PIN NUMBER: - 4544753 UNDER THE GUIDANCE OF DR. SULBHA DEY MULUND COLLEGE OF COMMERCE (AUTONOMOUS) S.N. ROAD, MULUND (WEST), MUMBAI – 400080  DECLARATION I, MR. SHIVAM SURESH RAJPUT, a student of M.COM (BANKING AND FINANCE) 2nd YEAR, ROLL NUMBER – 2216544 hereby declares that I have completed the project on “A STUDY ON AWARENESS ABOUT THE MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY”, in the academic year 2024 - 25. Under the guidance of DR. SULBHA DEY. The information submitted is true & original to the best of my knowledge. I hereby further declare that all information on this project has been obtained & presented per academic rules and ethical conduct. DATE: - __________________ PLACE: - MUMBAI SIGNATURE OF STUDENT  PARLE TILAK VIDYALAYA ASSOCIATION’S MULUND COLLEGE OF COMMERCE (AUTONOMOUS) S.N. Road, Mulund – West, Mumbai- 400080 CERTIFICATE This is to certify that the project “A STUDY ON AWARENESS ABOUT THE MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY”. by MR. SHIVAM SURESH RAJPUT Roll No. 2416544 completed in partial fulfillment of Second Year M.com – Banking and Finance Semester 3 (CBCS) Examination during the Academic Year 2024 – 2025 has been found satisfactory. This report had not been submitted for any other examination and does not form part of any other course undergone by the candidate. Course Co-Ordinator Project Guide/Internal Examiner Principal External Examiner College Seal Date:  ACKNOWLEDGEMENT To list all who have helped me is difficult because numerous people have helped me in the completion of this study that I have conducted ‘“A STUDY ON AWARENESS ABOUT THE MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY”. I would like to acknowledge the following as being idealistic channels and fresh dimensions in the completion of this project. I take this opportunity to thank THE UNIVERSITY OF MUMBAI for giving me the chance to do this project, I would like to thank our college’s principal DR. SONALI PEDNEKAR for the valuable support required for the completion of this project. I take this opportunity to thank our m.com coordinator DR. ANURADHA GANESH, for his moral support & guidance. I would like to express my heartfelt gratitude to my project guide, DR. SULBHA DEY, whose invaluable guidance and continuous support have been instrumental in the completion of this project “A STUDY ON AWARENESS ABOUT THE MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY”. Her expertise, encouragement, and insightful feedback helped me navigate various challenges and stay motivated throughout the research. I am deeply appreciative of her dedication and care, which made this project a rewarding and successful endeavor. I am also grateful to MY SUPERIORS AND COLLEAGUES AT MULUND COLLEGE OF COMMERCE for providing me with a wonderful learning experience. I would thank The NON-TEACHING STAFF AND LIBRARY STAFF OF OUR COLLEGE AND MY FRIENDS who have directly or indirectly contributed their valuable time and helped me to complete this project. Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of the project especially my PARENTS & PEERS who supported me throughout my project.  ABSTRACT The research report is prepared as a requirement of the m.com (banking and finance) program of the University of Mumbai. This research report is “A STUDY ON AWARENESS ABOUT THE MUTUAL AMONG PEOPLE IN MUMBAI CITY”. This study investigates the level of awareness regarding mutual funds among residents of Mumbai, focusing on various demographic factors such as age, gender, income level, and education. The primary objectives are to assess the extent of mutual fund awareness across different demographic groups, identify the sources through which individuals obtain information on mutual funds, and analyze the factors influencing investment decisions. The research employs a quantitative approach, utilizing surveys to collect data from a representative sample of Mumbai’s population. Analyzing this data provides insights into the disparities in awareness based on demographic differences and helps in understanding the predominant information channels utilized by potential investors. The study also aims to identify key factors such as risk perception, financial literacy, and investment goals that influence individuals’ decisions to invest or abstain from mutual funds. To test the hypotheses, statistical analyses are performed, with the alternative hypothesis proposing a significant difference in awareness levels across demographic groups, while the null hypothesis suggests no significant difference. The findings of this study offer valuable implications for financial educators, policymakers, and investment advisors seeking to enhance mutual fund awareness and promote informed investment decisions among diverse segments of the population in Mumbai. For this purpose, primary data was collected from 198 investors.  TABLE OF CONTENTS CHAPTER NO 01: - INTRODUCTION. CHAPTER NAME OF CHAPTER PAGE NO NO. 1.1 INTRODUCTION. 1 1.2 INDUSTRY PROFILE. 2–3 1.3 CONCEPT OF MUTUAL FUND. 3 1.4 HISTORY OF MUTUAL FUND IN INDIA. 4–5 1.4.1 FIRST PHASE – 1964-1987. 4 1.4.2 SECOND PHASE – 1987-1993 – ENTRY OF PUBLIC SECTOR 4 MUTUAL FUNDS. 1.4.3 THIRD PHASE -1993-2003 –ENTRY OF PRIVATE SECTOR MUTUAL 4–5 FUNDS. 1.4.4 FOURTH PHASE – SINCE FEBRUARY 2003 - APRIL 2014. 5 1.5 THE GROWTH OF THE MUTUAL FUND INDUSTRY. 5–7 1.6 REGULATORY OF MUTUAL FUND IN INDIA. 7–8 1.7 ROLE REGULATORY OF MUTUAL FUND IN INDIA. 8–9 1.8 TYPES OF MUTUAL FUND SCHEMES. 10 – 14 1.9 ADVANTAGES & DISADVANTAGES OF MUTUAL FUND. 14 – 17 1.9.1 ADVANTAGES OF MUTUAL FUNDS. 14 – 16 1.9.2 DISADVANTAGES OF MUTUAL FUNDS. 16 – 17 1.10 RISKS INVOLVED IN MUTUAL FUND. 18 – 21 1.11 STRUCTURE OF MUTUAL FUND COMPANY. 21 – 26 1.12 GLOBAL SCENARIO OF MUTUAL FUND INDUSTRY. 26 – 32 1.13 INDIAN SCENARIO OF MUTUAL FUND INDUSTRY. 32 – 36 1.14 SEBI REGISTER MUTUAL FUND COMPANY IN INDIA. 36 – 37 1.15 PROFILE OF THE STUDY AREA. 38 1.16 STATEMENT OF PROBLEM. 38 1.17 OBJECTIVE OF STUDY. 39 1.18 HYPOTHESIS OF STUDY. 39 – 40 1.19 OPERATIONAL DIVINATION OF TERMS & CONCEPT. 41 – 42 1.20 CHAPTER SCHEME. 42 1.21 SCOPE OF STUDY. 43 – 44 1.22 LIMITATIONS OF STUDY. 44 – 45 1.23 SIGNIFICANCE OF STUDY. 45 1.24 CONCLUSION. 46 CHAPTER NO 02: - REVIEW OF LITERATURE. CHAPTER NAME OF CHAPTER PAGE NO. NO 2.1 INTRODUCTION. 48 2.2 REVIEW OF LITERATURE. 49 – 55 2.3 RESEARCH GAP. 55 2.4 CONCLUSION. 56 CHAPTER NO 03: - RESEARCH METHODOLOGY. CHAPTER NAME OF CHAPTER PAGE NO. NO 3.1 INTRODUCTION. 58 3.1.1 TYPES OF RESEARCH METHODOLOGY. 59 – 62 3.1.2 ADVANTAGES OF RESEARCH METHODOLOGY. 62 – 64 3.2 RATIONALE OF STUDY. 64 3.3 AREA OF STUDY. 65 3.4 OBJECTIVE OF STUDY. 65 3.5 HYPOTHESIS. 66 3.6 RESEARCH METHODOLOGY. 67 3.7 CHAPTER SCHEME. 68 3.8 CONCLUSION. 69  CHAPTER NO 04: - DATA COLLECTION, ANALYSIS, AND INTERPRETATION. CHAPTER NAME OF CHAPTER PAGE NO. NO 4.1 WHAT IS DATA COLLECTION. 71 4.1.1 METHODS OF DATA COLLECTION. 72 – 75 4.1.1.1 PRIMARY SOURCES. 72 – 74 4.1.1.2 SECONDARY SOURCES. 74 – 75 4.2 WHAT IS DATA ANALYSIS. 75 4.2.1 STEPS IN DATA ANALYSIS. 75 – 77 4.2.2 TYPES OF DATA ANALYSIS. 77 – 78 4.3 DATA INTERPRETATION. 78 4.3.1 METHODS OF DATA INTERPRETATION. 78 – 80 4.3.2 TYPES OF DATA INTERPRETATION. 80 4.4 RESULTS AND DISCUSSIONS. 81 – 97 4.4.1 GENDER. 81 – 82 4.4.2 AGE. 82 – 83 4.4.3 EDUCATIONAL QUALIFICATION. 83 – 84 4.4.4 OCCUPATION. 85 – 86 4.4.5 MONTHLY INCOME. 86 – 87 4.4.6 PREFERRED MODE OF INVESTMENT. 87 – 88 4.4.7 AWARE ABOUT INVESTMENT IN MUTUAL FUNDS. 88 – 89 4.4.8 EVER INVESTED IN MUTUAL FUND. 89 – 90 4.4.9 INFORMATION ABOUT MUTUAL FUND. 90 – 91 4.4.10 CONSIDER THE MOST RELIABLE FOR INFORMATION ON MUTUAL 91 – 92 FUNDS. 4.4.11 MOST IMPORTANT FACTORS INFLUENCING YOUR DECISION TO 93 – 94 INVEST IN MUTUAL FUND. 4.4.12 MOST IMPORTANT FACTORS INFLUENCING YOUR DECISION NOT 94 – 96 TO INVEST IN MUTUAL FUND. 4.5 HYPOTHESIS TESTING. 96 – 97 4.6 CONCLUSION. 98 CHAPTER NO 05: - MAJOR FINDINGS. CHAPTER NAME OF CHAPTER PAGE NO. NO 5.1 INTRODUCTION. 100 5.2 OBSERVED BY THE RESEARCHER BY ANALYZING DATA IN EACH 100 – TABLE. 101 5.3 CONCLUSION. 101 CHAPTER NO 06: - RECOMMENDATIONS AND CONCLUSION. CHAPTER NAME OF CHAPTER PAGE NO. NO 6.1 RECOMMENDATIONS. 103 – 104 6.2 CONCLUSION. 105 CHAPTER 7: - BIBLIOGRAPHY AND WEBLIOGRAPHY, ANNEXURE. CHAPTER NAME OF CHAPTER PAGE NO. NO 7.1 BIBLIOGRAPHY AND WEBLIOGRAPHY. 107 – 108 7.2 ANNEXURE. 109 – 113  LIST OF FIGURES FIGURE CONTENTS PAGE NO. NO 1.1 THE STRUCTURE OF MUTUAL FUND COMPANY. 22 1.2 SHOWING WORLDWIDE TOTAL ASSETS OF MUTUAL FUNDS 27 TRILLIONS OF US DOLLARS: YEARS END; 1993 – 2023 1.3 WORLDWIDE DISTRIBUTION OF NET ASSETS OF MUTUAL FUNDS 28 AT THE END OF QUARTER 2 OF 2023. 1.4 SHOWING DISTRIBUTION OF MF NET ASSETS IN AMERICA. 29 1.5 SHOWING DISTRIBUTION OF MF NET ASSETS IN ASIA. 30 1.6 SHOWING DISTRIBUTION OF MF NET ASSETS IN EUROPE. 32 1.7 ASSET UNDER MANAGEMENT IN INDIAN MUTUAL FUND 34 INDUSTRY. 1.8 LEADING MUTUAL FUND GROUPS IN INDIA. 35 3.1 TYPES OF RESEARCH METHODOLOGY. 59 3.2 PRIMARY V/S SECONDARY RESEARCH. 62 4.1 SOURCES OF DATA COLLECTION. 72 4.2 GENDER. 81 4.3 AGE. 82 4.4 EDUCATIONAL QUALIFICATION. 84 4.5 OCCUPATION. 85 4.6 MONTHLY INCOME. 86 4.7 PREFERRED MODE OF INVESTMENT. 87 4.8 AWARE ABOUT INVESTMENT IN MUTUAL FUND. 88 4.9 EVER INVESTED IN MUTUAL FUND. 89 4.10 INFORMATION ABOUT MUTUAL FUND. 90 4.11 CONSIDER THE MOST RELIABLE FOR INFORMATION ON MUTUAL 92 FUND. 4.12 MOST IMPORTANT FACTORS INFLUENCING YOUR DECISION TO 93 INVEST IN MUTUAL FUND. 4.13 MOST IMPORTANT FACTORS INFLUENCING YOUR DECISION NOT 95 TO INVEST IN MUTUAL FUND.  LIST OF TABLES TABLE CONTENTS PAGE NO. NO 1.1 THE ROLE OF CONSTITUENTS OF MUTUAL FUNDS. 24 1.2 WORLDWIDE DISTRIBUTION OF NET ASSETS OF MUTUAL FUNDS AT 27 THE END OF QUARTER 2 OF 2023. 1.3 DISTRIBUTION OF NET ASSETS OF MUTUAL FUND IN AMERICA. 28 1.4 DISTRIBUTION OF NET ASSETS OF MUTUAL FUND IN ASIA. 29 1.5 DISTRIBUTION OF NET ASSETS OF MUTUAL FUND IN EUROPE. 31 1.6 ASSETS UNDER MANAGEMENT IN INDIAN MUTUAL FUND 33 INDUSTRY. 4.1 GENDER. 81 4.2 AGE. 82 4.3 EDUCATIONAL QUALIFICATION. 83 4.4 OCCUPATION. 85 4.5 MONTHLY INCOME. 86 4.6 PREFERRED MODE OF INVESTMENT. 87 4.7 AWARE ABOUT INVESTMENT IN MUTUAL FUND. 88 4.8 EVER INVESTED IN MUTUAL FUND. 89 4.9 INFORMATION ABOUT MUTUAL FUND. 90 4.10 CONSIDER THE MOST RELIABLE FOR INFORMATION ON MUTUAL 91 FUND. 4.11 MOST IMPORTANT FACTORS INFLUENCING YOUR DECISION TO 93 INVEST IN MUTUAL FUND. 4.12 MOST IMPORTANT FACTORS INFLUENCING YOUR DECISION NOT TO 94 INVEST IN MUTUAL FUND. 4.13 HYPOTHESES TESTING. 96 – 97  CHAPTER 1 INTRODUCTION A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 1 of 124  CHAPTER 1 INTRODUCTION 1.1 INTRODUCTION A mutual fund is an entity that pools the money of many investors -- its unit-holders -- to invest in different securities. Investments may be in shares, debt securities, money market securities, or a combination of these. Those securities are professionally managed on behalf of the unit-holders, and each investor holds a pro-rata share of the portfolio i.e. entitled to any profits when the securities are sold, but subject to any losses in value as well. The research report “TO STUDY ON THE AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY” tries to understand the investors’ behavior term investment options. The research report will seek to cover all the fundamental aspects related to mutual funds and investment in them. 1.2 INDUSTRY PROFILE The Indian financial system is based on four basic components financial market, financial institutions, financial services, and financial instruments. All play important roles for smooth activities for the transfer of the funds and allocation of the funds. The main aim of the Indian financial system is that provide efficient services to the capital market. The Indian capital market has been increasing tremendously during the second-generation reforms. The first- generation reforms started in 1991 with the concept of LPG. (liberalization, privatization, globalization). Then after 1997 second generation reforms were started, still going on, including reforms of industrial investment, reforms of fiscal policy, reforms of ex-imp policy, reforms of the public sector, reforms of the financial sector, reforms of foreign investment through institutional investors, and reforms of banking sectors. The economic development model adopted by India in the post-independence era has been characterized by a mixed economy with the public sector playing a dominating role and the activities in the private industrial sector control measures emaciated from time to time. The last two decades have been a phenomenal expansion in geographical coverage and the financial spread of our financial system. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 2 of 124 The spared of the banking system has been a major factor in promoting financial intermediation in the economy and in the growth of financial savings with progressive liberalization of economic policies, there has been a rapid growth of the capital market, money market, and financial services industry including merchant banking, leasing, and venture capital, leasing, hire purchasing. Consistent with the growth of the financial sector and second-generation reforms it needs to fruition of the financial sector. It’s also needed to provide efficient service to the investor mostly if the investors are supplied a small amount, in that point of view the mutual fund plays a vital for better service to the small investors. The main vision for the analysis for this study is to scrutinize the performance of five-star rated mutual funds, given the weight of risk, return, assets under management, net assets value, book value, and price-earnings ratio. 1.3 CONCEPT OF MUTUAL FUND The word ‘mutual’ denotes something to be done collectively by a group of people with a common objective. ‘fund’ is used in monetary terms, to collect some money from the members for a common objective of earning profits with joint efforts. The mutual fund concept refers to a fund, managed by an asset management company with the financial objectives of generating growth. After collecting the money from investors asset management companies this money in different stocks, bonds, and other financial securities in a diversified manner. A detailed study is carried out before investing, and a detailed analysis is done on the market conditions and market trends of stock and bond prices. It helps the fund manager to invest properly and in the right direction. Investors are given an equity position in mutual funds in which they invest their money. When after a certain time, whether long-term or short-term, the investors sell the shares of the mutual fund, they receive the growth according to the market conditions. The investment companies allocate the money received from investors in different stocks and bonds according to their study about the market trend and earn a profit on that. Investors generally sell the units of their mutual funds at any time they want. However, the growth will vary according to the market value of the stocks and bonds in which that particular mutual fund made the investment. Generally, the shareholders of mutual funds sell their shares when the prices are up, and ‘capital gain” is sure to happen. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 3 of 124  1.4 HISTORY OF MUTUAL FUND IN INDIA A strong financial market with broad participation is essential for a developed economy. With this broad objective, India’s first mutual fund was established in 1963, namely, Unit Trust of India (UTI), at the initiative of the government of India and Reserve Bank of India ‘with a view to encouraging saving and investment and participation in the income, profits, and gains accruing to the corporation from the acquisition, holding, management, and disposal of securities. In the last few years, the MPH industry has grown significantly. The history of mutual funds in India can be broadly divided into five distinct phases as follows: 1.4.1 FIRST PHASE – 1964-1987 The mutual fund industry in India started in 1963 with the formation of UTI in 1963 by an act of parliament and functioned under the regulatory and administrative control of the Reserve Bank of India (RBI). In 1978, UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. Unit Scheme 1964 (US ’64) was the first scheme launched by UTI. At the end of 1988, UTI had ₹ 6,700 crores of assets under management (aum). 1.4.2 SECOND PHASE – 1987-1993 – ENTRY OF PUBLIC SECTOR MUTUAL FUNDS The year 1987 marked the entry of public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporations of India (GIC). SBI mutual fund was the first ‘non-uti’ mutual fund established in June 1987, followed by a bank mutual fund (Dec. 1987), Punjab National Bank mutual fund (Aug. 1989), Indian Bank mutual fund (Nov 1989), bank of India (Jun 1990), bank of Baroda mutual fund (Oct. 1992). Lic established its mutual fund in June 1989, while GIC had set up its mutual fund in December 1990. At the end of 1993, the mf industry had assets under management of ₹47,004 crores. 1.4.3 THIRD PHASE -1993-2003 –ENTRY OF PRIVATE SECTOR MUTUAL FUNDS The Indian securities market gained greater importance with the establishment of SEBI in April 1992 to protect the interests of the investors in the securities market and to promote the development of, and regulate, the securities market. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 4 of 124 In the year 1993, the first set of SEBI mutual fund regulations came into being for all mutual funds, except UTI. The erstwhile Kothari Pioneer (now merged with FRANKLIN TEMPLETON MF) was the first private sector MF registered in July 1993. With the entry of private sector funds in 1993, a new era began in the Indian mf industry, giving Indian investors a wider choice of mf products. The initial SEBI MF regulations were revised and replaced in 1996 with a comprehensive set of regulations, viz., SEBI (mutual fund) regulations, 1996 which is currently applicable. The number of MSFS increased over the years, with many foreign sponsors setting up mutual funds in India. Also, the mf industry witnessed several mergers and acquisitions during this phase. As of the end of January 2003, there were 33 MFS with a total aum of ₹1,21,805 crores, out of which UTI alone had aum of ₹44,541 crores. 1.4.4 FOURTH PHASE – SINCE FEBRUARY 2003 - APRIL 2014 In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated into two separate entities, viz., the specified undertaking of the unit trust of India (SUUTI) and UTI mutual fund which functions under the SEBI mf regulations. With the bifurcation of the erstwhile UTI and several mergers taking place among different private sector funds, the MF industry entered its fourth phase of consolidation. Following the global meltdown in the year 2009, securities markets all over the world tanked and so was the case in India. Most investors who had entered the capital market during the peak had lost money and their faith in MF products was shaken greatly. The abolition of entry load by SEBI, coupled with the after-effects of the global financial crisis, deepened the adverse impact on the Indian mf industry, which struggled to recover and remodel itself for over two years, in an attempt to maintain its economic viability which is evident from the sluggish growth in mf industry aum between 2010 to 2013. 1.5 GROWTH OF MUTUAL FUND INDUSTRY The history of mutual funds dates support to the 19th century when it was introduced in Europe, in particular, Great Britain, Robert Fleming set up in 1868 the first investment trust called Foreign and Colonial Investment Trust which promised to manage the finances of the moneyed classes of Scotland by scattering the investment over many different stocks. This A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 5 of 124 investment trust and other investment trusts which were afterward set up in Britain and the U.S. resembled today’s close-ended mutual funds. The first mutual fund in the U.S., Massachusetts investor’s trust, was set up in March 1924. This was an 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 andnighties when there was a significant increase in the number of mutual funds, schemes, assets, and shareholders. In the US the mutual fund industry registered ten-fold growth in the eighties. Since 1996, mutual fund assets have exceeded bank deposits. The mutual fund industry and the banking industry virtually rival each other in size. A mutual fund is a type of investment company that gathers assets from investors and collectively invests in stocks, bonds, or money market instruments. The investment company concepts date to Europe in the late 1700s, according to K. Geert Rouen host in the Origins Mutual Funds, when “a Dutch merchant and broker invited subscriptions from investors with limited means.” The materialization of “investment pooling” in England in the 1800s brought the concept closer to U.S. shares. The enactment of two British laws, the Joint Stock Companies Acts of 1862 and 1867, permitted investors to share in the profits of an investment enterprise, and limited investor liability to the amount of investment capital devoted to the enterprise. Maybe more outstandingly, the British fund model established a direct link with U.S. securities markets, serving to finance the development of the post-civil war U.S. economy. The Scottish-American investment trust, formed in February 1873 by fund pioneer Robert Fleming, invested in the economic potential of the United States, chiefly through American railroad bonds. Many other trusts followed that not only targeted investment in America but led to the introduction of the fund investing concept on U.S. shores in the late 1800s and early 1900s. Nov.1925. All these funds were open-ended having redemption features. Similarly, they had almost all the features of good modern mutual funds –like sound investment policies and restrictions, open endless, self- liquidating features, a publicized portfolio, simple capital structure, excellent and professional fund management, and diversification, etc., and hence they are the honored grandparents of today’s funds. Prior to these funds, all the initial investment companies were closed-ended companies. Therefore, it can be said that although the basic concept of A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 6 of 124 diversification and professional fund management, were picked by u.s.a. from England investment companies” the mutual fund is an American creation.” Because of their exclusive feature, open-ended mutual funds rapidly became very popular. By 1929, there were 19 open-ended mutual funds in the USA with total assets of $140 million. But the 1929 stock market crash followed by the great depression of 1930 ravaged the U.S. financial market as well as the mutual fund industry. This necessitated stricter regulation for mutual funds and for financial sectors. Hence, to protect the interest of the common investors, the U.S. government passed various acts, such as the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Companies Act of 1940. A committee called the National Committee of an Investment Company (now, investment company institute), was also formed to cooperate with a federal regulatory agency and to keep informed of trends in mutual fund legislation. As a result of this measure, the mutual fund industry began to develop speedily and the total net assets of the mutual funds industry increased from $448 million in 1940 to $2.5 billion in 1950. The number of shareholder’s accounts increased from 29600 to more than one million during 1940-1951. “As a result of renewed interest in the mutual fund industry they grew at an 18% annual compound rate reaching a peak of their rapid growth curve in the late 1960s. 1.6 REGULATORY OF MUTUAL FUND IN INDIA ▪ SEBI The capital market regulates the mutual funds in India. SEBI requires all mutual funds to be registered with them. SEBI issues guidelines for all mutual fund’s operations-investment, accounts, expenses, etc. Recently, it has been decided that money market mutual funds of registered mutual funds will be regulated by SEBI through (mutual fund) regulation 1996. ▪ RBI RBI, a supervisor of the banks-owned mutual funds- as banks in India come under the regulatory jurisdiction of RBI, banks-owned funds are to be under the supervision of RBI and SEBI. RBI has supervisory responsibility over all entities that operate in the money markets. ▪ MINISTRY OF FINANCE(MOF) A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 7 of 124 The Ministry of Finance ultimately supervises both the RBI and SEBI and plays the role of apex authority for any major disputes over SEBI guidelines. ▪ COMPANY LOW BOARD The registrar of companies is called the company low board. ACS of mutual funds are companies registered under the Companies Act 1956 and therefore answerable to regulatory authorities empowered by the Companies Act. ▪ STOCK EXCHANGE Stock exchanges are self-regulatory organizations supervised by SEBI. Many closed-ended funds of accounts are listed as stock exchanges and are traded like shares. ▪ OFFICE OF THE PUBLIC TRUSTEE Mutual funds are public trusts governed by the Indian Trust Act of 1882. The board of trustee’s company is accountable to the office of public trustee, which in turn reports to the charity commissioner. 1.7 ROLE OF REGULATORS IN INDIA ▪ SECURITIES AND EXCHANGE BOARD OF INDIA Securities and Exchange Board of India (SEBI) is the regulatory authority for securities markets in India. It regulates, among other entities, mutual funds, depositories, custodians’ registrars, and transfer agents in the country. The applicable guidelines for mutual funds are set out in SEBI (mutual funds) regulations, 1996, as amended to date. Some aspects of these regulations are discussed in various sections of this workbook. An updated and comprehensive list of circulars issued by SEBI can be found in the mutual funds section of SEBI’S website: www.sebi.gov.in. Master circulars, which capture the essence of various circulars issued up to a specified date, may be downloaded from WWW.SEBI.GOV.IN. Some segments of the financial markets have their own independent regulatory bodies. Wherever applicable, mutual funds need to comply with regulations issued by other regulators. For instance, RBI regulates the money market and foreign exchange market in the A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 8 of 124 country. Therefore, mutual funds need to comply with RBI’s regulations regarding investments in the money market, investments outside the country, investments from people other than Indians resident in India, remittances (inward and outward) of foreign currency, etc. Stock exchanges are regulated by SEBI. Every stock exchange has its own listing, trading, and margining rules. Mutual funds need to comply with the rules of the exchanges with which they choose to have a business relationship. Anyone who is aggrieved by a ruling of SEBI can file an appeal with the Securities Appellate Tribunal (SAT). ▪ SELF-REGULATORY ORGANIZATIONS (SRO) In the developed world, it is common for market players to create self-regulatory organizations, whose prime responsibility is to regulate their own members. The statutory regulatory bodies set up by the government only lay down the broad policy Framework, and leave the micro-regulations to the SRO. For instance, the Institute of Chartered Accountants of India (ICAI) regulates its own members. The securities exchanges in India such as the NSE, BSE, and MSEI are vested with self-regulatory responsibilities. They regulate the firms listed on their stock exchange and also their trading members. ▪ ASSOCIATION OF MUTUAL FUNDS IN INDIA Asset management companies (AMS) in India are members of the Association of Mutual Funds in India (AMFI), an industry body that has been created to promote the interests of the mutual fund industry [such as the Confederation of Indian Industry (CII) for overall industry and NASSCOM for its industry]. AMFI is not an SRO. THE OBJECTIVES OF AMFI ARE AS FOLLOWS: ▪ To define and maintain high professional and ethical standards in all areas of operation of the mutual fund industry. ▪ To recommend and promote best business practices and code of conduct to be followed by members and others engaged in the activities of mutual fund and asset management including agencies connected or involved in the field of capital markets and financial services. ▪ To interact with the Securities and Exchange Board of India (SEBI) and to represent SEBI on all matters concerning the mutual fund industry. ▪ To represent the government, Reserve Bank of India, and other bodies on all matters relating to the mutual fund industry. ▪ To undertake a nationwide investor awareness program to promote a proper A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 9 of 124  understanding of the concept and working of mutual funds. 1.8 TYPES OF MUTUAL FUND SCHEMES There is a wide variety of mutual fund schemes that cater to investors’ needs, irrespective of their age, financial position, risk tolerance, and return expectations. Mutual funds can be of 3 basic types, depending on how they are offered for purchase and redemption. They are ▪ Open-Ended Funds ▪ Closed-Ended Funds ▪ Interval Funds ▪ OPEN-ENDED FUNDS: An open-ended fund does not have a fixed maturity date. It is open to accept purchases and redemption at any time. An open-ended fund offers units to investors for the first time during the new fund offer (NFO). Investors can buy and sell units of an open-ended fund at the mutual fund offices or their investor service centers (ISCs) on a continuous basis. ▪ CLOSED-ENDED FUNDS: Closed-ended funds operate for a specific period. On the specified maturity date, all units are redeemed and the scheme comes to a close. Closed-end funds are offered in an NFO but are closed for further purchases after the NFO. ▪ INTERVAL FUNDS: Interval funds are a variant of closed-ended funds. They are primarily closed-ended but become open-ended at specific intervals. Usually 'transaction period' during which the scheme is open for purchase and redemption is specified. Investors may use the 'specified transaction period' in order to transact in the fund. The simplest way to categorize mutual fund products is to look at the investment objective and the portfolio of the fund. A fund may seek to invest the money it mobilizes from investors in debt instruments, equity instruments, commodities such as gold, international funds, and securities in other funds, derivatives or some combination of these investment options. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 10 of 124 The three broad categories are: Debt funds investing in short and long-term debt instruments Equity funds investing in equity securities Hybrid funds investing in a combination of equity and debt The return that a fund may offer and the risk it carries depends on the investment portfolio. ▪ DEBT FUNDS: Debt funds invest predominantly in debt securities. Debt securities have a fixed maturity date and pay a specific rate of interest. The return from a debt fund is made up of interest income and any capital appreciation (depreciation) in value due to changes in market prices. Several types of debt funds invest in various segments of the debt market. ▪ MONEY MARKET / LIQUID FUNDS: Money market / liquid funds are short-term funds having a maturity of less than 1 year. These funds primarily invest in money market investments like certificates of deposit, treasury bills, commercial papers, and term deposits. Though it has less risk and fewer returns it possesses high liquidity and it has no entry load and exit load. ▪ FLOATING RATE FUNDS: These funds invest with the objective of investing in short-term floating instruments, such as bank loans, bonds, and other debt securities. There are two types of floating rate funds long term and short term. Return on these funds changes in line with the changing interest rates scenario in the debt markets. These funds are suitable when interest rates are increasing. ▪ CASH / TREASURY MANAGEMENT FUNDS: Cash/treasury management funds are a type of money market fund that gives the benefit of instant liquidity. This fund tries to provide current income with high liquidity. The fund A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 11 of 124 invests in a mix of short-term debt and money market instruments. ▪ GILT FUND: These funds invest in securities issued by state and/or central government having medium- or long-term maturity. Change in interest rate and other economic factors decide the nav of the scheme. It has a high degree of interest rate risk but at the same time, it is highly secure. ▪ HIGH YIELD DEBT FUND: High-yield debt funds give higher returns but at the same time involve higher risk. This type of mutual fund has not entered the Indian mutual fund industry yet. ▪ FIXED MATURITY PLAN: These are close-ended debt funds with a specific date of maturity that is less than or equal to the maturity date of the scheme. Units purchased under the scheme cannot be redeemed during the tenure of such fund. But those can be traded on stock exchanges. ▪ SHORT TERM PLAN: These are the funds that invest in the debt instruments with shorter duration. These funds are useful for investing the surplus money which is not required immediately but a bit later on. ▪ EQUITY FUNDS: Equity funds invest in equity shares issued by companies. The risk of such funds is higher than that of debt funds since equity offers a lower income (dividend) and can be subject to two volatile changes in value. However, equity funds offer long-term capital appreciation and are bought more for growth than for income. The risk level of equity funds can differ depending on the investment strategies adopted by the fund manager. ▪ DIVERSIFIED EQUITY FUNDS: This fund is basically aiming at capital appreciation. It is a well-diversified fund i.e. investment is made across different sectors and industries and hence, sector-specific or A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 12 of 124 industry-specific risk gets reduced. A small portion of the investment is made in the money market. It is suitable for investors having long-term investment goals. ▪ SECTOR / THEMATIC FUNDS: Sector funds are invested in a specific sector like infrastructure, it, pharmaceuticals etc. Or in different market segments like large cap, mid cap, etc. This type of fund involves high risk high-return opportunity. ▪ EQUITY INDEX FUNDS: Equity index mutual funds are for the conservative investor. As the name indicates, they invest in the entire capitalization of the index. The main characteristics of index funds are broad market exposure, low operating expenses, and low portfolio turnover. ▪ TAX SAVING FUNDS: Equity-linked savings schemes (ELSS) are the example of tax-saving funds. These schemes have a year’s lock-in period. These funds are invested in equities and hence offer long-term growth opportunities at the same time also offer tax benefits. ▪ HYBRID FUNDS: Pure equity funds are associated with high risk and debt funds cannot rip the returns fully though less risky. The solution for this is a hybrid fund which invests part of the funds in equity and part in debt. Thus, the returns are averaged with the lesser risk. Funds that have a combination of asset classes such as debt and equity in their portfolio are called hybrid funds. They may serve the needs of investors who look for a combination of income-oriented and growth-oriented investments. ▪ MULTIPLE YIELD FUNDS: These are the hybrid debt-oriented funds that invest a major portion of the funds in debt instruments and balance in dividend-yielding equity. The debt instruments assist in generating returns with lesser risk and equity helps in appreciation in value. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 13 of 124 ▪ MONTHLY INCOME PLANS: These are also debt-oriented hybrid plans that generate regular returns through investment in primary debt and money market instruments. The balance fund is invested in equity to have better capital appreciation. However, an important point to be noted is that the fund does not assure the monthly income. It depends on the distributable surplus available with the fund. ▪ ASSET ALLOCATION FUNDS: Asset allocation fund is basically a feeder fund that invests the fund amount in the underlying pure equity and debt funds from the same fund house. Different parameters are used by different funds to take the decision about when and how much to re-balance the portfolio. These are also called as fund of funds (FOFO). ▪ CAPITAL PROTECTION ORIENTED FUNDS: Under this fund the fund allocation to debt securities is done in such a way that at the end of the term of the product the value of debt investment is equal to the original pool of the fund. And equity portion aims to give the returns on the maturity date. The main objective of this type of fund is capital protection. It does not guarantee the returns. At least one rating agency must rate the fund in order to call it a capital protection-oriented fund. 1.9 ADVANTAGES & DISADVANTAGES OF MUTUAL FUNDS Every coin has two sides and mutual fund is also not an exception to this rule. There are certain advantages as well as disadvantages for investment in mutual funds. They are discussed below. 1.9.1 ADVANTAGES OF MUTUAL FUNDS Mutual funds are advantageous to individual investors about their direct involvement in investment portfolio activity covering the following aspects: RISK SPREADING: A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 14 of 124 Diversification is almost universally acclaimed by investment advisors and academic researchers who have found that there is virtually no value added by holding only a limited number of stocks when a person invests in a mutual fund he appreciates in a large basket of shares of different companies and industries which are included in the fund’s portfolio. Without spending considerable time and money, small investors can enjoy the facility of diversification. Fund diversification also reduces and spreads the risk factor of investors. The fluctuations of the stock markets have less impact on the mutual funds. A fall in the price of a few scripts will not affect them much. SKILLED MANAGEMENT: Through mutual funds, the investors get the expertise of professional money managers. Professional managers can easily tackle the purchase and sell without giving the pain of paperwork to individual investors. The trained, skillful, professional management of mutual funds can successfully select a stock portfolio and change as per changed circumstances. The stock market is a very technical area that lures an average investor but inexperienced hands may soon burn their fingers. The mutual fund provides the benefit of skilled portfolio management to the small investor, who otherwise cannot afford such expertise or knowledge. AUTOMATIC REINVESTMENT: In mutual funds, it is possible to reinvest the dividends and capital gain, while it is difficult for individual investors to reinvest the dividends and capital gain. This revolving type of investment makes possible forced saving for the investors which can make a big difference in the long run. FLEXIBILITY: Except for some of the mutual funds, many mutual funds have flexibility. Any time the investor can redeem or diverse the mutual fund scheme. The mutual funds having a locking period also get such flexibility in a stipulated period. On the expiry of this period, the investor can easily change the portfolio by selling particular units. In this way, he can reinvest the money where he finds lucrative returns and less risk. LIQUIDITY: A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 15 of 124 Mutual funds are required by the SEBI to provide liquidity to investors. They are ready to buy back the units from the investors at the nav on any day after the expiry of the initial lock- in period. They announce through daily newspapers their repurchase price of units under the various schemes after regular intervals. Some mutual funds are also listed on various stock exchanges and can be sold off by individual investors at the prevailing market price. ENCOURAGE SYSTEMATIC INVESTMENT: Mutual funds encourage systematic investment. Investors can choose a systematic investment plan to invest regularly, a systematic withdrawal plan to withdraw regularly, or a systematic transfer plan to transfer money from one scheme to another. TAX SHELTER: Income tax exemption has been ensured for mutual funds, while originally only such mutual funds as are set up by public sector banks or public financial institutions were exempt from tax. Now the benefit of tax exemption has been extended to all mutual funds. 1.9.2 DISADVANTAGES OF MUTUAL FUNDS Mutual funds have emerged all over the world as a fact of economic life, but they are not free from limitations. The following are the notable disadvantages of mutual funds: MF HAS NO CUSTOMIZED PORTFOLIOS: Mutual funds are standard products, managed centrally, offering significant advantages to investors who are not equipped to make complex investment choices. Investors do not exercise any direct control over how the portfolio is managed but participate equitably in it. Customized portfolios are usually offered as portfolio management services (PMS). MF OFFERS TOO MANY PRODUCT VARIANTS: When so many variants of the same product are available in the market making a choice among many funds becomes tough for the investors. Mutual funds try to vary their products, even if slightly, to provide a choice to customers. If these are similar in objectives and A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 16 of 124 performance, investors may find it tough to differentiate the products and make the choice for their needs. HIGH MANAGEMENT COST: Mutual funds have to incur substantial expenses to manage the investible funds to garner from investors. These include the salaries of the professional experts employed by the fund to manage its portfolio. The management costs of the fund are deducted from the total returns earned on the fund’s portfolio and only the balance is distributed among the investors. This reduces the returns that would have otherwise been available to the investors had they managed their portfolios themselves. HIGH PROMOTIONAL EXPENSES: Cut-throat competition among the various mutual funds to mobilize the savings of the masses necessitates heavy promotional expenses. As estimated RS. 1.5 crore is being spent on the promotion of every scheme launched by mutual funds in India. These expenses are likely magnified with the entry of more players in the mutual fund industry as the increase in competition would lead to heavier promotional expenses. This will further reduce the net returns which would be available for distribution among the mutual fund investors. FLEXIBILITY: Because a fund holds many stocks, it may be difficult for it to unload its shares when the market goes down. Thus, by keeping money in a fund, the investor may have to ride the market down. On the other hand, there is no reason why his or her individual shares in the fund cannot be redeemed at any time. The share size of some funds reduces the flexibility to buy and sell as frequently and in as large volumes as the fund manager may prefer. REDEMPTION COST: Though the buyback arrangement offered by mutual funds does import liquidity to the investor’s portfolio, the price at which the shares are redeemed is net of redemption costs. Therefore, the considerations that the investors get in reduced on account of the redemption costs which are dedicated, making investment in mutual funds disadvantageous. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 17 of 124  1.10 RISKS INVOLVED IN MUTUAL FUND Mutual funds can help to diversify investments to reduce risk. However, not all mutual funds are broadly diversified. Some are concentrated in a single industry, geographic region, or bond maturity range. That means they carry a higher degree of risk. On the other hand, these concentrated funds – or sector funds – may carry the opportunity of a greater return and may be appropriate as one of many holdings for an investor portfolio. Investors' actual returns from mutual funds may differ from what they expected, based on the assessment of the product and the historical returns. This represents a risk to the investors. Risk refers to the possibility that how a mutual fund product performs may vary from what was expected, and usually manifest in the volatility in the nav. The higher the variance of the nav from its average, the greater the risk. The different types of risk an investor may come across are as follows: INTEREST RATE RISK: Changes in interest rates – and in expected future interest rates – can cause the prices of some investments to risk of falling suddenly. When interest rates climb e.g., bond prices fall in lockstep. The reverse is also true. Falling rates mean higher prices for bonds. The prices of all types of investments reflect expectations about the future course of interest rates and thus to some extents are subject to interest rate risk. However, the average investor is most likely to encounter interest rate risk in the bond market. If you buy a long-term bond or bond mutual fund and interest rates rise, your investment will drop in value. Should rates fall on the other hand, you can expect to enjoy a profit as the investment gains value. This price fluctuation can be dramatic. For example, if long-term rates double, say from 7% to 14%, the value of your bond will be cut roughly in half. You can sell it, hope to recoup something to a capital loss, tax deduction, and invest in a higher-yielding security or you can hold on to it, collecting 7% on your investment at a time when the market rate is 14%. How can you reduce your exposure to interest rate risk? Pick a short-term bond fund. They are hurt less by rising rates than long-term bond funds. What if you want to increase your exposure to interest rate risk because you think rates are going down? Buy shares in a zero-coupon bond fund. If you are right, rates fall, and you will profit. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 18 of 124 Credit or default risk Credit risk arises from the default in payment of interest or principal, or both, by an issuer of debt securities held in a mutual fund portfolio. A deterioration of the credit quality of the paper held by a fund will result in falling prices and net asset values. Credit risk is assessed from the credit rating of a bond assigned by rating agencies such as Crisil. A high credit rating indicates a low degree of default risk. AAA-rated bonds have less credit risk than a- rated bonds. Bonds with ratings below BBB are considered to be of speculative-grade and risky. The greater the credit risk, the greater the interest rate a borrower or issuer of securities must pay. As a result, mutual funds that invest in lower-quality security offer higher yields than those that invest only in top-quality obligations. In theory, higher yield compensates investors who are willing to take on the higher risk of loss of principal if some issuers don’t repay and their bonds become worthless. By investing in a corporate bond fund, one can get the kind of diversification that reduces exposure to the risk of one particular company defaulting on its obligations. To reduce risk further one should pick a fund that buys only the securities of big, highly-rated corporations. Or by increasing credit risk, and potential return by buying shares in a junk bond fund or other type of fund that invests in low-grade debt securities. Sebi mandates an acceptable level of credit risk in mutual funds by stipulating that: A mutual fund should invest in instruments that are credit-rated by agencies registered with SEBI. Investment in unrated debt securities of one company cannot exceed 10% of the net assets of a scheme. Not more than 25% of the net assets of a scheme can be in such unrated securities across issuers MARKET RISK: Market risk is a standard risk in mutual fund products. Since mutual funds can invest only in marketable securities, and have to mark-to-market their investment portfolio every business day, the investors are exposed to the risk that a nav and therefore returns would vary with the variations in the market values. All mutual fund products are subject to market risks, the difference being only in degree. Market risk in equity arises from changes in prices from changes in underlying fundamental and technical factors. As the market's expectation for the performance of the company changes the prices of stocks change, creating market risk to investors. In debt instruments changes in prices are triggered by changes in macro-economic A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 19 of 124 factors that change the market expectations for interest rates. Market risk in debt instruments is also known as interest rate risk. Changes in interest rates lead to changes in the prices of issued debt instruments. Market risk is managed primarily through diversification. Sebi mandates a minimum level of diversification in every mutual fund portfolio by stipulating that: Equity shares in a single stock cannot exceed 10% of the net assets. Debt securities of a single borrower cann ot normally exceed 15% of net assets; with trustee approval, it can go up to a maximum of 20% of net assets. The holdings of a mutual fund across all its schemes cannot be over 10% of the paid-up capital of a single company. Mutual funds cannot write an option or purchase instruments with embedded written options in them. Some product structures enable managing market risk better. Liquid funds and other short-term funds that invest in short-term securities are not affected so much by changes in market prices. This is because they derive most of their nav movement from interest income which is stable and a minor proportion of a NAV movement can be attributed to mark-to-market changes. Mutual funds are required to inform the investors that the changes in market prices of securities, in which the fund has invested, can impact the nav and therefore cause risk. The standard disclaimer "mutual funds are subject to market risk; please read the scheme information document carefully before investing" is published along with all mutual fund advertisements and product literature. The risk factors associated with the scheme are published in the scheme information document. Investors may form return expectations based on past performance and therefore expect the same returns in the future. Since market risk may lead to actual returns being different from what is expected mutual funds have to mandatorily publish the disclaimer "past performance may or may not be sustained in the future" in all their product advertisement and literature. LIQUIDITY RISK: This is the chance that there will be no ready market for the investment if they are to be sold in a hurry. One of the chief advantages of mutual funds is their marketability. The units can be redeemed at any time at their nav per unit. If it is sold, cash can be received for them in a few days, or even the next day if the fund company wires the proceeds from the sale directly in to bank account. Moreover, mutual funds provide you with a way to invest directly in securities that would be less marketable if you bought them directly. Because mutual funds must stand ready to repurchase units for cash, their managers must maintain adequate cash A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 20 of 124 holdings and bank credit lines to handle redemptions by any fund holders who might be selling. Funds that invest heavily in less–marketable securities such as certain types of stock known as letter stock or restricted stock, could face problems if they are hit with a rush of redemption orders. Even if the securities in the portfolio of a mutual fund is marketable, the market in which it is listed and traded may not offer a high level of liquidity, or the securities held by the fund may not be actively traded. This creates liquidity risk in the portfolio. Fund managers may need to liquidate some of the holdings if the market seems to be overvalued, or may need liquidity to meet the requirements to pay out redemption or dividends. Liquidity risk may not enable buying or selling easily as may be required, reducing the flexibility in managing the portfolio. Funds that invest in small and mid-cap stocks may find it difficult to exit such stocks without impacting the price. Fund managers may also be wary of the growing size of a mid or small-cap portfolio, since they may not like to invest too much in a single stock due to lack of liquidity; and they may not like to hold too many stocks which makes it tough to monitor the portfolio. The secondary market in corporate bonds of lower credit quality is not very liquid; a fund holding a corporate bond that has been downgraded by rating agencies may find it tough to sell the bond. Mutual funds also ensure liquidity in their portfolios by indicating in their asset allocation that they may hold liquid money market securities as required. This may reduce the return of the portfolio but enable higher liquidity if the fund managers need it. Mutual funds also reserve the right to temporarily stop redemption if they perceive higher illiquidity in the markets, to avoid selling the securities at a distress price. Sebi mandates an acceptable level of liquidity in a mutual fund by stipulating that: Illiquid and thinly traded securities cannot be more than 10% of net assets in a closed- end fund and not over 5% of net assets in an open-ended fund. To enable investors to judge the liquidity risk, such holdings have to be explicitly disclosed in the six-monthly portfolio disclosures by the fund. In an extra ordinary situation, liquidity needs of a fund may be made from borrowings. 1.11 STRUCTURE OF MUTUAL FUND COMPANY Sebi (mutual fund) regulations, 1996 laid down the structure to be followed by mutual funds in India. The sponsor creates the mutual fund and sets up the AMC. The mutual fund itself is structured as a trust, as required by law. It is managed by the trustees in the beneficial interest A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 21 of 124 of the unit holders. Trustees appoint the management company (amc) to manage the fund. The following are the different stakeholders in the structure of a mutual fund company. STRUCTURE OF MUTUAL FUND COMPANY: FIGURE 1.1: - SHOWING THE STRUCTURE OF MUTUAL FUND COMPANY. SPONSOR: A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 22 of 124 A mutual fund is promoted by the sponsor, who sets up the trust and AMC appoints the board of trustees and board of directors of the AMC. The sponsor seeks regulatory approval for the mutual fund. Sebi has laid down the eligibility criteria for a sponsor. A sponsor should: Have at least five years’ experience in the financial services industry. Have a good financial track record of at least three years prior to registration of the fund. At least 40% of the capital of the asset management company is to be contributed by the sponsor. TRUST: The mutual fund itself is set up as a trust. Investors in the mutual fund are the beneficiaries of the trust. Sponsor appoints trustees with SEBI approval, to act on behalf of the investors. The trust deed is executed by the sponsor in favor of the trustees and it deals with the establishment of the trust, the authority and responsibility of the trustees towards the unit holders and the AMC. Sebi has also laid down the clauses that have to form part of the trust deed. Trustees can be an identified set of individuals or a trustee company set up for the purpose. The board of trustees comprising at least four members, (or the board of directors of the trustee company) oversees the working of the mutual fund. At least two-thirds of the members of the board of trustees have to be independent of the sponsor. The board of trustees has to meet at least six times a year. Trustees are paid a fee for their services. There are aspects of general and specific due diligence, specified by SEBI, to be exercised by trustees, to oversee the working of the AMC and the management of the mutual fund. Several key decisions of the AMC with respect to managing the mutual fund require the trustee’s approval. ASSET MANAGEMENT COMPANY: An asset management company (AMC) is the investment manager of the mutual fund and is responsible for running the day-to-day operations of the mutual fund. The AMC is appointed by the trustees of the fund, in consultation with the sponsor and with the approval of SEBI. The rights and obligations of the AMC are specified in the investment management agreement signed between the trustees and the AMC. The AMC’s primary role is to manage the contributions from investors and make investment decisions. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 23 of 124  SEBI’S REGULATIONS FOR AMCS REQUIRE THE FOLLOWING: AMCS should have a net worth of at least Rs. 10 crores at all times. At least 50% of members of the board of an AMC have to be independent. The AMC of one mutual fund cannot be an AMC or trustee of another fund. Amcs cannot engage in any business other than that of financial advisory and investment management. Statutory disclosures regarding AMC’s operations should be periodically submitted to SEBI. Prior approval of the trustees is required before a person is appointed as a director on the board of the AMC. An AMC cannot invest in its own schemes, in normal course. If such an investment is being made, it has to be disclosed in the offer document of the scheme. The AMC will not be eligible for fees on such investments. The appointment of an AMC can be terminated by the majority of the trustees, or by 75% of the unit-holders. FUND CONSTITUENTS: The functional departments in a typical AMC are: fund management, operations, sales and marketing, customer service, compliance, finance, and accounts. Core functions in these areas are done in-house, while other functions may be outsourced to constituents who offer specialized services. Mutual fund constituents (except custodians) are appointed by the AMC with the approval of the trustees. All mutual fund constituents have to be registered with SEBI. They are usually paid fees for their services. The following table lists the various constituents and their roles: TABLE NO. 1.1: SHOWING THE ROLE OF CONSTITUENTS OF MUTUAL FUNDS. CONSTITUENT ROLE CUSTODIAN HOLD AND SETTLE FUNDS AND SECURITIES R & T AGENT KEEP AND SERVICE INVESTOR FOLIOS A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 24 of 124  BANKS ENABLE COLLECTION AND PAYMENT AUDITOR AUDIT SCHEME ACCOUNTS DISTRIBUTORS DISTRIBUTE FUND PRODUCTS TO INVESTORS BROKERS EXECUTE TRANSACTIONS IN SECURITIES CUSTODIANS: Custodians are usually large banks. They hold the cash and securities of the mutual fund and are responsible for their safekeeping and settling investment transactions using these funds and securities. Custodians are appointed by the sponsor. They represent the only constituent not directly appointed by the AMC. Custodians should be independent of the sponsor. The sponsor cannot appoint as custodians, entities in which they hold 50% or more of the equity capital; or have 50% or more of the board representatives as their nominees. The custodian performs the following functions: Delivering and accepting securities and cash, to complete transactions made in the investment portfolio of the mutual fund. Tracking and completing corporate actions and payouts such as right, bonuses, offers for sale, buyback offers, dividends, interest, and redemptions on the securities held by the fund. The custodian has to coordinate with the depository participants (DPS) which hold the securities account of the mutual fund schemes. Offering fund accounting and valuation services to mutual funds. (some funds may prefer to manage this function in-house) REGISTRAR AND TRANSFER AGENTS: Registrar and transfer agents (r & t agents) are primarily responsible for creating and maintaining investor records and servicing them. Investor records are kept in numbered accounts called folios. They accept and process investor transactions. They also operate investor service centers (ISCs) which act as the official points for accepting investor transactions with a fund. R & t functions include: Issuing and redeeming units and updating the unit capital account. Enabling investor transactions such as purchase, redemption, and switches. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 25 of 124  Creating, maintaining, and updating investor records. Banking the payment instruments (cheques and drafts) given by investors and notifying the AMC. Processing payouts to investors in the form of dividends and redemptions. Sending statutory and periodic information to investors. BANKS, BROKERS AND AUDITORS: Banks provide collection and payment services to mutual funds. Investor cheques and drafts are collected into the mutual fund scheme accounts by banks. Banks are also involved in the payment of redemption proceeds and dividends. Auditors audit the books of the mutual fund. It is mandatory to keep the accounts of each mutual fund scheme separately. The auditors for the AMC’s accounts are distinct from the auditors of the mutual fund. Brokers execute the buy and sell transactions of the fund managers on stock exchanges. DISTRIBUTORS: AMC appoints distributors who sell the mutual fund products to investors. They are empaneled by a mutual fund and offered commissions on the sale of the schemes. Distributors may work for more than one mutual fund. There is no exclusivity in mutual fund distribution. The sponsor or an associate may act as a distributor for the fund with which they are associated. For example, ICICI Bank is the sponsor of the ICICI Prudential mutual fund and is also one of its distributors. Distributors may be individuals or institutions such as banks, non-banking finance companies (NBFCS), or broking and distribution companies. Individual distributors and employees of corporate distributors have to pass the certification examination mandated by SEBI and conducted by the National Institute of Securities Markets (NISM series v a – mutual fund distributors certification examination). They have to obtain an AMFI registration number (ARN) after clearing the examination, to impanel as distributors with a mutual fund. Distributors enable the reach of mutual fund products across geographical locations. 1.12 GLOBAL SCENARIO OF MUTUAL FUND INDUSTRY During the last decade, the net assets of the mutual fund industry have witnessed tremendous A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 26 of 124 growth all over the world. However, in spite of this healthy growth, a significant difference exists in the size and structure of the mutual fund industry across the nations. The United States alone captures about half of the world mutual fund industry, suggesting disparity in the growth of the world MF industry. The mutual fund industry has grown larger in those countries that are developed and have a strong institutional base whereas the growth of the mutual fund industry has been smaller in those countries which have high entry barriers. Other factors that have influenced the size and structure of the mutual fund industry are the percentage of the educated population, level of the maturity of the industry, presence of the multinational financial institutions in the country, the performance of the equity and bond market, tax incentive and regulatory framework, the attractiveness of complementary and substitute financial products and operational efficiency of the mutual fund industry. FIGURE 1.2: - SHOWING WORLDWIDE TOTAL ASSETS OF MUTUAL FUNDS (TRILLIONS OF US DOLLARS: YEARS END; 1993 - 2023 From the above graph, we can observe that the global mutual fund industry has boomed over the last two decades. The assets in mutual funds have increased more than sevenfold since 1993. It was $ 4.0 trillion in 1993 which rose to $ 28.9 trillion in 2013. TABLE NO. 1.2: SHOWING WORLDWIDE DISTRIBUTION OF NET ASSETS OF MUTUAL FUNDS AT THE END OF QUARTER 2 OF 2023 A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 27 of 124  CONTINENTS NET ASSETS OF MF (MILLIONS OF U.S. DOLLARS) America 22,910,648 Europe 14,315,210 Asia 3,326,710 Africa 157,222 Australia 1,597,258 WORLD 42,307,048 FIGURE 1.3: - SHOWING WORLDWIDE DISTRIBUTION OF NET ASSETS OF MUTUAL FUNDS AT THE END OF QUARTER 2 OF 2023 WORLD WIDE DISTRIBUTION OF MF NET ASSETS 0% 4% 8% Americas Europe 34% 54% Asia Africa Australia From table no. 1.2 and figure no. 1.3 above it is observed that America is in first place in holding the net assets of mutual funds. It has approx. 54% of the total world’s mutual fund net assets. Europe is in second place holding approx. 34% of the world’s mutual fund net assets. Asia and Africa and Australia hold a very negligible portion of the world’s mutual fund net assets. One can say that mutual funds have become popular only in America and Europe. It is at the crawling stage in the remaining world. The following tables and charts further analyze the countries in different continents where mutual funds have become popular or are still in the developing stage. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 28 of 124  TABLE NO 1.3: DISTRIBUTION OF NET ASSETS OF MUTUAL FUND IN AMERICA COUNTRIES IN NET ASSETS OF MF CONTINENT (MILLIONS OF U.S. AMERICA DOLLARS) Argentina 16,512 Brazil 1,505,170 Canada 1,301,847 Chile 42,480 Costa Rica 2,516 Mexico 112,125 Trinidad & Tobago 6,814 United States 19,923,184 AMERICAS 22,910,648 FIGURE 1.4: - SHOWING DISTRIBUTION OF MF NET ASSETS IN AMERICA DISTRIBUTION OF MF NET ASSETS IN AMERICA 20,000,000 15,000,000 10,000,000 5,000,000 0 From table no. 1.3 And graph no 1.4. It is observed that America’s total net assets in mutual funds of 22,910,648 million us dollars are mainly contributed by 6 countries. But the major contribution is of the United States. Brazil and Canada are contributing very little and remaining countries like Argentina, Chile, Costa Rica, Mexico, and Trinidad & Tobago at A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 29 of 124 negligible levels. So, we can say that the United States holds 87% of America’s mutual fund net assets which is 47.09% of the world’s net assets of mutual funds. TABLE NO. 1.5: DISTRIBUTION OF NET ASSETS OF MUTUAL FUND IN ASIA COUNTRIES IN NET ASSETS OF MF CONTINENT (MILLIONS OF U.S. ASIA DOLLARS) China 1,154,330 India 178,483 Japan 1,475,209 Korea, Rep. of 393,589 New Zealand 46,360 Pakistan 4,502 Philippines 5,357 Taiwan 68,880 ASIA 3,326,710 FIGURE 1.5: - SHOWING DISTRIBUTION OF MF NET ASSETS IN ASIA DISTRIBUTION OF MF NET ASSETS IN ASIA 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 From the above table no 1.5 and figure no 1.5, it is clear that only 8 countries in Asia contribute to the net assets of mutual funds. In Asia Japan is in first place by contributing 1,475,209 million US dollars, China is in second place by contributing 1,154,330 million US A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 30 of 124 dollars and Korea is in third place with 393,589 million US dollars. India’s contribution is very little and New Zealand, Pakistan Philippines, and Taiwan are contributing at negligible levels. Thus, it is noticeable that the Indian Mutual fund industry is at the infant level. Japan and China are the major contributors to the Asian Continent. TABLE NO. 1.5: DISTRIBUTION OF NET ASSETS OF MUTUAL FUND IN EUROPE COUNTRIES IN CONTINENT NET ASSETS OF MF EUROPE (MILLIONS OF U.S. DOLLARS) Austria 187,060 Belgium 133,989 Bulgaria 485 Croatia 2,262 Czech Republic 9,265 Denmark 118,971 Finland 107,891 France 1,866,100 Germany 2,003,612 Greece 4,611 Hungary 17,637 Ireland 2,128,143 Italy 257,934 Liechtenstein 45,598 Luxembourg 3,843,406 Malta 3,485 Netherlands 781,512 Norway 109,576 Poland 32,397 Portugal 23,998 Romania 5,172 Slovakia 6,205 Slovenia 2,513 A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 31 of 124  Spain 276,642 Sweden 305,744 Switzerland 505,020 Turkey 13,729 United Kingdom 1,522,253 EUROPE 14,315,210 FIGURE 1.6: - SHOWING DISTRIBUTION OF MF NET ASSETS IN EUROPE DISTRIBUTION OF MF NET ASSETS IN EUROPE 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 France Greece Portugal Slovakia Finland Norway Hungary Poland Romania Spain Sweden Turkey Denmark Germany United Kingdom Ireland Slovenia Switzerland Czech Republic Netherlands Malta Italy Austria Belgium Bulgaria Liechtenstein Croatia Luxembourg Table no. 1.5 and figure no. 1.6 describes that the mutual funds are more popular in Europe. 28 countries in Europe are having mutual funds in their capital markets. But Luxembourg, Germany, France, Ireland and United Kingdom these 5 countries are having major share in European mutual fund industry. 1.13 INDIAN SCENARIO OF MUTUAL FUND INDUSTRY: In 1954, the shroff committee was constituted for the private sector in India. The committee recommended that to increase the availability of capital for industries through the Indian capital market unit trusts should be established. The committee observed that unit trusts were suitable for mobilizing the small savings of the investors both in the public and private sectors. These recommendations came into reality after certain amendments in 1963 when the parliament enacted the unit trust of India act. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 32 of 124  OVERVIEW OF MUTUAL FUND INDUSTRY IN INDIA: The Unit Trust of India act laid down the foundation of the mutual funds industry. Uti was set up in 1963 as a statutory body. It launched us-64 as its first open-ended scheme in 1964. Mutual funds are considered one of the best available investments as compared to others, they are very cost-efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. The options available are to invest the money in stock market. However, a common investor is not well informed and competent enough to understand the complexities involved in the price movement of securities in the financial market. This is where mutual funds come to rescue them. The following table indicates the growth of net assets of mutual funds over the years in India. TABLE NO 1.6: ASSETS UNDER MANAGEMENT IN INDIAN MUTUAL FUND INDUSTRY Year Ended 31st March Asset Under Management (Rs. In Crores) 1965 25 1987 4,564 1993 47,733 2003 79,464 2004 139,616 2005 149,554 2006 231,862 2007 326,388 2008 505,152 2009 417,300 2010 613,979 2011 59,250 2012 587,212 2013 701,443 2014 825,240 A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 33 of 124  2015 1,082,757 FIGURE 1.7: - SHOWING ASSET UNDER MANAGEMENT IN INDIAN MUTUAL FUND INDUSTRY (1965 – 2015) 1200000 1000000 800000 600000 Year Ended 31st March 400000 200000 Asset Under Management 0 (Rs. In Crores) 1965 1987 1993 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Indian mf industry witnessed impressive growth till the year 2007-08 and gave an impression of becoming a mature industry. However, after several years of relentless growth, the industry witnessed a fall in net assets in the year 2008-09 and subsequently in the year 2010- 11, suggesting its vulnerability to the local financial market and global economic crisis. During 2014-15 it recorded a tremendous growth of 31.20%. It is expected that this growth will continue in the coming years, which will help the Indian economy to grow further. Indian economy is one of the fastest-growing economies in the world. The country's savings are now around 29 %. Because of high growth potential, foreign investors are investing in the Indian market. India is the next emerging economy after the US and China. Hence sound financial market is of utmost importance. It is the financial market that channelizes the savings of the people into the investment. Several international funds are operating independently in India and some are expected to come in the future. Foreign investors, local institutions, and mutual funds are now playing a bigger role. The tremendous growth of the Indian mutual fund industry is an indicator of the efficient financial market. Indian mutual fund industry started with traditional products like equity funds, debt funds, and balanced A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 34 of 124 funds and later significantly increased its product base. Today, the industry has introduced a wide range of products such as money market funds, sector-specific funds, index funds, gilt funds, insurance-linked funds, exchange-traded funds, and marching towards realty funds. The different types of schemes offered by the Indian mutual fund industry provide several options for investment to the common man. What is noteworthy is that the bulk of the mobilization has been by the private sector mutual funds rather than bank-sponsored mutual funds. The mutual fund industry in India is quite sophisticated and successful because of the participation of good and reputed Indian and international institutions. Further development of the capital market is possible with the improvements in the mutual fund industry which will mobilize the savings on a wider scale. The following diagram shows the leading mutual fund groups in India. The ranking is done on the basis of (asset under management) of the respective fund houses. FIGURE 1.8: - SHOWING LEADING MUTUAL FUND GROUPS IN INDIA The growth and development of various mutual fund products in the Indian capital market has proved to be one of the most catalytic instruments in generating momentous investment growth in the capital market. In this context, close monitoring and evaluation of mutual funds has become essential. With an emphasis on an increase in domestic savings and improvement in the deployment of investment through markets, the need and scope for mutual fund operation have increased tremendously. Thus, the involvement of mutual funds in the transformation of the Indian economy has made it urgent too. Apart from the global economic environment, the future A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 35 of 124 health of the mf industry in India is also likely to depend on several factors. Some of them are as follows; first, overall economic development of the country measured through growth in the GDP; second, change in the demographics of individuals; third, structure of current and future social security system; fourth, technological innovations; fifth, enabling support from the regulator and government agencies; sixth, bridging rural-urban divide; seventh, comprehensive investor awareness program; and eight, understanding the behavior of mf investors, particularly retail investors 1.14 SEBI REGISTERED MUTUAL FUND COMPANIES IN INDIA AXIS MUTUAL FUND - MF/061/09/02 BARODA PIONEER MUTUAL FUND - MF/018/94/2 BIRLA SUN LIFE MUTUAL FUND – MF/020/94/8 BNP PARIBAS MUTUAL FUND – MF/049/04/01 BOI AXA MUTUAL FUND – MF/056/08/01 CANARA ROBECO MUTUAL FUND – MF/004/93/4 DSP BLACKROCK MUTUAL FUND – MF/036/97/7 EDELWEISS Mutual Fund – MF/057/08/02 ESSEL MUTUAL FUND – MF/062/09/03 FRANKLIN TEMPLETON MUTUAL FUND – MF/026/96/811. HDFC MUTUAL FUND – MF/044/00/6 HSBC MUTUAL FUND – MF/046/02/5 ICICI PRUDENTIAL MUTUAL FUND – MF/003/93/6 IDBI MUTUAL FUND – MF/064/10/01 IDFC MUTUAL FUND – MF/042/00/3 IIFCL MUTUAL FUND (IDF) – MF/071/13/01 IIFL MUTUAL FUND – MF/067/11/02 IL&FS MUTUAL FUND (IDF) – MF/072/13/02 INDIABULLS MUTUAL FUND – MF/068/11/03 A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 36 of 124  INVESCO MUTUAL FUND – MF/052/06/01 ITI MUTUAL FUND – MF/073/18/01 JM FINANCIAL MUTUAL FUND – MF/015/94/8 KOTAK MAHINDRA MUTUAL FUND – MF/038/98/1 L&T MUTUAL FUND – MF/035/97/9 LIC MUTUAL FUND – MF/012/94/5 MAHINDRA MUTUAL FUND – MF/069/16/01 MIRAE ASSET MUTUAL FUND – MF/055/07/03 MOTILAL OSWAL MUTUAL FUND – MF/063/09/04 NIPPON INDIA MUTUAL FUND – MF/022/95/1 PIGM MUTUAL FUND – MF/069/12/01 PRINCIPAL MUTUAL FUND – MF/019/94/0 QUANT MUTUAL FUND – MF/028/96/4 QUANTUM MUTUAL FUND – MF/051/05/02 SBI MUTUAL FUND – MF/009/93/3 SHRIRAM MUTUAL FUND – MF/017/94/4 SUNDARAM MUTUAL FUND – MF/034/97/2 TATA MUTUAL FUND – MF/023/95/9 TAURUS MUTUAL FUND – MF/002/93 UNION MUTUAL FUND – MF/066/11/01 UTI MUTUAL FUND – MF/048/03/01 YES, MUTUAL FUND – MF/074/18 A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 37 of 124  1.15 PROFILE OF STUDY AREA The profile of the study area is awareness about the mutual fund in Mumbai city. Mumbai is the largest city in India and the financial capital of the country. It is located in the state of Maharashtra on the west coast of India. Mumbai is the ninth-most populous city in the world and the most populous city in India, with a population of over 12 million people. According to the Mumbai Municipal Corporation, the city's nominal GDP was estimated to be $360 billion in 2024, making it one of the largest urban economies in South Asia. The city has a wide range of demographic groups in terms of age, gender, income, and education, which allows for a comprehensive analysis of how these factors influence mutual fund awareness and investment behaviors. Additionally, as a major hub for financial activities, Mumbai residents are exposed to various sources of information on investment options, providing a relevant context for studying the awareness levels and factors affecting investment decisions in mutual funds. Mumbai accounts for approximately 6.16% of India's total GDP, and 40% of India's foreign trade, and is home to the country's largest and oldest stock exchange, the Bombay Stock Exchange (BSE), and the National Stock Exchange of India (NSE). The city is also a hub for various industries such as entertainment (Bollywood), finance, information technology, and manufacturing. 1.16 STATEMENT OF PROBLEM This study seeks to evaluate the level of awareness about mutual funds among different demographic groups. With the growing importance of mutual funds as a tool for personal investment, understanding the extent to which people are informed about these financial products is critical. This research will explore the knowledge and awareness levels of mutual funds, investigate the primary sources through which people receive information about them, and analyze key factors that influence individuals' decisions to invest. By examining demographic differences, this study aims to identify any disparities in mutual fund awareness, thereby contributing valuable insights to improve financial literacy and targeted outreach efforts. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 38 of 124  1.17 OBJECTIVE OF STUDY ▪ To Assess the Level of Awareness About Mutual Fund Among Different Demographic Group (Age. Gender, Income Level Education). ▪ To Examine the Sources of Information About Mutual Fund Use by People. ▪ To Identify the Factors Influencing People's Decision to Invest or Not Invest in Mutual Fund. 1.18 HYPOTHESES OF STUDY A hypothesis is a precise, testable statement of what the researcher predicts will be the outcome of the study. It is stated at the start of the study. This usually involves proposing a possible relationship between two variables: the independent variable (what the researcher changes) and the dependent variable (what the research measures). In research, there is a convention that the hypothesis is written in two forms, the null hypothesis, and the alternative hypothesis (called the experimental hypothesis when the method of investigation is an experiment). The reason for undertaking research is to observe a specific phenomenon. A hypothesis, therefore, lays out what the said phenomenon is. It does so through two variables, an independent and a dependent variable. THE FOLLOWING HYPOTHESES WERE FORMULATED TO GUIDE THIS STUDY HYPOTHESIS HYPOTHESIS 1 ▪ ALTERNATE HYPOTHESIS H1: There is a significant difference in the level of awareness about mutual funds between different demographic groups. ▪ NULL HYPOTHESIS H1: There is no significant difference in the level of awareness about mutual funds between different demographic groups. A STUDY ON AWARENESS ABOUT MUTUAL FUND AMONG PEOPLE IN MUMBAI CITY Page 39 of 124 HYPOTHESIS 2 ▪ ALTERNATE HYPOTHESIS H1: Certain sources of information (e.g., social media, financial advisors, advertisements) are more influential than others in spreading awareness about mutual funds in Mumbai. ▪ NULL HYPOTHESIS H1: All sources of information have a similar level of influence in spreading awareness about mutual funds in Mumbai. HYPOTHESIS 3 ▪ ALTERNATE HYPOTHESIS H1: Specific factors (e.g., risk tolerance, perceived return on investment, past experiences)