A Study on Investor Behaviour Towards Mutual Funds in India

International Journal of Research in Management ISSN 2249-5908 Available online on http://www.rspublication.com/ijrm/ijrm_index.htm Volume 15 No. 5, 2025 DOI: 10.5281/zenodo.17642374 Original Article ©2025 RS Publication, [email protected] 31 A Study on Investor Behaviour Towards Mutual Funds in India Ms. T. Nandhini. M.com. (Assistant Professor of Commerce) Mr.M. Saranraj. II M.com ., Sri Krishnasamy Arts and Science College, Mettamalai. ARTICLE INFO ABSTRACT ©2025 RS Publication Paper ID: IJRM691B34E6382CE Received: 2025-10-12 Published: 2025-11-18 DOI: https://dx.doi.org/1 0.5281/zenodo.176423 74 Page No: 31-37 The mutual fund industry in India has evolved as a significant investment avenue for both small and large investors over the last few decades. This paper attempts to understand the general behavioural trends of Indian investors towards mutual fund investments by examining psychological, demographic, and economic factors that influence their decisions. The study highlights that investors’ choices are primarily driven by risk perception, awareness level, income, and education. With the advent of technology and digital platforms, access to mutual funds has become easier, leading to growing participation among young investors. However, many retail investors still lack adequate knowledge about the different categories of funds, market risks, and long-term benefits. This study emphasizes the importance of financial literacy, investor education, and transparency in the mutual fund ecosystem. It concludes that creating awareness, simplifying processes, and improving trust can further enhance mutual fund penetration in India and contribute to the growth of the Indian capital market. Keywords: Investor Behaviour, Mutual Funds, Risk Perception, Financial Awareness, Investment Decision, India Introduction Investment plays a crucial role in the economic development of any country by mobilizing savings and channelizing them into productive uses. In recent years, mutual funds have emerged as one of the most attractive and convenient investment avenues in India, especially for retail investors who prefer professional management and diversification of risk. A mutual fund pools money from multiple investors and invests in diversified securities such as equities, bonds, and money market instruments, thereby reducing individual risk exposure. The Indian mutual fund industry has shown tremendous growth during the last two decades, supported by financial reforms, technological advancement, and growing awareness INTERNATIONAL JOURNAL OF RESEARCH IN MANAGEMENT Available online on http://www.rspublication.com/ijrm/ijrm_index.htm ISSN 2249-5908 Cite This Paper: Ms. T. Nandhini.and Mr.M. Saranraj. (2025). "A Study on Investor Behaviour Towards Mutual Funds in India". INTERNATIONAL JOURNAL OF RESEARCH IN MANAGEMENT (IJRM), vol. 15, no. 6, 2025, pp. 31-37. DOI: https://dx.doi.org/10.5281/zenodo.17642374 International Journal of Research in Management ISSN 2249-5908 Available online on http://www.rspublication.com/ijrm/ijrm_index.htm Volume 15 No. 5, 2025 DOI: 10.5281/zenodo.17642374 Original Article ©2025 RS Publication, [email protected] 32 among the public. With the rapid expansion of digital platforms, investors can now access, compare, and invest in mutual fund schemes from the comfort of their homes. However, despite the increasing popularity of mutual funds, the participation of small and rural investors still remains relatively low due to limited financial literacy, lack of trust, and fear of market volatility. Investor behaviour is influenced by multiple factors including psychological attitudes, income levels, age, education, social influence, and past experiences. Many investors still rely on traditional saving instruments like bank deposits and gold rather than market-based investments. Understanding the behavioural patterns of investors is essential for fund managers, financial advisors, and policymakers to design effective strategies that enhance participation and promote a culture of informed investing. Therefore, this study aims to analyze and interpret the behaviour of Indian investors towards mutual funds, to identify the key factors that drive or restrict their investment decisions, and to suggest measures that can strengthen the mutual fund industry in India. Review of literature : The behaviour of investors towards mutual funds has been widely studied by researchers across different countries, as it plays a crucial role in shaping the financial market. According to Gupta (2022), investment behaviour is largely influenced by individual perceptions of risk and return, along with the investor’s financial literacy level. The study emphasized that educated investors with higher income are more likely to diversify their investments across various mutual fund schemes. Sharma and Singh (2021) observed that behavioural biases such as overconfidence, herd mentality, and familiarity bias have a strong impact on investment decisions. Investors often rely on friends, relatives, or media recommendations rather than conducting independent analysis. Their study also highlighted that marketing campaigns and brand reputation of mutual fund companies significantly influence investor preferences. Rao (2020) examined the demographic aspects of mutual fund investors and found that age, gender, and income levels have a considerable effect on the choice of schemes. Younger investors tend to prefer equity-oriented funds with higher returns, whereas older investors generally prefer debt or balanced funds for safety. In another study, Kumar and Bansal (2019) pointed out that awareness and trust are key factors determining the success of mutual fund schemes in developing economies like India. Lack of knowledge about market risks and limited accessibility to investment platforms often discourage participation among rural and middle-income groups. Further, reports published by AMFI (2023) and SEBI (2022) revealed that the mutual fund industry in India is expanding steadily, with growing adoption of Systematic Investment Plans (SIPs). However, the overall penetration rate remains low compared to developed International Journal of Research in Management ISSN 2249-5908 Available online on http://www.rspublication.com/ijrm/ijrm_index.htm Volume 15 No. 5, 2025 DOI: 10.5281/zenodo.17642374 Original Article ©2025 RS Publication, [email protected] 33 nations. These studies collectively indicate that enhancing investor education, transparency, and accessibility are essential for sustainable growth of the mutual fund sector in India. Objectives of the Study : The main objective of this study is to analyze the behaviour of investors towards mutual fund investments in India and to identify the factors influencing their investment decisions. The specific objectives are as follows: 1. To examine the level of awareness and perception of investors regarding mutual fund schemes in India. 2. To identify the demographic factors such as age, gender, education, occupation, and income that influence investor preferences. 3. To study the behavioural factors including risk appetite, investment objectives, and financial literacy affecting mutual fund investment choices. 4. To assess the role of financial advisors, advertisements, and peer influence in shaping investor decisions. 5. To understand the major challenges faced by investors while investing in mutual funds. 6. To suggest suitable measures to enhance investor participation and confidence in the Indian mutual fund industry. Data analysis and discussion (theoretical ) : In this study, the analysis is based on secondary data collected from journals, articles, and reports published by SEBI, AMFI, and other financial research bodies. The findings reveal that the mutual fund industry in India has witnessed remarkable growth over the past decade, primarily driven by increasing investor awareness and technological developments. The introduction of online platforms and mobile investment apps has simplified the process of investing, thereby attracting a large number of young investors. However, the behavioural analysis of investors indicates that risk perception continues to be a key determinant of investment choice. Most small investors prefer debt or hybrid funds as they are perceived to be safer compared to equity-oriented schemes. Income level and education also play a significant role — individuals with higher income and financial literacy tend to diversify their portfolios across different asset classes. The discussion also reveals that Systematic Investment Plans (SIPs) have become a popular mode of investment among salaried individuals because they promote disciplined saving habits and reduce the impact of market volatility. Yet, rural and semi-urban investors remain underrepresented in the mutual fund market due to lack of accessibility, limited trust, and low financial awareness. Moreover, marketing campaigns, peer influence, and media promotions have emerged as major behavioural triggers that shape investors’ decisions. Fund houses with strong brand reputation and transparent performance records tend to attract more investors. In summary, the analysis suggests that while the mutual fund sector in India has made International Journal of Research in Management ISSN 2249-5908 Available online on http://www.rspublication.com/ijrm/ijrm_index.htm Volume 15 No. 5, 2025 DOI: 10.5281/zenodo.17642374 Original Article ©2025 RS Publication, [email protected] 34 significant progress, further efforts are required to enhance investor confidence, simplify investment procedures, and improve financial literacy across all sections of society. A stronger regulatory framework and consistent investor education initiatives can help in sustaining the long-term growth of the industry Research Methodology : The present study titled “A Study on Investor Behaviour Towards Mutual Funds in India” is descriptive in nature and is primarily based on secondary data. The purpose of the study is to understand the various factors influencing investor behaviour and to identify the challenges and opportunities in the Indian mutual fund industry. 1. Nature of the Study The research is descriptive and analytical in nature. It aims to describe investor attitudes, preferences, and behavioural patterns towards mutual fund investments using already published data and theoretical concepts. 2. Sources of Data The study mainly relies on secondary data collected from: ● Research papers and journal articles related to investor behaviour ● Reports published by SEBI (Securities and Exchange Board of India) and AMFI (Association of Mutual Funds in India) ● Books, newspapers, and online financial portals ● Government publications and official websites 3. Sampling Design Since this study is based on secondary data, no primary sampling has been conducted. However, various published reports and surveys by regulatory authorities and research institutions have been analyzed to ensure accuracy and reliability. 4. Tools for Analysis The collected data has been analyzed through qualitative interpretation and logical reasoning. Graphs, percentages, and comparative statements from published sources have been referred to wherever necessary. 5. Period of the Study The study covers data and reports published during the period 2019–2024, focusing on recent developments and behavioural trends among Indian investors. International Journal of Research in Management ISSN 2249-5908 Available online on http://www.rspublication.com/ijrm/ijrm_index.htm Volume 15 No. 5, 2025 DOI: 10.5281/zenodo.17642374 Original Article ©2025 RS Publication, [email protected] 35 6. Limitations of the Study 1. The study depends entirely on secondary data; hence, primary behavioural responses could not be verified directly. 2. The findings may vary depending on regional differences and changing market conditions. 3. Investor psychology is dynamic, and therefore, conclusions may not be universally applicable across all investor categories Findings and Suggestions: Findings Based on the analysis and review of literature, the following key findings have been derived: 1. Most Indian investors still prefer traditional saving instruments like bank deposits and gold due to fear of market risk and lack of awareness about mutual funds. 2. The awareness level about different types of mutual fund schemes is relatively low, especially among rural and middle-income investors. 3. Risk perception and return expectation are the major factors influencing investor decisions. 4. Investors with higher education and income tend to diversify their portfolios and prefer equity-oriented mutual funds. 5. Systematic Investment Plans (SIPs) are becoming a popular investment option among salaried individuals due to their flexibility and low entry cost. 6. Financial literacy and trust play a crucial role in motivating investors to invest in mutual funds. 7. Marketing efforts, media exposure, and peer recommendations significantly influence investor behaviour. Suggestions 1. Financial institutions and mutual fund companies should organize regular awareness and training programs to educate potential investors about the benefits and risks of mutual fund investments. 2. Simplification of investment procedures and use of regional languages in promotional materials can help reach rural investors more effectively. International Journal of Research in Management ISSN 2249-5908 Available online on http://www.rspublication.com/ijrm/ijrm_index.htm Volume 15 No. 5, 2025 DOI: 10.5281/zenodo.17642374 Original Article ©2025 RS Publication, [email protected] 36 3. The government and SEBI should continue to strengthen investor protection measures to enhance transparency and trust in the system. 4. Financial advisors should focus on providing personalized guidance based on investors’ income, risk tolerance, and long-term goals. 5. Introducing financial literacy modules in educational institutions can promote an investment-oriented culture among the youth. 6. Mutual fund companies should emphasize long-term wealth creation rather than short-term returns in their marketing strategies. Conclusion The study concludes that investor behaviour towards mutual funds in India is shaped by a combination of demographic, psychological, and economic factors. Although mutual funds have emerged as a preferred investment avenue for many, a large portion of the population still remains hesitant due to limited awareness and fear of market risk. The research highlights that financial literacy, trust, and transparency are the key elements for improving participation in the mutual fund sector. Technological advancements and the popularity of SIPs have made investing easier and more disciplined, especially among young investors. To ensure sustainable growth of the mutual fund industry, continuous investor education, effective regulation, and ethical marketing practices are essential. If these measures are effectively implemented, mutual funds can become a powerful instrument for channelizing household savings into productive investments, thereby contributing significantly to India’s economic development. References: 1. Gupta, R. (2022). Investor Behaviour and Mutual Fund Investment in India. International Journal of Management and Social Science Research, 11(3), 45–52. 2. Sharma, P., & Singh, R. (2021). A Study on Factors Influencing Mutual Fund Investment Decisions. Journal of Business and Economic Development, 9(2), 33–41. 3. Rao, S. (2020). Demographic Analysis of Mutual Fund Investors in India. Indian Journal of Finance, 14(5), 22–28. 4. Kumar, A., & Bansal, N. (2019). Investor Awareness and Trust in Mutual Fund Investments. International Journal of Financial Research, 10(1), 78–85. 5. AMFI (Association of Mutual Funds in India). (2023). Industry Report 2023. Retrieved from https://www.amfiindia.com International Journal of Research in Management ISSN 2249-5908 Available online on http://www.rspublication.com/ijrm/ijrm_index.htm Volume 15 No. 5, 2025 DOI: 10.5281/zenodo.17642374 Original Article ©2025 RS Publication, [email protected] 37 6. SEBI (Securities and Exchange Board of India). (2022). Annual Report 2021–22. Retrieved from https://www.sebi.gov.in 7. Pandey, I. M. (2020). Financial Management. Vikas Publishing House, New Delhi. 8. Tandel, S. (2021). Behavioural Finance and Investment Decisions. Himalaya Publishing House, Mumbai. 9. RBI (Reserve Bank of India). (2023). Report on Financial Stability in India. Retrieved from https://www.rbi.org.in