Major Determinants of Mutual Fund Investment in India: Factor Analysis of the Survey

Abstract

The Indian mutual fund sector initiated its operations with traditional offerings such as equity funds, debt funds, and balanced funds, and has subsequently broadened its range of products considerably. The diverse array of schemes available through the Indian mutual fund sector provides a multitude of investment opportunities for the average investor. Within this scholarly article, the author has sought to clarify the determinants that encourage investors to allocate their capital to mutual funds. Factor analysis proves to be particularly beneficial for distilling a limited set of factors from an extensive collection of interrelated variables, thereby facilitating their management prior to implementation in subsequent analytical methods. By utilizing factor analysis, it becomes possible to eliminate redundant inquiries from the final iteration of the questionnaire designed to assess mutual fund awareness and consumer investment behavior. The findings have demonstrated that factor analysis not only facilitates the identification of superfluous items but also plays a pivotal role in the extraction of fundamental factors from the dataset acquired via a questionnaire survey. Accordingly, major components that affect mutual funds’ investments have been identified viz. good returns and low risk, customer friendliness, newsbased customer sentiment, convenience and need of fund manager. The application of factor analysis in the assessment of questionnaires yields critical insights for policymakers, allowing them to focus on a limited number of pivotal factors rather than an extensive variety of parameters.