PREFACE

M
BA is a stepping-stone to the management carrier and to develop
good manager it is necessary that the theoretical must be
supplemented with exposure to the real environment. Theoretical
knowledge just provides the base and it’s not sufficient to produce a good
manager that’s why practical knowledge is needed. Therefore the research
product is an essential requirement for the student of MBA. This research
project not only helps the student to utilize his skills properly learn field
realities but also provides a chance to the organization to find out talent among
the budding managers in the very beginning. In accordance with the
requirement of MBA course I have summer training project on the topic
“Market Capitalization of Mutual Funds and ULIPS”. The main objective of
the research project was to study the two instruments and make a detailed
comparison of the two.

For conducting the research project sample size of 50 customers of Bajaj

Capital was selected. The information regarding the project research was
collected through the questionnaire formed by me which was filled by the
customers there.

In the growing global competition, business has taken a new shape in the
world. Today’s Manager has to understand the uncertainty of business
environment to cope with the situation. Dissertation for each and every
student of PGPM is an essential part of completion at the end of 1 st year of the
course. The prime objective of this summer training to familiar with real life
business environment and apply the theoretical concept of business into reality
and know how much theory is applicable in day to day business activity. It
also sharpens their knowledge, hones their analytical and other business
acumen and develops better appreciation of the practical problems of business,
especially from the management point of view.
Moreover the experience acquired by student helps to decide the future
professional career. As per the module is concern I underwent in a project
entitled “Market Capitalization of Mutual Fund & ULIP”.

1
 ACKNOWLEDGEMENTS

A
Successful project is fruitful culmination of efforts of many people, some
directly involved, and others who have quietly encouraged and extended
their support, while being in the background. I take this opportunity to
extend my deep sense of gratitude and heartfelt thanks to all those who have
helped us directly or indirectly during the course of my project.

My colleagues and associates at ASIAN SCHOOL OF BUSINESS

MANAGEMENT continue to have important impact on my thinking. I am in debt
to my corporate guide Mr. Sambit Mohanty (Branch Head) & Shibashis
Pattanaik(Financial Planning Executive) of “Bajaj Capital “Bhubaneswar. Who
have taught me a great deal as we worked together to adopt marketing
management thinking to the problems of different situations. This dissertation
could not have been written without Prof.Kalpana Sahoo who not only served as
my supervisor but also encouraged and challenged me throughout my academic
program who patiently guided me through the dissertation process, never
accepting less than my best efforts. I am also appreciative of all that I have learned
from working with industry executives who have generously shared their insight
and experiences.

I would like to give thanks to all the staff of “Bajaj capital.” Bhubaneswar (Orissa)
for their valuable and sincere cooperation and plying all the database of “Bajaj
capital”, Bhubaneswar (Orissa). I am thankful to my parents, & my entire family
who are always my source of brainchild & unplumbed exertion towards the
journey of my life.
At last but not the least I am grateful to Omnipotent God for his manifold blessing
in this endeavor of mine.

Deviprasad Dandapat
28th June 2010

2
 EXECUTIVE SUMMARY
3
 EXECUTIVE SUMMARY

I
n today’s corporate and competitive world, I find that insurance 7 Mutual
Fund sector has the maximum growth and potential as compared to the
other sectors. Insurance has the maximum growth rate of 70-80% while as
FMCG sector has maximum 12-15% of growth rate. This growth potential attracts
me to enter in this sector and Bajaj Capital has given me the opportunity to work
and get experience in highly competitive and enhancing sector.

My project was to understand the different marketing strategies adopted by the

company, namely, Bajaj Capital to increase their market share and also to achieve
its own target in order to attain the zenith of its respective sector.

My SIP has helped me in learning a lot of things about the corporate world. As a
project trainee I was required to understand the behavior of the consumer in order
to manipulate the market and gain an advantage in the competitive scenario.

I also learned to develop the agency channel and how to create business
opportunities. This helped me to know the issues of the competitive market and
also helped me enhance my communication and convincing skills.

Understanding the ground reality of marketing is like stars in the eyes of every
Management Professional, & this experience becomes more profound when the
inception is with a pioneer like Bajaj Capital. During the two months Summer
Project with Bajaj Capital had a very nice Corporate World Exposure, which I
think will serve as a stepping stone for me in my corporate journey.

In today’s corporate and competitive world, I find that insurance 7 Mutual Fund
sector has the maximum growth and potential as compared to the other sectors.
Insurance has the maximum growth rate of 70-80% while as FMCG sector has

4
maximum 12-15% of growth rate. This growth potential attracts me to enter in this
sector and Bajaj Capital has given me the opportunity to work and get experience
in highly competitive and enhancing sector.

Unit Links Insurance Plan (ULIP) and Mutual Fund (MF) are the two most
preferred options for a part time investor to invest into equity. But how do we
decide which one should we go for. Though it is very easy to decide, people tend to
confuse themselves most of the time. This Report talks about some points that you
need to consider while deciding which option we want to take. Mutual Fund is
pure investments. ULIP are combination of Insurance and Investment.

5
 Market Capitalization of Mutual Fund and ULIPs
Chapter-01

Mutual Fund

6
 INTRODUCTION

A
Mutual Fund is a collective investment vehicle formed with the specific objective of
raising money from a large number of Individuals and investing it according to a pre
specified objective. The word Mutual in a Mutual Fund signifies a vehicle wherein the
benefits of Investment accrued pro rata to all the investors in proportion to there Investments.
Over the past decades Mutual Funds have grown intensely in popularity and have experienced a
considerable growth rate. Mutual Funds are popular because they make it easy for small
investors to invest their money in a diversified pool of securities. As the Mutual Fund industry
has evolved over the years

MEANING:
“Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. Anyone with an invisible surplus of as little as few thousand rupees can invest in
Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined
investment objective and strategy.”

The fund manager in different types of securities then invests the money thus collected. These
could range from shares to debentures to money market instruments, depending on the scheme’s
stated objectives. The income earned through these investments and the capital appreciations
realized by the scheme are shared by its unit holders in proportion of the number of units owned
by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportune investing a diversified, professionally managed basket of securities at a relatively low
cost.

A Mutual Fund is the ideal investment vehicle for today’s complex modern world. It appoints
professionally qualified and experienced staff that manages each of these functions on full time
basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost
to each investor. In effect, the Mutual Fund vehicle exploits economies of scale in all three areas
– research, investing and transaction processing.

While the concept of individuals coming together to invest money collectively is not new, the
Mutual Fund in its present form is a 20th century phenomenon. In fact, Mutual Funds gained
popularity only after the Second World War. Globally, there are thousand of firm’s offerings tens
of thousand of Mutual Funds with different investment objectives. Today Mutual Funds
collectively manage almost as much money as banks.

7
Along with the success of Mutual Funds, inevitably there arose a need to regulate the industry.
Thus regulation and regulatory bodies came into being so that small investors were not misled or
put to loss by some unscrupulous people representing themselves as Mutual Funds.

Characteristics of Mutual Funds:

• The ownership is in the hands of the investors who have pooled in their funds.
• It is managed by a team of investment professionals and other service providers.
• The pool of funds is invested in a portfolio of marketable investments.
• The investors share is denominated by ‘units’ whose value is called as Net Asset Value
(NAV) which changes everyday.
• The investment portfolio is created according to the stated investment objectives of the
fund.

ADVANTAGES OF MUTUAL FUNDS:

The advantages of Mutual Funds are given below:

• Portfolio Diversification
Mutual Funds invest in a number of companies. This diversification reduces the risk because it
happens very rarely that all the stocks decline at the same time and in the same proportion. So
this is the main advantage of Mutual Funds.

• Professional Management
Mutual Funds provide the services of experienced and skilled professionals, assisted by
investment research team that analysis the performance and prospects of companies and select
the suitable investments to achieve the objectives of the scheme.

• Low Costs
Mutual Funds are a relatively less expensive way to invest as compare to directly investing in a
capital markets because of less amount of brokerage and other fees.

• Liquidity
This is the main advantage of Mutual Fund, which is whenever investor needs money he can
easily get redemption, which is not possible in most of other options of investment. In open-
ended schemes of Mutual Fund, the investor gets the money back at net asset value and on the
other hand in close-ended schemes the units can be sold in a stock exchange at a prevailing
market price.

8
• Transparency
In Mutual Fund, investors get full information of the value of their investment, the proportion of
money invested in each class of assets and the fund manager’s investment strategy
• Flexibility
Flexibility is also the main advantage of Mutual Fund. Through this investors can systematically
invest or withdraw funds according to their needs and convenience like regular investment plans,
regular withdrawal plans, and dividend reinvestment plans etc.
• Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps investors to avoid many problems like
bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save
time and make investing easy.
• Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A Mutual Fund
because of its large corpus allows even a small investor to take the benefit of its investment
strategy.
• Well Regulated
All Mutual Funds are registered with SEBI and they function with in the provisions of strict
regulations designed to protect the interest of investors. The operations of Mutual Funds are
regularly monitored by SEBI.

Disadvantages of Mutual Funds:

Mutual Funds have their following drawbacks:
• No Guarantees
No investment is risk free. If the entire stock market declines in value, the value of Mutual Fund
shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer
risks when they invest in Mutual Funds than when they buy and sell stocks on their own.
However, anyone who invests through Mutual Fund runs the risk of losing the money.
• Fees and Commissions
All funds charge administrative fees to cover their day to day expenses. Some funds also charge
sales commissions or loads to compensate brokers, financial consultants, or financial planners.
Even if you don’t use a broker or other financial advisor, you will pay a sales commission if you
buy shares in a Load Fund.
• Taxes
During a typical year, most actively managed Mutual Funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes profit on its sales, you will
pay taxes on the income you receive; even you reinvest the money you made.

9
• Management Risk
When you invest in Mutual Fund, you depend on fund manager to make the right decisions
regarding the fund’s portfolio. If the manager does not perform well as you had hoped, you
might not make as much money on your investment as you expected. Of course, if you invest in
index funds, you forego management risk because these funds do not employ managers.

Types of Mutual Fund Schemes:

In India, there are many companies, both public and private that are engaged in the trading of
Mutual Funds. Wide varieties of Mutual Fund Schemes exist to cater to the needs such as
financial position, risk tolerance and return expectations etc. Investment can be made either in
the debt Securities or equity .The table below gives an overview into the existing types of
schemes in the Industry.

MUTUAL FUND SCHEME

By By Investment Other
Objectives
structure Schemes

Open-ended Tax saving

Schemes fund

Debt Equity
Close Ended
Schemes Schemes Schemes
Sector specific
fund
MM Mutual Large cap
Fund Fund

Interval
Schemes FMP Mid cap
Fund Index
Schemes

Other Debt Small cap

Schemes Fund

Any Other
Equity Fund
10
Generally two options are available for every scheme regarding dividend payout and growth
option. By opting for growth option an investor can have the benefit of long-term growth in the
stock market on the other side by opting for the dividend option an investor can maintain his
liquidity by receiving dividend time to time. Some time people refer dividend option as dividend
fund and growth fund. Generally decisions regarding declaration of the dividend depend upon
the performance of stock market and performance of the fund.

Option Regarding Dividend

Dividend Growth

Payout Reinvested

Systematic Investment Plan (SIP):

Systematic investment plan is like Recurring Deposit in which investor invests in the particular
scheme on regular intervals. In the case it is convenient for salaried class and middle-income
group. In this case on regular interval units of specified amount is created. An investor can make
payment by regular payments by issuing cheques, post dated cheques, ECS, standing Mandate
etc. SIP can be started in the any open-ended fund if there is provision of it. There are some entry
and exit load barriers for discontinuation and redemption of the fund before the said period.

According to Structure:

Open – Ended Funds:

An open – ended fund is one that is available for subscription all through the year. These do not
have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV)
related prices. The key feature of open –ended schemes is liquidity.

Close – Ended Funds:

A close – ended fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can invest in

11
the scheme at the same time of the initial public issue and thereafter they can buy and sell the
units of the scheme on the stock exchanges where they are listed. In order to provide an exit
route to the investors, some close – ended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related prices.

Interval Funds:
Interval funds combine the features of open – ended and close – ended schemes. They are open
for sales or redemption during pre-determined intervals at their NAV.

According to Investment Objective:

Growth Funds:
The aim of growth funds is to provide capital appreciation over the medium to long term. Such
schemes normally invest a majority of their corpus in equities. It has been proven that returns
from stocks are much better than the other investments had over the long term. Growth schemes
are ideal for investors having a long term outlook seeking growth over a period of time.

Income Funds:
The aim of the income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and government
securities. Income funds are ideal for capital stability and regular income.

Balanced Funds:
The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the NAV
of these schemes may not normally keep pace or fall equally when the market falls. These are
ideal for investors looking for a combination of income and moderate growth.

Money Market Funds:

The main aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safe short term instruments such as treasury
bills, certificates of deposit, commercial paper and inter – bank call money.
Returns on these schemes may fluctuate depending upon the interest rates prevailing in the
market. These are ideal for corporate and individual investors as a means to park their surplus
funds for short periods.

12
Other Schemes:

Tax Saving Schemes:

These schemes offer tax rebates to the investors under specific provisions of the Indian Income
Tax laws as the government offers tax incentives for investment in specified avenues.
Investments made inequity Linked Saving Schemes (ELSS) and Pension Schemes are allowed as
deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors
to save capital gains.

Special Schemes:
Index Schemes:
Index funds attempt to replicate the performance of a particular index such as the BSE Sensex or
the NSE 50.

Sector Specific Schemes:

Sector funds are those which invest exclusively in a specified industry or a group of industries or
various segments such as ‘A’ group shares or initial public offerings.

Bond Schemes:
It seeks investment in bonds, debentures and debt related instrument to generate regular income
flow.

13
 Industrial
Profile

14
Industry Profile:
The Mutual Fund industry is a lot like the film star of the finance business. Though it is perhaps
the smallest segment of the industry, it is also the most glamorous – in that it is a young industry
where there are changes in the rules of the game everyday, and there are constant shifts and
upheavals. The Mutual Fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is achieved by the pooling
of a number of small investments into a large bucket. Yet it has been the subject of perhaps the
most elaborate and prolonged regulatory effort in the history of the country.

A little history:
The Mutual Fund industry started in India in a small way with the UTI Act creating what was
effectively a small savings division within the RBI. Over a period of 25 years this grew fairly
successfully and gave investors a good return, and therefore in 1989, as the next logical step,
public sector banks and financial institutions were allowed to float Mutual Funds and their
success emboldened the government to allow the private sector to foray into this area.

The initial years of the industry also saw the emerging years of the Indian equity market, when a
number of mistakes were made and hence the Mutual Fund schemes, which invested in lesser-
known stocks and at very high levels, became loss leaders for retail investors. From those days to
today the retail investor, for whom the Mutual Fund is actually intended, has not yet returned to
the industry in a big way. But to be fair, the industry too has focused on brining in the large
investor, so that it can create a significant base corpus, which can make the retail investor feel
more secure.

The Indian Mutual Fund industry has Rs 5.67 lakh crores of Assets Under Management
(AUM). As per data released by Association of Mutual Funds in India, the asset base of all
Mutual Fund combined has risen by 7.32% in April, the first month of the current fiscal. As of
now, there are 33 fund houses in the country including 16 joint ventures and 3 wholly owned
foreign asset managers.

According to a recent McKinsey report, the total AUM of the Indian Mutual Fund industry could
grow to $350-440 billion by 2012, expanding 33% annually. While the revenue and profit (PAT)
pools of Indian AMCs are pegged at $542 million and $220 million respectively, it is at par with
fund houses in developed economies. Operating profits for AMCs in India, as a percentage of
average assets under management, were at 32 basis points in 2006-07, while the number was 12
bps in UK, 17 bps in Germany and 18 bps in the US, in the same time frame.

15
 Major Players in Indian Mutual Fund Industry and Their AUM

Mutual Fund Name No. of As on Crores

Scheme
s
ABN AMRO MF 337 July 31, 2008 7803
7803AIG Global MF 54 July 31, 2008 3513
SBI Mutual Fund 177 July 31, 2008 29151.00
Birla Mutual Fund 343 July 31, 2008 37497.00
BOB Mutual Fund 22 July 31, 2008 56.00
Canara Robeco Mutual Fund 54 July 31, 2008 4576.00
DBS Chola Mutual Fund 80 July 31, 2008 1853.00
Deutsche Mutual Fund 187 July 31, 2008 10792.00
DSP Merrill Lynch Mutual Fund 211 Feb 29, 2008 19483.00
Escorts Mutual Fund 26 Feb 29, 2008 177.00
Fidelity Mutual Fund 39 Mar 31, 2008 7464.00
Franklin Templeton 230 July 31, 2008 24441.00
Investments
HDFC Mutual Fund 371 July 31, 2008 50,752.00
HSBC Mutual Fund 221 July 31, 2008 16,385.00
ICICI Prudential Mutual Fund 431 July 31, 2008 55,161.00
ING Mutual Fund 262 July 31, 2008 7091.00
JPMorgan Mutual Fund 9 July 31, 2008 3054.00
Kotak Mahindra Mutual Fund 185 July 31, 2008 18,782.00
LIC Mutual Fund 112 July 31, 2008 17,499.00
Lotus India Mutual Fund 216 July 31, 2008 7831.00
Morgan Stanley Mutual Fund 3 July 31, 2008 2,814.00
PRINCIPAL Mutual Fund 151 July 31, 2008 11,359.00
Quantum Mutual Fund 6 July 31, 2008 66.00
Reliance Mutual Fund 345 July 31, 2008 84,564.00
Sahara Mutual Fund 45 July 31, 2008 175.00
Mirae asset Mutual Fund 255 July 31, 2008 2546.00
Sundaram Mutual Fund 219 July 31, 2008 11,898.00
Tata Mutual Fund 389 July 31, 2008 20,443.00
Taurus Mutual Fund 14 July 31, 2008 289.00
UTI Mutual Fund 315 July 31, 2008 46,120.00

Source: www.mutualundsindia.com/amc_snapshot.asp?amc_name=AM008

16
History of Mutual Fund:
The Mutual Fund industry in India started in 1963 with the formation of Unit Trust of India
(UTI), at the initiative of the Government of India and Reserve Bank. The history of Mutual
Funds in India can be broadly divided into four distinct phases: -

First Phase – 1964- 87

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was setup by the Reserve
Bank of India and functioned under the Regulatory and administrative control of the Reserve
Bank of India. In 1978 UTI was delinked from the RBI and the Industrial Development Bank of
India (IDBI) took over the regulatory and administrative control in place of RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI hadRs.6, 700 crores of
assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector Mutual Funds set up by public sector banks
and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed
by Can bank Mutual Fund(Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92).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 Mutual Fund industry had assets under management of Rs.47,004
crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian Mutual Fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all Mutual Funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector Mutual Fund registered in July 1993.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963UTIwas bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management ofRs.29, 835 crores as at the end of January 2003, representing broadly, the
assets of US 64scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations. The
second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March2000 more thanRs.76,000 crores of assets under management and with

17
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the Mutual Fund industry
has entered its current phase of consolidation and growth. As at the end of September, 2004,
there were 29funds, which manage assets of Rs.153108 crores under 421 schemes.

Analysis:
 First Phase – 1964-87(UTI was the Only Player)

 Second Phase – 1987-1993 (Entry of Public Sector Funds):

 Third Phase – 1993-2003 (Entry of Private Sector Funds):

 Fourth Phase – Since February 2003.

18
Overview of Mutual Fund Industry:

Over the past decades Mutual Funds have grown intensely in popularity and have experienced a
considerable growth rate. The graph indicates the growth of assets over the years.

Growth in Assets under Management:

19
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit
Trust of India effective from February 2003. The Assets under management of the Specified
Undertaking of the

Unit Trust of India has therefore been excluded from the total assets of the industry as a whole
from February 2003 onwards.

This is how a Mutual Fund going on. it is also called as the life cycle of Mutual Fund.

This is the way how Mutual Fund works. Its starts from investor and it also end with investor. So
investor plays a vital role in Mutual Fund. It’s all about Mutual Fund. Now we are going to
discuss about the Reliance Mutual Fund (RMF) in detail.

Economic Environment:

While the Indian Mutual Fund industry has grown in size by about 320% from March, 1993 (Rs.
470 billion) to December, 2004 (Rs. 1505 billion) in terms of AUM, the AUM of the sector
excluding UTI has grown over 8 times from Rs.152 billion in March 1999 to $ 148 billion as at
March 2008.

Though India is a minor player in the global Mutual Fund industry, its AUM as proportion of the
global AUM has steadily increased and has doubled over its levels in 1999.The growth rate of
Indian Mutual Fund industry has been increasing for the last few years. It was approximately
0.12% in the year of 1999 and it is noticed 0.25% in 2004 in terms of AUM as percentage of
global AUM.

20
Some facts for the growth of Mutual Funds in India:
• 100% growth in the last 6 years.
• Number of foreign AMC’s is in the queue to enter the Indian markets.
• Our saving rate is over 23%, highest in the world. Only channelizing these savings in
Mutual Funds sector is required.
• We have approximately 29 Mutual Funds which are much less than US having more than
800. There is a big scope for expansion.
• Mutual Fund can penetrate rural like the Indian insurance industry with simple and limited
products.
• SEBI allowing the MF's to launch commodity Mutual Funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planners who can provide need based advice.

Recent trends in Mutual Fund industry:

The most important trend in the Mutual Fund industry is the aggressive expansion of the foreign
owned Mutual Fund companies and the decline of the companies floated by the nationalized
banks and smaller private sector players. Many nationalized banks got into the Mutual Fund
business in the early nineties and got off to a start due to the stock market boom were prevailing.
These banks did not really understand the Mutual Fund business and they just viewed it as
another kind of banking activity. Few hired specialized staff and generally chose to transfer staff
from the parent organizations. The performance of most of the schemes floated by these funds
was not good. Some schemes had offered guaranteed returns and their parent organizations had
to bail out these AMCs by paying large amounts of money as a difference between the
guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have
not been able to retain staff, float new schemes etc.

21
 Members of AMFI:

Bank Sponsored
1. Joint Ventures - Predominantly Indian
1. Canara Robeco Asset Management Company Limited
2. SBI Funds Management Private Limited
2. Others
1. Baroda Pioneer Asset Management Company Limited
2. UTI Asset Management Company Ltd
Institutions
1. LIC Mutual Fund Asset Management Company Limited
Private Sector
1. Indian
1. Benchmark Asset Management Company Pvt. Ltd.
2. DBS Cholamandalam Asset Management Ltd.
3. Deutsche Asset Management (India) Pvt. Ltd.
4. Edelweiss Asset Management Limited
5. Escorts Asset Management Limited
6. IDFC Asset Management Company Private Limited
7. JM Financial Asset Management Private Limited
8. Kotak Mahindra Asset Management Company Limited (KMAMCL)
9. Quantum Asset Management Co. Private Ltd.
10. Reliance Capital Asset Management Ltd.
11. Sahara Asset Management Company Private Limited
12. Tata Asset Management Limited
13. Taurus Asset Management Company Limited
2. Foreign
1. AIG Global Asset Management Company (India) Pvt. Ltd.
2. FIL Fund Management Private Limited
3. Franklin Templeton Asset Management (India) Private Limited
4. Mirae Asset Global Investment Management (India) Pvt. Ltd.

3. Joint Ventures - Predominantly Indian

1. Birla Sun Life Asset Management Company Limited

22
 2. DSP Merrill Lynch Fund Managers Limited
3. HDFC Asset Management Company Limited
4. ICICI Prudential Asset Management Company Limited
5. Sundaram BNP Paribas Asset Management Company
Limited

4. Joint Ventures - Predominantly Foreign

1. ABN AMRO Asset Management (India) Pvt. Ltd.
2. Bharti AXA Investment Managers Pvt. Ltd
3. HSBC Asset Management (India) Private Ltd.
4. ING Investment Management (India) Pvt. Ltd.
5. JPMorgan Asset Management India Pvt. Ltd.
6. Lotus India Asset Management Co. Pvt. Ltd.
7. Morgan Stanley Investment Management Pvt. Ltd.
8. Principal PNB Asset Management Co. Pvt. Ltd.

23
Frequently Used Terms:
Advisor - Is employed by a Mutual Fund organization to give professional advice on the fund’s
investments and to supervise the management of its asset.

Diversification – The policy of spreading investments among range of different securities to

reduce the risk.

Net Asset Value (NAV) - Net Asset Value is the market value of the assets of the scheme
minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number
of units outstanding on the Valuation Date.

Sales Price - Is the price you pay when you invest in a scheme. Also called Offer price. It may
include a sales load.

Repurchase Price - Is the price at which a close-ended scheme repurchases its units and it
may include a back-end load. This is also called Bid Price.

Redemption Price - Is the price at which open-ended schemes repurchase their units and
close-ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load - Is a charge collected by a scheme when it sells the units. Also called ‘Front-end’
load. Schemes that do not charge a load are called ‘No Load’ schemes.\

Repurchase or ‘Back-end’ Load

Is a charge collected by a scheme when it buys back the units from the unit holders.

Dividend Policy:
Dividend will be distributed from the available distributable surplus after the deduction of the
divided distribution surplus after the deduction of the dividend distribution tax and the applicable
surcharge, if any. The Mutual Fund is not guaranteeing or assuring any dividend.

24
 Chapter-02

ULIP (UNIT LINKED INSURANCE Policy)

25
Introduction:

W orld over, insurance come in different forms and shapes. although the generic
names may find similar, the difference in product features makes one wonder
about the basis on which these products are designed .With insurance market
opened up, Indian customer has suddenly found himself in market place where he is bombarded
with a lot of jargon as well as marketing gimmicks with a very little knowledge of what is
happening. This module is aimed at clarifying these underlying concepts and simplifying the
different products available in the market.
Current Market Share of Private Insurance Companies in India:

We have many products like Endowment, Whole life, Money back etc. All these products are
based on following basic platforms or structures viz:
• Traditional Life Insurance
• Universal Life or Unit Linked Insurance Policy.

26
Traditional Life – An Overview:

The basic and widely used form of design is known as Traditional Life Platform. It is based on
the concept of sharing. Each of the policy holder contributes his contribution (premium) into the
common large fund is managed by the company on behalf of the policy holders.

Administration of that common fund in the interest of everybody was entrusted to the insurance
company .It was the responsibility of the company to administer schemes for benefit of the
policyholders. Policyholders played a very passive roll. In the course of time, the same concept
of sharing and a common fund was extended to different areas like saving, investment etc.

Features of Traditional Life:

• This is the simplest way of designing product as far as concerned. He has no other
responsibility but to pay the premium regularly.
• Company is responsible for the protection as well as maximization of the policyholder’s
funds.
• There is a common fund where in all the premiums paid are accumulated. Expenses incurred
as well as claim paid are then taken out of this fund.
• Companies carry out the valuation of the fund periodically to ascertain the position. It is also a
practice to increase the minimum possible guarantee under a policy every year in the form of
declaring and attaching bonuses to the sum assured on the basis of this valuation.
• Declaration of bonuses is not mandatory.
• Based on the end objective, companies may offer different plans like saving plans, investment
plans etc.(e.g. Endowment , SPWLIP)

It helps to maintain a smooth growth and protects against the vagaries of the market. In other
words it minimizes the risk of investments for an average individual. He shares his risk with a
group of like-minded individuals.

Universal Life or Unit Linked Insurance Policy:

ULIP is the Product Innovation of the conventional Insurance product. With the decline in the
popularity of traditional Insurance products & changing Investor needs in terms of life
protection, periodicity, returns& liquidity, it was need of the hour to have an Instrument that
offers all these features bundled into one.

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Meaning:
A Unit Link Insurance Policy (ULIP) is one in which the customer is provided with a life
insurance cover and the premium paid is invested in either debt or equity products or a
combination of the two. In other words, it enables the buyer to secure some protection for his
family in the event of his untimely death and at the same time provides him an opportunity to
earn a return on his premium paid. In the event of the insured person's untimely death, his
nominees would normally receive an amount that is the higher of the sum assured or the value of
the units (investments).

To put it simply, ULIP attempts to fulfill investment needs of investor with protection/insurance
needs of an insurance seeker. It saves the investor/insurance-seeker the hassles of managing and
tracking a portfolio or products. More importantly ULIPs offer investors the opportunity to select
a product which matches their risk profile.

Unit Linked Insurance Plans came into play in the 1960s and became very popular in Western
Europe and Americas. In India The first unit linked Insurance Plan , popularly known as ULIP –
Unit Linked Insurance Plan in India was brought out by Unit Trust Of India in the year 1971 by
entering into a group insurance arrangement with LIC o provide for life cover to the investors ,
while UTI , as a mutual was taking care of investing the unit holders money in the capital market
and giving them a fair return .

Subsequently in the year 1989, another Unit Linked Product was launched by the LIC Mutual
Fund called by the name of “DHANARAKSHA” which was more or less on the line of ULIP of
UTI. Thereafter LIC itself came out with a Unit Linked Insurance Product known by name
“BIMA PLUS” in the year2001-02.

Presently a number of private life insurance companies have launched Unit Linked Insurance
Products with a variety of new features.

ULIP - Key Features:

• Premiums paid can be single, regular or variable. The payment period too can be regular
or variable. The risk cover can be increased or decreased.
• As in all insurance policies, the risk charge (mortality rate) varies with age.
• The maturity benefit is not typically a fixed amount and the maturity period can be
advanced or extended.
• Investments can be made in gilt funds, balanced funds, money market funds, growth
funds or bonds.

28
 • The policyholder can switch between schemes, for instance, balanced to debt or gilt to
equity, etc.
• The maturity benefit is the net asset value of the units.
• The costs in ULIP are higher because there is a life insurance component in it as well, in
addition to the investment component.
• Insurance companies have the discretion to decide on their investment portfolios.
• Being transparent the policyholder gets the entire episode on the performance of his fund.
• ULIP products are exempted from tax and they provide life insurance.
• Provides capital appreciation.
• Investor gets an option to choose among debt, balanced and equity funds

Functions of ULIP:

• ULIPs work on the lines of Mutual Funds. The premium paid by the client (less any charge)
is used to buy units in various funds (aggressive, balanced or conservative) floated by the
insurance companies.
• Units are bought according to the plan chosen by the policyholder. On every additional
premium, more units are allotted to his fund.
• The policyholder can also switch among the funds as and when he desires. While some
companies allow any number of free switches to the policyholder, some restrict the number
to just three or four. If the number is exceeded, a certain charge is levied.
• Individuals can also make additional investments (besides premium) from time to time to
increase the savings component in their plan. This facility is termed "top-up".
• The money parked in a ULIP plan is returned either on the insured’s death or in the event of
maturity of the policy.
• In case of the insured person’s untimely death, the amount that the beneficiary is paid is the
higher of the sum assured (insurance cover) or the value of the units (investments).However,
some schemes pay the sum assured plus the prevailing value of the investments.

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Types of Funds do ULIP Offers:
Most insurers offer a wide range of funds to suit one’s investment objectives, risk profile and
time horizons. Different funds have different risk profiles. The potential for returns also varies
from fund to fund.
The following are some of the common types of funds available along with an indication of their
risk characteristics.

General Description Nature of investment Risk

Category

Equity Funds Primarily invested in company stocks with the Medium to

general aim of capital appreciation High

Income, Fixed Invested in corporate bonds, government Medium

Interest and Bond securities and other fixed income instruments
Funds

Cash Funds Sometimes known as Money Market Funds — Low

invested in cash, bank deposits and money
market instruments

Balanced Funds Combining equity investment with fixed interest Medium

instruments

There are various unit linked insurance plans available in the market. However, the key ones are
pension, children, group and capital guarantee plans.

The Pension Plans come with two variations — with and without life cover —and are meant
for people who want to generate returns for their sunset years.

The Children Plans, on the other hand, are aimed at taking care of their educational and other
needs.

Apart from unit-linked plans for individuals, Group Unit Linked Plans are also available in the
market. The Group linked plans are basically designed for employers who want to offer certain
benefits for their employees such as gratuity, superannuation and leave encashment.

The other important category of ULIPs is Capital Guarantee Plans. The plan promises the
policyholder that at least the premium paid will be returned at maturity. But the guaranteed

30
amount is payable only when the policy’s maturity value is below the total premium paid by the
individual till maturity.

However, the guarantee is not provided on the actual premium paid but only on that portion of
the premium that is net of expenses (mortality, sales and marketing, administration).

USP of ULIPS:
Insurance cover plus savings:
ULIPs serve the purpose of providing life insurance combined with savings at market-linked
returns. To that extent, ULIPS can be termed as a two-in-one plan in terms of giving an
individual the twin benefits of life insurance plus savings.

Multiple investment options:

• ULIPS offer a lot more variety than traditional life insurance plans. So there are multiple
options at the individual’s disposal. ULIPS generally come in three broad variants:
• Aggressive ULIPS (which can typically invest 80%-100% in equities, balance in debt)
• Balanced ULIPS (can typically invest around 40%-60% in equities)
• Conservative ULIPS (can typically invest up to 20% in equities)
• Although this is how the ULIP options are generally designed, the exact debt/equity
allocations may vary across insurance companies. Individuals can opt for a variant based on
their risk profile.

Flexibility:
The flexibility with which individuals can switch between the ULIP variants to capitalize on
investment opportunities across the equity and debt markets is what distinguishes it from other
instruments. Some insurance companies allow a certain number of ‘free’ switches. Switching
also helps individuals on another front. They can shift from an Aggressive to a Balanced or a
Conservative ULIP as they approach retirement. This is a reflection of the change in their risk
appetite as they grow older.

Works like an SIP:

Rupee cost-averaging is another important benefit associated with ULIPs. With an SIP,
individuals invest their monies regularly over time intervals of a month/quarter and don’t have to
worry about ‘timing’ the stock markets.

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Hurdles of ULIP:

No Standardization:
All the costs are levied in ways that do not lend to standardization. If one company calculates
administration cost by a formula, another levies a flat rate. If one company allows a range of the
sum assured (SA), another allows only a multiple of the premium. There was also the problem of
a varying cost structure with age

Lack of Flexibility in Life Cover:

ULIP is known to be more flexible in nature than the traditional plans and, on most counts, they
are. However, some insurance companies do not allow the individual to fix the life cover that he
needs. These rely on a multiplier that is fixed by the insurer

Overstating the Yield:

Insurance companies work on illustrations. They are allowed to show you how much your annual
premium will be worth if it grew at 10 per cent per annum. But there are costs, so each company
also gives a post-cost return at the 10per cent illustration, calling it the yield. Some companies
were not including the mortality cost while calculating the yield. This amounts to overstating the
yield.

Internally Made Sales Illustration:

During the process of collecting information, it was found that the sales benefit illustration
shown was not conforming to the Insurance Regulatory and Development Authority (IRDA)
format. In many locations30 per cent return illustrations are still rampant

Not All Show the Benchmark Return:

To talk about returns without pegging them to a benchmark is misleading the customer. Though
most companies use Sensex, BSE 100 or the Nifty as the benchmark, or the measuring rod of
performance, some companies are not using any benchmark at all.

Early Exit Options:

The ULIP product works over the long term. The earlier the exit, the worse off is the investor
since he ends up redeeming a high-front-load product and is then encouraged to move into
another higher cost product at that stage. An early exit also takes away the benefit of
compounding from insured.

Creeping Costs:
Since the investors are now more aware than before and have begun to ask for costs, some
companies have found a way to answer that without disclosing too much. People are now asking
how much of the premium will go to work. There are plans that are able to say 92 per cent will

32
be invested, that is, will have a front load of just 8 per cent. What they do not say is the much
higher policy administration cost that is tucked away inside (adjusted from the fund value).While
most insurance companies charge an annual fee of about Rs 600 as administration costs, that stay
fixed over time, there are plans that charge this amount, but it grows by as much as 5 per cent a
year over time. There are others that charge a multiple of this amount and that too grows.

Are Investment Returns Guaranteed in a ULIP?

Investment returns from ULIP may not be guaranteed.” In unit linked products/policies, the
investment risk in investment portfolio is borne by the policy holder”. Depending upon the
performance of the unit linked fund(s) chosen; the policy holder may achieve gains or losses on
his/her investments. It should also be noted that the past returns of a fund are not necessarily
indicative of the future performance of the fund.

Charges, fees and deductions in a ULIP:

ULIPs offered by different insurers have varying charge structures. Broadly, the different types
of fees and charges are given below. However it may be noted that insurers have the right to
revise fees and charges over a period of time.

Premium Allocation Charge:

This is a percentage of the premium appropriated towards charges before allocating the units
under the policy. This charge normally includes initial and renewal expenses apart from
commission expenses.

Mortality Charges:
These are charges to provide for the cost of insurance coverage under the plan. Mortality
charges depend on number of factors such as age, amount of coverage, state of health etc.

Fund Management Fees:

These are fees levied for management of the fund(s) and are deducted before arriving at the
Net Asset Value (NAV).

Policy/ Administration Charges:

These are the fees for administration of the plan and levied by cancellation of units. This could
be flat throughout the policy term or vary at a per-determined rate.

Surrender Charges:
A surrender charge may be deducted for premature partial or full encashment of units wherever
applicable, as mentioned in the policy conditions.

33
Fund Switching Charge:
Generally a limited number of fund switches may be allowed each year without charge, with
subsequent switches, subject to a charge.

Service Tax Deductions:

Before allotment of the units the applicable service tax is deducted from the risk portion of the
premium.

Can one seek refund of premiums if not satisfied with the policy, after purchasing it?
The policyholder can seek refund of premiums if he disagrees with the terms and conditions of
the policy, within 15 days of receipt of the policy document (Free Look period). The
policyholder shall be refunded the fund value including charges levied through cancellation of
units subject to deduction of expenses towards medical examination, stamp duty and
proportionate risk premium for the period of cover.

What should one verify before signing the proposal?

One has to verify the approved sales brochure for

o All the charges deductible under the policy
o Payment on premature surrender
o Features and benefits
o Limitations and exclusions
o Lapsation and its consequences
o Other disclosures
o Illustration projecting benefits payable in two scenarios of 6% and 10% returns as
prescribed by the life insurance council.

What happens if payment of premiums is discontinued?

a) Discontinuance within three years of commencement –
If all the premiums have not been paid for at least three consecutive years from inception, the
insurance cover shall cease immediately. Insurers may give an opportunity for revival within the
period allowed; if the policy is not revived within that period, surrender value shall be paid at the
end of third policy anniversary or at the end of the period allowed for revival, whichever is later.

b) Discontinuance after three years of commencement –

At the end of the period allowed for revival, the contract shall be terminated by paying the
surrender value. The insurer may offer to continue the insurance cover, if so opted for by the
policy holder, levying appropriate charges until the fund value is not less than one full year’s
premium. When the fund value reaches an amount equivalent to one full year’s premium, the
contract shall be terminated by paying the fund value.

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 Chapter-03

ULIPs vs. Mutual Funds

35
Comparison between ULIPS and Mutual Funds:

U nit Linked Insurance Policies (ULIPs) as an investment avenue are closest to Mutual
Funds in terms of their structure and functioning. As is the cases with Mutual Funds,
investors in ULIPs are allotted units by the insurance company and a net asset value
(NAV) is declared for the same on a daily basis.
Similarly ULIP investors have the option of investing across various schemes similar to the ones
found in the Mutual Funds domain, i.e. diversified equity funds, balanced funds and debt funds
to name a few. Generally speaking, ULIPs can be termed as Mutual Fund schemes with an
insurance component.
However it should not be construed that barring the insurance element there is nothing
differentiating Mutual Funds from ULIPs.

Points of difference between the two:

1. Mode of investment/ investment amounts

Mutual Fund investors have the option of either making lump sum investments or investing using
the systematic investment plan (SIP) route which entails commitments over longer time
horizons. The minimum investment amounts are laid out by the fund house.

ULIP investors also have the choice of investing in a lump sum (single premium) or using the
conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or
monthly basis. In ULIPs, determining the premium paid is often the starting point for the
investment activity.

This is in stark contrast to conventional insurance plans where the sum assured is the starting
point and premiums to be paid are determined thereafter.

ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure.
For example an individual with access to surplus funds can enhance the contribution thereby
ensuring that his surplus funds are gainfully invested; conversely an individual faced with a
liquidity crunch has the option of paying a lower amount (the difference being adjusted in the
accumulated value of his ULIP). The freedom to modify premium payments at one’s
convenience clearly gives ULIP investors an edge over their Mutual Fund counterparts.

2. Expenses
In Mutual Fund investments, expenses charged for various activities like fund management, sales
and marketing, administration among others are subject to per-determined upper limits as
prescribed by the Securities and Exchange Board of India.

36
For example equity-oriented funds can charge their investors a maximum of2.5% per annum on a
recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund
house and not the investors. Similarly funds also charge their investors entry and exit loads (in
most cases, either is applicable). Entry loads are charged at the timing of making an investment
while the exit load is charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP products with no upper
limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development
Authority. This explains the complex and at times 'unwieldy' expense structures on ULIP
offerings. The only restraint placed is that insurers are required to notify the regulator of all the
expenses that will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since higher expenses translate into
lower amounts being invested and a smaller corpus being accumulated. ULIP-related expenses
have been dealt with in detail in the article "Understanding ULIP expenses".

3. Portfolio disclosure
Mutual Fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit
most fund houses do so on a monthly basis. Investors get the opportunity to see where their
monies are being invested and how they have been managed by studying the portfolio.

There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our
interactions with leading insurers we came across divergent views on this issue.

While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory,
the other believes that there is no legal obligation to do so and that insurers are required to
disclose their portfolios only on demand.
Some insurance companies do declare their portfolios on a monthly/quarterly basis.

However the lack of transparency in ULIP investments could be a cause for concern considering
that the amount invested in insurance policies is essentially meant to provide for contingencies
and for long-term needs like retirement; regular portfolio disclosures on the other hand can
enable investors to make timely investment decisions.

4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the Mutual Funds segment and ULIPs segment are largely
comparable. For example plans that invest their entire corpus in equities (diversified equity
funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing
only in debt instruments (debt funds) can be found in both ULIPs and Mutual Funds.

37
If a Mutual Fund investor in a diversified equity fund wishes to shift his corpus into a debt from
the same fund house, he could have to bear an exit load and/or entry load.

On the other hand most insurance companies permit their ULIP inventors to shift investments
across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are
allowed free of charge every year and a cost has to be borne for additional switches).

Effectively the ULIP investor is given the option to invest across asset classes as per his
convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull market when the ULIP
investor's equity component has appreciated, he can book profits by simply transferring the
requisite amount to a debt-oriented plan.

5. Tax benefits
ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds
well, irrespective of the nature of the plan chosen by the investor. On the other hand in the
Mutual Funds domain, only investments I-Tax-saving funds (also referred to as equity-linked
savings schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (For example
diversified equity funds, balanced funds), if the investments are held for a period over 12
months, the gains are tax free; conversely investments sold within a 12-month period attract
short-term capital gains tax @ 10%.

Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term
capital gain is taxed at the investor's marginal tax rate. Despite the seemingly similar structures
evidently both Mutual Funds and ULIPs have their unique set of advantages to offer. As always,
it is vital for investors to be aware of the nuances in both offerings and make informed decisions.

Facts to Be Considered Before Investing In ULIPS:

The high returns (above 20 per cent) are definitely not sustainable over along term, as they
have been generated during the biggest Bull Run in recent stock market history.

The free hand given to ULIPs might prove risky if the timing of exit happens to coincide with a
bearish market phase, because of the inherently high equity component of these schemes.

While a debt-oriented ULIP scheme might be superior to a debt option in a conventional Mutual
Fund due to tax concessions that insurance companies enjoy, such tax incentives may not last.

38
Look beyond NAVs:
The appreciations in the net asset value (NAV) of ULIPs barely indicate the actual returns earned
on your investment. The various charges on your policy are deducted either directly from
premiums before investing in units or collected on a monthly basis by knocking off units.

Either way, the charges do not affect the NAV; but the number of units in your account suffers.
You might have access to daily NAVs but your real returns may be substantially lower. A rough
calculation shows that if our investments earn a 12 per cent annualized return over a 20-year
period in a growth fund, when measured by the change in NAV, the real pre- tax returns might
be only 9 per cent. The shorter the term, the lower the real returns.

How charges dent returns:

An initial allocation charge is deducted from our premiums for selling, marketing and broker
commissions. These charges could be as high as 65per cent of the first year premiums. Premium
allocation charges are usually very high (5-65 per cent) in the first couple of years, but taper off
later. The high initial charges mainly go towards funding agent commissions, which could be as
high as 40 per cent of the initial premium as per IRDA (Insurance Regulatory and Development
Authority) regulations.

The charges are higher for a linked plan than a non-linked plan, as the former require lot more
servicing than the latter, such as regular disclosure of investments, switches, re-direction of
premiums, withdrawals, and so on.

Insurance companies have the discretion to structure their expenses structure whereas a Mutual
Fund does not have that luxury. The expense ratios in their case cannot exceed 2.5 per cent for an
equity plan and 2.25 per cent for a dept plan respectively. The lack of regulation on the expense
front works to the detriment of investors in ULIPs.

The front-loading of charges does have an impact on overall returns as we lose out on the
compounding benefit. Insurance companies explain that charges get evened out over a long term.
Thus we are forced to stay with the plan for a longer tenure to even out the effect of initial
charges as the shorter the tenure, the lower our real returns. If we want to withdraw from the
plan, you lose out, as you will have to pay withdrawal charges up to a certain number of years.

In effect, when we lock in our money in a ULIP, despite the promise of flexibility and liquidity,
we are stuck with one fund management style. This is all the more reason to look for an
established track record before committing our hard-earned money.

39
Evaluate alternative options:
As an investor we have to evaluate alternative options that give superior returns before
considering ULIPs. Insurance companies argue that comparing ULIPs with Mutual Funds is like
comparing oranges with apples, as the objectives are different for both the products.

Most ULIPs give us the choice of a minimum investment cover so that we can direct maximum
premiums towards investments.

Both ULIPs and Mutual Funds target the same customers. If risk cover is your primary
objective, pure insurance plans are less expensive. When we choose a Mutual Fund, we look for
an established track record of three to five years of consistent returns across various market
cycles to judge a fund's performance.

It is early days for insurance companies on this score; investing substantially in linked plans
might not be advisable at this juncture.

Try top-ups
Insurance companies allow us to make lump-sum investments in excess of the regular premiums.
These top-ups are charged at a much lower rate —usually one to two per cent. The expenses
incurred on a top-up including agent commissions are much lower than regular premiums.

Some companies also give a credit on top-ups. For instance, if you pay in Rs
100 as a top up, the actual allocation to units will be Rs 101. If you keep the regular premiums to
the minimum and increase your top ups, you can save up on charges, enhancing returns in the
long run.

Reduce life cover:

The price of the life cover attached to a ULIP is higher than a normal term plan. Risk charges are
charged on a daily or monthly basis depending on the daily amount at risk. Rates are not locked
and are charged on a one-year renewal basis.

Our life cover charges would depend on the accumulation in your investment account. As
accumulation increases, the amount at risk for the insurance company decreases. However, with
increasing age, the cost per Rs 1,000sum assured increases, effectively increasing your overall
insurance costs. A lower life cover could yield better returns.

Stay away from riders;

Any riders, such as accident rider or critical illness rider, are also charged on a one-year renewal
basis. Opting for these riders with a plain insurance cover could provide better value for money.

40
ULIP's as an investment is a very good vehicle for wealth creation, but way
Unit Linked Insurance schemes are sold by insurance company representative’s and insurance
advisers is not correct.

ULIP's usually have following charges built into it:

a) Up-front Charges
b) Mortality Charges (Charges for providing the risk cover for life)
c) Administrative Charges
d) Fund Management Charges

Mutual Funds have the following charges:

a) Up-front charges (Marketing, Advertising, distributors’ fee etc.)
b) Fund Management Charges (expenses for managing your fund)

A few aspects of investing in ULIPs versus Mutual Funds.

Liquidity;
ULIPs score low on liquidity. According to guidelines of the Insurance Regulatory and
Development Authority (IRDA), ULIPs have a minimum term of five years and a minimum lock
in of three years. You can make partial withdrawals after three years. The surrender value of a
ULIP is low in the initial years, since the insurer deducts a large part of your premium as
marketing and distribution costs. ULIPs are essentially long-term products that make sense only
if your time horizon is 10 to 20 years.
Mutual Fund investments, on the other hand, can be redeemed at any time, barring ELSS (equity-
linked savings schemes). Exit loads, if applicable, are generally for six months to a year in equity
funds. So Mutual Funds score substantially higher on liquidity.

Tax efficiency
ULIPs are often pitched as tax-efficient, because your investment is eligible for exemption under
Section 80C of the Income Tax Act (subject to a limit of Rs 1 lakh). But investments in ELSS
schemes of Mutual Funds are also eligible for exemption under the same section .Besides the
premium, the maturity amount in ULIPs is also tax-free, irrespective of whether the investment
was in a balanced or debt plan. So they do have an edge on Mutual Funds, as debt funds are
taxed at 10% without indexation benefits, and20% with indexation benefits. The point, though, is
that if you invest in a debt plan through a ULIP, despite its tax-efficiency your post-tax returns
will below, because of high front-end costs. Debt Mutual Funds don’t charge such costs.

Expenses
Insurance agents get high commissions for ULIPs, and they get them in the initial years, not
staggered over the term. So the insurer recovers most charges from you in the initial years, as it
risks a loss if the policy lapses. Typically, insurers levy enormous selling charges, averaging

41
more than 20%of the first year’s premium, and dropping to 10% and 7.5% in subsequent years.
(And this is after investors balked when charges were as high as 65 %)

Compare this with Mutual Funds’ fees of 2.25% on entry, uniform for all schemes. Different
ULIPs have varying charges, often not made clear to investors.

For instance, an agent who sells you a ULIP may get 25% of your first year’s premium, 10% in
the second year, 7.5% in the third and fourth year and 5%thereafter. If your annual premium is
Rs 10,000 and the agent’s commission in the first year is 25%, it means only Rs 7,500 of your
money are invested in the first year. So even if the NAV of the fund rises, say 20%, that year,
your portfolio would be worth only Rs 9,000—much lower than the Rs 10,000 you paid. On the
other hand, if you invest Rs 10,000 in an equity scheme with a2.25% entry load, Rs 225 is
deducted, and the rest is invested. If the scheme’s NAV rises 20%, your portfolio is worth Rs
11,730. This shows how

ULIPs work out expensive for investors. Deduct the cost of a term policy from the Mutual Fund
returns, and you’re still left with a sizable difference.

42
Mutual Fund Vs ULIP in a Nut shell

43
Review of the Literature:
In Orissa apart from Bajaj capital there is four more third Party broker Companies
are there. Looking at the market share the LIC is the pioneer but in last few years
the private players have performed very well despite that the Performance of Bajaj
Capital though satisfactory, but it is not the best. Because the other players are
giving a cut throat competition & grabbing a high chunk of the market share.

In order to decipher the reason behind this cause. At first I inquired my

respondents regarding its product line but no where they reflected it as a matter of
worry. As per their opinion Bajaj capital have a sound product line tackle this
problem. Then I focused on the quality of service provided by Bajaj Capital,
Similarly the ICs marked it to be satisfactory, when I asked for their feedback in
the questionnaire & through personal interview, many of them said that the people
of Orissa have less knowledge regarding the products & service quality offered by
Bajaj Capital. In their view the problem might be lying with the promotional
strategy of Field Force. So I decided to carry on a study to decipher the
competitiveness of Promotional Strategy of Field Force of Bajaj Capital in Orissa.

Then I tried to gain as much as knowledge regarding the promotional strategy

being a vital tool for a company’s success for this I searched for as much as
information as I can & I went through many journals, books , Internet sources.
The knowledge I have acquire & the problem with Bajaj Orissa in Orissa , inspired
to me carry on my survey to study the competitiveness of promotional strategy of
field force of Bajaj Capital in Orissa.

The hypothesis taken behind this study is that the promotional strategy of field
force of Bajaj Capital in Orissa is not Profound.

44
 Chapter-04

Company Profile

Bajaj Capital's Mission Statement

“The focus of our organization is to be the most useful, reliable and efficient provider of
Financial Services. It is our continuous endeavor to be a trustworthy adviser to our clients,
helping them achieve BCIBL financial goals”.

45
Bajaj Capital Ltd.

T he Bajaj Capital Group is one of India’s premier Investment Advisory and Financial
Planning companies. It is also SEBI- approved Category Merchant Bankers.

Bajaj Capital is among the pioneers of the investment advisory and financial planning industry in
India. For over four decades, the Company has been serving Indian investors, and giving shape
to the vision of its founder-chairman, Mr. K.K. Bajaj.

It offers personalized Investment Advisory and Financial Planning services to individual

investors, corporate houses, institutional investors, Non-Resident Indians (NRIs) and High Net
worth Clients, among others.

As one of India’s largest distributors of financial products, we offer a wide range of investment
products such as Mutual Funds, life and general insurance, bonds, post office schemes, etc.
offered by reputed public and private and government organizations.

Company Profile:
Bajaj Capital is one of India’s leading Financial Services companies offering Free Advice on
Investments, Insurance, Tax Saving, Retirement Planning, Financial Planning, Children’s Future
Planning and other services. It also has a wide range of products and services for Corporate,
High Net worth Individuals, and NRIs all under one roof.

At Bajaj Capital, it believes in dreaming big. Dreams inspire us to excel. They ignite hope and
kindle in us the passion to stretch there limits. It also believes that nothing can or should stop us
from realizing our dreams and financial constraints should be the last thing to stop anyone.

Four decades of excellence:

For over four decades, we have been helping people realize BCIBL aspirations by helping them
make their wealth grow, and plan their financial lives. Today, Bajaj Capital is a one of the
largest financial planning and investment advisory companies in India, with a strong
presence all over the country. It takes pride in serving our customers both individual and
institutional, and is known for our strong professionalism and work ethics.

Wide range of services:

We offer a comprehensive range of services including financial planning and investment advice,
and the entire gamut of financial instruments and investment products of almost all major

46
companies, both public and private. In addition, we also provide investment assistance by
helping you complete all the formalities, and help you keep regular track of your investments.

These services and products are delivered through our network of 134 Bajaj Capital Investment
Centers located all over the country.

Bajaj Capital is also a SEBI- approved Category Merchant Banker. They raise resources for over
1,000 top institutions and corporate houses every year, and offer specialized services to Non-
Resident Indian (NRIs) and High Net worth Clients.

Key Personnel

 Mr. K.K. Bajaj

Chairman

 Mr. Rajiv Deep Bajaj

Vice Chairman & Managing Director

 Mr. Sanjiv Bajaj

Joint Managing Director

 Mr. Anil Chopra

CEO & Director

47
Introducing Bajaj Capital Insurance Broking Ltd (BCIBL)
“By your side whenever you need us”
Risks are unavoidable in personal life and in business, but can be managed by proper planning.

As a true partner, BCIBL promises to use their knowledge for customer benefit. Be it advice on
the right insurance products or looking after your rights and interests in case of a claim, with a
mission-“we’ll be by your side... whenever you need us”.

That's exactly where they at Bajaj Capital Insurance Broking Ltd. step in. At BCIBL, an
IRDA licensed "Composite Insurance Broker" bearing license number CB 042/02, they call
it Risk Management. They help customers to identify the potential risks and pass some of them
on to insurance companies.

They are customer’s partners, who help them to identify and understand various risks, prioritize
them and eventually manage them.

As a broker, BCIBL do not offer customers just a single option but multiple options available,
and help you select the most appropriate one.

Products:
They offer a wide range of Life and General Insurance products offered by the insurance
companies that cover almost the entire spectrum of risks that individuals or your business may
face.

BCIBL offers a wide range of insurance packages including:

• Personal Lines

• Auto
• Home
• Travel
• Accident & Health

• Property Insurance

• Fire and Special Peril

• Marine
• Machinery Breakdown
• Electronic Equipment Insurance

48
 • Loss of Profits etc.

• Liability Insurance

• Commercial
• General Liability
• Product Liability
• Workman's Compensation/ Employer's Liability

• Contingency Risks

• Event Cancellation
• Wedding Insurance
• All Risk for Mobiles, Computers and Laptops etc.

• Industrial All Risk and Project Insurance

• Specialty Products

• Professional Indemnity/Errors & Omissions (E&O)

• Directors and Officers Liability (D&O)
• Fidelity Guarantee
• Commercial Cyber Crime Insurance
• Credit Insurance
• Mutual Fund & Asset Protection

49
Why consult BCIBL?

• As IRDA licensed Insurance Brokers, BCIBL are your representatives unlike an

agent who represents an insurance company.
• At BCIBL, BCIBL consider it your right to receive independent, unbiased and
professional advice.
• BCIBL enjoy the 'Preferred Insurance Broker' status with many of the Insurance
companies. This, in essence, translates into a greater benefit for customers.
• In fact, BCIBL enjoy a transactional relationship with almost all the Insurance
companies present in India.
• We are therefore proud to say that many companies have come up with insurance
products based on our feedback.
• We have a strong operational and servicing team, and an all-India reach.
• We also have the support of a strong IT infrastructure and responsive call centers.
As such, we are easily accessible.
Milestones:

Bajaj Capital has contributed to the growth of the Indian Capital Market at every step.

In 1965, BCIBL were the first to innovate the Companies Fixed Deposit. Today, BCIBL is
playing an active role in the growth of the Indian Mutual Fund industry.

BCIBL is also working closely with private insurance companies to deepen India's insurance
market.

Here is a brief gist of BCIBL’s journey through the years.

1964
Bajaj Capital sets up its first Investment Centre in New Delhi to guide individual investors on
where, when and how to invest.

India's first Mutual Fund, Unit Trust of India (UTI) is incorporated in the same year.

1965
Bajaj Capital is incorporated as a Company. In the same year, the company introduces an
innovative financial instrument the Company Fixed Deposit. EIL Ltd. (Oberoi Hotels, then
known as Associated Hotels of India Ltd.) becomes the first company to raise resources through
Company Fixed Deposits.

50
1966
Bajaj Capital expands its product range to include all UTI schemes and Government saving
schemes in addition to Company Fixed Deposits.

1969
Bajaj Capital manages its first Equity issue (through an associate company) of Grauer & Wells
India Ltd.; right from drafting the prospectus to marketing the issue.

1975
Bajaj Capital starts offering 'need-based' investment advice to investors, which would later be
known as 'Financial Planning' in the investment world.

1981
SAIL becomes the first government company to accept deposits, followed by IOC, BHEL,
BPCL, HPCL and others; thus opening the floodgates for growth of retail investment market in
India.

Bajaj Capital plays an active role in all the schemes as 'Principal Brokers.

1986
Public Sector Undertakings (PSUs) begin making public issues of bonds MTNL, NHPC, IRFC
offer a series of Bond Issues. Bajaj Capital is among the top ranks of resource mobilizes.

1987
SBI leads the launch of Public Sector Mutual Funds in India. Bajaj Capital plays a significant
role in fund mobilization for all these players.

1991
SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top mobiliser with
collections of over US $20 million.

1993
The first private sector Mutual Fund Kothari Pioneer is launched, followed by Birla and Alliance
in the following years. Bajaj Capital plays an active role and is ranked among the top mobilisers
for all these schemes.

1995
IDBI and ICICI begin issuing their series of Bonds for retail investors. Bajaj Capital is the co-
manager in all these offerings and consistently ranks among the top five mobilisers on an all-
India basis.

1997
Private sector players lead the revival of Mutual Funds in India through Open-ended Debt
schemes. Bajaj Capital consolidates its position as India's largest retail distributor of Mutual
Funds

51
1999
Bajaj Capital begins marketing Life and General Insurance products of LIC and GIC (through
associate firms) in anticipation of opening up of the Insurance Sector. Bajaj Capital achieves the
milestone of becoming the top 'Pension Scheme' seller in India and launches marketing of GIC's
Health Insurance schemes.

2000
Bajaj Capital implements its vision of being a 'One-stop Financial Supermarket.' The Company
offers all kinds of financial products, including the entire range of investment and insurance
products through its Investment Centers. Bajaj Capital offers 'full-service merchant banking'
including structuring, management and marketing of Capital issues. Bajaj Capital reinvents
'Financial Planning' in its international sense and upgrades its entire team of Investment Experts
into Financial Planners.

2002
The Company focuses on creating investor awareness for Financial Planning and need-based
investing. To achieve this goal, the company introduced the International College of Financial
Planning. The graduates of this institute become Certified Financial Planners (CFPs), a coveted
professional qualification.

2004
Bajaj Capital obtains the All India Insurance Broking License. Simultaneously, a series of wealth
creation seminars are launched all over the country, making Bajaj Capital a household name.

2005
Bajaj Capital launches 360° Financial Planning, a software-based program aimed at
encouraging scientific and holistic investing.

2007
Bajaj Capital launches Stock Broking and Depository (Demat) Services.

2008
Bajaj Capital launches Just Trade, an online Platform for investing in Equities, Mutual Funds,
IPO's

52
Objectives of Bajaj Capital:

• To serve their clients with utmost dedication and integrity so that they exceed their
expectations and build enduring relationships.
• To offer unparalleled quality of service through complete knowledge of products,
constant innovation in services and use of the latest technology.
• To always give honest and unbiased financial advice and earn their clients' everlasting
trust.
• To serve the community by educating individuals on the merits of Financial Planning and
in turn help shape a financially strong society.
• To create value for all stake holders by ensuring profitable growth.
• To build an amicable environment that accords respect to every individual and permits
their personal growth.
• To utilize the power of teamwork to function as a family and build a seamless
organization.

The Significance of the Logo of Bajaj capital:

• The logo depicts Lord Ganesha who is the source of all our values and ethics in business.
• The large ears of Lord Ganesha remind Bajaj Capital to hear more. They listen carefully to
our clients to understand their needs.
• The weight of the trunk on the mouth symbolizes silence. Bajaj Capital works silently,
without blowing their own trumpet.
• The long trunk symbolizes continuous exploration. Bajaj Capital explores all avenues to
provide the best investment opportunities for our clients.
• The heavy posture of Ganesha symbolizes stability. Bajaj Capital helps our clients to
attain financial stability through wise investments.

53
• Lord Ganesha is known as the remover of obstacles and bestower of prosperity. Bajaj
Capital emulates His example and tries their best to help our clients attain prosperity by
proper financial planning.
• The logo has a yellow background. Yellow is the color of gold, which symbolizes wealth.
According to Vedic lore, it is also the color associated with Brihaspati, the guru and
counselor of the Gods. We offer our clients sage counsel to make their wealth grow.
• The letters are in red. Red is the color rajas symbolizing power and incessant activity. It
symbolizes our aggressive quest for your well-being and happiness.
• The white streak represents the trunk of Lord Ganesha. White is the color of satvaguna,
and implies our selfless commitment to your life-long happiness.

Strengths of Bajaj Capital:

• Wide range of products and services

• 41 years experience as Investment Advisors and Financial Planners

• More than eight lakh satisfied clients all over India

• Countrywide network of 134 branches

• Over 12,000 NRI clients across the globe

• Personalized wealth management advice

• 24 x 7 online accessibility through www.bajajcapital.com

• Strong team of qualified and experienced professionals including CAs, MBAs, MBEs,
CFPs, CSs, Insurance experts, Legal experts and others

• SEBI-Approved Category I Merchant Bankers

• Group Co BCIBL is an IRDA-licensed Direct Insurance Broker

54
 Chapter-05

Research

Research Methodology

55
Research Methodology:
Objective of the Research:
• To study about the Mutual Funds industry.
• To study the approach of investors towards Mutual Funds and ULIPs.
• To study the behavior of the investors whether they prefer Mutual Funds or ULIPS?

Scope of the research:

• Subject matter is related to the investor’s approach towards Mutual Funds and ULIPs.
• People of age between 20 to 65.
• Area limited to Cuttack & Bhubaneswar.
• Demographics include names, age, qualification, occupation, marital status and annual
income.
Achievements:
My On The Job Training has given me a good experience in learning how to sell a product, how
to deal with the customers, how to generate leads, how to maintain relation with the existing
customers, how to get the references from the existing customers, how maintain a good
relationship with co-employees. I have learn the convincing and persuasive skills in my OJT.
Initially I have faced some hurdles in the beginning of the project to get the leads, but later on I
could coup with the problems and I could perform my task successfully.

Steps of Research Design:

Define the information needed:

This first step states that what the information that is actually required is. Information in this case
we require is that what is the approach of investors while investing their money in Mutual Funds
and ULIPs. E.g. what do they consider while deciding as to invest in which of the two i.e.
Mutual Funds or ULIPs. Also, it studies the extent to which the investors are aware of the
various costs that one bears while making any investment. So, the information sought and
information generated is only possible after defining the information needed.

Design the research:

A research design is a framework or blueprint for conducting the research project. It details the
procedures necessary for obtaining the information needed to solve research problems. In this
project, the research design is explorative in nature.

56
Specify the scaling procedures:
Scaling involves creating a continuum on which measured objects are located. Both nominal and
interval scales have been used for this purpose.

Construct and pretest a questionnaire:

A questionnaire is a formalized set of questions for obtaining information from respondents.
Where as pretesting refers to the testing of the questionnaire on a small sample of problems.

Population:
The general public who are investing money in Mutual Funds and ULIPs, both.

Sample Unit:
Investors and non-investors.

Sample Size:
This study involves 50 respondents.

Sampling Technique:
The sample size has been taken by non-random convenience sampling technique

Data Collection:
Data has been collected both from primary as well as secondary sources as described below:

Primary sources:
Primary data was obtained through questionnaires filled by people and through direct
communication with respondents in the form of Interview.

Secondary sources:
The secondary sources of data were taken from the various websites, books, journals reports,
articles etc. This mainly provided information about the Mutual Fund and ULIPs industry in
India.

Plan for data analysis:

Analysis of data is planned with the help of mean, chi-square technique and analysis of variance.

57
 Analysis & Interpretation

58
 Market Capitalization of Mutual Funds and ULIPs:
What do investors prefer?
1) Do you invest in Mutual Funds?

Response Frequency Percentage

Yes 19 38%

No 31 62%

total 50 100

Interpretation: 62% of the people invest in mutual funds.

59
2) If not, then what other option(s) do you prefer to invest?
Options frequency percentages

Fixed deposits 12 42.10

Post office schemes 8 31.57

Recurring deposits 4 15.78

Others 7 10.52

Total 31 100

3) What is the mode of information that you use for insurance companies?

60
 Options Frequency percentage

Advertisements 21 42%
Agents 11 22%
Seminar 6 12%
Workshop 8 16%
Others 4 8%
total 50 100

Frequency Observed- (observed- (observed-

Options expected expected)2 expected) ²/e

Advertisements 21 11 121 12.1

Agents 11 1 1 0.1
Seminar 6 -4 16 1.6
Workshop 8 -2 4 0.4
Others 4 -6 36 3.6
Total 50 178 17.8

Expected Frequency=50/5=10
Chi square= Σ │observed-expected│² = 17.8
Expected

At 4 degree of freedom, df (4) =7.815, thus the calculated value is greater than the table value.
Hence, H0 is rejected

Interpretation: It means that all the modes of information are not the same. Advertisement is
more popular

61
4) In which sector do you prefer to invest your money?

Options Frequency Percentages

Government sector 27 54
Private sector 23 46
Total 50 100

Frequency Observed- (observed- (observed-

Options expected expected)2 expected) ²/e

Government 27 2 4 0.16
sectors
Private sector 23 -2 4 0.16
Total 50 -2 8 0.32
Expected Frequency=50/2=25
Chi square= Σ │observed-expected│² = 0.32
Expected

At df(1), the table value is 3.841 which is greater than the calculated value.
Hence, H0 is accepted.

Interpretation: People prefer both the sectors equally.

62
5) At which rate do you want your investment to grow?

Options Frequency Percentages

Steadily 17 34

At an average rate 13 26

fast 20 40

Total 50 100

Interpretation: 40% of the respondents want their investments to grow in a faster rate.

6) Which factor do you consider before investing in Mutual Fund or ULIPs?

Options Frequency Percentages

Safety of principal 14 28

63
 Low risk 15 30
Higher returns 14 28
Maturity period 4 8
Terms and conditions 3 6
Total 50 100

Frequency Observed- (observed- (observed-

Options expected expected)2 expected) ²/e
Safety Of Principal 14 4 16 1.6
Low Risk 15 5 25 2.5
Higher Returns 14 4 16 1.6
Maturity Period 4 -6 36 3.6
Terms And 3 -7 49 4.9
Conditions
Total 50 142 14.2

Chi square= Σ │observed-expected│² = 14.2

Expected

At DF (4), the table value is 9.488 which is less than the calculated value. Hence, H0 is rejected
Interpretation: people prefer low risk as the most important factor before investing in Mutual
Funds or ULIPs.

64
7) Imagine that stock market drops immediately after you invest in it then
what will you do?

Options frequency
Withdraw your money 8
Wait and watch 26
Invest more in it 16

Interpretation: 26% of the respondents will wait and watch even if the share market drops.

8) How often do you monitor your investment?

Options Frequency
Daily 15
Monthly 25
Occasionally 10

65
Interpretation: It shows that most of the people .i.e. 50% prefer monitoring their investment
on monthly basis.
20% of the people monitor their investment occasionally.

9) What percentage of your income do you invest?

Options Frequency Percentages
0- 5% 26 52
5-10% 13 26
10-15% 11 22
Total 50 100

Options Frequency MV Dx=MV-7.5/5 Fdx

0-5 26 2.5 -1 -26

5-10 13 7.5 0 0

10-15 11 12.5 1 11

Total 50 -15
MEAN= 7.5+ -15/20 * 5= 6%

Interpretation: People invest around 6% of their income

66
10) You would describe your financial situation as being:

Options (X) Frequency ( ƒ) ƒx ƒ x²

Very Unstable(1) 11 11 11
Somewhat Unstable(2 12 24 48
Moderately Stable(3) 9 27 81
Stable(4) 10 40 160
Very Stable(5) 8 40 200
Total 50 142 500

Sample mean = ΣFx = 142 = 2.84

Σf 50

Standard deviation, σ = √ Σ ƒ x² - Σƒx = 2.675

Σƒ Σƒ

Standard error = Standard Deviation = 2.675 = 0.3783

√n 7.07

Z= │Xs - Xp│= │2.84-3│= 0.4229

S.E 0.3783

Since The Calculated Value Is Lesser Than the Table Value at (.05) I.E 1.96,
Ho is accepted.

Interpretation: The Financial Situation Is Moderately Stable.

11) If in the near future if you ever plan to invest in your money in any of the
mutual fund company, which would be your choice?

Options Frequency Percentages

SBI Mutual Fund 7 14
HDFC Mutual Fund 8 16
Reliance Mutual Fund 14 28
ABN AMRO Mutual Fund 11 22
Others 10 20
Total
Frequency 50 100
Observed- (Observed- (Observed-
Options Expected Expected) Expected)
2

²/E

67
 SBI Mutual Fund 7 -3 9 0.9

HDFC Mutual Fund 8 -2 4 0.4

Reliance Mutual Fund 14 4 16 1.6

ABN AMRO Mutual Fund 11 1 1 0.1
Others 10 0 0 -----
Total 50 0 30 3.0
Chi square= Σ │observed-expected│² = 3.0
Expected

At df (4), the table value is 9.488 which is greater than the calculated value. Hence,
H0 is accepted.

Interpretation: People mostly prefer all the brands equally for their future investments.

12) Do you have any Idea about Bajaj Capital?

Response Frequency Percentage

Yes 32 64
No 18 32
Total 50 100

68
Interpretation: There are 64% of people are known about the Bajaj capital.

13) Have you ever invested through Bajaj Capital?

Response Frequency Percentage

Yes 42 84
No 8 16
Total 50 100

Interpretation: People of Cuttack and Bhubaneswar are pretty much interested to Invest
through Bajaj Capital.

69
14) Are you satisfied by the offerings & services provided by the Bajaj
Capital?

Response Frequency Percentage

Yes 28 56
No 22 44
Total 50 100

Interpretation: There is a mix response from the respondents about the services provided by
Bajaj Capital.

70
15) In which Product of Bajaj Capital you have invested?

Products No of people
Invested
Life Insurances 26
General Insurances 14
Mutual Funds 21
Fixed Deposits 17
Online share Trading 11
Total 50

Note: Here one people have invested in more than one product.

Interpretation: Life Insurances And Mutual Funds Could Fetch More Investments. Followed
By Fixed Deposit, General Insurance And Online Share Trading.

71
Demographics:

• 58% of people belong to 25-35 age group and on the other hand only
• 17% of people age belongs to above 40 groups.
• 17% of the people are under graduate.
• 52% of the people are graduates,
• 31% of the people are post graduates.
• 55% of the people are married
• 45% of the people are unmarried.
• 31% of the people are having their own business.
• 31% of the people are salaried.
• 25% are professionals.
• 8% are housewives.
• 5% are retired.
• 24% of the people belong to below 1, 50,000 income group.
• 36% of the people belongs to1, 50,000 – 2, 50,000 income groups.
• 33% of the people belong to 2, 50,000 – 4, 00,000 income group.
• Only 7% of the people belong to above 4, 00,000 income group.

72
 FINDINGS & Recommendations
Findings:
73
• Highest number of investors comes from the salaried class.
• Highest number of investors comes from the age group of 25- 35.
• Most of the people have been investing their money n the share market
belongs to Rs.400000 and above income group.
• Mostly investors prefer monitoring their investment on monthly basis.
• Most of the people invest up to 6% of their annual income in mutual funds.
• Most of the people between the age group of 25– 35 invest their money in
share market.

74
Recommendations:
The performance of the mutual fund depends on the previous years Net Asset
Value of the fund. All schemes are doing well. But the future is uncertain. So, the
AMC (Asset under Management Companies) should take the following steps:

• The people do not want to take risk. The AMC should launch more
diversified funds so that the risks become minimum. This will lure more and
more people to invest in mutual funds.
• The expectation of the people from the mutual funds is high. So, the
portfolio of the fund should be prepared taking into consideration the
expectations of the people.
• Try to reduce fund charges, administration charges and other charges which
help to invest more funds in the security market and earn good returns.
• Different campaigns should be launched to educate people regarding mutual
funds.
• Companies should give regular dividends as it depicts profitability.
• Mutual funds should concentrate on differentiating the portfolio of their MF
than their competitors MF
• Companies should give handsome brokerage to brokers so that they get
attracted towards distribution of the funds.

75
 CONCLUSION
76
Conclusion
After the successfully completion of my summer internship I understood that
market research is an important aspects for a company through out the life cycle of
a particular product. It helps in knowing the changing taste, preference, life style
etc. of the consumer. During the training I found that Random Sampling method is
a perfective market research technique.

With reference to my research topic that is “Market Capitalization of Mutual

Fund & ULIPs”. I found that, 43% of the respondents have responded with a
positive note. But a major chunk of them i.e. 53% respondents opined it to be not
satisfactory.

A mutual fund is the ideal investment vehicle for today’s complex and modern
financial scenario. Markets for equity shares, bonds and other fixes income
instruments, real estate, derivatives and other assets have become mature and
information driven. Today each and every person is fully aware of every kind of
investment proposal.

Everybody wants to invest money, which entitled of low risk, high returns and easy
redemption. In my opinion before investing in mutual funds, one should be fully
aware of each and everything.

At the same time ULIPs as an investment avenue is good for people who have
interest in staying for a longer period of time, that is around 10 years and above.
Also in the coming times, ULIPs will grow faster.

ULIPs are actually being publicized more and also the other traditional endowment
policies are becoming unattractive because of lower interest rate. It is good for
people who were investing in ULIP policies of insurance companies as their
investments earn them a better return than the other policies.

77
 BIBLOGRAPHY
78
 B ibliography:

Books:

• Business Research Methods – Zikmund William G.

• Research Methodology- Kothari C.R.
• Management research Methodology- Krishnaswamy K.N., Sivakumar
Appa Iyer, Mathirajan M.
• Managerial Decision Modeling with spreadsheets – Balakrishnan
Nagraj, Render Barry & Stair Ralph M.
• Summer Internship Simplified – Prof. Mishra Anil
• Marketing Management- Kottler Philip
• Indian financial system
• Securities analysis & port folio management -Avadhhani.V.A

Websites:

• www.bajajcapital.com
• www.amfiindia.com
• www.mutualfundsindia.com
• www.principalindia.com
• www.investorsguide.com
• www.moneycontrol.com
• www.sbimf.com
• www.sebi.co.in

79
 • www.reliancemf.com
• www.sebi.co.in
• www.google.com

• www.quickmba.com

• www.indiainfoline.com

• www.hindubusinessline.com

• www.wikipedia.com

• www.economictimes.com

• www.yahoofinance.com

Magazine and Newspapers;

• Front Line

• Stock Market Book

• Dallas Street Journal’s

• Outlook Money

• Company Brochures & Presentations

• 4P’s Magazine

• The Times Of India

• The Economic Times

80
 APPENDIX
81
 QUESTIONNAIRE
DECLARATION: I am Deviprasad Dandapat pursuing PGPM from
Asian School of Business Management, Bhubaneswar. As a
part of the curriculum I am doing research on “Market
Capitalizations of Mutual fund & ULIPs”. Kindly help me in the
same by filling the Questionnaire. Your response would be kept
strictly confidential and would be used only for academic research.

1. Do you invest in Mutual Funds or ULIPs?

Yes No
2. If not, then what other option(s) do you prefer to
invest?
• Fixed deposits • If others, please specify:

• Post office schemes ……………………………

• Recurring deposits ...
3. How do you get the information of the various
Insurance Companies?
• Advertisement • Seminar
• Work shops 
4. In which sector do you prefer to invest your money?
• Private Sector • Public Sector
5. At which rate do you want your investment to grow?
• Steadily • Fast
• At an average rate
6. Which factor do you consider before investing in
Mutual Fund or ULIPs?
• Safety of principal • Maturity period
• Low risk • Terms and conditions
• High returns

82
 7. Imagine that stock market drops immediately after
you invest in it then what will you do?
• Withdraw your money • Invest more in it
• Wait and watch

8. How often do you monitor your investment?

• Daily • Occasionally
• Monthly
9. What percentage of your income do you invest?
• 0-5% • 5-10% • 10-15%
10. You would describe your financial situation as being:

• Very unstable • Stable

• Somewhat unstable • Very stable
• Moderately stable
11. If in the near future if you ever plan to invest in your

money in any of the Mutual Fund Company, which would

be your choice?
• SBI Mutual Fund • Others:
• HDFC Mutual Fund …………………………
• Reliance Mutual Fund …………………………
• ABN AMRO Mutual …………………
Fund
12. Do you have any Idea about Bajaj Capital?
Yes No
13. Have you ever invested through Bajaj Capital?

Yes No
14. In which Product of Bajaj Capital you have invested?
• Life Insurances • General Insurances

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 • Mutual Funds

• Fixed Deposits

• Online share Trading

Are you satisfied by the offerings & services provided by the Bajaj
Capital?
Yes No
PERSONAL DETAILS
Name: ………………………………………………………………
Address: ……………………………………………………………
……………………………………………………………
Mobile No:…………………………………………………………
Gender: Male Female
Marital status: Single Married
Age Group:
• Below 20
• Between 20-30
• Between 30-40
• Above 40
Qualification:
• Under graduate
• Graduate
• Post graduate
• Other: ……………………………
Occupation:
• Salaried
• Business
• Housewife
• Professional

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 • Retired
• Other: …………………………………
Annual income:
• Below Rs 1, 50,000
• Rs 1,50,000- Rs2,50,000
• Rs 2,50,000- Rs 4,00,000
• Above Rs 4,00,000
Signature of the Respondent

Thanks for Your Kind Co-operation

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