CHAPTER-I

INTRODUCTION

INTRODUCTION TO MUTUAL FUNDS

CONCEPT A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, -professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

The project basically carried out to give good guidelines for investor. And also to educate the investors about mutual funds. The project idea is to project mutual funds as the better avenue for investment. Mutual fund is productive package for a layinvestor with limited finances. Mutual fund is a very old practice in U.S., and it has made a recent entry into India. Common man in India still finds Bank as a safe door for investment. This shows that mutual funds have not gained a strong foot-hold in his life.

The project creates an awareness that the mutual fund is worthy investment practice. The various schemes of mutual funds provide the investor with a wide range of investment options according to his risk-bearing capacities and interest. Besides, they also give a handy return to the investor. The project analyses various schemes of mutual fund by taking different mutual fund schemes from different AMCS. The future challenges for mutual funds in India are also considered.

PURSPOSE OF THE STUDY:

The study basically made to educate the investors about Mutual Funds. Analyze the various schemes to highlight the risk and return of diversity of investment that mutual funds offer. Thus, through the study one would understand how a common man could fruitfully convert a pittance into great penny by wisely investing into the right scheme according to his risk- taking abilities.

SCOPE OF THE STUDY:

The study is limited to the analysis made for three major types of schemes offered by four AMCs namely Indian infoline Asset Management Co. Ltd. Canbank Investment Management Services, DSP Merrill Lynch Investment Managers Ltd. and Templeton Asset Management (India) Pvt. Ltd. Each scheme is calculated their risk and return using different performance measurement theories. The reasons for such performance are immediately analyzed in the commentary. Pie charts are used to reflect the portfolio risk and return.

OBJECTIVES:

1. To project mutual funds as the productive avenue to invest in contrast to the laxity of bank investing. 2. To show the wide range of investment options available in MFs by explaining various schemes offered by different AMCs. 3. To help an investor to make a right choice of investment, while considering the inherent risk factors. 4. To understand the recent trends in the MF world. 5. To understand the risk and return of the various schemes. 6. To find out the various problems faced by Indian mutual funds and possible solutions.

A mutual fund, also referred to as an open-end fund, is an investment company that spreads its money across a diversified portfolio of securities -- including stocks, bonds, or money market instruments. Shareholders who invest in a fund each own a representative portion of those investments, less any expenses charged by the fund.

Mutual fund investors make money either by receiving dividends and interest from their investments, or by the rise in value of the securities. Dividends, interest and profits from the sale of any securities (capital gains) are passed on to the shareholders in the form of distributions. And shareholders generally are allowed to sell (redeem) their shares at any time for the closing market price of the fund on that day.

DR GLEN BROWN

Mutual funds have been around for a long time, dating back to the early 19th century. The first modern American mutual fund opened in 1924, yet it was only in the 1990s that mutual funds became mainstream investments, as the number of households owning them nearly tripled during that decade. With recent surveys showing that over 88% of all investors participate in mutual funds, you're probably already familiar with these investments, or perhaps even own some. In any case, it's important that you know exactly how these investments work and how you can use them to your advantage.

A mutual fund is a special type of company that pools together money from many investors and invests it on behalf of the group, in accordance with a stated set of objectives. Mutual funds raise the money by selling shares of the fund to the public, much like any other company can sell stock in itself to the public. Funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds and money market instruments. In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities. For most mutual funds, shareholders are free to sell their shares at any time, although the price of a share in a mutual fund will fluctuate daily, depending upon the performance of the securities held by the fund.

Methodology of Study

To fulfill the objective of the study both primary and secondary data has been collected. Primary data is the data collected specifically for the study. Data is collected directly from people and organization via questioners or surveys before being analyzed to reach conclusions concerning the issues covered in the questionnaire or survey.

In this study primary data was collected through interaction with staff of India info line pvt Ltd. and the applications of Reliance equity fund.

Secondary data is the data collected previously by someone else for some other purpose, which can be analyzed and interpreted according to requirements. For example, source s of secondary data are government publications, newspapers, worldwide web etc.

In this study the secondary is mainly taken from The company `s training material. Reconciliation statements, Other documents generated with in the organization, which have to access WWW.indiainfoline.com, WWW.amfindia.com, WWW.Sebi.com

LIMITATIONS OF THE STUDY:

1. The study is conducted in short period, due to which the study may not be detailed in all aspects. 2. The study is limited only to the analysis of different schemes and its suitability to different investors according to their risk-taking ability. 3. The study is based on secondary data available from monthly fact sheets, web sites, offer documents, magazines and newspapers etc. as primary data was not accessible. 4. The study is limited by the detailed study of various schemes.

CHAPTER - II REVIEW OF LITRATURE

The study basically made to educate the investors about Mutual Funds. Analyze the various schemes to highlight the risk and return of diversity of investment that mutual funds offer. Thus, through the study one would understand how a common man could fruitfully convert a pittance into great penny by wisely investing into the right scheme according to his risk- taking abilities.

BENEFITS OF MUTUAL FUND INVESTMENT Professional Management: Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. Diversification: Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

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Return Potential: Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

Low Costs: Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

Liquidity: In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency: You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

Flexibility: Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

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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. STRUCTURE AND CONSTITUENTS OF FUND

MUTUAL FUND

Sponsor

Trustee

AMC

Custodian

Mutual fund schemes may be classified on the basis of its structure and its investment objective. By Structure: Openended funds: An open end 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-end schemes is liquidity. Closed-ended funds: A closed end funds has a stipulated maturity period which generally raging from 3 to 15 years. The funds are open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exist route to the investors, some close ended funds give

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an option of selling back the units to the Mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. Interval Funds: Interval funds combine the features of open-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices. By 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, have outperformed most other kind of investments held 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 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.

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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 aim of money funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer 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 rate prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

Load Funds: A Load Funds is one that charges a commission for entry of exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry exit loads range from 1% to 2%. It could be corpus is put to work.

No-Load Funds: A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load is that the entire corpus is put to work.
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Other Schemes: Tax Saving Schemes These schemes offer tax rebates to the investor under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments in Equity Linked Saving Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act. The Act also provide opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been sold to April 1, 2000 and the amount is invested before September 30, 2000.

Special Schemes Industry Specific Schemes: Industry Specific Schemes invest in the industries specified in the offer document. The investment or these funds is limited to specific like InfoTech, FMCG and Pharmaceuticals etc.

Index Schemes: Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE

Sectoral Schemes: Sectoral 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.
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History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases First Phase 1964-87(UTI MONOPOLY) An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.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 Canbank 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.

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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. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, 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.

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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 March 2000 more than Rs.76, 000 crores of assets under management and with 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 June 30, 2003, there were 31 funds, which manage assets of Rs.104762 crores under 376 schemes. The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

Note: While 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

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Resent Trends in Mutual Funds Industry The Indian Mutual fund industry, despite all that has been said about it is still in a nascent stage and has extremely bright future ahead. The industry is still one-tenth size of the banking deposits in the country. The private sector mutual fund industry in its resent avatar is barely 7 years old. The total asset under management over the past 4 to 5 tears has almost remain stagnant around the Rs 100, 000 crore mark. This has put a question mark in front of the claims that mutual funds are growing part of the financial savings and planning industry in India. It holds scope for growth. In India this industry began with the setting up of the Unit Trust Of India (UTI) in 1964 by the government of India in order to mobiles small saving. During the past 37 years, UTI has grown to be a dominant player in the industry with assets with over Rs 76,547 cr as of March2000. However, trouble hit UTI has lost its dominant position in the industry and the asset under management has slipped drastically to Rs 46,396 cr. Private sector mutual funds, which were permitted along with foreign partners in 1993, now enjoy a dominant position in the country. Kothari Pioneer Mutual fund was the first fund to be established in the private sector with foreign fund. The private sector now controls around RS 45,818 crore assets under management, almost half the size of the industry. The mutual fund industry has become a fastest growing sector in the countrys capital and financial market with an average compounded growth rate of 20 percent over the past five years. This is despite increasing competition with more than 30 asset management companies for investors money. As on June 2002, the industry has Rs 100,703 crore asset under management spread across 36 funds with more than 390 schemes.
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Substantial development have made; spurred on by changes and amendments in regulation as the mutual fund regulation that established a comprehensive legal framework for the mutual fund industry to develop coherently. The securities and Exchange Board Of India (SEBI) came out with comprehensive regulation in 1993 which defined the structure of the mutual fund and asset management Companies for the first time. The industry is in the process of evolving into a bigger and better investment medium for all market segment, Say Kavita Hurry, CEO ING Investment Management, further, currently, ING Investments manages around Rs.364 crore as on June 2002.

Drastic Transformation: The industry is undergoing a transformation and is witnessing large number of mergers, acquisitions and takeovers in the schemes and asset management companies. Mutual fund products are competing with the banks deposits, Reserves Banks of India (RBI) bonds, pension funds and post offices schemes that provide not only guaranteed return but also tax-free returns. However, mutual funds are unable to provide assured return since they are investing in financial markets and returns from them are, by definition, uncertain. These transformation benefiting the investor friendly open-ended schemes, increasing the range of funds to choose from, enhanced transparency and improvement regulation.

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New challenges and growth areas: However, an important step towards maturating of the industry will be develop third party distribution channel and expand distribution outside of the major cities. The challenges for the private fund players manager will be to break the big city limit and begin to sell and educate the rest of the market and to diversify sales, says Moodys Investors services and ICRA report on the industry. Further the report notes, asset management companies must attract more retail investors. A strong retail back-bone will create better standards, greater competition and more liquidity, in addition to maintain and improving best practices and better company governances. The industry needs go deeper into the existing markets and wider into the new markets and provides newer financial products to grow. Adds Nikhil Kattau, chief executive officer, Sun F&C. Sun F&C currently manages around Rs.427 crore. Another fundamental turning point in the growth of the mutual fund market is the opening of the market to the foreign investments. Now there is an industry wide limit for investing in overseas securities $500 million offering Indian Mutual funds and Indian investor the possibility to invest in the non-Indian security mutual funds is a fundamental step towards modernization and evolution of the market, notes Moddys ICRA report. Stable and long-term fiscal incentives designed to capture long-term retail and private pension savings will be of utmost importance for the industry. Here, governments fiscal policy and have the capital market regulators for the industrys continued growth will play an essential role.

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In a supportive environment, investors would be reassured of a stable industry, private fund managers will be motivated and encouraged to develop new products and foreign managers will be attracted to the dynamic market. In an economy growing at 6 percent per annum, any fall in any segment by more than 30 percent obviously indicates that something serious is happening and concerned people need to take remedial steps. In the relative absence of UTI from the scne, till it fate decided by its masters in North Block, the onus of building investor confidences falls on the shoulders of the private sector mutual funds. With maturing financial markets and increasing marketing there are reasons for more than moderate optimisms. Market Trends: A lone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players in the market. In spite of the stiff competition and losing market share, UTI still remains a formidable force to reckon with. Last six years have been the most turbulent as well as exiting ones for the industry. Product innovation is now pass with the game shifting to performance delivery in fund management as well as service. Those directly associated with the fund management industry like distributors, registrars and transfer agents, and even the regulators have become more mature and responsible. The industry is also having a profound impact on financial markets. While UTI has always been a dominant player on the bourses as well as the debt markets, the new generations of private funds, which have gained substantial mass, are now seen flexing their muscles.By rewarding honest and transparent management with higher valuations, a system of risk-reward has been created where the corporate sector is more transparent then before.

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Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and technology sector. Funds performances are improving. Funds collection, which averaged at less than Rs100bn per annum over five-year period spanning 199398 doubled to Rs210bn in 1998-99. In the current year mobilization till now have exceeded Rs300bn. Total collection for the current financial year ending March 2000 is expected to reach Rs450bn.

What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sector mutual funds. Indeed private MFs saw a net inflow of Rs. 7819.34 crore during the first nine months of the year as against a net inflow of Rs.604.40 crore in the case of public sector funds. Mutual funds are now also competing with commercial banks in the race for retail investors savings and corporate float money. The power shift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are losing out in the current scenario. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way. The collection in the first half of the financial year 1999-2000 matches the whole of 1998-99. India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund assets are not even 10% of the bank deposits, but this trend is beginning to change. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. (Source: Thinktank, The Financial Express September, 99) This is forcing a large number of

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banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds are going to change the way banks do business in the future.

Banks v/s Mutual Funds BANKS Low High Low MUTUAL FUNDS Better Low High

Returns Administrative exp. Risk

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STRUCTURE OF MUTUAL FUNDS Sponsor Company

Establishes MF as a Trust Registers MF with SEBI

Managed by a Board of Trustees

Mutual Fund

Hold Unitholders Fund in MF Ensure Compliance to SEBI Enter into Agreement with AMC

Appointed by Board of Trustees

Asset Management Company

Appointed by Trustees

Float, MF Funds Managers Fund as Per SEBI guidelines & AMC Agreement Provides Necessary Custodian Services Provide Banking Services

Custodian

Appointed by AMC

Bankers

Appointed by AMC

Registrars and Transfer Agents

Provide Registrars Services and act as a Transfers Agents

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The formation and operations of mutual funds in India is solely guided by SEBI (Mutual Fund) Regulations, 1993, which came into force on 20 January 1993. The regulations have since been replaced by the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, through a notification on 9 December 1996 (Appendix 2). Figure gives an idea of the structure of Indian mutual funds. A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian. They are of course assisted by other independent administrative entities like banks, registrars and transfer agents. We may discuss in brief the formation of different entities, their functions and obligations. The sponsor for a mutual fund can by any person who, acting alone or in combination with another body corporate establishes the mutual fund and gets it registered with SEBI. The sponsor is required to contribute at least 40 per cent of the minimum net worth (Rs 10 crore) of the asset management company. The sponsor must have a sound track record and general reputation of fairness and integrity in all his business transactions. As per SEBI Regulation, 1996, a mutual fund is to be formed by the sponsor and registered with SEBI. A mutual fund shall be constituted in the form of a trust and the instrument of trust shall be in the form of a deed, duly registered under the provisions of the Indian Registration Act, 1908, executed by the sponsor in favour of trustees named in such an instrument.

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The board of trustees manages the mutual fund and the sponsor executes the trust deeds in favour of the trustees. The mutual fund raises money through sale of units under one or more schemes for investing in securities in accordance with SEBI guidelines. It is the job of the mutual fund trustees to see that the schemes floated and managed by the AMC appointed by the trustees, are in accordance with the trust deeds and SEBI guidelines. It is also the responsibilities of the trustees to control the capital property of mutual funds schemes. The trustees have the right to obtain relevant information from the AMC, as well as a quarterly report on its activities. They can also dismiss the AMC under specific condition as per SEBI regulations. At least half the trustees should be independent persons. The AMC or its employees cannot act as a trustee. No person who is appointed as a trustee of a mutual fund can be appointed as a trustee of any other mutual fund unless he is an independent trustee and prior permission is obtained from the mutual fund in which he is a trustee. The trustees are required to submit half-yearly reports to SEBI on the activities of the mutual fund. The trustees appoint a custodian and supervise their activities. The trustees can be removed only with prior approval of SEBI. As per SEBI guidelines, an asset management company is appointed by the trustees to float the schemes for the mutual fund and manage the funds raised by selling units under a scheme. The AMC must act as per SEBI guidelines, trust deeds and management agreement between trustee & the AMC.

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List of AMCs Benchmark Mutual Fund Birla, Sun Life Mutual Fund BOB Mutual Fund, BOI Mutual Fund, Canbank Mutual Fund, Chola Mutual Fund, Deutsche Mutual Fund, DSP Merrill Lynch Mutual Fund, Dundee Mutual Fund, Escorts Mutual Fund, First India Mutual Fund, Fund, SMC mutual fund,HDFC Mutual Fund, HSBC Mutual Fund, IL&FS Mutual Fund, Indian Bank Mutual Fund, ING Savings Trust Mutual Fund, JF Mutual Fund, Alliance Capital, Mutual Fund, JM Mutual Fund, Kotak Mahindra Mutual Fund, LIC Mutual Fund, Morgan Stanley Mutual Fund, Pioneer ITI Mutual Fund, PNB Mutual Fund, Principal Mutual Fund, Prudential ICICI Mutual Fund, Reliance Capital Mutual Fund, SBI Mutual Fund, Shriram Mutual Fund, Standard Chartered Mutual Fund, Sun F&C Mutual Fund, Sundaram Mutual Fund, Tata Mutual Fund, Taurus Mutual Fund, Templeton Mutual Fund, Unit Trust of India, UTI Mutual Fund, Zurich India Mutual Fund, Alliance Capital Mutual Fund.

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PLAYERS IN MUTUAL FUND INDUSTRY

NAME OF THE FUND

NO. OF SCHEMES ASSET UNDER MANAGEMENT

ALLIANCE MUTUAL FUND BENCH MARK MUTUAL FUND BIRLA MUTUAL FUND BOB MUTUAL FUND CAN BANK MUTUAL FUND CHOLA MUTUAL FUND SMC MUTUAL FUND DUNDEE MUTUAL FUND ESCORTS MUTUAL FUND FIRST INDIA MUTUAL FUND FRANKLIN TEMPELTION MUTUAL FUND GIC MUTUAL FUND HDFC MUTUAL FUND IDBI-PRINCIPAL MUTUAL FUND IL & FS MUTUAL FUND ING MUTUAL FUND JF MUTUAL FUND JM MUTUAL FUND KOTAK MUTUAL FUND MORGAN STANLEY MUTUAL FUND PIONEER ITI MUTUAL FUND PNB MUTUAL FUND PRU ICICI MUTUAL FUND RELIANCE CAPITAL MUTUAL FUND SBI MUTUAL FUND STANDARD CHARTERED MUTUAL FUND SUN F& C MUTUAL FUND SUNDARAM MUTUAL FUND TATA MUTUAL FUND TAURUS MUTUAL FUND
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36 1 35 8 14 25 20 19 13 5 25 13 22 33 18 15 3 21 30 1 62 8 52 15 42 30 26 11 20 11

(Rs. CRORE) 3309.03 6.1 3436.79 31 692.04 812.67 3154.67 20.72 83.91 0.7 3919.52 333.29 4707.32 1346.61 537.72 396.31 201.8 1199.2 1907.35 793.87 3517.77 149.76 7006.72 2913.25 3215.40 3294.63 413.11 702.25 893 59.76

UTI MUTUAL FUND ZURICH INDIA MUTUAL FUND LIC MUTUAL FUND

103 39 27

509.83 255.11 2340.3

NEED AND IMPORTANCE OF STUDY A small investor is the one who is able to correctly plan & decide in which profitable & safe instrument to invest. To lock up ones hard earned money in a savings banks account is not enough to counter the monster of inflation. Using simple concepts of diversification, power of compound interest, stable returns & limited exposure to equity investment, one can maximize his returns on investments & multiply ones savings.

Investment is a serious proposition one has to look into various factors before deciding on the instruments in which to invest. To save is not enough. One must invest wisely & get maximum returns. One must plan investment in such a way that his investment objectives are satisfied. A sound investment is one which gives the investor reasonable returns with a proper profitable management

This report gives the details about various investment objectives desired by an investor, details about the concept & working of mutual fund. This report also covers

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the different players in Mutual Funds and different avenues of investment & in detail about SMC MUTUAL FUNDS.

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SEBI GUIDELINES (BRIEFLY)

Schemes of a Mutual Fund: The asset Management Company shall launch no scheme unless the

trustees approve such scheme and a copy of the offer document has been filed with the Board. pay filing fees. The offer document shall contain disclosures which are adequate in Every mutual fund shall along with the offer document of each scheme

order to enable the investors to make the investment decision including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the groups companies of the sponsor a close-ended scheme shall be fully redeemed at the end of the maturity period. Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution. The mutual fund and asset management company shall be liable to

refund the application money to the applicants;1. If the mutual fund fails to receive the minimum subscription amount

referred to in clause (a) of sub-regulation (1); 2. If the moneys received from the applicants for units are in exceeded

subscription as referred to in clause (b) of sub-regulation (1) The asset management company shall issue to the applicant whose (uncompleted)

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Rules Regarding Advertisement: The offer document and advertisement materials shall not be misleading

or contain any statement or opinion, which are incorrect or false. Investment Objectives and Valuation Policies: The price at which the units may be subscribed or sold and the price at

which such units any time is repurchased by the mutual fund shall be made available to the investors. General Obligations: Every asset management company for each scheme shall keep and

maintain proper books of accounts, records and documents, for each scheme so as to explain its transactions and to disclose at any point of time the financial position of each scheme and in give a true and fair view of the state of affairs of the fund and intimate to the Board the place where such books of account, records and document are maintained. The financial year for all the schemes shall end as of March 31 of each

year. Every mutual or the asset Management Company shall prepare in respect of each financial year an annual report and annual statement of accounts of the schemes and the fund as specified in Eleventh schedule. Every mutual fund shall have the annual statement of accounts guided by an auditor who is not any way associated with the auditor of the asset management company.

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Proactive For Action in Case Of Default: On and from the date of the suspension of the certificate or the approval

as the case may be the mutual fund, trustees or asset management company, shall cease to carry on any activity as mutual fund, trustees or asset management company, during the period of suspension, and shall be subject to the directions of the Board with regard to any records, documents, or securities that may be in its custody of control, telling to its activities as mutual fund, trust asset management company. Restrictions on Investments: A mutual fund scheme shall not invest more than 15% of its NAV In

debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to of the scheme with the prior approval of the Board of Trustees and the Board of asset management company y. A mutual fund scheme shall not invest more than 10% of its NAV in

unrated debt instruments issued by a single issuer and the total investments in such not exceed 25% of the NAV of the Board of asset Management Company. No mutual fund under all its schemes should own more than ten per cent

of any companys. paid up capital carrying voting rights, Such transfers are done at the prevailing market price for quoted

Instruments on spot basis; the securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made. A scheme may invest in another scheme under the same asset

management company or any other mutual fund without charging any fees, provided that aggregate interschmes investment made by all schemes under the same management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund.
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The initial issue expansion in respect of any scheme may not exceed six

per cent of the funds raised under that scheme. Every management company shall buy and sell securities on the basis of

deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sales, deliver the securities and shall in no case put itself in a position whereby it Has to make short sale or carry forward transaction or engage in bad finance. Every management company shall, get the securities purchased or

transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature. Pending deployment of funds of a scheme in securities in terms of

investment objective is of the scheme a mutual fund can invest the funds, of the scheme in short term deposits of scheduled commercial banks. No mutual fund scheme shall make any investment in;

I. Any unattested security of an associate or group company of the sponsor or II. Any security issued by way of private placement by an associate or group company of the sponsor; or The listed securities of group companies of the sponsor which is in Excess of 30% of the net assets [of all the schemes of a mutual fund] No mutual fund scheme shall invest more than 10 per cent of its NAV in

the equity shares or equity related instruments of any company. Provided that, the limit of 10 per cent shall not be applicable for investments in index fund or sector industry specific scheme.

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INVESTORS RIGHTS AND OBLIGATIONS Investors Rights: The offer document of a scheme lays down the investors rights. Investors are the owners of the schemes assets, and it is therefore imperative that they are aware of their rights with respect to the schemes assets, its management, recourse to the trustees, the AMC and other constituents. The important rights of the unit-holders are outlined below: Unit-holders have a proportionate right in beneficial ownership of the

schemes assets otherwise held in trust for them by the Trustees of the fund. They also have the proportionate right to any dividend or income declared under the scheme. Unit-holders have the right to obtain from the trustees any information

that may have an adverse bearing on their investments. Unit-holders are entitled to receive dividend warrants within 42 days of

the date of dividend declaration. The appointment of an AMC of a fund can be terminated by 75% of the

unit-holders of the scheme present and voting at a special meeting that can be called for the purpose with the prior approval of SEBI. Unit-holders have the right to inspect major documents of the fund i.e.

material contracts (the trust deed, the investment management agreement, the custodian services agreement and the registrar and transfer agency agreement), memorandum and articles of association of the AMC, recent audited financial statements, the texts of SEBI (MF) Regulations, Indian Trusts Act and the offer document of the scheme.

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Investors have the right to approve any changes in the fundamental

attributes of a closed-end scheme (type of scheme, investment objective and terms of issue), provided the consent of 75% of unit-holders has been obtained. In case of openend schemes they have the right to be adequately informed of such changes, so they can exercise the option redeeming their holdings in the fund. Each unit-holder has the right to receive a copy of the annual financial

statements, and periodic statements regarding his transactions (purchase, redemption, and transfer), distributions and reinvestments.

Legal Limitations to Investors Rights Investors need to note that while they enjoy several rights as outlined above, they are also subject to certain limitations in their capacity as unit-holders. Unit-holders are not distinct from the trust and therefore cannot sue the trust i.e. they jdo not have legal recourse to the trust as, under Indian law, the Trust is not a district or separate legal entity. However, an investor can initiate legal proceedings against the trustees who are the protectors of the investors interests, if they feel aggrieved by any action of the trustees that is seen not to be in their interest. Also, the fundamental concept of a mutual fund is that the investors invest as their own risk and cannot force the AMC to assure a specified level of return. In other countries, mutual funds, do not offer assured return schemes, as any profits or losses on fund investments in any case belong to the investors. In India, in the initial stages of development of the fund industry, some of the fund sponsors have, however, offered such assured returns to investors. But, the investors need to understand that except in certain circumstances the sponsors of a mutual fund do not have any legal obligation to meet the shortfall in case the assured return is not achieved.

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Since assured return schemes do exist in India, an exception has been made by SEBI in case of schemes where such assurance is provided in the offer document, with a guarantee from the sponsor to meet any shortfall. Only if the offer document has specifically provided such guarantee by a named sponsor, the investors will have the right to sue the sponsors to make good any shortfall in promised returns. A prospective investor does not enjoy any standing or rights with respect to the fund, the AMC or any other constituent. It is only after he has invested in a scheme that he becomes entitled to the rights discussed earlier. The courts have also upheld this view in relevant cases in India. In case a unit-holder is aggrieved by any actions of the Fund or AMC, the appropriate form for him to approach is SEBI as mentioned below.

Investors Obligations It is the investors duty to carefully study the offer document before investing in units of a scheme. He must appreciate the fundamental attributes of the scheme, the risk factors, his rights and the funds and the sponsors track record. Failure to effectively study the offer document does not entitle him later to have recourse to the fund, the trustees or the AMC. The investor must also monitor his investment in a scheme by carefully studying the schemes financial statements, its portfolio composition and research reports published by mutual fund tracking agencies. He can certainly exercise in a reasonable way his right to ask the trustees for information that he requires. But, the monitoring is entirely the investors own responsibility.

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Accounting and Valuation: The Importance of Accounting Knowledge The balance sheet of a mutual fund is different from the normal balance sheet of a bank or a company. All of the fund's assets belong to the investors and are held in fiduciary capacity for them. Mutual fund employees and mutual fund agents need to be aware of the special requirements concerning accounting for the fund's assets, liabilities and transactions with investors and other outside constituents such as banks, securities custodians and registrars. This knowledge will help them better understand their responsibilities and their place in the organization, by getting an overview of the functioning of the fund, and to explain the performance of mutual funds to investors. Mutual funds in India are required to follow the accounting policies laid down in SEBI (Mutual Fund) Regulations, 1996 and the amendments in 1998. This section of the workbook summarizes the important Regulations, and periodical budgets.

Net Asset Value (NAV) A mutual fund is a common investment vehicle where the assets of the fund belong directly to the investors. The fund does not account for investors' subscriptions as liabilities or deposits but as Unit Capital. On the other hand, the investments made on behalf of the investors are reflected on the assets side and are the main constituent of the balance sheet. There are, however, liabilities of a strictly short-term nature that may be part of the balance sheet. The fund's Net Assets are therefore defined as the assets minus the liabilities. As there are many investors in a fund, it is common practice for mutual funds to compute the share of each investor on the basis of the value of Net Assets per Share/Unit, commonly known as the Net Asset Value (NAV).

39

The following are the regulatory requirements and accounting definitions lay down by SEBI. NAV = Net Assets of the scheme / Number of Units Outstanding, i.e. Market value of investments + Receivables + Other Accured Income + Other Assets =Accured Expenses - Other Payables - Other Liabilities No. of Units Outstanding as at the NAV date

A fund's NAV is affected by four sets of factors: -- Purchase and sale of investment securities -- Valuation of all investment securities held -- Other assets and liabilities, and -- Units sold or redeemed

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RISK INVOLVED IN MUTUAL FUNDS INDUSTRY

Mutual funds are not free from risk. It is so because basically the mutual funds also invest their funds in stock markets on shares, which are volatile in nature and are not risk free, the following risk are inherent in their dealing.

INHERENT RISK FACTORS: 1) Market Risks: In general there are certain risks associated with the every kind of investment on shares. They are called market risks. These market risks can be reduced, but cannot be completely eliminated even by a good investment. The prices of shares are subjected to wide price fluctuations depending upon market conditions over which nobody has a control. Moreover, every economy has to pas through a cycle-Boom, Recession,

Slump and Recovery. The phase of the business cycle affects the market conditions to a large extent.

2) Scheme Risks There are certain risks inherent in the scheme itself. It all depends upon the nature of the scheme. For instance, in a pure growth scheme, risks are greater.

3) Investment Risks Whether the mutual fund makes money in shares or loses depends upon the investment expertise of the Asset Management Company. If the investment advice goes wrong, the fund has to suffer a lot. The investment expertises of various funds are different and it is reflected on the returns, which they offer to investors.

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4) Business Risks The corpus of a mutual fund might have been invested in a companys shares. If the business of that company suffers any set back, it cannot declare any dividend. It may even go to the extent of winding up its business. Though the mutual fund can withstand such a risk, its income paying capacity is affected. 5) Political Risks Successive Governments bring with them fancy new economic ideologies and policies. It is often said that many economic decisions are politically motivated.

Changes in Government bring in the risk of uncertainty which every player in the financial service industry has to face. So mutual funds are no exception to it.

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CHAPTER - III COMPANY PROFILE

43

COMPANY PROFILE

Indianbulls is emerging as one of the top most wealth management companies in India with a daily turnover of over 200 crores and 116 branches spread all over the country. The Sharyans Group has an impressive portfolio of businesses under its fold which mainly fall under the real estate and financial services categories. The prominent subsidiaries of this Group are Prebone Yamane (Countrys largest debt broking company), Intime Spectrum (Indias largest Registry & Transfer Agents), and Collin Stewarts India Private Limited (Portfolio Management Services & Research along with institutional broking operations for Collin Stewarts which is the largest wealth management company in the UK). Under the guidance of the Sharyans and Inga Group, Indianbulls will soon touch the pinnacles of success in the financial services industry by being a dominant force in the broking as well as the distribution arena. With an unblemished and reputed track record, Indianbulls is all set become an imposing wealth management firm in the country by giving the best to its clients as well as stakeholders. Indianbulls has been set up to engage in Stock Broking Institutional Broking Derivatives Depository Services Distribution of Investment Products Distribution of Insurance Commodities Broking

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OFFERINGS

45

Research competency: Our primary strengths lie in research and operational efficiency. The day-to-day operations are managed by some of the best professionals in the industry having indepth understanding of underlying market trends and sound business practices The Research Team comprises of competent professionals with vast experience, insightful analytical abilities and high standards of integrity. Some of research reports are as below: Economic Outlook and Updates Sector & Company Reports Technical Recommendations Daily Market Report Daily Technical Outlook Reports on New Fund Offerings Weekly analysis of mutual funds Fund Focus Weekly debt report: Debt Dose Monthly Newsletter - ITI Investment Flash Monthly 4 Pager - ITI Wealth Wise ITIFSL also offer daily technical calls through SMS to our clients free of charge

ADVANTAGES TO INVESTERS: Why you need a financial planner? The financial planner is someone who can help you invest across investment avenues based on your risk profile and investment objectives. Post-investment, he
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monitors your investments and ensures that you are on course to achieve your investment objectives. If necessary, he suggests changes to your financial plan so that you are able to achieve your investment objectives as planned. Given the critical inputs provided by the financial planner in helping you achieve your financial goals, it is important that you select the right financial planner. Here are the reasons why ITI is the right planner for you Certification/Membership More than anything else, this is a pre-requisite from the compliance point of view. Your financial planner should be certified and registered as a broker or mutual fund agent with NSE, BSE, AMFI etc. ITI FSL has Trading and Clearing Memberships with major Stock Exchanges in India to offer broking services across market segments at all of the National-level Exchanges. ITI FSL is a Depository Participant with CDSL. We also have memberships with commodity exchanges. We have AMFI certified professionals to advice you on mutual funds.

Competence Gone are the days when financial planning simply required delivering application forms. The traditional "one-size fits all" approach is pass. With the increasing list of investment avenues on offer, selecting the one that suits you the best

47

is becoming a challenge. To that end, competence and skill set are the basic criteria that investors should look for in an investment planner. With ITI fine staff of professionals, you can be sure that you will get the best advice and service to achieve your financial goals. Furthermore, the recommendations offered by ITI are backed by solid research.

Value-add services In addition to financial planning, ITI provides related, value-add services that can assist you in the investment process. On-line tools and calculators are some of our more popular value-add services. These tools can help you keep track of your investments. These value-add services form an integral part of our offering. One-stop shop Every individual has different needs and the same undergo a change over a period of time. The financial planner should be capable enough to understand these needs and offer suitable products to fulfill them. For this purpose, ITI provides you with the entire range of investment products from stocks, mutual funds, bonds to fixed deposits. In other words, we offer a "one-stop" solution for all your investment needs. Accessibility One of the common complaints from investors is that their financial planner is unavailable/inaccessible and therefore unable to provide adequate/prompt service. This

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is particularly common in a one-man setup where the financial planner's services begin and end with him, with little or no backup. If the financial planner is preoccupied with some important clients or if he relocates, it leaves you in a soup because your financial plan is in limbo. It is best to go with a financial planning initiative that is run by teams (as opposed to one-man setups) to ensure continuity of your financial plan. ITI has a team of professionals who are ever ready to serve you at any point of time. We are spread across the country so that you can have access to us always

KEY LEARNINGS IN THE ORGANIZATION EQUITY FUTURES OPTIONS COMMODITIES IPO MUTUAL FUNDS SIP TAX SAVING SCHEMES IN INDIA ONLINE AND OFFLINE TRADING PORTFOLIO MANAGEMENT

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CHAPTER - IV ANALYSIS

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1. Age:

Below 20 40 49

20 29 50 59

30 39 Above 60

AGE WISE CLASSIFICATION OF RESPONDENTS AGE BELOW 20 20-29 30-39 40-49 50-59 ABOVE 60 TOTAL NO. OF RESPONDENTS NIL 69 13 34 35 49 200 PERCENTAGE NIL 34.5 6.5 17 17.5 24.5 100

AGE GROUP OF RESPONDENTS

NO. OF RESPONDENTS / PERCENTAGE 80 70 60 50 40 30 20 10 0
20 -2 9 30 -3 9 40 -4 9 50 -5 9 20 BE LO W VE 60

NO. OF RESPONDENTS PERCENTAGE

AGE

AB O

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Interpretation: According to the survey the respondents were of different age group. The investors of age below 20 are in no number. The investors of age 20-29 are 69 in number with 34.5%. The investors of age 30-39 are 13 with 6.5%, 40-49 there are 34 investors with 17% and in between 50-59 there are 35 investors with 17.5% and above 60 there are 49 investors with 24.5%.

2. Sex:

Male

Female

GENDER OF THE RESPONDENTS GENDER MALE FEMALE TOTAL NO. OF RESPONDENTS 158 42 200 PERCENTAGE 79 21 100

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GENDER OF THE RESPONDENTS

180 160 140 120 100 80 60 40 20 0 MALE GENDER FEMALE NO. OF RESPONDENTS / PERCENTAGE

NO. OF RESPONDENTS PERCENTAGE

Interpretation: In the survey numbers of male respondents are more in number that is about 79% & the next position has been occupied by female respondents they are about 21% of the sample so, mainly men prefer to go for investments.

3. Occupation:

Household Professional

Business Retired

Service Student

OCCUPATION OF THE RESPONDENTS

OCCUPATION HOUSE HOLD BUSINESS SERVICE PROFESSIONAL RETIRED STUDENT

NO. OF RESPONDENTS 9 46 84 30 15 16
53

PERCENTAGE 4.5 23 42 15 7.5 8

TOTAL

200

100

OCCUPATION OF RESPONDENTS
90 80 70 60 50 40 30 20 10 0
LD ED AL S E ES O VI IO IR H N D EN C N T

NO OF RESPONDENCE / PERCENTAGE

NO. OF RESPONDENTS PERCENTAGE

SE R

ET R

BU

occupy 8

According to the survey the respondents were of different occupations.

Most respondents are from service sector is about 42% of the sample. A respondent from the business are occupying 23%, and then comes professional with 15%, students %, retired people occupy 7.5%, with house hold occupying 4.5%.

PR

OCCUPATON

FF

ES S

54

ST U

SE

SI

4. Annual Income

< One Lakh 2 3 Lakh

1 2 Lakh Above 3 Lakhs

TABLE-4: ANNUAL INCOME OF THE RESPONDENT ANNUAL NO. OF RESPONDENTS PERCENTAGE

< 1,00,000 1-2 LAKHS

53 84

26.5 42

2-3 LAKHS ABOVE 3 LAKHS TOTAL

48 15 200

24 7.5 100

ANNUAL INCOME OF THE RESPONDENT

NO. OF RESPONDENTS / PERCENTAGE 90 80 70 60 50 40 30 20 10 0
00 S S KH KH 00 LA LA KH ,0 S

NO. OF RESPONDENTS PERCENTAGE

1,

1-

2-

<

ANNUAL INCOME

AB O

VE

55

LA

Interpretation: According to the survey, the respondents of the income group of less than 1 lack are of 26.5%. They were about 42% of the respondents are of the income group between 1-2 lack. 24% of the respondents were of the income group 2-3 lacks. 7.5% respondents were of the income group more than 3 lacks.

5. Do you invest any part of your savings?

Yes

No

DO THE RESPONDENTS INVEST THEIR MONEY

INVESTMENTS YES NO TOTAL

NO.OF RESPONDENTS 200 NIL 200

PERCENTAGE 100 NIL 100

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RESPONDENTS INVESTING THEIR MONEY

NO. OF RESPONDENTS / PERCENTAGE 250 200 150 100 50 0 YES INVESTMENTS NO NO. OF RESPONDENTS PERCENTAGE

Interpretation:

All the respondents considered in the sample, do invest their savings. Out of the total sample the respondents going for investments are total in numbers with all the two hundred respondents considered in sample are going for complete investments with 100%.

6. What criteria you keep in your mind while selecting an investment opportunity (rank them accordingly)?

Security Tax Benefits

Yield Liquidity

Maturity

INVESTOR PREFERENCE FOR VARIOUS INVESTMENT OBJECTIVES

ATTRIBUTES SECURITY YEILD

I 88 63

II 64 44

III 32 46

IV 9 24
57

V 7 23

WEIGHTED AVERAGE 55 47

RANK I II

MATURITY TAX BENEFIT LIQUIDITY

19 8 22

24 25 43

45 5 72

85 42 40

27 120 23

35 22 40

IV V III

MODEL CALCULATION:

= 88*5 + 64*4 + 32*3 + 9*2 + 7*1 / 1 + 2 + 3 + 4 + 5

= 440 + 256 + 96 +18 + 7 / 15 = 817/15

= 55.

6. Normally what investment opportunities you prefer to invest your savings?

Bank deposits Mutual funds

Shares Insurance

Bonds/Debentures Real Estate

NORMAL INVESTMENT OPPURTUNITIES THAT USUALLY RESPONDENT PREFER TO SAVINGS.

OPTIONS BANK DEPOSITS SHARES BONDS / DEBUNTRES MUTUAL FUNDS INSURANCE REAL ESTATE TOTAL

NO. OF RESPONDENTS 68 32 31 30 26 13 200

PERCENTAGE 33 16 16 15 13 7 100

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7. Normally what investment opportunities you prefer to invest your savings?

Bank deposits Mutual funds

Insurance If Mutual Funds Sample size200

Shares

Bonds/Debentures Real Estate

MUTUAL FUND IS A GOOD INVESTMENT OPTION.

OPTIONS YES NO TOTAL

NO. OF RESPONDENTS 159 41 200

PERCENTAGE 79.5 20.5 100

MUTUAL FUND IS A GOOD INVESTMENT OPTION

180 160 140 120 100 80 60 40 20 0 YES OPTIONS NO NO. OF RESPONDENTS / PERCENTAGE

NO. OF RESPONDENTS PERCENTAGE

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Many of those mutual funds are a good investment option & 20.5% is not a good investment option. The individuals are of the view that mutual fund is a good investment option. Of the total sample survey around 79.5% of the respondents feel

8. In which Mutual funds did you invest?

Indiainfoline

Others If Indiainfoline
TABLE-12:

RESPONDENTS PREFFERING INDIAN INFOLINE AS A DISTRIBUTOR OF MUTUAL FUNDS

OPTION INDIAN INFOLINE OTHERS TOTAL

NO. OF RESPONDENTS 138 62 200

PERCENTAGE 69 31 100

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Interpretation: According to the survey, 69% of the respondents are aware of INDIAN INFOLINE as a distributor of mutual funds & these 69% of the investors would like to invest in INDIAN INFOLINE mutual fund option. The rest 31% of the respondents would like to prefer others.
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9. What type of funds you prefer?

Debt Funds Hybrid Funds

Equity Funds

If Debt Funds

TYPE OF SCHEME PREFFERRED BY RESPONDENT IN DEBT FUNDS

OPTION LIQUID FUND FLOATE RATE GILT FUND DYNAMIC BOND FUND INCOME PLUS BOND INDEX FUND TOTAL

NO. OF RESPONDENTS 2 4 5 15 7 9 200

PERCENTAGE 5 10 12 35 17 21 100

TYPE OF SCHEME PREFFERRED BY RESPONDENT IN DEBT FUNDS

21%

5%

10% 12%

LIQUID FUND FLOATE RATE GILT FUND DYNAMIC BOND FUND INCOME PLUS BOND INDEX FUND

17% 35%

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Interpretation: on the survey, it is Based found that the respondents prefer dynamic bond fund which occupies 35%, then follows is the bond Index Fund with 21%, thirdly Income Plus is seen with more percentage with 17, followed by Gilt Fund, Floating Rate Fund, & Liquid Fund with 12, 10, 5.

10.Which type of schemes you prefer?

Liquid Fund Dynamic Bond Fund

Floating Rate Income Plus

Gilt Fund Bond Index Fund

If Equity Funds TYPE OF SCHEME PREFFERED IN EQUITY FUNDS OPTION ADVANTAGE FUND MID CAP EQUITY PLAN MNC FUND INDEX FUND NO. OF RESPONDENTS 26 6 4 5 3
63

PERCENTAGE 33 8 5 6 4

DIVIDEND YEILD PLUS INDIA OPPURTUNITIES FUND TOTAL

32 2 78

41 3 100

TYPE OF SCHEME PREFFERED IN EQUITY FUNDS ADVANTAGE FUND

MID CAP EQUITY PLAN 33% 41% MNC FUND INDEX FUND 4% 6% 5% 8% DIVIDEND YEILD PLUS INDIA OPPURTUNITIES FUND

3%

Interpretation: Based on the survey, that out of 78 sample size, most of the investors choose dividend yield plus which occupies 41%, followed by Advantage Fund with 33%, then MNC fund with 6%, mid cap 8%, Equity plan 5%, India opportunities fund 3%.

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CHAPTER - V FINDINGS & CONCLUSIONS

65

Findings& Conclusions 4 5 6 7 8 1. The majority of respondents were of the age group below 29 & above 60. 2. Male occupy most of the sample size 3. Major part of the respondents belong to service sector. 4. Annual income of the respondents between 1-2 lacks prefers more of investments. 5. Respondents irrespective of major investment or small are investing in some or other sources of investments. 9 6. Investors preference when going for an investment in primarily for security.

10 7. Respondents prefer Bank Deposits as most secured for investment, & then to shares, Bonds / Debentures & then to Mutual Funds. 11 8. The role of Financial Advisors play a key role in making investors educated about mutual fund. Around 33% of the respondents choose Financial advisors for guidance. 12 9. From the Survey conducted it is clear that 80% of the respondents feel that Mutual fund is a good investment option. 13 10. 69% of the respondents are aware of Kotak Mahindra as a distributor for Mutual Funds. 14 11. Out of total respondents, major of them prefer to mutual fund because of investment strategy. 15 12. From the survey it is clear that most of the respondents feel Kotak Mahindra as a better option for mutual fund. 16 13. 78% of the Respondents the recommending Kotak Mahindra as a better investment opportunity.

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CHAPTER - VI SUGGESTIONS

67

Suggestions

Kotak Mahindra has to review their portfolio frequently to maximize the wealth of the investors. (Data support)

Kotak Mahindra Sun Life has to invest in firms, which are having good offers & high growth opportunities such as shares listed in GroupA.

The awareness of mutual fund & its various schemes should be increased among the people by proper advertising, promotion and conducting investors meets..

The fund manager has to be aggressive in portfolio decisions especially MIP MIP II & I fund.The Ground rules of Mutual Fund Investing

Moses gave to his followers 10 commandments that were to be followed till eternity. The world of investments too has several ground rules meant for investors who are novices in their own right and wish to enter the myriad world of investments. These come in handy for there is every possibility of losing what one has if due care is not taken. 1) Assess yourself: Self-assessment of ones needs; expectations and risk profile is of prime importance failing which, one will make more mistakes in putting money in right places than otherwise. One should identify the degree of risk bearing capacity one has and also clearly state the expectations from the investments. Irrational expectations will only bring pain.

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2) Try to understand where the money is going: It is important to identify the nature of investment and to know if one is compatible with the investment. One can lose substantially if one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go through the literature such as offer document and fact sheets that mutual fund companies provide on their funds. 3) Don't rush in picking funds, think first: one first has to decide what he wants the money for and it is this investment goal that should be the guiding light for all investments done. It is thus important to know the risks associated with the fund and align it with the quantum of risk one is willing to take. One should take a look at the portfolio of the funds for the purpose. Excessive exposure to any specific sector should be avoided, as it will only add to the risk of the entire portfolio. Mutual funds invest with a certain ideology such as the "Value Principle" or "Growth Philosophy". Both have their share of critics but both philosophies work for investors of different kinds. Identifying the proposed investment philosophy of the fund will give an insight into the kind of risks that it shall be taking in future.

4) Invest. Dont speculate: A common investor is limited in the degree of risk that he is willing to take. It is thus of key importance that there is thought given to the process of investment and to the time horizon of the intended investment. One should abstain from speculating which in other words would mean getting out of one fund and investing in another with the intention of making quick money. One would do well to remember that nobody can perfectly time the market so staying invested is the best option unless there are compelling reasons to exit.

69

5) Dont put all the eggs in one basket: This old age adage is of utmost importance. No matter what the risk profile of a person is, it is always advisable to diversify the risks associated. So putting ones money in different asset classes is generally the best option as it averages the risks in each category. Thus, even investors of equity should be judicious and invest some portion of the investment in debt. Diversification even in any particular asset class (such as equity, debt) is good. Not all fund managers have the same acumen of fund management and with identification of the best man being a tough task, it is good to place money in the hands of several fund managers. This might reduce the maximum return possible, but will also reduce the risks.

6) Be regular: Investing should be a habit and not an exercise undertaken at ones wishes, if one has to really benefit from them. As we said earlier, since it is extremely difficult to know when to enter or exit the market, it is important to beat the market by being systematic. The basic philosophy of Rupee cost averaging would suggest that if one invests regularly through the ups and downs of the market, he would stand a better chance of generating more returns than the market for the entire duration. The SIPs (Systematic Investment Plans) offered by all funds helps in being systematic. All that one needs to do is to give post-dated cheques to the fund and thereafter one will not be harried later. The Automatic investment Plans offered by some funds goes a step further, as the amount can be directly/electronically transferred from the account of the investor.

70

7) Do your homework: It is important for all investors to research the avenues available to them irrespective of the investor category they belong to. This is important because an informed investor is in a better decision to make right decisions. Having identified the risks associated with the investment is important and so one should try to know all aspects associated with it. Asking the intermediaries is one of the ways to take care of the problem.

8) Find the right funds: Finding funds that do not charge much fees is of importance, as the fee charged ultimately goes from the pocket of the investor. This is even more important for debt funds as the returns from these funds are not much. Funds that charge more will reduce the yield to the investor. Finding the right funds is important and one should also use these funds for tax efficiency. Investors of equity should keep in mind that all dividends are currently tax-free in India and so their tax liabilities can be reduced if the dividend payout option is used. Investors of debt will be charged a tax on dividend distribution and so can easily avoid the payout options.

9) Keep track of your investments: Finding the right fund is important but even more important is to keep track of the way they are performing in the market. If the market is beginning to enter a bearish phase, then investors of equity too will benefit by switching to debt funds as the losses can be minimized. One can always switch back to equity if the equity market starts to show some buoyancy.

71

10) Know when to sell your mutual funds: Knowing when to exit a fund too is of utmost importance. One should book profits immediately when enough has been earned i.e. the initial expectation from the fund has been met with. Other factors like non-performance, hike in fee charged and change in any basic attribute of the fund etc. are some of the reasons for to exit. For more on it, read " When to say goodbye to your mutual fund." Investments in mutual funds too are not risk-free and so investments warrant some caution and careful attention of the investor. Investing in mutual funds can be a dicey business for people who do not remember to follow these rules diligently, as people are likely to commit mistakes by being ignorant or adventurous enough to take risks more than what they can absorb. This is the reason why people would do well to remember these rules before they set out to invest their hard-earned money.

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CHAPTER - VII BIBLIOGRAPHY

73

I. TEXT BOOK 1. Investments Analysis & Portfolio Management PRASANA CHANDRA V.K.BHALLA 2. Financial Accounting I.M.PANDAY II. WEB SITES www.mutualfundsindia.com www.amfiindia.com www.utimf.com www.bseindia.com III. MAGAINES Business India Business World IV. NEWS PAPERS Economic Times Business Standard.

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