1

A REPORT ON
SUMMER INTERNSHIP/ PROJECT WORK
For
__________ (J.M.Financial) __________

Submitted to

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)

CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)

CHANGA

Prepared by

(Lokesh Bhatiya)

ID No.:09 mba 02

M.B.A. First Year

Under the Guidance of

Vaishali Shah

Ganshyam Vyash

INDUKAKA IPCOWALA INSTITUTE OF

MANAGEMENT (I2IM)

CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)

AT. & PO. CHANGA – 388 421 TA: PETLAD DIST. ANAND, GUJARAT

JULY 2010

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 DECLARATION

I, Lokesh Bhatiya, student of the two-year MBA programme at Indukaka

Ipcowala Institute of Management (I2IM) hereby declare that the report on summer
training and project work entitled “Risk and Investment Behaviour of Investor” is the result of
my own work. I also acknowledge the other works / publications cited in the report.

Place: Changa ( )

Date: 31.07.2008 (Lokesh Bhatiya)

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 Acknowledgement

Sometimes words fall short to show gratitude, the same happened with me during this project. The
immense help and support received from J.M.Financial management Pvt. Ltd. overwhelmed me during the
project.

My sincere gratitude to Mr. Ghanshyam Vyas (Branch head JM Financial Pvt. Ltd., Baroda) whose
co-operation and guidance proved immensely helpful to me during the course of summer training.

I am also very thankful to Mr. Jignesh Mochi, Mr. Muliksir for their guidance & support during the
summer training & summer project.

I am very grateful to the G. Krishnamurthi (Principal) for allowing us to take my training from such a
reputed organisation. I am thankful to Mrs. Vaishali Shah for helping me in every related aspect of training
& project. I also very thankful to Mr. Govind Dave for providing their valuable reference in arranging the
summer training in such a reputed organization.

I also wish to acknowledge my sincere thanks to the entire concern faculty for their valuable advice
and suggestions.

Last but not the least; my heartfelt love for my parents, whose constant support and blessings helped
me throughout this project.

LOKESH BHATIYA

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 TABLE OF CONTENTS

Sr.No. Particular Page Number

PART 1 –ORGANISATIONAL PROFILE

1 Introduction 7

2 The company 9

a. • History 9

b. • Mission & Vision 12

c. • Management structure 14

d. • Products 18

3 Functional area 19

a. • Market & Marketing 19

b. • Production/Operation 22

c. • Human Resourses 24

4 Decision making 27

a. • Strategic decision area & 27

Decision making process
b. • Tactical and Operational 28
decision area & Decision making
process
c. • Formal & Informal power 29
relations
5 Financial Analysis 30

a. • Profitability of the firm of last 30

4 years
b. • Asset built up in the last 4 33
years
c. • Key financial ratio & 36
interpretation
d. • Financial health & future of 37
the organization
6. My learning from the study of organization 38

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 PART 2-Project Study
7. Overview of the Project 40

a. • Background of the study 41

• Objective of Study 41

8. Research Methodology 42

9. Data analysis, Finding & Interpretation

10. Limitation

11. Appendices

13 References

EXECUTIVE SUMMARY OF ORGANIZATION PROFILE

The report contains the information about J.M .Financial and the core areas as well as the services that it
provides. It provides information about

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  Individual’s financial advisors
 Equity brokerage group
 Fixed deposits

It also contains different functional areas such as

 Marketing management
 Financial management
 Human resources management
The report contain various tactical decisions, strategic, operational financials analysis

INTRODUTION

JM Financial group

JM Financial is an integrated financial services group offering wide range of capital market service to
its corporate and individual clients. The Group has business interest in investment banking, institutional
equity sale & broking, private & corporate wealth management, research, equity broking, portfolio
management, asset management, commodity broking etc.

JM Financial service private limited

JM Financial service private limited is a private sector organization. The Register & Corporate office
of this organization is in Mumbai and the branch office of JM Financial is in 22 cities in India.

JM Financial private limited (JM Financial Services) is a full service wealth management and equity
broking firm with a focus on capital markets.

JM Financial services offers research-based instrument advisory and equity trading services to high
net worth individuals and corporate investors across wide range of financial product.
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 Their domestic research capabilities, capital market expertise and an exclusive level of personal
attention enable them to design and execute customized investment strategies for their clients.

JM Financial service private limited provide full time service in

• Private Wealth Group advising high net worth individuals

• Corporate wealth Group advising top approximately 500 Corporate Treasuries
• Secondary Broking- Equity and derivatives
• Depository services
• Portfolio Management Service
• Distribution of
 Mutual Funds – deft and equity
 Equity IPO’s
 Fixed income product
 Real estate funds
 Private equity
 Structured Product

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 THE COMPANY

Evolution & History

JM Financial Limited was started in 1986 by JM Financial & Investment Consultancy Services
Private Limited ( JM FICS) to engage in the business of stock broking and securities.

JM Financial & JM FICS sponsored one of India’s first private sector mutual fund viz. JM mutual
funds, JM financial mutual fund made a simultaneous launch of three open ended funds in December, 1994.
The trustee of this fund is JM Financial Asset Management Pvt. Ltd.

JM Financial Group subsequently entered into in equity partnership with Morgan Stanley in 1999.

Morgan Staley is one of the world’s leading financial service firms with approximately 45,000
employees in 390 offices across 23 countries worldwide. Morgan Stanley has a presence is almost every
financial market.

The partnership led to setting up of two joint venture companies, JM Morgan Stanley Private
Limited, with interest in the area of investment banking, retail distribution, private wealth management and
fixed income securities and JM Morgan Stanley Securities Private Limited with operations in institutional
equity sales and trading. While JM Financial holds 51% of JM Morgan Stanley private limited with 49%
being held by Morgan Stanley. JM Morgan Stanley private limited operates in the area of retail distribution
and fixed income sales & trading through two wholly owned subsidiaries viz., JM Morgan Stanley Financial
Service Private Limited and JM Morgan Stanley Fixed Income Securities Private Limited.

JM Financial Limited has approved the merger of JM Securities Private Limited, a JM Financial
group of company itself. This merger is subject to satisfactory receipts of all statutory, regulatory, corporate
and other approvals as may be required, including but not limited to, approval of relevant high citst, Reserve
Bank of India, Stock Exchange, Securities Exchange Board of India, and share holders. After the proposed
merger JM Financial had expend its interest in equity broking, investment banking, retail & fixed income
broking, asset management, commodities broking and equity financing business.

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Awards

Year Name of Award Details

Finance Asia Country Awards for

2009 Best Equity House, India
Achievement

Ranked among top 50 companies by Great

2009 Best Workplaces in India 2009
Places to Work Institute

Ranked among top 50 companies by Great

2008 Best Workplaces in India 2008
Places to Work Institute

Outlook Money NDTV Profit

2008 Best Merchant Banker - Runners Up
Awards

2007 Finance Asia Achievement Awards Best India Deal – for Vodafone’s $12 billion
acquisition of HTIL

2007 Finance Asia Achievement Awards Best Secondary Offering – for ICICI’s $4.6
billion simultaneous follow-on of ADRs and
domestic shares

2007 The Asset Triple A Regional Award Best Follow-on Offering - for ICICI’s $4.6
billion simultaneous follow-on of ADRs and
domestic shares

2007 ICRA Mutual Funds Awards Open Ended Sectoral–Healthcare-1 year

performance (till 31.12. 2006), Gold - JM
Healthcare Sector Fund

2006 CNBC TV18 – CRISIL Mutual Fund Floating Rate Plan - JM Floater Short Term
Awards Plan

EuroMoney Awards of Excellence Best M&A House, India

2005 Finance Asia Best Follow-on Offering - ICICI Bank

USD1.75 billion concurrent ADR and
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 domestic share sale
Finance Asia
Best India Deal - Reliance Industries USD
4.8 billion restructuring

2004 Finance Asia Best India Deal - USD 1.2 billion Tata
Consultancy Services IPO

Best Privatisation - USD 2.4 billion ONGC

Asset Asian Awards
follow-on offering

Best Deal in India - OIL & Natural Gas

Asia Money
Corporation

Best Overall Strategy – Brokers

Asia Money

Best Overall Macroeconomics – Brokers

Asia Money

2002 CIRISL Best Fund Awards Best Performing Open-end Debt Scheme -
JM Income Fund

2001 CIRISL Best Fund Awards Best Performing Open-end Debt Scheme -
JM Income Fund

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Vision Statement

“To be the most trusted partner for every stakeholder in the financial world.”

Mission Statement

• Earning trust is a process (it can be gained and lost every day!)
• Sharing trust creates great teams (whether betJMen employees or betJMen organisations)
• Being trustworthy is the most efficient way of generating and retaining long-term business
•
• Self–trust is the starting point of trusting others

JM believe:

• Earning trust is a process (it can be gained and lost every day!)
• Sharing trust creates great teams (whether between employees or between organisations)
• Being trustworthy is the most efficient way of generating and retaining long-term business
• Self–trust is the starting point of trusting others

Believes

JM FINANCIAL have always sought to be a value-driven organization, where its values direct its
growth and success.

Integrity:

Integrity is fundamental to its business. JM FINANCIAL adhere to moral and ethical principles in
everything JM FINANCIAL do as professionals, colleagues and corporate citizens. Its reputation based on
its high standards of integrity is invaluable.

Teamwork:

JM FINANCIAL believe extensive teamwork is what makes it possible for us to work together
towards a common goal. JM FINANCIAL value and respect each individual's commitment to group effort.

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Client Focus:

JM FINANCIAL always put the interest of its clients before its own. JM FINANCIAL understand its
client needs, seek new opportunities for them, address them and deliver unique solutions as per their
expectations. The success of its clients is the biggest reward for us.

Innovation:

JM FINANCIAL understand its clients' needs and develop solutions for the most complex or the
simplest, the biggest or the smallest financial transactions, whether for individuals or institutions. Creativity
and innovation are key factors to everything JM FINANCIAL do. JM FINANCIAL encitsage new ideas
which help us address unique opportunities.

Implementation:

Its expertise, experience and its continuous focus on the quality of execution ensures effective
implementation of its strategies.

Performance:

JM FINANCIAL believe in development of its people and continuously hone its skills, setting
higher targets of performance for itsselves. JM FINANCIAL strive to attract, develop and retain the best
talent. JM FINANCIAL recognize and reward talent based on merit.

Partnership:

Its relationships with all its stakeholders reflect its spirit of partnership. Clients see us as trusted
advisors, shareholders see us as partners and employees see us as family. JM FINANCIAL respect, trust and
support all its stakeholders.

Management Structure of J M Group

JM FINANCIAL is a private company and the offices are spread over the country. J M
FINANCIAL has many branches in India. its structure is discuss as follow with the management hierarchy.

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Management Structure of J M Group

14
Geographical Spread of JM Financial Services Pvt. Ltd.

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Products

Primary Market:


 IPO Offering - Debt and Equity
 Mutual Fund - Debt and Equity

Secondary Market:

 Equity Advisory and Broking

 Fixed Income Advisory & Execution
 Future & Option Advisory & Broking
 Buybacks
 Block Trade

Sales Services

 Customized investment advisory and asset allocation of portfolio

 Portfolio Tracking for Mutual Funds
 Portfolio Tracking for Secondary Equity

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 FUNCTIONAL AREAS

Business segment of JM Financial service

Private wealth Group

Private Wealth Group (PWG) is a personalized investment advisory service for high net worth
individual with an investible surplus in excess of USD 1 mn. (Rs 5 crore) with dedicated wealth
managers for managing the client’s wealth.

PWG segment draws upon the full spectrum of firm resources & expertise in capital markets for
generating investment ideas and developing customized investment solution for meeting their client’s
financial goal.

Corporate wealth group

Corporate Wealth Group (CWG) at JM Financial provides research-based investment advisory

service to top 500 corporate treasuries for deployment of surplus funds. A dedicated investment advisor
supported by research and product team is assigned to each corporate client.

Equity Brokerage Group

Equity Brokerage group (EBG) offers trading and research-based equity advisory services to high net
worth individuals, retail clients and corporates.

This group focuses on generating wealth for the client through stoke ideas and trading strategies
based on a combination of fundamental and research analysis.

Equity Brokerage Group distinguishes itself from others by focusing on providing customized
investment solutions and brokerage services to various client segments.

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Independent Financial Advisor Group

JM Financial service has developed one of the largest network of distribution of financial product to
retail investors through Independent Financial Advisors (IFA).

JM Financial Group’s expertise in capital market and strong investment banking franchise, helps
them in launching public issues of companies with strong fundamental and creditable promoter
background for generating their clients.

Main Services

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Target market

Target market of JM Financial is all those who wants to invest either in fixed deposit or wands to invest
in share market. JM financial also help the person who wants to take expert advice. So the JM financial
target market is as follow

• Broker
• Sub-broker
• Local agent
• Individual investor
• Senior citizen
• Conservative investor
• Aggressive investor

Market share of JMFS

Approximately JMFS captures 20% of total market share of overall broking but the brighter part is
that its market share is increasing year by year.

Competitors of JMFS

• Reliance Capital
• Kotak
• Karvy
• Shri Global traders
• Bajaj Holding
• Local broker
• VSE

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Distribution channel

JMFS wants to reach deep in the market. It has very good link with sub broker. So by sub broker
chain company try to reach it`s target market.

Promotional measure

Company use all possible source of promotional measure to reach it’s target market. The promotional
measure includes

• Advertisement
• Sale promotion
• Publicity
• Development of franchise
• Development of sub broker

Measure of customer satisfaction taken by the company

• JMFS uses very simple technique to know customer satisfaction. Company use
 Feedback from filling
 Direct contact with customer
 Provide some addition service
 Help in tax panning etc.
 Try to advice the customer the satisfy customer financial need

Office timing

Monday to Friday 9.00 AM to 6.30 PM

Saturday 10.30 AM to 2.30

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Attendance system

Attendance system in J M financial is very simple. All employees have to sign in the register when
they come & when they go out. In this way they record in time & out time of any employ.

Critical working hour

Critical working hour in the organization is the trading time in the stock market i.e. 9:00 AM to 3:30
PM.

Discipline

JM Financial is very particular about in & out time of employees. So all the employees have to
follow strict time schedule of the organization.

Human resource planning

Whenever there is requirement of manpower each & every branch send there need to Head office.
The branch also describes the job where the person is required. The brief job description is also given by the
branch office. Base on the

Requirement of the branch the head office takes the responsibility overall human resource planning.

The HRP of the JM financial includes number of person require, type of person required, number of person
require in each & every branch, source of recruitment whether it is eternal or external source & so on.

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Process of HRP

Each branch send their requirement to Head office

Head office collects the data of requirement of each

Head office check whether the person actually required
branch

After that Head office do actual HRP for each branch

Recruitment & Selection

After HRP recruitment and selection process starts. Head office provides power to the branch head
for recruitment & selection at junior level. Branch head specify the requirement like skill, education,
experience etc. After that though interview recruitment & selection process done.

At senior management level recruitment & selection is Completed through head office. JM Financial
generally use advertisement etc. to generate the application.

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 After screening the application, some written test & interview is use for final selection.

Level Source of Selection Selection at

recruitment method

Junior management Internal source mainly Interview Branch level

Level though reference

Senior management External source mainly Interview Head office

Level though advertisement level

Training & Development

Whenever a new employ is recruited training is provided to the new employ. The number of days of
training is depends on which types of work the person is going to do. But it is on an average 15 days to 20
days training is provided to a new employ.

Promotion policy

Promotion is provided on JM Financial strictly on the merit based. Performance appraisal plays the
key role in the promotion. The employ who has highly rated in his performance appraisal has better chance
of getting promotion.

Transfer policy

Organization reserves the transfer whenever need arise. Organization can transfer any employ at
different branch in same city or different city.

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Welfare facility of the organization

• Picnic once in a year

• Performance bonus
• Tea 3-4 times in a day
• Competition among employ child & some prize distribution

Budgetary control system

Budgetary system is control head office in Bombay. all the major decision regarding the budget are
taken at H.O , but execution is done at different branches .

Board meeting

The board meeting is held quarterly at head office. they make all the kind of decisions including the
regular work and also the researches they make .

Senior management decision

The senior management makes all the tactical decisions regarding all the major investment in the
different branches.

Operating decision

These decisions are made by the head of the branches the operating decisions includes all the day to
day working decisions

There is nice and smooth coordination among all the layers in the organization the work is allocated
as per the qualification as well as the specialization.

Distribution Channel

JMFS wants to reach deep in the market. It has very good link with sub broker. So by sub broker
chain company try to reach it`s target market.

DECISION MAKING
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Strategic Decision Area at JM Financial

JM Financial use a systematic method to identity strategic decision area. The strategic decision area
is mainly concern with long term goals and objective of a firm. External environment is a great impact on
organizational strategic decision area.

The main strategic decisions areas in JM Financial are are:

 Whether to open new branch or not

 Where to open new branch
 Where to close down the branch
 Policy to deal with competition in long run
 Decide the wage & salary structure to retain employ
 Recruitment & selection decision
 Overall firm plan to survival in the long run

Strategic Decision making process of firm

Key feature strategic decision making in JM Financial

 Centralized decision making

 Fully control by head office Mumbai
 Key role top management
 Decision for long run goal of a farm

Process of Strategic Decision making

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 1. Analysis of internal & external environment
2. Analysis of strength & weakness of firm
3. Find the list of need
4. Provide the priority of need
5. Make the final strategic decision
6. Get approval & implementation

Tactical & operational decisions in JM Financial

The main tactical & operational areas are

 Day to day decision of firm

 Decision to deal with short term competition
 Decision of recruitment & selection at junior level

Key feature of operational decision at JM Financial

 Centralized decision
 Decision at head office Mumbai
 Implemented by the branch head at respective branch

Process of operational & tactical decision

1. Branch head find the requirement of its own branch

2. It send its requirement at head office
3. It also send his idea view etc. what has to done to solve the problem
4. Branch head analysis all the requirement
5. Final decision taken by branch head
6. Implementation is done on respective branches

Formal power relation

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 JM Financial follow hierarchy for decision making. At branch level power is in the hand of branch
head. He is responsible for at branch activity. All other employee at branch level has power to do their own
work but branch head give final approval.

But the strategic decision or operational decision all the power goes to top management. Top
management has a power to take long term and short term decision of a firm. Branch manager has very little
power in this regard.

Informal power relation

All though branch head has very little power in decision making but top management always
welcome his suggestion.

At branch level also branch head provide freedom to the employees for giving suggestion in branch
level decision making and suggestion play an important role in decision making.

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 FINANCIAL ANALYSIS

JM Financial

Profit & Loss account ------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Income
Sales Turnover 13.41 13.40 39.32 33.64 24.46
Excise Duty 0.00 0.00 0.00 0.00 0.00
Net Sales 13.41 13.40 39.32 33.64 24.46
Other Income -3.69 4.22 0.06 1,736.77 -1.74
Stock Adjustments 0.00 0.00 0.00 0.00 0.00
Total Income 9.72 17.62 39.38 1,770.41 22.72
Expenditure
Raw Materials 0.00 0.00 0.00 0.00 0.00
Power & Fuel Cost 0.00 0.00 0.00 0.00 0.00
Employee Cost 0.00 0.15 1.29 3.68 4.44
Other Manufacturing Expenses 0.00 0.00 0.00 0.00 0.00
Selling and Admin Expenses 0.16 1.27 1.21 10.94 1.41
Miscellaneous Expenses 0.08 0.45 1.13 3.83 3.41
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Total Expenses 0.24 1.87 3.63 18.45 9.26

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths 12 mths 12 mths
Operating Profit 13.17 11.53 35.69 15.19 15.20
PBDIT 9.48 15.75 35.75 1,751.96 13.46
Interest 0.00 0.00 0.00 0.05 0.04
PBDT 9.48 15.75 35.75 1,751.91 13.42
Depreciation 0.02 0.02 0.03 0.10 0.27
Other Written Off 0.00 0.00 0.00 0.00 0.00
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Profit Before Tax 9.46 15.73 35.72 1,751.81 13.15
Extra-ordinary items 0.00 -0.01 0.00 0.01 -0.02
PBT (Post Extra-ord Items) 9.46 15.72 35.72 1,751.82 13.13
Tax -0.01 0.45 0.42 391.63 5.17
Reported Net Profit 9.48 15.27 35.31 1,360.16 7.97
Total Value Addition 0.24 1.87 3.62 18.46 9.26
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 2.83 7.50 15.00 75.00 15.00
Corporate Dividend Tax 0.40 1.05 2.55 12.75 0.05
Per share data (annualised)
Shares in issue (lakhs) 113.25 155.25 300.00 300.00 7,497.83
Earning Per Share (Rs) 8.37 9.83 11.77 453.39 0.11
Equity Dividend (%) 25.00 25.00 50.00 250.00 20.00
Book Value (Rs) 28.34 140.87 127.00 551.15 21.96

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Net profit of last 4 years

Year Net Profit (Rs in Lakhs)

2005-06 1569

2006-07 3531

2007-08 136017

2008-09 797

By the graph we see that profit of JM Financial is consistently increased over the years. But the year
2008 profit has increase at very high rate. The main reason of this rise is the market boom at that time and in
this profit “other income” contributes the most. So, immediate decline in the profit of the next year is not a
cause of worry. After all in the time of recession the firm has performed well.

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Net Fixed asset in last 4 year

JM Financial

Balance Sheet ------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 11.29 15.50 29.98 29.98 74.97
Equity Share Capital 11.29 15.50 29.98 29.98 74.97
Share Application Money 0.00 12.37 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 20.81 203.19 351.02 1,623.46 1,571.40
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Networth 32.10 231.06 381.00 1,653.44 1,646.37
Secured Loans 0.00 0.00 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 0.00 0.15 0.28
Total Debt 0.00 0.00 0.00 0.15 0.28
Total Liabilities 32.10 231.06 381.00 1,653.59 1,646.65

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths 12 mths 12 mths
Application Of Funds
Gross Block 1.09 1.09 1.18 1.90 2.34
Less: Accum. Depreciation 0.23 0.24 0.27 0.37 0.62
Net Block 0.86 0.85 0.91 1.53 1.72
Capital Work in Progress 0.00 0.00 0.00 0.04 0.00
Investments 31.13 148.16 350.65 1,521.43 1,524.08
Inventories 0.00 0.00 0.00 0.00 0.00
Sundry Debtors 0.00 0.00 0.00 0.00 0.00
Cash and Bank Balance 0.18 0.67 0.82 0.48 0.85
Total Current Assets 0.18 0.67 0.82 0.48 0.85
Loans and Advances 4.89 92.71 48.81 101.65 103.75
Fixed Deposits 0.00 0.00 0.00 238.65 150.68
Total CA, Loans & Advances 5.07 93.38 49.63 340.78 255.28
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 1.74 2.77 2.65 122.37 118.96
Provisions 3.23 8.55 17.55 87.81 15.46
Total CL & Provisions 4.97 11.32 20.20 210.18 134.42
Net Current Assets 0.10 82.06 29.43 130.60 120.86
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
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Total Assets 32.09 231.07 380.99 1,653.60 1,646.66
Contingent Liabilities 3.59 3.59 3.58 3.80 4.27
Book Value (Rs) 28.34 140.87 127.00 551.15 21.96

Net Fixed asset in last 4 year

Year 2005- 2006- 2007- 2008-

06 07 08 09
Fixed Assets 85.99 84.21 90.84 153.1
7
(Rs in lakhs)

From the graph we see that JM Financial`s fixed asset has increased over the years. By the end of
2008-09 the fixed asset of JM financial 172.67 lakhs which is increased by 105.05% as compare to the year
of 2005-06. So it shows that organization is doing well and organization has enough funds to in invest in
fixed assets.

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Key Ratio

1. Current Ratio
Year Current Ratio

8.24
Mar '06
2.46
Mar '07
1.62
Mar '08
1.90
Mar '09

From the data given above one can conclude that the firm is depending more and more on debt fund for
financing the business which good for the firm but the investor should take care of it.

2. Dividend per Share

Years Dividend per

share
Mar '06 02.50
Mar '07 05.00

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Mar '08 25.00
Mar '09 00.20

From the above graph we can one can say that dividend per share is increasing. From the year 2006 to 2008
dividend per share has increased by 900%. But in 2009 it declined. The reason is “Stock split “. The Share of JM has
splited into 10 and now it of Rs.1 F.V. which was previously of Rs 10 each.

3. Gross Profit Ratio

Year G.P. Ratio (in %)

March 2008 44.82

March 2009 61.04

34
 The profit margin of the firm is considerably increased as compare to past year. The profit margin has
increased even after the year was of recession which is good sign factor.

Financial health of the organization

Financial health of the organization is very good the reasons are

 The organization has performed well even in recession period.

 The ratio of the organization is also very good
 Organization has not any major loan liability it is also a good sign.
 Organization EPS is also very good.

Future of the organization

JM Financial is growth oriented organization the future of JM Financial is looking bright. It happen that JM Financial
may not earn super normal profit like 2008 but in the long run the future of the organization is very good.

35
 MY LEANINGS FROM THE STUDY

The objective of the summer training at the M.B.A level is to develop the idea about the industrial
environment as well as business practices in order to develop the a practical skills as a supplement to
theoretical study of management in general . After this training I realize how the real world works

Now I am in better position to understand the hierarchy how the different department are loaded with
responsibilities and accountability. How the top management control the activities and the work of bottom
level.

The study of organizational behaviour has help me to realize how an individual’s behave in work
stress what are relationship between the different employees particularly at the operation level

The analysis and interpretation of cost has made me realize how important the costing is for any
organization weather production or a service particularly at the J.M.F.S the cost cutting is high due to the
recession.

Marketing is done through their strong contacts with their clients and sub brokers whenever a new
N.F.O or an I.P.O is comes they contact their customers and inform them. The individual financial advisory
groups stay in contacts with customers and try build new through the existing ones.

Finance is the life blood of any organization here at the J.M.F.S I realize how finance is related with
all the other departments all the functions in the organization have to come across finance first . the working
pattern of J.M.F.S depends heavily on the performance of the stock market this thing roves from the profit
which J.M has reached ,when the stock market was 21000 mark in 2008

I also learned many new things as well from J.M such as how trading is done how investors react in
bull and bear period.

I also got the idea about mutual fund & How it works

Mutual Fund Operation Flow Chart

36
Meaning

A Mutual Fund invests the pool of money collected from the investors in a range of securities comprising
equities, debt, money market instruments etc.

The main advantages of the mutual funds are

 Capital appreciation
 Dividend distribution
 Diversified risk
 Diversified porthfolio
we came to know various terms like of share market

 Stock futures
 Stoke option
 Difference between share, mutual fund and fixed deposits

37
 (A) MUTUAL FUND

1. INTRODUCTION:

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 invested by the fund manager in different types of securities
depending upon the objective of the scheme. These could range from shares to debentures to money market
instruments. The income earned through these investments and the capital appreciations realized by the
scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata). 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 portfolio at a relatively low cost. Anybody with an inventible surplus of
as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined
investment objective and strategy.

A Mutual fund is the ideal investment

vehicle for today’s complex and modern financial
scenario. Markets for equity shares, bonds and
other fixed income instruments, real estate,
derivatives and other assets have become
mature and information driven. Price
changes in these assets are driven by global events occurring in faraway places. A typical individual is
unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their
implications and act speedily. A draft offer document is to be prepared at the time of launching the fund.
Typically, it pre specifies the investment objectives of the fund, the risk associated, the costs involved in the
process and the broad rules for entry into and exit from the fund and other areas of operation. In India, as in
most countries, these sponsors need approval from a regulator, SEBI (Securities exchange Board of India) in
our case. SEBI looks at track records of the sponsor and its financial strength in granting approval to the
fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to the investment
objective. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one to
handle registry work for the unit holders (subscribers) of the fund. In the Indian context, the sponsors

38
promote the Asset Management Company also, in which it holds a majority stake. In many cases a sponsor
can hold a 100% stake in the Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor
of the Birla Sun Life Asset Management Company Ltd., which has floated different mutual funds schemes
and also acts as an asset manager for the funds collected under the schemes.

Characteristics:

• A mutual fund actually belongs to the investors who have pooled their funds.

• A mutual fund is managed by investment professionals and other service providers, who earn a fee for their
services, from the fund.

• The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio is updated
every day.

• The investor’s share in the fund is denominated by ‘units’. The value of the units changes with change in
the portfolio’s value, every day. The value of one unit of investment is called the Net Asset Value or NAV.

39
 2. 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 of India. In the past decade, Indian mutual fund
industry had seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly
of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The private
sector entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004; it reached
the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the
deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the country.
Large sections of Indian investors are yet to be intellectualed with the concept. Hence, it is the prime
responsibility of all mutual fund companies, to market the product correctly abreast of selling.

The mutual fund industry can be broadly put into four phases according to the development of the
sector. Each phase is briefly described as under.

First Phase – 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.
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), PuJ.M.Financial servicesab 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.

40
 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
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. 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.

GROWTH IN ASSETS UNDER MANAGEMENT

Note: 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.
41
3. MUTUAL FUND STRUCTURE:

The Structure Consists

The structure of mutual funds in India is governed by the SEBI Regulations, 1996. These regulations
make it mandatory for mutual funds to have a 3-tier structure of Sponsors-Trustee-AMC (Asset Management
Company). The Trustees are responsible to the investors in the mutual funds, and appoint the AMC for
managing the investment portfolio. The AMC is the business face of the mutual funds, as it manages all the
affairs of mutual funds. The mutual funds and AMC have to be registered by the SEBI.

Sponsor

Sponsor is the person who acting alone or in combination with another body corporate establishes a
mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the
eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations,
1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the
Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund

Trust

The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by
the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.

42
Trustee

Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The
main responsibility of the Trustee is to safeguard the interest of the unit holders and inter-alia ensure that the
AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of
India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the
respective Schemes. At least 2/3rd directors of the Trustee are independent directors who are not associated
with the Sponsor in any manner.

Asset Management Company (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC is
required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset
management company of the Mutual Fund. At least 50% of the directors of the AMC are independent
directors who are not associated with the Sponsor in any manner. The AMC must have a net worth of at least
10 crores at all times.

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual
Fund. The Registrar processes the application form, redemption requests and dispatches account statements
to the unit holders.

Custodian

A custodian handles the investment back office of a mutual fund. Its responsibilities include receipt and
delivery of securities, collection of income, distribution of dividends, and segregation of assets between
schemes. The sponsor of a mutual fund cannot act as a custodian to the fund. For example, Deutsche Bank is
a custodian, but it cannot service Deutsche Mutual Fund, its mutual fund arm.

Depository

Indian capital markets are moving away from having physical certificates for securities, to ownership of
these securities in ‘dematerialized’ form with a Depository.

43
4. MUTUAL FUND OPERATION:

HOW DOES A MUTUAL FUND WORK?

Mutual Fund Operation Flow Chart

44
5. TYPES OF MUTUAL FUND:

45
 A Mutual Fund may float several schemes, which may be classified on the basis of its structure, its
investment objectives and other objectives.

Type of Mutual Fund on the bases of constitution:

Open – Ended Schemes

As the name implies the size of the scheme (fund) is open – i.e. not specified or pre-determined.
Entry to the fund is always open, the investor who can subscribe at anytime. Such fund stands ready to buy
or sell its securities at anytime. The key feature of Open-ended schemes is Liquidity. It implies that the
capitalization of the fund is constantly changing as investors sell or buy their shares. Further, the shares or
units are normally not traded on the stock exchange but are repurchased by the funds at announced rates.
Open-ended schemes have comparatively better liquidity despite the fact that these are not listed. The reason
is that investors can any time approach mutual fund for sale of such units. No intermediaries are required.
Moreover, the realizable amount is certain since repurchase is at a price based on declared net asset value
(NAV). The portfolio mix of such schemes has to be investments, which are actively traded in the market.
Otherwise it will not be possible to calculate NAV. This is the reason that generally open-ended schemes are
equity based. In Open-ended schemes, the option of dividend reinvestment is available.

Close-Ended Schemes

A Close – ended schemes have a definite period after which their shares/units are redeemed. The
scheme is open for subscription only during a specified period at the time of launch of a scheme. 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 the units 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. In these types of schemes, the size of the fund kept to be
constant. SEBI regulations stipulate that at least one of the two exit routes is provided to the investor i.e.
either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV
generally on weekly basis.

Interval schemes

Interval Schemes combine the features of both open-ended and close-ended schemes. They are open
for sale or redemption during pre-determined intervals at NAV based prices.

46
Mutual Fund schemes by Investment Objectives:

EQUITY FUNDS

These funds invest a major part of their corpus in equities. The composition of the fund may vary from
scheme to scheme and the fund manager’s outlook on various scrip’s. The Equity Funds are sub-classified
depending upon their investment objective, as follows:

1. Growth Fund:

Aim to provide capital appreciations over the medium to long term. These schemes normally invest a
majority of their funds in equities and are willing to bear short term decline in value for possible future
appreciation. These schemes are not for investors seeking regular income or needing their money back in the
short-term

2. Diversified Equity Fund:

Diversified equity funds are the most popular among investors. They invest in many stocks across many
sectors, and because they have the freedom to chop and churn their portfolios as they like, diversified equity
funds are a good proxy to the stock market. If a general exposure to equities is what you want, they are a
good option. They can invest in all listed stocks, and even in unlisted stocks.

3. Equity – Linked Savings Schemes (ELSS):

Equity – linked savings schemes (ELSS) are diversified equity funds that additionally offer income tax
benefits to individuals. ELSS is one of the many section 80c instruments, along with the more popular debt
options like the PPF, NSC and infrastructure bonds. In this Section 80c grouping. ELSS is unique.

4. Index Fund:

An index fund is a diversified equity fund; with a difference- a fund manager has absolutely no say in
stock selection. At all times, the portfolio of an index fund mirrors an index, both in its choice of stocks and
their percentage holding. As of March 2004, equity index funds tracked either the Sensex or the Nifty. So, an
index fund that mirrors the Sensex will invest only in the 30 Sensex stocks, which too in the same proportion
as their weight age in the index.

5. Sector Fund:

Sector funds invest in stocks from only one sector, or a handful of sectors. The objective is to capitalize
on the story in the sectors, and offer investors a window to profit from such opportunities. It’s a very narrow
focus, because of which sector funds are considered the riskiest among all equity funds.

47
 6. Mid – Cap Fund:

These are diversified funds that target companies on the fast – growth trajectory. In the long run, share
prices are driven by growth in a company’s turnover and profits. Market players refer to them as ‘mid-sized
companies’ and ‘mid-cap stocks’ with size in this context being benchmarked to a company’s market value.
So, while a typical large cap stock would have a market capitalization of over Rs 1,000 crores, a mid-cap
stock would have a market value of Rs 250-2,000 crores.

DEBT FUNDS

These Funds invest a major portion of their corpus in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt
instruments, these funds ensure low risk and provide stable income to the investors.

Debt funds are further classified as:

1. Gilt Funds:

Invest their corpus in securities issued by Government, popularly known as GOI debt papers. These
Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they
invest in papers backed by Government.

2. Income Funds:

Income funds aim to maximize debt returns for the medium to longer term. Invest a major portion into
various debt instruments such as bonds, corporate debentures and Government securities.

3. MIPs:

Invests around 80% of their total corpus in debt instruments while the rest of the portion is invested in
equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return
matrix when compared with other debt schemes.

4. Short Term Plans (STPs):

Meant for investors with an investment horizon of 3-6 months. These funds primarily invest in short term
papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also
invested in corporate debentures.

48
 5. Liquid Funds:

Also known as Money Market Schemes, These funds are meant to provide easy liquidity and
preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call
money market etc. These funds are meant for short-term cash management of corporate houses and are
meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are
considered to be the safest amongst all categories of mutual funds.

6. Floating Rate Funds:

These income funds are more insulated from interest rate than their conventional peers. In other words,
interest rate changes, which cause the NAV of a conventional debt fund to go up or down, have little, or no,
impact on NAVs of floating rate funds.

BALANCED FUNDS

These funds, as the name suggests, are a mix of both equity and debt funds. They invest in both
equities and fixed income securities, which are in line with pre-defined investment objective of the scheme.
These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and
the debt part provides stability in returns.Each category of funds is backed by an investment philosophy,
which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the
funds objective and invest accordingly.

HYBRID FUNDS

 Growth and Income Fund:

Strike a balance capital appreciation and income for the investors. In these funds portfolio is a mix
between companies with good dividend paying record and those with potential capital appreciation. These
funds are less risky than growth funds bit more than income funds.

 Asset Allocation Fund:

These funds follow variable asset allocation policy. These move in an out of an asset class (equity, debt,
money market or even non-financial assets). Asset allocation funds are those, which follow more stable
allocation policies like balanced funds. Those, which flexible allocation policies, are like aggressive
speculative funds.

49
6. COMPARISON OF MUTUAL FUND:

Investment Who Should Investment

Mutual
Risk
Fund Objective Portfolio Invest Horizon

3
Aggressive investors
Equity Long-term Capital
High Risk Stocks & Shares years +
Funds Appreciation Long term Inv.

Capital Balanced ratio of equity

2
Balanced Growth & Regular Market Risk and debt funds to ensure Moderate &
Funds Income and Interest higher returns at lower Aggressive years +
Risk risk

To generate returns
that are NAV varies 3
Index Portfolio índices like
commensurate with with index Aggressive investors.
Funds BSE, NIFTY etc
returns of respective performance years +

indices

12
Interest Rate Salaried &
Gilt Funds Security & Income Government securities
Risk conservative investors months +

Debentures,
Credit Risk & 12
Bond Salaried &
Regular Income Interest Rate
Funds Govt securities, conservative investors
Risk months +
Corporate Bonds

Liquidity + Treasury Bills,

Park funds in current 2 days
Money Moderate Income + Certificate of Deposits,
Negligible A/cs or short-term
Market Reservation of Commercial Papers,
Bank Dep. - 3 weeks
Capital Call Money

Short-term
Funds Call Money,

(Floating - Liquidity + Little Interest CommPapers, Treasury Those with surplus 3 weeks -

short-term) Moderate Income Rate Bills, CDs, Short-term short-term funds 3 months
Govt. securities.

7. ADVANTAGES OF MUTUAL FUND:

50
 Mutual Funds offer several benefits to an investor that are unmatched by the other investment options.
Last six years have been the most turbulent as well as exiting ones for the industry. New players have come
in, while others have decided to close shop by either selling off or merging with others. Product innovation
is now passé 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.

1. Affordability :

Small investors with low investment fund are unable to invest in high-grade or blue chip stocks. An
investor through Mutual Funds can be benefited from a portfolio including of high priced stock.

2. Diversification :

Investor’s investment is spread across different securities (stocks, bonds, money market, real estate, fixed
deposits etc.) and different sectors (auto, textile, IT etc.). This kind of a diversification add to the stability of
returns, reduces the risk for example during one period of time equities might underperform but bonds and
money market instruments might do well do well and may protect principal investment as well as help to
meet return objectives.

51
 3. Variety :

Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers
different types of schemes to investors

4. Professional Management:

Mutual Funds employ the services of experienced and skilled professionals and dedicated investment
research team. The whole team analyses the performance and balance sheet of companies and selects them to
achieve the objectives of the scheme.

5. Tax Benefits:

Depending on the scheme of mutual funds, tax shelter is also available. As per the Union Budget-99,
income earned through dividends from mutual funds is 100% tax free. Under ELSS of open-ended equity-
oriented funds an exemption is provided up to Rs. 100,000/- under section 80C.

6. Regulation:

All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations
designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by
SEBI.

52
8. DISADVANTAGES OF MUTUAL FUND:

The following are the disadvantages of investing through mutual fund:

• No control over cost:

Since investors do not directly monitor the fund’s operations, they cannot control the costs effectively.
Regulators therefore usually limit the expenses of mutual funds.

• No tailor-made portfolio:

Mutual fund portfolios are created and marketed by AMCs, into which investors invest. They cannot made
tailor made portfolio.

• Managing a portfolio of funds:

As the number of funds increase, in order to tailor a portfolio for himself, an investor may be holding
portfolio funds, with the costs of monitoring them and using hem, being incurred by him.

• Delay in Redemption:

The redemption of the funds though has liquidity in 24-hours to 3 days takes formal application as well as
needs time for redemption. This becomes cumbersome for the investors.

• Non-availability of loans:

Mutual funds are not accepted as security against loan. The investor cannot deposit the mutual funds against
taking any kind of bank loans though they may be his assets.

53
9. RISK INVOLVED IN MUTUAL FUND:

THE RISK-RETURN TRADE-OFF

The most important relationship to understand is the risk-return trade-off. Higher the risk greater the
returns/loss and lower the risk lesser the returns/loss. Hence it is up to you, the investor to decide how much
risk you are willing to take. In order to do this you must first be aware of the different types of risks involved
with your investment decision.

MARKET RISK:

Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the
market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This
is known as Market Risk. A Systematic Investment Plan (“SIP”) that works on the concept of Rupee Cost
Averaging (“RCA”) might help mitigate this risk.

CREDIT RISK:

The debt servicing ability (may it be interest payments or repayment of principal) of a company
through its cash flows determines the Credit Risk faced by you. This credit risk is measured by independent
rating agencies like CRISIL who rate companies and their paper. An ‘AAA’ rating is considered the safest
whereas a ‘D’ rating is considered poor credit quality. A well-diversified portfolio might help mitigate this
risk.

54
INFLATION RISK:

Things you hear people talk about: “Rs. 100 today is worth more than Rs. 100 tomorrow.”
“Remember the time when a bus ride costed 50 paisa?”

“Mehangai Ka Jamana Hai.”

The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of times people
make conservative investment decisions to protect their capital but end up with a sum of money that can buy
less than what the principal could at the time of the investment. This happens when inflation grows faster
than the return on your investment. A well-diversified portfolio with some investment in equities might help
mitigate this risk.

INTEREST RATE RISK:

In a free market economy interest rates are difficult if not impossible to predict. Changes in interest
rates affect the prices of bonds as well as equities. If interest rates raise the prices of bonds fall and vice
versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified
portfolio might help mitigate this risk.

POLITICAL/GOVERNMENT POLICY RISK:

Changes in government policy and political decision can change the investment environment. They
can create a favourable environment for investment or vice versa. LIQUIDITY RISK:

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity
Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that
lean towards purchase of liquid securities.

55
10. NET ASSET VALUE:

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities.
In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the
amount that the shareholders would collectively own. This gives rise to the concept of net asset value per
unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by
dividing the net asset value of the fund by the number of units. However, most people refer loosely to the
NAV per unit as NAV, ignoring the "per unit". We also abide by the same convention.

Definition of NAV

Net Asset Value, or NAV, is the sum total of the market value of all the shares held in the portfolio
including cash, less the liabilities, divided by the total number of units outstanding. Thus, NAV of a mutual
fund unit is nothing but the 'book value.'

Calculation of NAV

The most important part of the calculation is the valuation of the assets owned by the fund. Once it is
calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The
detailed methodology for the calculation of the asset value is given below.

Asset value is equal to

Sum of market value of shares/debentures

+ Liquid assets/cash held, if any

+ Dividends/interest accrued Amount due on unpaid assets Expenses accrued but not paid

NAV per unit = Other liabilities/ No. of units outstanding of the scheme

Details on the above items

For liquid shares/debentures, valuation is done on the basis of the last or closing market price on the
principal exchange where the security is traded.

For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be estimated. The value of
fixed interest bearing securities moves in a direction opposite to interest rate changes Valuation of
debentures and bonds is a big problem since most of them are unlisted and thinly traded. This gives
considerable leeway to the AMCs on valuation and some of the AMCs are believed to take advantage of this
and adopt flexible valuation policies depending on the situation.

56
 Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with every
passing day, interest is said to be accrued, at the daily interest rate, which is calculated by dividing the
periodic interest payment with the number of days in each Period. Thus, accrued interest on a particular day
is equal to the daily interest rate multiplied by the number of days since the last interest payment date.

Usually, dividends are proposed at the time of the Annual General meeting and become due on the
record date. There is a gap between the dates on which it becomes due and the actual payment date. In the
intermediate period, it is deemed to be "accrued".

Expenses including management fees, custody charges etc. are calculated on a daily basis.

NAV and its impact on the returns

We feel that a MF with lower NAV will give better returns. This again is due to the wrong perception
about NAV. An example will make it clear that returns are independent of the NAV.

Say, you have Rs 10,000 to invest. You have two options, wherein the funds are same as far as the
portfolio is concerned. But say one Fund X has an NAV of Rs 10 and another Fund Y has NAV of Rs 50.
You will get 1000 units of Fund X or 200 units of Fund Y.

After one year, both funds would have grown equally as their portfolio is same, say by 25%. Then
NAV after one year would be Rs 12.50 for Fund X and Rs 62.50 for Fund Y. The value of your investment
would be 1000*12.50 = Rs 12,500 for Fund X and 200*62.5 = Rs 12,500 for Fund Y. Thus your returns
would be same irrespective of the NAV.

It is quality of fund, which would make a difference to your returns. In fact for equity shares also
broadly this logic would apply.

Misconception about NAV

This situation arises from the perception that a fund at Rs 10 is cheaper than say Rs 15 or Rs 100.
However, this perception is totally wrong and investors would be much better off once they appreciate this
fact.

Two funds with same portfolio are same, no matter what their NAV is. NAV is immaterial. Why
people carry this perception is because they assume that the NAV of a MF is similar to the market price of
an equity share. This, however, is not true.

57
11. BASIC CONCEPTS OF LOADS:

1. Entry Load:

The load charged at the time of investment is known as entry load. It’s meant to cover the cost that the
AMC spends in the process of acquiring subscriber’s commission payable to brokers, advertisements,
register expenses etc. The load is recovered by way of charging a sale price higher than the prevailing NAV.

2. Exist Load:

Some AMC do not charge an entry load but they charged an exist load i.e., they deduct a load before paying
out the redemption proceeds. Psychologically, investors are much more willing to pay exist loads as
compared to entry loads.

3. Unit:

Units mean the investment of the unit holders in a scheme. Each unit represents one undivided share in the
assets of a scheme. The value of each unit changes, depending on the performance of the fund.

58
12. FACTORS AFFECTING MUTUAL FUND:

1. Governmental Influences

Mutual fund business is a highly regulated business throughout the world as it seeks to ensure that
quality and fairly priced schemes are available. Governmental intervention thus in mutual fund market
usually is most needed to ensure that insurers are reliable. And in the developing countries the additional
goal may be promotion of domestic mutual fund industry and ensuring the national mutual fund industry
contributes to overall economic development. In a non technical sense mutual fund is purchased in a good
faith so the duty of government intervention in mutual fund industry is to ensure that this principle of mutual
fund is never defeated.

The ideology of government plays an important role in mutual fund industry also. For example in the past
during 1991, the P .V Narsimha Rao government strongly believed in liberalization also liberalized the
mutual fund sector which helped to allow private players in the industry from 1993 and enhancing joint
ventures with foreign companies.

The present government with more focuses on foreign direct investments has declared to favor the rise FDI
in mutual fund to 49% which further enhances competition in the industry.

2. Taxation Policy

Social equity being one of the motives behind tax collections, government gives certain exemptions from
such levying. One such exemption is deduction incurred by taxpayers towards investment in mutual fund
coverage. Similarly, capital invested in infrastructure bonds etc is offered with certain concession under tax
laws. The central idea behind such exemptions is that the capitals so allocated by individuals reduce the
ultimate burden on the public infrastructure or helps in creating such infrastructural facilities.

 The income tax rules related to the mutual fund transactions can be classified under:

A. Exemptions available to companies

• Expenses deductible from commission earned by distributor, banker, national distributor.

• Tax concessions under risk management practices of an enterprise

• In growth option equity schemes there no long term capital gain by company.

• In dividend option equity schemes there no tax.

59
• Return received by charitable trust is total exempted from tax.

60
 B. Tax rules governing investment by individuals

Deduction in respect of ELSS schemes (sec 80C): Investment in this fund would enable you to avail
the benefits under clause (xiii) of a section 80C of the Income Tax Act investment made in the schemes up
to 1 lakh by the eligible investor for deduction under this section of the Act.

Since it will be an income deduction an investment of Rs 1 lakh in this fund can save off Rs. 33600
from your tax payable liability (assuming you are in the highest tax bracket).

Investor will receive tax free dividend in above case.

Investor will also receive tax free dividend by investing equity schemes in dividend option Investors also
receive tax free return by investing equity schemes in growth option for long term capital gain.

 Tax planning’s

An individual can think of health ELSS schemes purchase as a tool of tax planning exercise. For
example people who are marginally affected by tax liability can be as well purchase an ELSS fund get
benefits of Rs. 33600 from tax. In this way tax burden is become less by purchasing ELSS fund. Thus tax
law offer benefit to individuals/companies by way of exemptions/deductions of expenditure incurred
towards purchase of mutual fund various schemes coverage from total taxable income.

3. Foreign Trade Regulations

With the vast potential for mutual fund in India due its large population in the country many foreign
companies are ready to enter into the Indian market. But companies can be permitted in India through joint
ventures with an Indian partner as well as come separately and the foreign equity shall be restricted to only
25%. Another statement also tells that Indian subsidiaries of foreign companies shall not be allowed to
participate in banking sector unless they entered in to joint ventures with the Indian partners.

But at present the mutual fund regulator is in favor of hike in FDI cap from 25% to 49%, and is finalizing a
report that will be submitted to the government for a comprehensive legislation for the industry. The security
exchange board of India and association of mutual fund India have been advocating a hike in FDI limit for
mutual fund companies so that the foreign partners can infuse additional funds in these companies to sustain
their growth.

The government will need to amend the separate mutual fund Act for FDI capital as well as domestic
company as this is the statutory provision unlike sectors like civil aviation and telecom, which have come
through notification.

61
4. National Income

The relative importance of the mutual fund Market within a country will also be dependent upon
economic development. With greater rates of economic growth, consumption of investment should increase
as a result of increased income, and an increased stock of assets requiring mutual fund. Furthermore, the
development of mutual fund is likely to facilitate greater economic growth, implying that economic growth
may be endogenous. Consistent with these arguments, studies find that the level of financial development
and economic development are positively related to the level of mutual fund across emerging markets.

5. Consumptions and Savings

The gross capital formation of any country is important for indication of its growth in the future
years. It is quite necessary to set up the rate of capital formation so that a large stock of machines, tools and
equipments are accumulated in a country. Experience of development in other countries suggests that a high
rate of capital formation was achieved to trigger rapid rate of economic growth. With the hike in foreign
capital coming to India the rate of capital formation is becoming boom to insurers, which has given them
opportunities. It is heartening to them to note that latest savings rate of 28% is highest till now and with the
growth rate near to 8% is bringing a pool of buyer’s purchasing power. This directly influences the demand
for mutual fund products.

6. Employment

The effect of employment on mutual fund industry is as direct as that on economic development of
any country. With the rising levels of employment the effect on mutual fund industry is positive because
employment adds to the insured properties and assets from every prospective be it due to organized or
unorganized.

7. Inflation

The midterm policy review the strong macroeconomic indicators and RBI has revised its GDP
growth estimates to the upper limit of the earlier projection range 8% inflation (WPI) has been steadily
moving up in recent times and RBI has highlighted that primary articles prices have been one of the key
contributors. However one needs to keep in mind that recent increase in global oil prices.

8. Money supply

The central banks has indicated that credit growth and money supply number are likely to be above
its prosecution for the current fiscal year, the statement “to consider promptly all possible measures as
appropriate to the evolving global and domestics situation “is indicative of phased increase in FII limits for
gilt investment could help in depending the securities market and is part of the road map towards fuller
convertibility.
62
9. Interest

Interest is major factor for investment when a person find less return from investment tool than people move
towards the higher returns tool of investment.\

10. Risk factor

All investments in Mutual Fund and securities are subject to market risks and the NAV of the fund may go
up or down depending on the factors and forces affecting the security market. There can be no assurance that
the fund’s objective will be achieved. Past performance of the sponsors/Mutual fund/schemes/AMC is not
necessarily indicative of the future results. The name of the schemes does not in any manner indicate their
quality, their future prospects or returns.

The specific risk would be credit, market, illiquidity, judgmental error, interest rate, swaps and forward rates.

11. Demographic environment

The demographic environment significantly affects the demand for the mutual fund industry. Factors like the
average age of the population, levels of education, household structures income distribution, life style and
the extent of industrialization as well as urbanization terribly influences the demand of mutual fund schemes.

In India the average age of the population is at an increasing trend following the improved medical
technology and better awareness of health care requirements. As a result, the risk of investment death is
decreasing while connectivity is increasing. Simultaneously the demand for pension funds and income fund
is expected to grow.

For example at the time of independence the average age of dying for Indians was 45. Presently it has
increased to 65 following better healthcare, improvements in medical science and more health consciousness
among the common man. By 2010 it is expected to rise to 75. Hence risk profile is also changing. Earlier
people are thinking about safely but at present people thinking about capital growth.

12. Social Factors

The social environment covers the customs, habits, level of education, tastes and standard of living of people
in the society. Today’s social environment is greatly influenced to a major extent by the changes in
technological aspects. With the rapid progress in technology and economic liberalization, the physical
boundaries are gradually vanishing. As a result, the social life of the people and their views towards risk and
uncertainty of life and health are gradually changing.

63
Guidelines of the SEBI for Mutual Fund Companies:

Various investment options in Mutual Funds offer

To cater to different investment needs, Mutual Funds offer various investment options. Some of the
important investment options include:

Growth Option:
Dividend is not paid-out under a Growth Option and the investor realizes only the capital appreciation on the
investment (by an increase in NAV).

Dividend Payout Option:

Dividends are paid-out to investors under the Dividend Payout Option. However, the NAV of the mutual
fund scheme falls to the extent of the dividend payout.
Dividend Re-investment Option:
Here the dividend accrued on mutual funds is automatically re-invested in purchasing additional units in
open-ended funds. In most cases mutual funds offer the investor an option of collecting dividends or re-
investing the same.

Retirement Pension Option:

Some schemes are linked with retirement pension. Individuals participate in these options for themselves,
and corporate participate for their employees.

Insurance Option:
Certain Mutual Funds offer schemes that provide insurance cover to investors as an added benefit.

Systematic Investment Plan (SIP):

Here the investor is given the option of preparing a pre-determined number of post-dated cheques in favour
of the fund. The investor is allotted units on a predetermined date specified in the offer document at the
applicable NAV.

Systematic Withdrawal Plan (SWP):

As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows the investor the
facility to withdraw a pre-determined amount / units from his fund at a pre-determined interval. The
investor's units will be redeemed at the applicable NAV as on that day.

64
13. MUTUAL FUND PLAYERS:

The Indian mutual fund industry is mainly divided into three kinds of categories. These categories include
public sector players, nationalized banks and private sector and foreign players.

UTI Mutual Fund was one of the leading Mutual Fund companies in India till May 2006 with a corpus of
more than Rs.31, 000 Crore and it is the public sector mutual fund.Bank of Baroda, PuJ.M.Financial
servicesab National Bank, Can Bank and SBI are the major nationalized banks mutual fund.

At present mutual fund industry is mainly dominated by private and foreign sector players which include
major players like Prudential ICICI Mutual Fund, HDFC Mutual Fund, Reliance Mutual Fund etc. are
private sector mutual funds players while Franklin Templeton etc. are major foreign mutual fund players. At
present there are more than 33 players operating in Indian. The brief introduction of major players is given
as follows.

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the
Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November
4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life
Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the
Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a
conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 Crore.

Bank of Baroda Mutual Fund

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of
Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was
incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing Development Finance
Corporation Limited and Standard Life Investments Limited.

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HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private
Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC
Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a
joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was incorporated
on April 6, 1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential PLC of America; one of the largest life insurance
companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October 1993 with two
sponsors, Prudential PLC. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and
the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June 1993.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the
sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the
AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the India
Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual
Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome
returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crore as AUM. Now it has an
investor base of over 8 Lakhs spread over 18 schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsor for Tata Mutual Fund is
Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management
Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest
in the country with more than Rs. 7,703 Crore (as on April 30, 2005) of AUM.

66
Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having
more than 1,99,818 investors in its various schemes. KMAMC started its operations in December 1998.
Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was
the first company to launch dedicated gilt scheme investing only in government securities.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is
Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June
30, 1995 as Reliance Capital Mutual Fund, which was changed on March 11, 2004. Reliance Mutual Fund
was formed for launching of various schemes under which units are issued to the Public with a view to
contribute to the capital market and to provide investors the opportunities to make investments in diversified
securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The
Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company
Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20,1999.

Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company with a global AUM of
US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors
can buy or sell the Mutual Fund through their financial advisor or through mail or through their website.
They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid
schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income
schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and it’s leading in the market in securities,
investment management and credit services. Morgan Stanley Investment Management (MISM) was
established in the year 1975. It provides customized asset management services and products to
governments, corporations, pension funds and non-profit organizations. Its services are also extended to high
net worth individuals and retail investors. This is the first close end diversified equity scheme serving the
needs of Indian retail investors focusing on a long-term capital appreciation.
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Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its sponsor. The Trustee
Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the
name Escorts Asset Management Limited.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsor
and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16, 2000 and
headquartered in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was
setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is
Cholamandalam AMC Limited.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crore
towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the
provisions of the Indian Trust Act, 1882. . The Company started its business on 29th April 1994. The
Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the
Investment Managers for LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Government of India
undertaking and the four Public Sector General Insurance Companies, viz. National Insurance Co. Ltd
(NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India

68
 PART – II – PROJECT STUDY

Research Methodology:

Research Problem

To know the investment behavior of different investors in Baroda city.

Research Objective

The main objective of the project is to study the risk taking ability and investment pattern of the investor.

Subsidiary Objective

1. To know in which proportion does investors invest in different financial instruments.

2. To know the priority level between different factors related to investment like safety, return and risk.

3. To study growth of different financial instruments.

4. To know the main parameters to measure risk and return, so we may raise best performing portfolio.

5. Investors’ reason for investment.

Research Design

• In the context of this project report, I have utilized descriptive research design.

• Survey method will be also used for the research. Survey should be conducted by questionnaire
method.

Sampling Plan

Q.1 what is the target population?

- All the financial investors, resident in Baroda city.

Q.2 what are the parameters of interest?

- The risk taking ability and investment pattern of the investors.

Q.3 what is the sampling frame?

- Customers of J.M.FINANCIAL SERVICES and professional investors at V.S.C.

Q.4 what is the appropriate sampling method?

69
 - In the context of this project which is based on survey, the best method would be “non probability
convenience sampling method”, mainly because investors could not be interviewed as per our
requirements, but according to their availability and accessibility to meet them.

Q.5 what is the sample size?

- The sample size is of 100 samples, because of limitation of time and resources and comfort ability of
analysis.

Data collection plan

 Primary data: - primary data will been collected through questioner for this research project.

 Secondary data:-

• Return and past performance are collected from internet and database of
J.M.FINANCIAL SERVICES I.

• Factsheets of J.M.FINANCIAL SERVICES publication was referred to gather some

data.

Benefits of the Study

 Study is helpful to J.M.FINANCIAL SERVICES to know the investor’s pattern for the
investment.
 Study is helpful to J.M.FINANCIAL SERVICES to know the expectation of investors.
 Study may even help AMC to offer better mutual fund schemes.
 Study is helpful to me to get exposure regarding mutual fund industries.
Limitation of the study:

Every research has its own limitation and present research work is no exception to this general rule the
inherent limitation of the study are as under:

 Questionnaire method can be used only when respondents are literate and co-operative.

 Sample size was 100 that are not enough to study the awareness of Independent individuals.

 As sampling techniques is convenient sampling so it may result in personal bias. Even respondent
give bias answers. Time is main constraint of the research as we have been given project as well as
study simultaneously.

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  This report is limited to research area in Baroda city’s financial investors only.

 Time is main constraint of the research as the training period of 8 weeks is short for such studies.

Q. what is your age?

20-30 46

30-40 16

40-50 13

50-60 14

Above 60 11

Total 100

From the above table we can say that awareness for investment in youngster has been increased &
that’s why out of 100, 46% are youngster who do investment and they come in the age group of 20-30, then

71
comes age group of 30-40 from which 16% people do investment and other age group are 40-50 where they
do investment of 13%, 14%belongs to age group of 50-60 they do the investment, and 11%belongs to the
age group of 60-above they do their investment. We can say that youngsters are more careful for their
investment.

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 Q. Gender

Male 91

Female 9

As we can easily see that most of the investment decisions are taken by male person of the family. So
ratio of female individual investors to male investors is very less.

73
Q. what is your profession?

Business

Job In Private Sector

Job In Public Sector

Others

Total

Now 100 people doing investment out of which 45% people are from private sector, 22% are from
public sector, 10% are having their business and 23% are others which include retired people, housewives
and student. Reason for investment by all people was to secure the future and reason given by people doing
the job in private was their higher salary and unsecured job.

74
Q. What is your Educational Qualification?

SSC 12

HSC 18

Graduation 37

Post Graduation 24

Professional Degree 9

Here it is clearly visible that Higher educated people are more aware about financial intruments,
whereas less educated people i.e. SSC and HSC containing 30% are less interested in financial instruments
and do not have sufficient knowledge regarding it.

This shows that Mutual Fund industry should target Graduate and Post Graduate investors.

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Q. What is the annual income of individual household?

Income No.

< 50000 11

50,000 - 1,49,999 57

1,50,000 - 2,99,999 27

3,00,000 - 4,99,999 4

5,00,000 - 9,99,999 1

> 10,00,000 0

The data here reflects that most of the investors belong mainly to the income group Rs. 50,000-1,49,999
followed by the income group Rs. 1,50,000- 2,99,999.

So from this analysis we can conclude that as the income of individual falls in these groups the amount of
savings will be limited and they employee these savings in various instruments to have both returns and risk
coverage.

So Mutual Fund plays a major role in order to provide them good returns with limited risk and fund.

76
Q. Do you take Advise?

Yes 89

No 11

People now days are very busy and they do not have time to keep track of markets and returns of
financial avenues. Therefore, 89% of the investors do take professional advice before taking any investment
decision.

This shows the important of financial advisor and scope of it in near future.

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Q. From whom you take advice?

Respondent
Particular s Percentage

Professionals
Advisor 48 54

Relatives 29 33

Friends 12 13

Relatives 29 33

Friends 12 13

We can see that most of the investors prefer to go to professional advisor for their financial quires.
Still roll of relative and advice of friends remains the important factors by investor point of view.

78
Q. how would you describe yourself as a risk taker?

Careless 02

Willing To Take Risk for Higher Returns 27

Can Take Calculated Risk 46

Low Risk Taking Capabilities 18

Extremely Averse to Risk 07

Here the interpretation can be made that most of the investors under our survey are willing to take
calculated risk. And it is followed by investors who are willing to take risk for higher returns. This is a hint
that’s shows that Mutual Fund will gain more importance in near future.

This is an important question for our survey because we will suggest investment patterns for them based
on the risk taking abilities of individual investors. This will also help them to achieve expected returns based
on the amount of risk they take.

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 Q. Purpose of the execution of financial instruments’ transactions?

Single Transaction 15

Long-term investments in financial instruments 66

Speculations on the financial instruments’ market 6

Assets Management 33

Others 31

Here we can make out easily that most of the people indulge in long term investment and that’s the
reason that insurance growth in this country in higher because individual invest their savings mostly in
insurance.

Management is given due importance by individual investors.

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Q. Which factors you consider important while investing?

1 2 3 4 5

Savings 21 29 16 20 14 100

Regular Income 37 21 17 11 14 100

Purely Investment 17 18 25 19 21 100

Risk Coverage 16 21 23 21 19 100

Tax Benefit 9 11 19 29 32 100

100 100 100 100 100 500

Under our survey we noticed that many of the investors gave lot of importance to Regular Income before
investing which is very obvious.

It is interesting to see that Purely Investment is consider more important than Risk coverage and yet
the market share of Insurance is higher than that of Mutual Fund and this is due to lack of awareness and
some misconceptions regarding Mutual Fund industries.

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 Q. Rating the financial instrument (1 highest and 4 least preferred)

Instruments 1 2 3 4 Total

Stocks 19 22 34 25 100

Mutual Funds 26 34 21 19 100

Insurance 37 25 21 17 100

Fixed Deposits 18 19 24 39 100

Total 100 100 100 100 400

Under our survey we have noticed that most of the investors preffer insurance as an important investment
opportunity our the other financial instruments as for them risk coverage as an important factor.

Fixed deposits have lost its importance now a days and it is least preffered by the investors.

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 Q. Purpose of Investment (Future Requirement)

Retirement 28

Marriage of Children 17

Education of Children 19

Medical Expenses 33

Others 3

Total 100

The data gives us an indication that individual are very conscious about their future medical requirements
and which by their retirement expenditure. Thus is a clear indication that they give importance to their
personal requirements rather than institutional requirements.

Due to the inflation and Privatization of medical facilities the expenditure of various medical requirements
has increased which has given rise to its importance.

83
Q. Amount invested annually in various Instruments

50,000- >
Instruments < 50,000 1,00,000 1,00,000 Total

Stocks 17 13 3 33

Mutual Funds 33 35 21 89

Insurance 39 41 20 100

Fixed
Deposits 13 11 7 31

The finding here states that most of the investors prefer to invest in Insurance and Mutual Funds. Stocks
being highly volatile very few investors prefer it, and in case of Fixed Deposits the returns being low and
fixed, there are only marginal investors who prefer this.

The main instruments that they consider important are Insurance and Mutual Funds. Here in our survey we
have also found that all the investors prefer Insurance whereas Mutual Fund is preferred only by 89% of
investors.

Whereas the least preferred instrument is Fixed Deposits and Stocks, in case of FD it is due to low returns
and that over a long period of time. In case of Stock it is just the opposite the volatility of the market
increases the risk of investor and so they stay away from it.

84
Q. Experience in financial Instruments

Mutual Fixed
Stocks Fund Insurance Deposit

No Experience 28 12 0 17

Between 1 to 5
years 48 61 72 36

More than 5 years 24 27 28 47

100 100 100 100

Fixed deposit being the safest and the oldest financial instrument most of the investors have more experience
in it. It also shows that investors are more aware about Insurance and Mutual Fund industry.

It also gave me an indication that they do not have enough experience and fear from the volatility of the
Stock market and as a result of this the demand for Mutual Fund increased and its gaining its importance and
now standing in comparison with Insurance.

85
FINDINGS

From the above analysis, I found that even though certainly not the best or deepest of markets in the world, it
has ignited the growth rate in mutual fund industry to provide reasonable options for an ordinary man to
invest his savings.

Key Findings: -

 Around 50% of the investors invest to maximize their returns and they are ready to take moderate
risk in their investment portfolio.

 Most of the investors give importance to the fact that their investment should grow in value over a
period of time.

 Risk coverage is the most preferred by the investors.

 Knowledge about Mutual Funds and their various schemes is moderate among investors.

 It is necessary to make Mutual Fund more popular in the eyes of investors as well as distributors and
also cater trust which has been lost due to US-64.

 89% of samples showed that they take advice from other people before investing. This data shows
that investors don’t have time to keep track of market and they need professional advice.

 Most of the investors give importance to return and risk coverage.

 Objectives of the investors are to get something in return from their investment and at minimum risk
they are taking.

 Here the objective of the investor between the ages of 20-30 is to earn the higher return.

 While the age group above 30years concentrates on risk coverage and tax saving and they even take
care of the liquidity.

86
General Observation:-

Also we have worked out the return patterns of the four key financial instruments that we have included in
our survey. It is as follows:-

Fixed deposits have a constant return of 9% so the return is very low as compared to the other instruments.In
case of the Stock market due to high volatility and lack of knowledge of investors the risk factor increases
and as a return of this Mutual Fund industry has gain more importance.

From our survey we have found that the main competitor of the Mutual Fund industry is Insurance
that too the ULIP Plans of insurance. Here is a small calculation that shows why Mutual Fund is better as
compared to Insurance (ULIP Plans).

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 a 2.25% 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 sizeable difference.

And now even the entry load has been removed by SEBI (Securities Exchange Board of India) and so
this gives the investors more amount of returns as compared to Insurance (ULIP Plans).Now if an individual
wants both risk cover and higher returns than he may invest his amount in both say Rs. 5000 as premium of
insurance and Rs. 5000 in Mutual fund. Here if the fund rises by 20% that year, your portfolio for insurance
will be Rs. 4500 and that of Mutual Fund will be Rs. 5865. This will sum up to a total of Rs. 10365.
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CONCLUSION

 Mutual Fund is a good concept of investment, which collects the savings and invests in different
sector and different market in such a way that the investment gets highest return. This return will be
paid back to Unit holders.

 AMC’s and J.M.FINANCIAL SERVICES should give more stress on risk coverage and safety
attributes because investors more concerned about safety of their investments and of taking more
benefit of the investments.

 J.M.FINANCIAL SERVICE should launch its brand awareness campaign to be successful in Mutual
Fund industry.

 The perception of investors is that insurance is the best investment option among the four investment
products. And stock and FD are least preferred.

 Since last 5 years Mutual Fund industry has been gaining importance and as a result of this investors
are beginning to gain awareness about the industry.

 Most of the investors are with the misconception that Mutual Fund involves high risk and unasserted
returns.

 Regular income is at the peak of all the attributes.

 There is very less awareness among the investors about AMC’s

 The most vital problem spotted is of ignorance. Investors should be made aware of the benefits.
Nobody will invest until and unless he is fully convinced. Investors should be made to realize that
ignorance is no longer bliss and what they are losing by not investing.
 Mutual funds offer a lot of benefit which no other single option could offer. But most of the
people are not even aware of what actually a mutual fund is? They only see it as just another
investment option. So the advisors should try to change their mindsets. The advisors should target for
more and more young investors. Young investors as well as persons at the height of their career would
like to go for advisors due to lack of expertise and time
 Mutual Fund Company needs to give the training of the Individual Financial Advisors about
the Fund/Scheme and its objective, because they are the main source to influence the investors.

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 Before making any investment Financial Advisors should first enquire about the risk tolerance
of the investors/customers, their need and time (how long they want to invest). By considering these
three things they can take the customers into consideration.

 Younger people aged fewer than 35 will be a key new customer group into the future, so
making greater efforts with younger customers who show some interest in investing should pay off.
 Customers with graduate level education are easier to sell to and there is a large untapped
market there. To succeed however, advisors must provide sound advice and high quality.
 Systematic Investment Plan (SIP) is one the innovative products launched by Assets
Management companies very recently in the industry. SIP is easy for monthly salaried person as it
provides the facility of do the investment in EMI. Though most of the prospects and potential investors
are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.

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