A

PROJECT REPORT
ON
“STUDY ON GROWTH OF MUTUAL FUND IN INDIA”
With
STOCK HOLDING CORPORATION OF INDIA LIMITED
In Partial fulfillment for the Award of the Degree of
BACHELOROF BUSINESS ADMINISTARATION (BBA)
(2016-2019)

Submitted by
SAFIULLAH
(Regd No. 1209-16-684-308
Under the esteemed guidance of
RAJANI THOMAS MBA, M.COM
Lecturer

Department of Management
ST. MARY’S COLLEGE, YOUSUFGUDA.
(AFFILIATED TO OSMANIA UNIVERSITY)
HYDERABAD
2016-2019
 DECLARATION

I hereby declare that this synopsis of the project work entitled “STUDY ON
GROWTH OF MUTUAL FUND IN INDIA” with reference to “STOCK
HOLDING CORPORATION OF INDIA LTD.”, is a bonafide work done by me
for the award of the degree of “Bachelor of Business Administration” (BBA),
from Osmania University, done under the guidance of Ms. RAJANI THOMAS,
Lecturer Department of Management, St. Mary’s College, during the academic
years 2016 – 2019 and it has not been submitted to any other University or
Institution for the award of any Degree or Diploma.

Name: SAFIULLAH

Regd. No: 1209-16-684-308

Faculty Guide:
Ms. RAJANI THOMAS
Lecturer
Department of Management
ST. MARY’S COLLEGE
YOUSUFGUDA.
 CERTIFICATE

This is to certify that the project entitled “STUDY ON GROWTH OF MUTUAL

FUND IN INDIA” of “STOCK HOLDING CORPORATION OF INDIA
LTD.”, being submitted by SAFIULLAH in partial fulfillment for the award of
the degree of Bachelor of Business Administration (BBA)from St. Mary’s
College, Yousufguda, is a record of bonafide work carried out by him under my
guidance and supervision.

DATE: (Ms. RAJANI THOMAS )

PLACE: Lecturer

(Ms. RAJANI THOMAS)

LECTURER

DEPARTMENT OF MANAGEMENT

ST. MARY’S COLLEGE

YOUSUFGUDA
 ACKNOWLEDGEMENTS

It is of great pleasure to take this opportunity to acknowledge and express

my gratitude to all those who helped me throughout my project work.

First of all, I would like to thank the Osmania University for having projects
as a part of BBA.

I express my sincere thanks to Mr. J. Mathew George, Principal,

St. Mary’s College for giving me permission for taking up my project work.

I thank Mr. M. BOBBY, Head of the Department, Department of

Management, St. Mary’s College, for giving me the opportunity to take up the
project work and helping me throughout the project.

I would like to thank Ms. RAJANI THOMAS, Lecturer, Department of

Management, for her valuable guidance and support for the completion of my
project work.

Finally, I would also like to thank my entire faculty in the Department of

Management, St. Mary’s College, for their enduring support throughout my BBA
Program.

Name: SAFIULLAH

Regd. No: 1209-16-684-308

CHAPTER PAGE
TITLE
NO. NO.

INTRODUCTION

 ADVANTAGES OF STUDY

 LIMITATIONS OF STUDY

 OBJECTIVES OF STUDY 1-5

1
 SCOPE OF STUDY

 RESEARCH METHODOLOGY

COMPANY DETAILS 6-14

2

3 LITERATURE REVIEW 15-60

4 DATA ANALYSIS OF SURVEY 61-80

5 CONCLUSION 81

6 RECOMMENDATIONS 82

7 REFERENCE AND GLOSSARY 83-90

 CHAPTER 1
INTRODUCTION
 ABOUT MUTUALFUNDS

Mutual fund is a trust that pools the savings of several investors who share a common
financial goal. This pool of money is invested in accordance with a stated objective. The joint
ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. The money thus
collected is then invested in capital market instruments such as shares, debentures and other
securities. The income earned through these investments and the capital appreciations
realized are shared by its unit holders in proportion the number of units owned by them.
Thus, a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low-cost. A Mutual Fund is an investment tool that allows small investors access to
a well-diversified portfolio of equities, bonds and other securities. Each shareholder
participates in the gain or loss of the fund. Units are issued and can be redeemed as needed.
The fund’s Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and sectors and
thus the risk is reduced. Diversification reduces the risk because all stocks may not move in
the same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual funds
are known as unit holders.

Flow Chart of Mutual Funds

When an investor subscribes for the units of a mutual fund, he becomes part owner of the
assets of the fund in the same proportion as his contribution amount put up with the corpus
(the total amount of the fund). Mutual Fund investor is also known as a mutual fund
shareholder or a unitholder.

Any change in the value of the investments made into capital market instruments (such as
shares, debentures etc.) is reflected in the Net Asset Value (NAV) of the scheme. NAV is
defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of
a scheme is calculated by dividing the market value of scheme's assets by the total number of
units issued to the investors.

ADVANTAGES OF MUTUALFUND

• Portfolio Diversification

• Professional management

• Reduction / Diversification of Risk

• Liquidity

• Flexibility &Convenience

• Reduction in Transaction cost

• Safety of regulated environment

• Choice of schemes

• Transparency

• Tax advantages.
LIMITATIONS OF MUTUALFUND

• No control over Cost in the Hands of an Investor

• No tailor-made Portfolios

• Managing a Portfolio Funds

• Difficulty in selecting a Suitable Fund Scheme

• Entry load and Exit Load Charges.

 OBJECTIVES OF THE STUDY

The objectives of this report are as follows-

a) To study the customer preference while investing.
b) To analyze the future of mutual funds in India.
c) To study various mutual fund schemes in India.
d) To identify the risk involved in mutual funds and how to analyze it.

SCOPE OF THE STUDY

The report helps us to understand the perception of the customers and helps to know in detail
about what factors will lead to the growth of Mutual Funds in India. It can help a lot of
Financial Institutions and Asset Management Company (AMC) to design the Mutual Fund
schemes according to their target audiences’ requirements.

LIMITATIONS OF THE STUDY

 The study is based on exploratory research methodology and can have sample bias.
 The behavioral attitude of the customers might have effect on the preferences of the
customers towards Mutual Funds and can deviate the results slightly from actual
results.
 Research is confined to only Indian Sub-continent and might vary as we move towards
the west, due to investment and saving patterns
 RESEARCH METHODOLOGY

Research Design : Exploratory Research

Research Instrument : Structured, Un-disguised

Sample Method : Non-Probability Sampling

Sample Size : 220

Sampling Design : Convenience Sampling

Sources of Data

DATA COLLECTION METHOD

 Primary Data

 Secondary Data

Primary Data- Primary research consists of a collection of original primary data collected by
the researcher. It is often undertaken after the researcher has gained some insight into the issue
by reviewing secondary research or by analyzing previously collected primary data.
Secondary Data- Under Secondary sources, information was collected from internal & external
sources. I made use of Internet sources.

SAMPLING DESIGN

 Sampling Size:50
 Sampling Method: Convenience Sampling

The report is based on primary data. One of the most important uses of research methodology is
that it helps in identifying the problem, collecting, analyzing, the required information and
providing alternative solution to the problem. It also helps in collecting the vital information that is
required by the investors to assist them for better decision making and help them understanding
how equity derivative market work.
 CHAPTER 2
REVIEW OF
LITERATURE AND
THEORETICAL
FRAMEWORK
REVIEW OF LITERATURE
Literature on mutual fund performance evaluation is enormous. A few research studies that have
influenced the preparation of this paper substantially are discussed in this section.
Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance. Drawing on
results obtained in the field of portfolio analysis, economist Jack L. Trey nor has suggested a new predictor of
mutual fund performance, one that differs from virtually all those used previously by incorporating the
volatility of a fund's return in a simple yet meaningful manner.
Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensen’s alpha) that
estimates how much a manager’s forecasting ability contributes to fund’s returns .As indicated by Stat man
(2000), the e SDAR of a fund portfolio is the excess return of the portfolio over the return of the benchmark
index, where the portfolio is leveraged to have the benchmark index’s standard deviation.
S. Narayan Rao ,et. al., evaluated performance of Indian mutual funds in a bear market through relative
performance index, risk-return analysis, Treynor’s ratio, Sharpe’s ratio, Sharpe’s measure , Jensen’s measure,
and Fame’s measure. The study used 269 open-ended schemes (out of total schemes of 433) for computing
relative performance index. Then after excluding funds whose returns are less than risk-free returns, 58
schemes are finally used for further analysis. The results of performance measures suggest that most of
mutual fund schemes in the sample of 58 were able to satisfy investor’s expectations by giving excess returns
over expected returns based on both premium for systematic risk and total risk.
Bijan Roy, conducted an empirical study on conditional performance of Indian mutual funds. This paper uses
a technique called conditional performance evaluation on a sample of eighty-nine Indian mutual fund
schemes. This paper measures the performance of various mutual funds with both unconditional and
conditional form of CAPM, Treynor-Mazuy model and Henriksson-Mertonmodel. The effect of incorporating
lagged information variables into the evaluation of mutual fund managers’ performance is examined in the
Indian context. The results suggest that the use of conditioning lagged information variables improves the
performance of mutual fund schemes, causing alphas to shift towards right and reducing the number of
negative timing coefficients.
Mishra, (2002) measured mutual fund performance using lower partial moment. In this paper, measures of
evaluating portfolio performance based on lower partial moment are developed. Risk from the lower partial
moment is measured by taking into account only those states in which return is below a pre-specified “target
rate” like risk-free rate.
Kshama Fernandes (2003) evaluated index fund implementation in India. In this paper, tracking error of index
funds in India is measured. The consistency and level of tracking errors obtained by some well-run index fund
suggests that it is possible to attain low levels of tracking error under Indian conditions. At the same time,
there do seem to be periods where certain index funds appear to depart from the discipline of indexation.
K. Pendaraki et al. studied construction of mutual fund portfolios, developed a multi-criteria methodology and
applied it to the Greek market of equity mutual funds. The methodology is based on the combination of
discrete and continuous multi-criteria decision aid methods for mutual fund selection and composition.
UTADIS multi-criteria decision aid method is employed in order to develop mutual fund’s performance
models. Goal programming model is employed to determine proportion of selected mutual funds in the final
portfolios.

MUTUAL FUNDS- CLASSIFICATION

Based on their structure:

 Open-ended funds: Investors can buy and sell the units from the fund, at
any point of time.
 Close-ended funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments cannot be made into the
fund. If the fund is listed on a stocks exchange the units can be traded like
stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund
Offers of close-ended funds provided liquidity window on a periodic basis
such as monthly or weekly. Redemption of units can be made during
specified intervals. Therefore, such funds have relatively low liquidity.

Based on their investment objective:

 Equity funds: These funds invest in equities and equity related instruments.
With fluctuating share prices, such funds show volatile performance, even
losses. However, short term fluctuations in the market, generally smoothens
out in the long term, thereby offering higher returns at relatively lower
volatility. At the same time, such fund scan yields great capital appreciation,
historically, equities have outperformed all asset classes in the long term.
Hence, investment in equity funds should be considered for a period of at
least 3-5years.
 It can be further classified as:

Index funds-
In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms
of composition and individual stock weight ages.

Equity diversified funds-

100% of the capital is invested in equities spreading across different
sectors and stocks.

Dividend yield funds-

It is similar to the equity diversified funds except that they invest in
companies offering high dividend yields.

Thematic funds-
Invest 100% of the assets in sectors which are related through some
theme.
e.g. An infrastructure fund invests in power, construction, cements
sectors etc.

Sector funds-
Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest in banking stocks.
ELSS-

Equity Linked Saving Scheme provides tax benefit to the investors

 Balanced fund: Their investment portfolio includes both debt and equity. As
a result, on the risk-return ladder, they fall between equity and debt funds.
Balanced funds are the ideal mutual funds vehicle for investors who prefer
spreading their risk across various instruments.
 Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% inequities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining

in debt

 Debt fund: They invest only in debt instruments, and are a good option for
investor savers to idea of taking risk associated with equities. Therefore, they
invest exclusively in fixed-income instruments like bonds, debentures,
Government of India securities; and money market instruments such as
certificates of deposit (CD), commercial paper (CP) and call money. Put your
money in to any of these debt funds depending on your investment horizon
and needs.

i) Liquid funds- These funds invest 100% in money market

instruments, a large portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government
securities of and-bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters

invest in debt instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage

opportunities due to mispricing between cash market and
derivatives market. Funds are allocated to equities, derivatives and
money markets. Higher proportion (around 75%) is put in money
markets, in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term

government securities.

vi) Income funds LT- Typically; such funds invest a major portion of
the portfolio in long-term debt papers.
vii) MIPs-MonthlyIncomePlanshaveanexposureof70%-90%todebt and
an exposure of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is
in line with that of the fund.

Mutual Fund Cycle

 INVESTMENT STRATEGIES

1.Systematic Investment Plan: Under this a fixed sum is invested each month on a fixed
date of a month. Payment is made through postdated cheques or direct debit facilities.
The investor gets fewer units when the NAV is high and more units when the NAV is
low. This is called as the benefit of Rupee Cost Averaging(RCA)

2.Systematic Transfer Plan: Under this an investor invest in debt oriented fund and give
instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same
mutual fund.

3.Systematic Withdrawal Plan: If someone wishes to withdraw from a mutual fund

then he can withdraw a fixed amount each month.

RISK V/S. RETURN:

Risk Vs Return: MF Industry

 CLASSIFICATION OF MUTUAL FUNDSCHEMES

Anymutualfundhasanobjectiveofearningincomefortheinvestorsand/orgettingincreased value of
their investments. To achieve these objectives mutual funds, adopt different strategies and
accordingly offer different schemes of investments. On this basis the simplest way to
categorize schemes would be to group these into two broad classifications:

A. OPERATIONALCLASSIFICATION
B. PORTFOLIO CLASSIFICATION
A. Operational classification highlights the two main types of schemes, i.e., open-
ended and close-ended which are offered by the mutual funds.
B. Portfolio classification projects the combination of investment instruments and
investment avenues available to mutual funds to manage their funds. Any portfolio
scheme can be either open ended or close ended.

A. Operational Classification:

a) 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 to the investor
who can subscribe at any time. Such fund stands ready to buy or sell its securities at
any time. 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 fund 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). No minute to minute fluctuations in rates haunt the
investors. 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. Moreover,
desiring frequently traded securities, open-ended schemes hardly have in their
portfolio shares of comparatively new and smaller companies since these are not
generally traded. In such funds, option to reinvest its dividend is also available. Since
there is always a possibility of withdrawals, the management of such funds becomes
more tedious as managers have to work from crisis to crisis. Crisis may be on two
 fronts, one is, that unexpected withdrawals require funds to maintain a high level of
cash available every time implying thereby idle cash. Fund managers have to face
questions like ‘what to sell’. He could very well have to sell his most liquid assets.
Second, by virtue of this situation such funds may fail to grab favorable
opportunities. Further, to match quick cash payments, funds cannot have matching
realization from their portfolio due to intricacies of the stock market. Thus, success
of the open-ended schemes to a great extent depends on the efficiency of the capital
market and the selection and quality of the portfolio.

b. Close Ended Schemes: Such schemes have a definite period after which their shares/ units are
redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e., their corpus
normally does not change throughout its life period. Close ended fund units’ trade among the
investors in the secondary market since these are to be quoted on the stock exchanges. Their
price is determined on the basis of demand and supply in the market. Their liquidity depends on
the efficiency and understanding of the engaged broker. Their prices free to deviate from NAV,
i.e., there is every possibility that the market price may be above or below its NAV.
If one takes into account the issue expenses, conceptually close ended fund units cannot be
traded at a premium or over NAV because the price of a package of investments, i.e., cannot
exceed the sum of the prices of the investments constituting the package. Whatever premium
exists that may exist only on account of speculative activities. In India as per SEBI (MF)
Regulations every mutual fund is free to launch any or both types of schemes.

B. Portfolio Classification:
Following are the portfolio classification of funds, which may be offered.

This classification may be on the basis of (a) Return, (b) Investment Pattern,
(c) Specialized sector of investment, (d) Leverage and (e) Others.

a) Return Based Classification:

To meet the diversified needs of the investors, the mutual fund schemes are made to
enjoy a good return. Returns expected are in form of regular dividends or capital
appreciation or a combination of these two.

i. Income Funds: For investors who are more curious for returns, Income funds
are floated. Their objective is to maximize current income. Such funds
distribute periodically the income earned by them. These funds can further be
split up into categories: those that stress constant income at relatively low risk
 and those that attempt to achieve maximum income possible, even with the use
of leverage. Obviously, the higher the expected returns, the higher the potential
risk of the investment.
ii. Growth Funds: Such funds aim to achieve increase in the value of the
underlying investments through capital appreciation. Such funds invest in
growth oriented securities which can appreciate through the expansion
production facilities in long run. An investor who selects such funds should be
able to assume a higher than normal degree of risk.
iii. Conservative Funds: The fund with a philosophy of “all things to all” issue
offer document announcing objectives as: (i) To provide a reasonable rate of
return, (ii) To protect the value of investment and, (iii) To achieve capital
appreciation consistent
With the fulfillment of the first two objectives. Such funds which offer a blend
of immediate average return and reasonable capital appreciation are known as
“middle of the road” funds. Such funds divide their
portfolioincommonstocksandbondsinawaytoachievethedesiredobjectives. Such
funds have been most popular and appeal to the investors who want both
growth and income.

b. Investment Based Classification:

Mutual funds may also be classified on the basis of securities in which they invest.
Basically, it is renaming the subcategories of return based classification.

i. Equity Fund: Such funds, as the name implies, invest most of their investible
shares in equity shares of companies and undertake the risk associated with
the investment in equity shares. Such funds are clearly expected to outdo other
funds in rising market, because these have almost all their capital in equity.
Equity funds again can be of different categories varying from those that
invest exclusively in high quality ‘blue chip companies to those that invest
solely in the new, un established companies. The strength of these funds is the
expected capital appreciation. Naturally, they have a higher degree of risk.

ii. Bond Funds: such funds have their portfolio consisted of bonds, debentures,
etc. this type of fund is expected to be very secure with a steady income and
little or no chance of capital appreciation. Obviously risk is low in such funds.
 In this category we may come across the funds called ‘Liquid Funds’ which
specialize in investing short-term money market instruments. The emphasis is
on liquidity and is associated with lower risks and low returns.

Balanced Fund: The funds, which have in their portfolio a reasonable mix of
equity and bonds are known as balanced funds. Such funds will put more emphasis
on equity share investments when the outlook is bright and will tend to switch to
debentures when the future is expected to be poor for shares.

(c) Sector Based Funds:

There are number of funds that invest in a specified sector of economy. While such funds
do have the disadvantage of low diversification by putting all their all eggs in one basket,
the policy of specializing has the advantage of developing in the fund managers an
intensive knowledge of the specific sector in which they are investing.

Sector based funds are aggressive growth funds which make investments on the basis of
assessed bright future for a particular sector. These funds are characterized by high
viability, hence riskier.

Risk meter of MF
 MUTUAL FUNDS FOR WHOM?

These funds can survive and thrive only if they can live up to the hopes and trusts of their
individual members. These hopes and trusts echo the peculiarities which support the
emergence and growth of such insecurity of such investors who come to the rescue of such
investors who face following constraints while making direct investments:

a. Limited resources in the hands of investors quite often take them away from
stock market transactions.
b. Lack of funds forbids investors to have a balanced and diversified portfolio.
c. Lack of professional knowledge associated with investment business unable
investors to operate gainfully in the market. Small investors can hardly afford
to have ex-pensive investment consultations.
d. To buy shares, investors have to engage share brokers who are the members of
stock exchange and have to pay their brokerage.
e. They hardly have access to price sensitive information in time.
f. It is difficult for them to know the development taking place in share market
and corporate sector.
g. Firm allotments are not possible for small investors on when there is a trend of
over subscription to public issues.
 WHY MUTUALFUNDS?

Mutual Funds are becoming a very popular form of investment characterized by many
advantages that they share with other forms of investments and what they possess uniquely
themselves. The primary objectives of an investment proposal would fit into one or
combination of the two broad categories, i.e., Income and Capital gains. How mutual fund is
expected to be over and above an individual in achieving the two said objectives, is what
attracts investors to opt for mutual funds. Mutual fund route offers several important
advantages.

Diversification: A proven principle of sound investment is that of diversification, which is

the idea of not putting all your eggs in one basket. By investing in many companies the
mutual funds can protect themselves from unexpected drop in values of some shares. The
small investors can achieve wide diversification on his own because of many reasons, mainly
funds at his disposal. Mutual funds on the other hand, pool funds of lakhs of investors and
thus can participate in a large basket of shares of many different companies. Majority of
people consider diversification as the major strength of mutual funds.

Expertise Supervision: Making investments is not a full time assignment of investors. So

they hardly have a professional attitude towards their investment. When investors buy mutual
fund scheme, an essential benefit one acquires is expert management of the money he puts in
the fund.
The professional fund managers who supervise fund’s portfolio take desirable decisions
viz., what scrip’s are to be bought, what investments are to be sold and more appropriate
decision as to timings of such buy and sell. They have extensive research facilities at their
disposal, can spend full time to investigate and can give the fund a constant supervision. The
performance of mutual fund schemes, of course, depends on the quality of fund managers
employed.

A. Liquidity of Investment: A distinct advantage of a mutual fund over other

investments is that there is always a market for its unit/ shares. Moreover, Securities
and Exchange Board of India (SEBI) requires the mutual funds in India have to
ensure liquidity. Mutual funds units can either be sold in the share market as SEBI
has made it obligatory for closed-ended schemes to list themselves on stock
exchanges. For open-ended schemes investors can always approach the fund for
repurchase at net asset value (NAV) of the scheme. Such repurchase price and NAV
is advertised in newspaper for the convenience of investors.
 B. Reduced risks: Risk in investment is as to recovery of the principal amount and as to
return on it. Mutual fund investments on both fronts provide a comfortable situation
for investors. The expert supervision, diversification and liquidity of units ensured in
mutual funds reduces the risks. Investors are no longer expected to come to grief by
falling prey to misleading and motivating ‘headline’ leads and tips, if they invest in
mutual funds.

C. Safety of Investment: Besides depending on the expert supervision of fund

managers, the legislation in a country (like SEBI in India) also provides for the safety
of investments. Mutual funds have to broadly follow the laid down provisions for the
regulations, SEBI acts as a watchdog and attempts whole heatedly to safeguard
investor’s interests.

D. Tax Shelter: Depending on the scheme of mutual funds, tax shelter is also available.
AspertheUnionBudget-2016, income earned through dividends from mutual funds is
100% tax-free at the hands of the investors.

E. Minimize Operating Costs: Mutual funds having large invisible funds at their
disposal avail economies of scale. The brokerage fee or trading commission may be
reduced substantially. The reduced operating costs obviously increase the income
available for investors.

Investing in securities through mutual funds has many advantages like – option to reinvest
dividends, strong possibility of capital appreciation, regular returns, etc. Mutual funds are
also relevant in national interest. The test of their economic efficiency as financial
intermediary lies in the extent to which they are able to mobilize additional savings and
channeling to more productive sectors of the economy.
 MARKETING OF FUNDS: CHALLENGESAND

OPPORTUNITIES

When we consider marketing, we have to see the issues in totality, because we cannot judge
an elephant by its trunk or by its tail but we have to see it in its totality. When we say
marketing of mutual funds, it means, includes and encompasses the following aspects:

 Assessing of investors needs and market research

 Responding to investor’s needs

 Product designing

 Studying the macro environment

 Timing of the launch of the product

 Choosing the distribution network

 Finalizing strategies for publicity and advertisement

 Preparing offer documents and other literature

 Getting feedback about sales

 Studying performance indicators about fund performance like NAV

 Sending certificates in time and other after sales activities

 Honoring the commitments made for redemptions and repurchase

 Paying dividends and other entitlements

 Creating positive image about the fund and changing the nature of the
market itself

The above are the aspects of marketing of mutual funds, in totality. Even if there is a single
weak-link among the factors which are mentioned above, no mutual fund can successfully
market its funds.
 PRODUCT INNOVATION ANDVARIETY

Investor Preferences

The challenge for the mutual funds is in the tailoring the right products that will help
mobilizing savings by targeting investors’ needs. It is necessary that the common investor
understands very clearly and loudly the salient features of funds, and distinguishes one fund
from another. The funds that are being launched today are more or less look-alikes, or plain
vanilla funds, and not necessarily designed to take into account the investors’ varying needs.
The Indian investor is essentially risk averse and is more passive than active. He is not
interested in frequently changing his portfolio, but is satisfied with safety and reasonable
returns. Importantly, he understands more by emotions and sentiments rather than a
quantitative comparison of funds’ performance with respect to an index. Mere growth
prospects, in an uncertain market, are not attractive to him. He prefers one bird in the hand to
two in bush, and is happy if assured a rate of reasonable return that he will get on his
investment. The expectations of a typical investor, in order of preference are the safety of
funds, reasonable return and liquidity.

The investor is ready to invest his money over a long period, provided there is a purpose
attached to it which is linked to his social needs and therefore appeals to his sentiments and
emotions. That purpose may be his child’s education and career development, medical
expenses, health care after retirement, or the need for steady and sure income after
retirement.
Inacountrywheresocialsecurityandsocialinsuranceareconspicuousmorebytheirabsence, mutual
funds can pool their resources together and try to mobilize funds to meet some of the social
needs of the society.

Product Innovations

With the debt market now getting developed, mutual funds are tapping the investors who
require steady income with safety, by floating funds that are designed to primarily have debt
instruments in their portfolio. The other area where mutual funds are concentrating is the
money market mutual funds, sectoral funds, index funds, gilt funds besides equity funds. The
industry can also design separate funds to attract semi-urban and rural investors, keeping
their seasonal requirements in mind for harvest seasons, festival seasons, sowing seasons, etc.
 DISTRIBUTION NETWORK

Among the competitors to the mutual fund industry, Life Insurance Corporation with its
dedicated sales force is offering insurance products; banks with their friendly neighborhood
presence offer the advantage of extensive network; finance companies with their hefty up
front incentives offer higher returns; shares–provided the market is moving favorably–also
attract direct investments from retail investors. It is against this background that the merits
and demerits of the alternative methods of distribution have to be studied.
QUALITY OFSERVICE

This industry primarily sells quality of services, given that the performance cannot be
promised. It is with this attribute along with procedural simplicity, that the fund gradually
builds its brand and its class of loyal investors. The quality of services is broadly categorized
as:

 Timely services after the sale of the units; and

 Continuous reporting of investment performance.

Mutual fund managers must give due attention and evaluate their performance on each front.
They may also consider an option of conducting a service audit for controlling and improving
the quality of service.

MARKETRESEARCH

Investment in mutual fund is not a one-time activity. It is a continuous activity. The same
investor, if satisfied, will come to the fund again and again. When the investor sends his
application, it is not only an application, but it also contains vital information. Most of this
information if tabulated and analyzed would provide important insights into investor needs,
preferences and behavior and enables us to target customers need more accurately, to achieve
better penetration, deeper loyalty and reduced costs. It is in this context that direct marketing
will assume increased importance. Knowing the customer thoroughly is of utmost
importance. Unlike the consumer goods industry, it is not possible for mutual fund industry
to test market and have pilot projects before launch. At the same time, focusing and
concentrating on a
particulargeographicareawherethefundhasastrongpresenceandprovenmarketingnetwork, can
help reduce network, can help reduce issue expenses and ultimately translate into higher
 returns for the investor. Very little research on investor preference is available, but the
industry can collectively have a data bank, and share the information for appropriate use.

Market Segmentation Different segments of the market have different risk-return criteria, on
the basis of which they take investment decisions. Not only that, in a particular segment also
there could be different sub-segments asking for yet different risk-return attributes, and
differential preference for various investments attributes of financial product.

Different investment attributes an investor expects in a financial product are:

 Liquidity

 Capital appreciation

 Safety of principal

 Tax treatment

 Dividend or interest income

 Regulatory restrictions

 Time period for investment, etc.

On the basis of these attributes the mutual fund market may be broadly segmented into five
main segments as under.

RETAIL SEGMENT

This segment characterizes large number of participants but low individual volumes. It
consists of individuals, Hindu Undivided Families, and firms. It may be further sub- divided
into:

i. Salaried class people;

ii. Retired people;

iii. Businessmen and firms having occasional surpluses;

iv. HUF’s for long term investment purpose.

These may be further classified on the basis of their income levels. It has been observed
that prospects in different classes of income levels have different patterns of
preferences of investment. Similarly, the investment preferences for urban and rural
prospects would differ and therefore the strategies for tapping this segment would differ
on the basis of differential life style, value and ethics, social environment, media habits,
and nature of work. Broadly, this class requires security of the principal, liquidity, and
regular income more than capital appreciation. It lacks specialized investment skills in
financial markets and highly susceptible to mob behavior. The marketing strategy
involving indirect selling through agency network and creating awareness through
appropriate media would be more effective in this segment.

Institutional Segment

This segment characterizes less number of participants, and large individual volumes. It
consists of banks, public sector units, financial institutions, foreign institutional
investors, insurance corporations, provident and pension funds. This class normally
looks for more specialized professional investment skills of the fund managers and
expects a structured product than a ready-made product. The tax features and regulatory
restrictions are the vital considerations in their investment decisions.

Each class of participants, such as banks, provides a niche to the fund managers in this
segment. It requires more of a personalized and direct marketing to sustain and increase
volumes.

Trusts

This is a highly regulated, high volumes segment. It consists of various types of trusts,
namely, charitable trusts, religious trust, educational trust, family trust, social trust, etc.
each with different objectives. Its basic investment need would be safety of the
principal, regular income and hedge against inflation rather than liquidity and capital
appreciation. This class offers vast potential to the fund managers, if the regulators
relax guidelines and allow the trusts to invest freely in mutual funds.

Non-Resident Indians

This segment consists of very risk sensitive participants, at times referred as fair
weather friends. They need the highest cover against political and exchange risk. They
normally prefer easy exit with repatriation of income and principal. They also hold a
strategic importance as they bring in crucial foreign exchange – a crucial input for
developing country like ours. Marketing to this segment requires special kind of
products for groups of foreign countries depending upon the provisions of tax treaties.
The range of suitable products is required to design to divert the funds flowing into
bank accounts. The latest flavor in the mutual fund industry is exclusive schemes for
non-resident Indians(NRI’s). SBI MF has already launched an exclusive scheme for
NRI’s. ICICI Prudential and JM Mutual are in process of finalizing details and some
more funds have also confirmed that they are planning such schemes.

The MF industry is also looking to tap the vast NRI funds of about $5 billion that were
transferred to the local banks as FCNR and NRE deposits on the redemption of the
Resurgent India Bonds in October, 2003. HDFC was one of the first to launch a fixed
maturity plan to NRI’s after the RIB redemption. The scheme had collected Rs.16-17
crores. Sundaram and HDFC MF are currently in the process of strengthening
distribution net-works overseas, especially in the Middle East.

Sanjay Santhanam, Vice President Marketing & Sales of Sundaram MF says, “We are
intensifying our efforts at tapping NRI money. To begin with, we are looking at a
representative office and a distribution network in Dubai. Then we will work out
specialized products and asset allocation models. NRI are used to seeing low interest
rates so their return expectations are different from domestic investors. The large South
Indian population in the Middle East will surely connect with the Sundaram brand.”

Corporate

Generally, the investment need of this segment is to park their occasional surplus funds
that earn returns more than what they have to pay on account of holding them.
Alternatively, they also get surplus fund due to the seasonality of the business, which
typically become due for the payment within a year or quarter or even a month. They
need short term parking place for their fund. This segment offers a vast potential to
specialized money market managers. Given the relaxation in the regulatory guidelines,
fund managers are expected design products to this segment. Thus, each segment and
sub-segment has their own risk return preferences forming niches in the market.

Mutual funds managers have to analyze in detail the intrinsic needs of the prospects and
design a variety of suitable products for them. Not only are those, the products also
required to be marketed through appropriately different marketing strategies.
AN OVERVIEW OF VARIOUS MUTRUAL FUND SCHEMES

Mutual Funds Schemes

 DETAILS OF VARIOUS MUTUAL FUNDSCHEMES

Mutual fund schemes can be broadly classified into Balanced Fund (Equity oriented, no long
term capital gain tax), Large Cap Fund, Mid-Cap Fund, Small Cap Fund, Multi-Cap Fund,
Multi Cap diversified Fund, Infrastructure Fund, Tax Saving (ELSS) Fund.

BALANCEDFUND

Balanced funds (or hybrid funds) invest their portfolio in a mix of debt and equity.
They can be equity-oriented or debt-oriented, depending on their exposure to equity. If
a fund invests minimum 65 per cent in equities, it is called equity-oriented balanced
fund. If a fund invests less than 65 percent in equities, it is called debt-oriented
balanced fund. This category is clearly segregated in our funds list.

Equity oriented balanced funds, if held for more than 12 months are exempt from long
term capital gains tax. For periods less than that, short term capital gains tax is
applicable at 15percent.

For debt oriented balanced funds, long-term capital gains tax is applicable if the fund is
held for 36 months or more. This is at 10 percent without indexation benefits or 20
percent with indexation benefits. Short-term capital gains tax on debt funds is as per
your tax bracket.

LARGE CAPFUND
Large cap (sometimes "big cap") refers to a company with a market capitalization value
of more than $10 billion. Large cap is a shortened version of the term "large market
capitalization." Market capitalization is calculated by multiplying the number of a
company's shares outstanding by its stock price per share. The dollar amounts used for
the classifications "large cap," mid cap" or "small cap" are only approximations that
change over time.
Investors like to diversify their portfolios by investing in companies in different industries and
at varying levels of assets, revenue and market size. A company's share price tells you little
about how big it is. A company with a market price of $100 can be much smaller than a
company with a market price of $10 depending on the number of shares it has outstanding in
the market.

MID-CAPFUND
Amid-cap fund is a type of stock fund that invests in mid-sized companies. A
company's size is determined by its market capitalization, with mid-sized firms generally
ranging from $2 billion to $10 billion in market cap.

Most stocks held in a mid-cap fund are firms with established businesses that are still
considered developing companies. These funds tend to offer more growth than large-
cap stocks and less volatility than the small-cap segment. The size restrictions for a
mid-cap stock fluctuate between funds. The range of $2 billion to $10 billion is only an
approximation, and it can change overtime.

SMALL CAPFUND
The primary investment objective of the scheme is to generate long term capital
appreciation by investing predominantly in equity and equity related instruments of
small cap companies and the secondary objective is to generate consistent returns by
investing in debt and money market securities.
These funds can touch soaring heights when the markets are favorable while can also
wipe out fortunes when the tide reverses.

MULTI-CAPFUND
These are diversified mutual funds which can invest in stocks across market
capitalization. In other words, they are market capitalization agnostic. These funds
resort to portfolio gyrations commensurate with the market condition.
These funds invest in stocks across market capitalization. That is, their portfolio
comprises of large cap, midcap and small cap stocks. They are relatively less risky
compared to a pure mid cap or a small cap fund and are suitable for not-so-aggressive
investors.

MULTI-CAP DIVERSIFIEDFUND

Multi Cap Equity Funds or Diversified Equity Funds invests in stocks of companies
across the stock market regardless of size and sector. These funds provide the benefit of
diversification by investing in companies spread across sector sand market
capitalization. They are generally meant for investors who seek exposure across the
market and do not want to be restricted to any particular sector. They invest in
companies across different market caps and hence reduce the amount of risk in the
fund. Diversification helps prevent events that could affect a single sector for affecting
the fund, and hence reduce risk.

INFRASTRUCTURALFUND

Infrastructure funds provide the opportunity to invest in essential public assets, such as
toll roads, airports and rail facilities. They are often attractive to investors looking for
predictable returns, as infrastructure projects are typically characterized by low levels
of competition and high barriers to entry.

TAX SAVING (ELSS)FUND

ELSS stands for Equity Linked Savings Scheme. These are tax saving mutual funds
that you can use to save income tax of up to Rs1.5 lakhs under Section 80C.ELSS funds
have a lock in period of 3 years and invest a majority of their portfolio in the stock
market.

Investments of up to Rs1.5lakh in ELSS funds earn a tax rebate under Section 80C
every year. The returns generated on the investments are also tax•-free in the hands of
the investor after completion of the 3• year lock in period. In case of SIP investments,
redemptions can be done on a first•in•first-out basis since each individual SIP has a
lock in of 3years.
 INDICATORS OF GROWTH OF MUTUALFUNDS

There has been a significant growth of mutual funds in India since last decade. There is an
expected rise in the mutual funds industry over the next 5 years which can be clearly
recognized using the following indicators-

ANNUALISEDRETURNS

A Compound Annual Growth Rate (CAGR) measures the rate of return over an
investment period. It is a smoothened rate because it measures the growth of an
investment as if it had grown at a steady rate, on an annually compounded basis.

CAGR = [(Current Value / Beginning Value) ^ (1/No. of Years)] -1

UNDERSTANDINGBETA

Beta measures the volatility of a security relative to something, usually a benchmark

index. A beta greater than one means the fund or stock is more volatile than the
benchmark index, while a beta of less than one means the security is less volatile than the
index.

If the market goes up by 10%, a fund with a beta of 1.0 should go up 10% and vice versa.
While standard deviation determines the volatility of a fund according to the disparity of
its returns over a period of time, beta, determines the volatility, or risk, of a fund in
comparison to that of its index or benchmark.

Beta is based on the capital assets pricing model which states that there are two kinds of
risk in investing in equities- systematic risk and non-systematic risk. Systematic risk is
integral to investing in the market and cannot be avoided. E.g. risk arising out of inflation
and interest rates. Non-systematicriskisuniquetoacompany-
canbeminimizedbydiversificationacross companies. Since non-systematic risk can be
diversified, investors need to be compensated for systematic risk which is measured by
Beta.

UNDERSTANDING STANDARDDEVIATION

It basically serves as a measure of uncertainty. Volatile securities that have a higher

standard deviation are also considered a higher risk because their performance may
change quickly, in either direction and at any moment.

So the standard deviation of a fund measures this risk by measuring the degree to which
 the fund fluctuates in relation to its mean return i.e. the average return of a fund over a
period.

For example, a fund that has a consistent four year return of 3%, would have a mean, or
average of 3%. The standard deviation for this fund would then be zero because the
fund's return in any given year does not differ from its four year mean of3%.

GROWTH OF AUM (ASSET UNDERMANAGEMENT)

Assets under management describe how much of investor’s money an investment

company controls. Investments are held in a mutual fund or hedge fund and are managed
by a venture capital company, brokerage company or portfolio manager.

AUM indicates the size of the fund and may refer to the total amount of assets managed
for all clients or the total assets managed for a specific client. It includes the funds the
manager can use to make transactions. For example, if an investor has $50,000 in an
investment portfolio, the fund manager can buy and sell shares using the investor's funds
without obtaining the investor’s permission

Fluctuating daily, AUM depends on the flow of investor money in and out of a particular
fund and asset performance. It also fluctuates based on changes in the company
investments or the value of a fund.

Several investment companies charge management fees that are a fixed percentage of
assets under management. Investment companies use assets under management as a
marketing tool to attract investors. It helps investors get an indication of the size of the
company's operations relative to its competitors. However, it is only one aspect in
evaluating a company and does not offer full details about the investment potential of the
company.

SHIFT FROM TRADITIONAL METHOD TO MUTUALFUNDS

There has been a clear shift from the unorganized sector of investment like chit funds etc. to the modern
and more organized way of investment, i.e. investment in mutual funds. Due to various restrictions by
SEBI the shift has been
 RESEARCHMETHODOLOGY

The whole study is based upon primary data. Therefore, information has been collected from interacting
with different customers and from various magazines, journals, websites, and bulletins. A boost in the
growth of Mutual Fund Se

LIST OF INFORMATIONREQUIRED

Primary Data: Primary data are generated when a particular problem and hand is investigated by the
researcher employ in Gmail questionnaire or telephone survey or personal interviews etc. The report is
exclusively based

METHOD USED IN COLLECTION OFDATA

Online Survey: Online survey is conducted by sending the survey link on various social
networking sites like- WhatsApp, Face book, LinkedIn etc. and even emailing the survey
to various customers and potential investors and non –investor clients who have shown
interest in investing in such instrument.
On online survey.

ADVANTAGES AND
DISADVANTAGES ADVANTAGES
a. It requires shorter period of time to complete.

b. Researcher can procure many different types of information.

c. The amount of information procured on each aspects is larger.

d. The results can be projected to the relevant universe with a greater accuracy.

e. The cost per completion is relatively very less compared to other survey.
 DISADVANTAGES

a. Behavior bias can be one of the errors encountered in this type of survey.

b. People may not accurately fill some data and can cause minor error.

TYPE OF SAMPLINGUSED

The type of sampling used is non-probability type of sampling. In non-probability sampling, the
chance of any particular unit in the population being selected is unknown. Since randomness is not involved
in the selection process, an estimate of the sampling error cannot be made. But this does not mean that the
findings obtained from non- probability samplings are of questionable value. If properly conducted their
findings can be as accurate as those obtained from probability sampling.

Convenience Sampling

As the name implies, a convenience sample is one chosen purely for expedience (e.g.,
items are selected because they are easy or cheap to find and measure.

While few analysts would find credibility in conclusions from such extreme cases, the inappropriateness of
using convenience sampling to estimate universe values is not widely recognized. The major problem with
this (and other non-probability method) is that one is unable to draw objective inference about a rigorously
defined universe. In practice, it is often found that the response given by convenient items in a universe differ
significantly from the responses given by universe items that are less accessible. As a result, unless one is
dealing with a known highly homogeneous universe (virtually all items responding alike), convenience
sampling should not be used to estimate universe.

Sample Size

The sample size taken in the project work is more than 220. The area selected is citizen with Indian origin or Current
NRI who have been living in India at least 1-year back Convenience sampling method was used in this study because of
the constraints like cost and time values.
 CHAPTER 3
INDUSTRY PROFILE
HISTORY OF THE INDIAN MUTUAL FUNDINDUSTRY

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. Though the growth was slow,
but it accelerated from the year 1987 when non-UTI players entered the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, both
qualities wise as well as quantity wise. Before, the monopoly of the market had seen an
ending phase the Assets under Management (AUM) was Rs67 billion. The private sector
entry to the fund family raised the AUM to Rs. 470 billion in March 1993 and till April 2004;
it reached the height if Rs. 1540billion.

The Mutual Fund Industry is obviously growing at a tremendous space with 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 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.
6,700crores 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 Canara bank Mutual Fund (Dec87), Punjab National Bank Mutual Fund
(Aug89), 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.Attheendof1993, the mutual fund industry had assets under
management of Rs. 47,004 crores.

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

1993 was the year in which the first Mutual Fund Regulations came into being, under which
all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari
 Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulationsin1996.The industry now functions under the SEBI (Mutual
Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with
total assets of Rs. 1, 21,805 crores.

Fourth Phase –2003-2014

InFebruary2003, following the repeal of the Unit Trust of India Act1963UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with
assets under management of Rs. 29,835 crores as at the end of January 2003, representing
broadly, the assets of US 64 scheme, assured return and certain other schemes

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the
erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector funds,
the mutual fund industry has entered its current phase of consolidation and growth.

The graph indicates the growth of assets over the years.

Growth in Asset Under Management

Following the global melt-down in the year 2009, securities markets all over the world had
tanked and so was the case in India. Most investors who had entered the capital market
 during the peak, had lost money and their faith in MF products was shaken greatly. The
abolition of Entry Load by SEBI, coupled with the after-effects of the global financial crisis,
deepened the adverse impact on the Indian MF Industry, which struggled to recover and
remodel itself for over two years, in an attempt to maintain its economic viability which is
evident from the sluggish growth in MF Industry AUM between 2010 to2013.

Fifth Phase (Current) – Since May 2014

Taking cognizance of the lack of penetration of MFs, especially in tier II and tier III cities,
and the need for greater alignment of the interest of various stakeholders, SEBI introduced
several progressive measures in September 2012 to "re-energize" the Indian Mutual Fund
industry and increase MFs’ penetration.

In due course, the measures did succeed in reversing he negative trend that had set in after
the global melt-down and improved significantly after the new Government was formed at
the Center.

Since May 2014, the Industry has witnessed steady inflows and increase in the AUM as well
as the number of investor folios (accounts).

The Industry’s AUM crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the first time
a son 31st May 2014 and in a short span of two years the AUM size has crossed ₹15 lakh
crore in July2016.

The overall size of the Indian MF Industry has grown from 3.26 trillion as on 31st March
2007to₹15.63 trillion a son31st August 2016, the highest AUM ever and a five-fold increase
in a span of less than 10years!!

In fact, the MF Industry has more doubled its AUM in the last 4 years from 5.87 trillion as
on31stMarch, 2012 to ₹12.33 trillion a son 31st March, 2016 and further grown to ₹15.63
trillion as on 31st August2016.

The no. of investor folio son as gone up from 3.95crore folios son 31-03-2014 to 4.98 crore
as on31-08-2016.

On an average 3.38 lakh new folios are added every month in the last 2 years since Jun 2014.

The growth in the size of the Industry has been possible due to the twin effects of the
regulatory measures taken by SEBI in re-energizing the MF Industry in September 2012 and
the support from mutual fund distributors in expanding the retail base.
MF Distributors have been providing the much needed last mile connect with investors,
particularly in smaller towns and this is not limited to just enabling investors to invest in
appropriate schemes, but also in helping investors stay on course through bouts of market
volatility and thus experience the benefit of investing in mutual funds.

In fact, even though FY 2015-16 was not a very good year for the Indian securities market,
the MF Industry witnessed steady positive net inflows month after month, even when the FIIs
were pulling out in a big way. This was largely because of the ‘hand-holding ‘of the investors
by the MF distributors and convincing them to stay invested and/or invests at lower NAVs
when the market had fallen.

MF distributors have also had a major role in popularizing Systematic Investment Plans (SIP)
over the years. In April 2016, the no. of SIP accounts has crossed 1 crore mark and currently
each month retail investors contribute around ₹3,500 crores via SIPs.

The graph indicates the growth of MF over the last 10 years.

FMF Industry- AUM Growth- Mar’07-Aug’16

INDUSTRY ANALYSIS-S.W.O. T
Industry analysis is a tool that facilitates a company's understanding of its position relative
to other companies that produce similar products or services. Understanding the forces at work
in the overall industry is an important component of effective strategic planning. The SWOT
Analysis can help us know the clear picture of the Mutual Fund Industry.

STRENGTH

The most critical strength for a mutual fund is its performance. If a fund is outperforming
the market, and particularly if it is at the top of its benchmark, that is a big selling point. If
the fund is part of a well-established company with a track record of success and a family
of high-performing products, that brand name and historical record may also be strength.
A best-in-class research department or methodology that has a track record of picking
winners is a huge asset as well. Different financial metrics may be key depending on your
investment style and the fund involved: dividend yield may be the key for one investor,
total return over a 10-year period for another.

WEAKNESS

One weakness to look at is your fund’s fees. A high expense ratio is a weakness even if it
pays for an active management currently beating the market with its returns. Even in good
times, expenses are a dragon investor return, and they will be more difficult to accept if
the performance declines. Size can be a weakness as well, since bigger isn’t always better.
As a small-cap fund gets bigger, for example, it will have a hard time finding growth
opportunities for all of its assets and may have to close or expand outside of its stated
objective. Risk may be a weakness for some investors looking for a smaller beta or
standard deviation.

OPPORTUNITIES

It's not enough to look at the current numbers when evaluating prospective mutual funds.
Youalsoneedtolookattheoverallmarketandconsiderwhetherthefundisbestpositioned to take
advantage of trends. A lagging fund may offer the best opportunity for growth if the
combination of a management change and economic trends prove beneficial. A change in
the government regulatory environment not only affects different industries, but the funds
that concentrate in those sectors as well.
THREATS

To some extent, many funds move along with general economic news. Some types of
funds do better in a recession while others track well in boom times those funds are
particularly threatened by a sudden change in the unemployment rate that undermines
consumer confidence or a stimulus plan that gets people spending again. In addition, if a
fund is dependent on a superstar manager, make sure you have a plan in place if that
manager suddenly decides to leave.
 CHAPTER 4
COMPANY PROFILE
STOCKHOLDING CORPORATION OF INDIA LTD

Introduction:

Stock Holding Corporation of India Ltd. (Stockholding) was promoted by the public
financial institutions and incorporated as a limited company on July 28, 1986. StockHolding
provides post trading and custodial services to institutional investors, mutual funds, banks
and insurance companies.

With the introduction of the depository system in the country. StockHolding commenced
offering depository related services to the retail segment and over the past few years, it has
come to acquire the stature of being one of the largest Depository Participant, besides being
the country’s largest and premier custodian. StockHolding also provides Professional
Clearing Member services to trading members in the Futures & Options Segment.

StockHolding has continued to build tie-ups with several agencies for offering various third
party financial products to clients. StockHolding acts as Point of Presence (POP) for National
Pension System. StockHolding also provides sub-broking services through its wholly owned
subsidiary, SHCIL Services Ltd. StockHolding acts as a Central Record Keeping Agency for
collection and payment of stamp duty in various States and Union Territories of India.
StockHolding has about 190 offices across the country.

StockHolding has been consistently earning profit and declaring dividends right from its
inception. WithasharecapitalofRs.211million, StockHoldings tangible net worth stand sat Rs.
6071 million as on March 31,2016.

Product and Services:

The focus of StockHolding has always been to direct its product and services for all
round benefit of its investors. StockHolding provides a wide range of financial services under
one roof, which has always been a priority while safety and investor friendliness have been
the hallmark of StockHolding’s products and services.

Institutional Segment:

StockHolding is India’s Largest Custodian by assets under custody. StockHolding services an

aggregate asset of over Rs. 32 lakh crores with a market share of over 22%. The services and
 products offerings of Stock Holding includes custodial services for all securities, valuation
and fund Accounting, securities lending and borrowing services, clearing services for
derivatives (equity, interest rate, currency), Custodial services for goal, custodial services to
Indian investors for their investments outside India, securities escrow services. As a
Designated Depository Participant (DDP), StockHolding provides registration and custodial
services for Foreign Portfolio Investors. StockHolding is the only non-bank Custodian to
hold a ‘No Action Letter’ under SEC 17 of US (SEC) regulations enabling it to offer custody
services to the US based funds.
In 2016, Stockholding was rated by the UK based internationally acclaimed ‘Global Custodian’ as a ‘Market
Outperformer’ as well as ‘Category Outperformer’ for the India Domestic Survey 2016. Stockholding was
also awarded the BSE SKOCH award 2016 for ‘Best Custodian- Business Excellence’. StockHolding’s ling
and diverse clientele includes Insurance Companies, Mutual Funds, Pension Funds, and Banks. Foreign Direct
Investors, Alternate Investment Funds, Public Sector Undertakings & High Net Worth Individuals.

StockHolding in its endeavor to offer a wider basket of services as custodian has added
international securities services for investing in securities of countries outside India. This
service would be of use of investors such as Mutual Funds, Corporate, Family Offices, and
High Net worth investors and Foreign Investors etc.

Retail Segment: Stockholding offers Depository Participant (DP) services, sub-

broking services, distribution of financial products and auxiliary services to its clients
in the Retail Segment.

Demat Services: Since 1998, StockHolding has been extending DP services to its
clients in the Retail Segment. The services offered include account opening,
dematerialization and rematerialization of securities, transaction processing and
creative/closure of pledge. Stockholding is also empaneled as a Contract Participant
with National Commodity and Derivatives Exchange (NCDEX) to hold commodities
in dematerialized form. StockHolding was successively awarded as star performer in
the category of Highest Asset Value and Top Performer in active accounts by NSDL.

Sub-broking Services: StockHolding offers sub-broking services through its wholly

owned subsidiary, SHCIL Services Ltd. (SSL) which is operational in Cash and F&O
segment of NSE & BSE and Currency Derivatives Segment of NSE. SSL provides
speedy, safe, reliable and affordable broking services to retail, HNI and corporate
clients, through StockHolding’s wide network of branches spread across the country.
Broking services include Internet Based Trading, Margin Trading Facility, Mobile
 Trading, trading of mutual funds through BSE Star MF platform, SIP in securities,
IPO/NCD bidding etc. SSL also appoints Sub-brokers/Authorized Persons & Remises
at attractive terms and conditions.

Distribution of Investment Products & Loans: StockHolding distributes Mutual Funds,

Fixed Deposits, Government of India Bonds, Capital Gain Bonds, Tax Free Bonds,
NCDs and IPOs. StockHolding provides its investors AMFI-MFU’s Common
Account Number (CAN) to hold Mutual Fund investments across fund houses in
different schemes, within a single account. Stock Holding, also provides an online
platform “e-MF” to facilitate investments in Mutual Funds and to carry out
subsequent transactions like STPs, SWPs and Redemptions. StockHolding has tied
up with leading Banks and NBFCs to offer Loan against Securities, Home Loan,
Education Loan, Auto Loan, Personal Loan, Business Loan and Loan against
Properties to retail clients and corporate.

StockHolding has tied up with MMTC Pump India Pvt Ltd, India’s largest refinery for
distribution of gold and silver coins of assured purity. Gold Accumulation Plan of
StockHolding is a product which enables client to purchase purest quality gold with minimum
investment of Rs. 1000. StockHolding offers bullion vault/ locker services at Zaveri Bazar,
Mumbai to retail and institutional clients.
Stockholding has been awarded ‘The Brand Leadership Award ‘at the My FM stars of the
Industry Awards for Excellence in Finance, Banking, Insurance and Financial Services.

National Pension System: National Pension System (NPS) introduced by

GovernmentofIndiaisregulatedunderPensionFundRegulatoryandDevelopment Authority
(PFRDA). StockHolding is a Point of Presence (POP) and the only Custodian in the
architecture of NPS. All the branches are registered as Point of Presence Service Provider
(POP-SE) to provide service in NPS. StockHolding received three awards from PFRDA in
recognition of its efforts in business development, improvement in service parameters and
brand building. StockHolding was awarded prizes in best Point of Presence (POP)- All Citizen
award, Best POP NPS Corporate and Best POP NPS Private Sector.

Individuals in Unorganized Sector, Corporate Employees and NRIs can avail full spectrum of
services in NPS through Stocking. Government employees who have joined the service prior

to 1st January2014 can also joint NPS through StockHolding. The subscribers of NPS
including the subscribers who have opened NPS account with other than StockHolding can use
Online System of StockHolding to pay their contribution.
Eligible Entities can joint NPS Corporate Module through StockHolding and Corporate who
want to distribute and promote NPS business can joint StockHolding as Point of Presence-Sub
Entity (POP-SE) as per the provision of PFRDA.
The Auxiliary Services: The auxiliary services provided by StockHolding include
Professional Clearing Member (PCM) services in Futures and Option (F&O) segment of NSE
and BSE, constituent SGL account services and PF accounting services. StockHolding also
provides PCM services in both segments of Currency Derivatives and Interest Rate Futures
(IRF) in NSE and BSE respectively. StockHolding is one of the largest Professional Clearing
Members of the country. StockHolding has been appointed as a custodian by NSCCL (The
National Securities Clearing Corporation Ltd. of NSE), NCDEX (National Commodity and
Derivatives Exchange), MCX (Multi Commodity Exchange of India Ltd.) and MCX-SX for
providing valuation of equities and commodities which serve as collateral margin provided by
clearing members with the Stock Exchanges.

E-stamping: StockHolding has been authorized by the Ministry of Finance, Government of India to act as a
Central Record-keeping Agency (CRA) to design and implement an electronic method of stamp duty
collection. E-stamping is a web- based solution for payment and collection of non-judicial stamp duty.
StockHolding is the sole CRA for e-Stamping in India.
Information Technology:
StockHolding works in a highly computerized environment. StockHolding has in-house capability to address all
information Technology (IT) requirements in terms of software development and maintenance, back office processing,
database administration and networking requirements. IT requirements. IT being the key to success of our operations,
StockHolding has made significant investments in State of the Art technologies to facilitate the business and to
minimize the risk from automated operations. StockHolding has a Tier III + Data Center with contemporary and latest
technology.

SHCIL Services Ltd. (SSL):

SSL is wholly subsidiary of StockHolding and is a SEBI registered corporate stock broking providing safe and reliable
services to all its retail and institutional clients across length and breadth of the country. SSL offers services in Cash and
F&O segment of NSE & BSE and currency Derivatives Segment of NSE.
Product and Services:
Broking:

 Retail and Institutional Broking in

Cash & F&O Segment
Currency Derivatives Segment
 Offer for Sale
 Offer to Buy
 Margin Trading Facility for Retail Clients
 Systematic Investment Plan (SIP) in Securities for Retail Clients
 Intraday Short Selling Facility for Retail Clients
 Online Trading
 Mobile Trading

Mutual Funds:

Allotment and Redemption of Mutual Funds units through-

 BSE Star MF
 NSEMFSS

Sub-broking:

Attractive terms and conditions offered for appointment of Sub-brokers.

Authorized Persona and Remises.

IPO & NCD Bidding:

Client can apply for IPO, NCD, and Tax Free Bonds through SSL
 Future Outlook:

StockHolding played a major role when the physical securities were in vogue. With the
introduction of the depository system in the country. Stockholding made a foray in to the
retail segment. It emerged as the premier custodian and one of the largest depository
participants in the country. Stock Holding also diversified into other service area such as
broking, third party distribution of financial products, digitization and storage of documents,
E-stamping, selling of bullion coins’ bullion vaults business, Gold Accumulation plan
(GAP), etc. Stock Holding is committed to provide quality and personalized services to all its
customers with a moto “Service with a Smile”.
 CHAPTER 4
DATA ANALYSIS AND
INTERPRETITION
 DATA ANALYSIS OF SURVEY

The analysis of the survey using the questionnaire given in ANNEXURE I of the
report, a questionnaire was sent to nearly 250 people and 220 positively responded to the
survey to know their investment preferences and behavior while investing.

The basic analysis consists of sorting and filtering the responses into the ones which can be
taken for analysis and which can be eliminated. The respondents who have shown complete
disinterest in investing and behavioral investments in Mutual Funds have been eliminated.
These respondents have been filtered and further analysis has been conducted.

It involves identifying the age groups responded, Gender based classification and have they
positively shown interest in investments. It also involves the occupation they do which makes
them invest. Furthermore, it can also help to understand the change in investment patterns
according the annual income bracket.

The purpose of advanced analysis is to do a real time analysis using pivot charts, and pivot
table to know whether the combination of these variables can have a substantial impact on
the behavior in investment. Can change of one variable lead to the systematic change in
investment in Mutual funds. Weal so can learn the significance of fixed variable like-gender,
age, income, occupation on the deterministic variables like risk taking ability, investment
arena, possibility of them investing or reinvesting etc.

The advanced survey analysis has been conducted closely with a “Financial Analyst” of a
financial institution so that the analysis is conducted in the most accurate manner.

Basic analysis of the survey involves the following analysis parameters-

Classification of the survey on basis of their” Gender”

A sample of 220 respondents have been collected and the gender based classification
can be tabulated as follows:
 GENDER ANALYSIS

Gender Total Number Total Percentage

Male 136 61.82

Female 84 38.18

Total 220 100.00

Gender Analysis

Gender

38%

62%

Pie Chart of Gender Classification

Interpretation
From the collected data we can infer that nearly 61.8% of the respondents are male and
Male Female
38.2% were females from various parts if India. The results in the interim report might be
biased towards the behavior of Males than Females.

Classification of the survey on basis of their “Age Groups”

The survey results can be further more classified on the bases of the age groups who have
responded to the given questionnaire.
AGE GROUP ANALYSIS

Age Number
18 or younger 2
19-24 156
25-34 49
35-44 3
45-54 5
55-65 3
65 or older 2
Total 220

Age Group Analysis

Age Group
180
156
Count of respondents

160

140

120
49
100

80 2 3 5 3 2

60 18 or 19-24 25-34 35-44 45-54 55-65 65orolder

40 younger
Age Group
20

0 Age Group Interpretation

Thesurveyresultshowsthatnearly156respondentslieintheagebracketof19-24yearswhich gives
an opportunity for the institution and the surveyor to tap this particular population and know
their consumer preferences while investing, as well as to know which combination of
variableswillboostthispopulationtoinvestinMutualFundswhichwouldbefurtheranalyzed in the
“Advanced Survey”
Understanding relation of Age Groups and Income Brackets with Investments

An investment pattern depends on a lot of variable; here we have simultaneously taken

age groupsrespondedtothesurveyandincomebracketsoftheparticularagegroupandunderstand if
they have current investment.

This will help us to know which income group should be mostly tapped for investments in
general so that they are likely to invest in financial products like mutual funds.

Thefollowinggraphshowsthecountofinvestmentswithrespecttotheincomeandagegroup
brackets-

AGE Vs INCOME
(CLASSIFICATION)
Age Above 5 Between Between 3 to 5 lakh I prefer Less Grand
lakh 1.5 to 3 not to than Total
lakh answer 1.5 lakh
18 or younger 1 1 2
19 – 24 28 7 7 77 37 156
25 – 34 11 4 11 14 9 49
35 – 44 1 2 3
45 – 54 4 1 5
55 – 64 1 2 3
65 or older 1 1 2
Grand Total 46 14 18 95 47 220

Classification on Basis of Age and Income (Current Investments)

 Age Vs Income
90

80

70

60
Count of Investment

Above 5 lakh
50
Between1.5to3lakh
40
Between 3 to 5 lakh
30
Iprefernottoanswer
20
Lessthan1.5lakh
10
18 or 19 - 24 25 - 34 35 - 44 45 - 54 55 - 64
0
65or
younger
older
Age Groups

Bar graph on comparative investments count with income and age

Interpretation

The analysis is done to know how investment count differs when there is a combination of
variable. It is used to identify whether the given person of a particular age bracket with a
particular income has done investment before. It helps to scale down our target audience.
 Understanding relation of Occupation and Income Brackets with Investments

There is a good relation between people having different occupation with different income
patterns tending to invest in various financial products. The bar graph of the combination of
various investment products with respect to income and occupation helps us to identify
which age group and income should be targeted.

Count of Occupation
Interested in
Investment
Annual Income Businessmen Government I prefer Private Retired Student Gran
Employee not to Employee d
answer Total
Above 5lakh 11 1 2 26 6 46
Between 1.5 to 3 3 1 5 3 2 14
Lakh
Between 3 to 5 1 1 15 1 18
Lakh
I prefer not to 1 5 8 1 80 95
Answer
Lessthan1.5lakh 3 1 3 40 47
Grand Total 19 3 8 57 4 129 220

Classification on Occupation and Income (Current Investments)

 Occupation Vs Income

Lessthan1.5lakh

Student
Iprefernottoanswer
Income Brackets

Retired
Between3to5lakh
Private Employee
Between1.5to3lakh Iprefernottoanswer

Above5lakh Government Employee

Businessmen
0 20 40 60 80 100

Count of Investment

Graphical representation of Occupation and Income (Current Investments)

 23. FINDINGS

1. Advanced analysis of the responses of the survey are the findings got from the data
which are filtered and binned to eliminate the outliers of the data.

2. The total survey of 220 respondents has been binned to 185 responses which find
importance in the advanced analysis conducted.

3. The Advanced analysis consists of knowing the risk taking ability of the customers,
what are their expected returns, what investment period do they prefer etc.

4. It was gives you a real time analysis of binned data to show hoe combination of two
or three input variables like Gender, Age, Occupation and Annual Income has a
significant impact on investing in mutual funds, will change in any variables have an
effect on their risk taking ability.

The Advanced Analysis using the binned data are as follows-.

Risk Taking Ability based on their Age Groups

Risk has been a very important factor in determining whether a person would invest in mutual
fund. The further analysis shows how different age group can affect the risk taking ability. A
7-scale Lakers scale is used which varies from risk taking ability of very low to very high and
the number of people are tabulated below to understand from the dataset, number of people
who can take a particular risk.

Age Very Moderately Moderately Very

Group Low Low Low Moderate High High High
19 - 24 6 6 17 59 28 7 9
25 - 34 4 1 6 13 9 3 2
35 - 44 0 0 0 2 0 0 0
45 - 54 1 2 0 1 1 0 0
55 - 64 0 1 1 1 0 0 0
65or
older 0 0 0 0 0 0 1

Tab 20.1 Risk Taking Ability

 Risk Taking Ability
140

120
Number ofrespondent

100

80

19-24 25-34 35-44 45-54 55-64 65orolder

60 Age Groups

VeryLow Low ModeratelyLow Moderate ModeratelyHigh High VeryHigh

40

Bar Graph of Risk Taking Ability

20

.
 Expected Return of customer based on their Occupation

The idea of mutual funds is to get maximum return but with the greed of maximum return comes risk so this
analysis gives an idea that with different occupation what are the expectation of a particular customer when it
comes to any investment

Occupation Less than 10% Between 10% to 30% Above 30%

Businessmen 0 9 4

Student 12 77 28

Private Employee 1 37 8

Retired 0 3 0

Government Employee 1 2 0

I prefer not to answer 0 3 3

Expected Return

Expected Return
90

80

70

60
Number ofrespondent

50

40

30

20

10 Businessmen Student Private Retired Government Iprefernotto

0 Employee Employee answer

Employee Type

Lessthan10% Between10%to30% Above30%

Bar Graph of Expected Return

 Gender based analysis of period of investment

Investment period has been a key influencer for mutual funds or any investment. According
to the gender, the classification of investment period by a customer is been taken and further
analysis has been done.
No of Respondent

Count of
Period Period
Less than1 More than 5 Grand
Gender 2-3 Years 3-5 Years Year Years Total
Female 30 10 15 19 74
Male 31 21 22 37 111
Grand Total61 31 37 56 185

Gender Based Period of Investment

Gender Based Investment Period

120

100

80

Morethan5Years
60
Lessthan1Year
3-5Years
40
2-3Years

20

0
Female Male
Gender

Bar Graph of Gender Based Period of Investment

 Analysis of Current Investments

It has been seen that the customers have the current investments in various investment tools
like capital markets, mutual funds, fixed deposits etc. This analysis shows the count of
respondent’s in
particular to their current investment.

Current Investments Count of Current Investments

Capital Markets (Shares) 31

No.ofrespondents

Fixed Deposit 61
Insurance 23
Mutual Funds 43
No Investment 10
Property 17

Grand Total 185

Classification of Current Investment

CurrentInvestment
70

60

50
Total
20

40

10
CapitalMarketsFixedDeposit Insurance Mutual FundsNoInvestment Property
30
(Shares)
TypeofInvestment
0

Bar Graph of Classification of Current Investment

Predictive Analysis of investment in Mutual Funds(Sample)

Age 19 - 24
Gender Female

Investments- Occupation
Mutual Funds
I prefer not to Private Grand
Annual Income Businessmen answer Employee Student Total
Above 5 lakh 2 3 5
Between 1.5 to 3
Lakh 1 1
Between 3 to 5
Lakh 1 1 2
I prefer not to
Answer 29 29
Lessthan1.5lakh 1 1 16 18
Grand Total 2 1 3 49 55

Pivot Table of Investment in Mutual Fund

 Mutual Funds- Predictive Analysis
35
Count ofpeople

30

25 Businessmen

Iprefernottoanswer

20 Private Employee

Student
5
15

0 Above5lakhBetween1.5toBetween3to5IprefernottoLessthan1.5
3lakh lakh answer lakh
10
Income Bracket

Bar Graph of predictive analysis of mutual funds as an investment

CHAPTER 5
CONCLUSION
 CONCLUSION

The end of millennium marks 54 years of existence of mutual funds in this country. The ride
through these 54 years is not been smooth. Investor’s opinion is still divided. While some are
for the mutual funds others are against it.

Mutual Funds (MF) have become one of the most attractive ways for the average person to
invest his money. It is said that Bank investment is the first priority of people to invest their
savings and the second place is for investment in Mutual Funds and other avenues. A Mutual
Fund pools resources from thousands of investors and then diversifies its investment in to
many different holdings such as stocks, bonds, or Government securities in order to provide
high relative safety and returns. Also generate leads of the prospective investors in Mutual
Funds for the Asset Management Company (AMC)

We can also infer that the growth in Mutual Fund industry has been quite prominent and has
helped in boost in the financial sector. The various indicators help us to identify how things
have been in favor of the growth of Mutual Funds in India.

There are many improvements pending in the field and it has to happen as soon as possible
so as to call the MF industry as a more Organized and well-developed sector.
 RECOMMENDATIONS

The recommendations which can be made after understanding the industry which can
benefit clients associated with Stock Holding Corporation of India Ltd. range from
modifying the services and information given to the clients.

 As per the survey we clearly know that which audience should be connected well
with delivering mutual funds.

 StockHolding can give recommendations to the clients based on the risk taking ability
which can be analyzed from similar surveys conducted over large population.

 Many educational fair can be arranged wherein information of such products can be
reached out to masses.

 Educational programs should be organized in sub-urban and rural areas so that they
are aware of such financial products.

 Different attacking methods of getting the target customers can be implemented so

that the right customers interested in Mutual Funds can be focused upon.

The major limitation of lack of information and the fear that of market risk disclaimer has led
to the non-penetration of such products in these regions. The company can take up such
village or town level activities and encourage people to invest by taking moderate amount of
risk.

Being a broking institution the company can also be informing and timely update the clients
with AMC dividend payouts, giving the after services with respect to recommending when to
come out of the scheme, etc. This will build a trust among the clients with respect to the
company image and the client base can be increased in Mutual Funds.
REFERENCES

KEVIN S., 2006. Security Analysis and Portfolio Management. New Delhi: PHI Learning
Private Limited

DONALD E. FISCHER, RONALD J. JORDAN, 1995. Security Analysis and Portfolio

Management 6 Edition. New Delhi: Pearson India

MATTHEW P. FINK, 2011. The Rise of Mutual Funds: An Insider's View [online], 2nd ed.:
Oxford University Press.

ROBERT POZEN; THERESA HAMACHER, 2015. The Fund Industry: How Your Money is
Managed [online], 2nd ed. Hoboken, NJ: Wiley Finance.

RAMOLA K.S., Mutual Fund and the Indian Capital Market’ Yojana [online], Vol. 36, No.11

SATYAJIT, DHAR, 1994. Mutual Funds in India- a Close Look [online], Finance India, Vol.
VIII pp. 675-679.

GAURI PRABHU, VECHALEKAR N.M, Perception of Indian Investor towards investment in

mutual funds, Pune: IOSR Journal of Economics and Finance pp. 66-74

Available from: http://www.iosrjournals.org/iosr-jef/papers/icsc/volume-1/8.pdf [Accessed

on 10 March 2017]
Stockholding Corporation of India Limited, viewed on 27 February 2017,
<http://www.StockHolding.co.in>
SHCIL Services Ltd, viewed on 1 March 2017, <www.shcilservices.com>
Association of Mutual Funds of India, viewed on 12 March 2017,
<www.amfiindia.com>
Mutual Funds India, viewed on 23 March 2017
<www.mutualfundindia.com>
Securities and Exchange Board of India, viewed on 26 March 2017,
<www.sebi.gov.in>
Money control, viewed on 1 April 2017 <www.moneycontrol.com>
Value Research: The Complete Guide to Mutual Funds, viewed on 3 April 2017
<https://www.valueresearchonline.com>
 GLOSSARY

General Terms:

Bonds

A debt security issued by government or corporation, which generally pays a stated

rate of interest and to return the principal amount of the loan on the maturity date.
Unlike stockholders, bondholders do not have ownership privileges.

Capital Gains

The gains made on sale of securities and certain other assets (including units of
mutual funds) are called capital gains. The gains can be long-term depending on the
period of holding of the asset and are charged to tax at different rates. Gains on
mutual fund units held for a period of 12 months or more are long-term gains.

Compounding

Interest earned not only on the initially invested principal but also on accumulated
interest during the period.

Credit rating

A measure indicating the bond the bond issuer’s credit worthiness, or his/her ability
to repay the loan. The bonds are rated by an independent rating agency such as
CRISIL, ICRA, and CARE.

Equity

A type of security representing part ownership in a company/corporation. Common

stocks, preferred stock, and convertible stock are types of equity securities, but debt
securities are not, as they do not represent ownership. These are generally listed on
BSE, NSE & other stock exchanges.
 Fixed income securities
A debt security that pays a defined rate of return. These do not offer an investor much potential
for growth. This usually refers to government, corporate or municipal bonds, which pay a
fixed rate of interest until the bonds mature, or preferred stock, which pays a fixed dividend. A
mutual fund investing in these types of securities may also be referred to as a fixed income
investment or security.

Floating Rate Securities

An interest rate, which is periodically adjusted, usually based on a standard market rate
outside the control of the institution. These rates often have a specified floor and Ceiling,
which limit the floating rate. The rate is pre-decided at regular intervals like half yearly,
annually based on market conditions. The opposite of having a floating rate is having a fixed
rate.

Inflation risk

The possibility that the value of assets or income will be eroded by inflation, affecting the
purchasing power of a currency Often mentioned in relation to fixed income Funds as they
may minimize the possibility of losing the principal.
Interest rate risk
The risk that a security’s value will change due to an increase or decrease in interest rates. A
bond’s price will always drop as interest rate rise and when interest rates fall, a bond’s price
will rise.

Money Market Instruments

Commercial paper, treasury bills, GOI securities with an unexpired maturity up to one year,
call money, certificates of deposit and any other instrument specified by the Reserve bank of
India.
Market risk

The potential loss that is possible as a result of short-term volatility of the stock market indicated by beta.
Owning mutual funds shields an investor to some market risk that a stockholder may be vulnerable to because
of their diversification.
NRE

A Non-Resident External Rupee account that NRI’s can open with any Indian bank. They can
use this account for making investments in India on a repairable basis.

NRI

A Non-Resident Indian who is an Indian citizen or a person of Indian origin but who resides
abroad. NRI’s have to follow specific rules when investing in India.

Yield to maturity (YTM)

The yield earned by a bond if it is held until its maturity date.

Business Specific:

1. Asset Management Company(AMC)

The trustee delegates the task of floating schemes and managing the collected money
to a company of professionals, usually experts who are known for smart stock pics.
This is an Asset Management Company (AMC). AMC charges a fee for the services
it renders to the MF trust. This the AMC acts as the investment manager of the trust
under the broad supervision and directions of the trustees. The AMC must have a net
worth of at least Rs. 10 crores at all times and it cannot act as a trustee of any other
mutual funds.

2. Annual Return
The percentage of change in net asset value over a year’s time, assuming
reinvestment of distribution such as dividend payment and bonuses.
3. Applicable NAV
NAV at which a transaction is affected. A cut-off time is set by the fund house and all
investmentsorredemptionsareprocessedatthatparticularNAV.ThisNAVisrelevant if the
application is received before that cut–off time on a day. A different NAV holds if received
thereafter.
 4. Average Maturity
Average time to maturity of all fixed-period investment in the portfolio of a scheme.

4. Assets Under Management(AUM)/Corpus

He total amount of money invested by all the investors in a scheme as on a date.

5. Balanced funds
A mutual fund scheme with an investment objective of both long term growth
and income, through investment in stocks and bonds. Generally, 60% is invested in
stocks and 40% in bonds, in order to obtain the highest returns consistent with a low
risk strategy.

6. Debt securities
A general term for any security representing money loaned that must be repaid to the lender at
a future date. Bonds, T-notes, T-bills and money market instruments are debt securities, but
they vary in maturities.

7. Entry Load
The load on purchase after the Initial (Public) Offer, now called NFO (New Fund Offer)

8. Exit Load
The load on redemption other than the Contingent Deferred Sales Charge (CDSC)
permitted under SEBI Regulations. A fee charged by some funds for redeeming or
buying back of units. The amount sometimes depends on how long the investment
was held, so the longer the time period, the smaller the charge.
9. Equity Schemes
A scheme that invests primarily in stocks while seeking to provide relatively high
long- term growth of capital.

10. Growth Funds

Mutual funds with a primary investment objective of long-term growth of capital.
Unlike income, which is somewhat regular and consistent in most cases, growth is
much less consistent. Growth investments, however, usually out-space the return on
income investments over the long-term (five to ten years, or longer). It invests mainly
in common stocks with significant growth potential.
 11. Income funds
A mutual fund that primarily seeks current income rather than growth of capital. It
will tend invest in stocks and bonds that normally pay high dividends and interest.

12. Initial Public Offer(IPO)

A fixed time period during which the first sale of units of a scheme are made
available to the public. The term Initial Public Offer used by mutual funds has been
replaced by a new term “New Fund Offer” effective June 2, 2005 by SEBI.

13. Index funds

A type of mutual fund in which the portfolios are constructed to mirror a specific
market index. Index funds are expected to provide a rate of return over time that will
approximate or match, but not exceed, that of the market, which they are mirroring.

14. Liquid Funds/Money market Funds

Investing only in short-term money market instruments including treasury bills,
commercial paper and certificates of deposit. The objective is to provide liquidity and
preserve the capital.

15. Mutual fund

A Mutual Fund is a common pool of money from numerous investors who wish to save money.
Each fund’s investors are chosen and monitored by qualified professionals who use this money
to create a portfolio. That portfolio could consist of stocks, bonds, money market instruments
or a combination of those. Mutual funds offer investors the advantages of diversification,
professional management, affordability, liquidity and convenience.

16. No Load Fund

A fund that sells its units to investors without a sales load/ charge.

17. Net Asset Value

Market value of one share of a mutual fund on a given day also known as the bid
price. Unlike the public offering price, the NAV includes no sales charges. The NAV
is calculated each day by taking the closing market value of all securities owned by a
mutual fund, plus all other assets (e.g. cash), and deducting the fund’s liabilities. This
sum is then divided by the fund’s total number of shares outstanding.
 18. Portfolio
A pool of individual owned by an investor or mutual fund. Portfolios may include a
combination of stocks, bonds and money market instruments. A list of the fund’s current
portfolio will usually be contained in a mutual fund’s annual report.
1. Rate of return
Rate of return is calculated by subtracting the purchase value by the present value and
then dividing it by the purchase value. For equities, we often include dividends with
the present value.
2. Rupee Cost Averaging
An investment strategy based on investing equal amounts in a fund at regular
intervals. Because more shares are bought when prices are low and fewer shares when
prices are high, the average cost of your shares may be lower than the average price
over the period you bought them. Rupee cost averaging cannot guarantee a profit or
protect against loss in declining markets.

Sector Fund

A fund that invests primarily in securities of companies engaged in a specific

industry. Sector funds entail more risk, but may offer greater potential returns than
funds that diversify their portfolios.

3. Switching
The movement of investment from one scheme to another; usually within the family of schemes. An investor
may switch schemes because of market conditions.

4. Systematic Investment Plan(SIP)

Allows an investor to periodically invest in units by issuing post-dated cheques or by
giving auto debit instructions. It allows the investor to benefit from rupee cost
averaging.

5. Systematic Transfer Program(STP)

A plan that allows the investor to give a mandate to the fund to periodically and
systematically transfer a certain amount from one scheme to another.
 QUESTIONNAIR

ANNEXURE-I

A small survey to understand consumer preferences in investments and to study indicators

which lead to investing in mutual funds.

1. What is your name? *

____________________ ____ ________ _____________

2. Wanted to know little bit more about you, _ _ _ _ _ _ _ _ _ _ _?

(The information you provide will remain confidential and cannot be used to identify
you.)

a) What is your gender, _ _ _ _ _ _ _ _ _ _ _?*

MALE FEMALE

b) If you don't mind what is your age range, _ _ _ _ _ _ _ _ _ _ _?*

A. 18 or younger
B. 19 -24
C. 25 -34
D. 35 -44
E. 45 -54
F. 55 -64
G. 65 or older
c) _ _ _ _ _ _ _ _ _, in which country were you born? *
____________________ ____ ________ _________

d) Can you tell us which city in India, _ _ _ _ _ _ _ _ _ _ _?*

____________________ ____ ________ _________

e) What is your current Occupation? *

A. Government Employee

B. Private Employee

C. Businessmen

D. Retired

E. Student

F. I prefer not to answer

f) What is your yearly income? *

A. Less than 1.5lakh

B. Between 1.5 to 3lakh

C. Between 3 to 5lakh

D. Above 5lakh

E. I prefer not to answer

g) What's the best email address for you, _ _ _ _ _ _ _ _ _ _ _? *

(I'll use this to get back to you. No spam or unexpected newsletters here.)
 h) Can you please share your mobile number? *

(We will keep your details confidential and won't share)

____________________
____ ________ _________
3) Are you interested in making investments, _ _ _ _ _ _ _ _ _ _ _? *
Yes
Y
No
N
 4) Let’s get to know little more about your interest in investments, _ _ _ _ _ _ _ _ _ __

(The information you provide will remain confidential and cannot be used to identify

you.)

a) What is the purpose of investment, _ _ _ _ _ _ _ _ _ _ _?*

A. Children Education
B. Vacation Abroad
C. House
D. Retirement
E. Future Savings
F. Other _ _ _ _ _ _ _ _ __

b) What is your preferred period of investment? *

A. Less than 1Year
B. 2-3Years
C. 3-5Years
D. More than 5Years

c) What is your risk taking ability in investments? *

d) What is your expected return from investments? *

A. Less than10%
B. Between 10% to30%
C. Above30%
 e) _ _ _ _ _ _ _ _ _ _, your current investments are in? *
A. Mutual Funds
B. Property
C. Fixed Deposit
D. Insurance
E. Capital Markets(Shares)

5) If Mutual Funds gives you higher returns with higher risk would you be interested? *
A. Yes
B. No

6) Do you think Mutual Funds should be given higher weight age in an

investment portfolio? *

7) Do you think Mutual Funds would be the option to invest for long term benefits? *
8) Feedback for the survey done
(Your valuable feedback will improve our survey quality)

_____ _____ __________ _____________ ___________

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _______
_____ _____ __________ _____________ ___________
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _______
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ ________
_____ _____ __________ _____________ ___________
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _______
_________________ __________________ ________
_____ _____ __________ _____________ ___________

9) Rate the ease of this survey

(This will help us to improve the survey quality)

Thank you for filling the Survey.