Professional Documents
Culture Documents
(Corporate Management)
University of Lucknow
SESSION: 2009-11
5. Company Profile
- Standard charted AMC Pvt Ltd;
- Schemes
- IDFC AMC Pvt Ltd;
- Schemes
- Acquisition of standard charted by IDFC
6. Findings
- Survey background;
- Methodology;
- Findings;
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Acknowledgment
Tauheed Ahmad
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Student undertaking
Student
(Tauheed Ahmad)
EXECUTIVE SUMMARY
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The Indian mutual fund industry in recent years has exponential growth and yet it is
still at a very nascent stage. We believe that the mutual fund industry has grown in
terms of size or choices available, but is a long distance from being regarded as a
mature one. To understand this one has to look at the scenario. The AUM grew from
Rs. 97,028 cr. as on 31 Dec 1999 to a whopping Rs. 8, 21, 659 cr. as on 30 Nov 2009
representing over 7 fold increase in the Assets under management.
India is also one of the fastest growing markets for mutual funds, attracting a host of
global players. Hence, investors will have an even wider range of products to choose
from. The combination of the increase in number of fund houses along with new
schemes and the increase in the number of people parking their saving in mutual
funds has resulted in increase per cent during April-December 2009. The AUM grew
from Rs. 97,028 cr. as on 31 Dec 1999 to a whopping Rs. 8,21, 659 cr. as on 30 Nov
2009. We already have many experts expressing their concentration at the frequency
of NFO launches. Yet we have less than 1000 schemes in India, compared to 15000 in
the US and 36000 in Europe. The gap is significant and has to be filled up with unique
and better priced products.
There has also been a rapid rise in the HNI segment. India stands only second-best to
Korea in the Asia- Pacific region in terms of percentage growth. The total HNWI (High
Net Worth Individual) assets stood at about $310 billion(according to Merrill Lynch
Capgemini Asia-Pacific Wealth Report 2009), and their assets are distributed over
various assets classes. To top them MFs will have to come up with structured products,
real estate funds, commodity based funds, art funds and the like.
Indian house holds have also increased their exposure to the capital market. Very
interestingly, the MF proportion in this has increased. In fact, there has been more
than 200% growth in the assets coming to MFs in the last 3 years. Statistics reveal
that a higher portion of investors’ savings is now invested in market-linked avenues
like mutual funds as compared to earlier times.
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Passing through the growth phase
We have always read that fund industry has seen three phases – the UTI phase, the
public sector phase and the post – UTI phase. But if we study a bit more closely, there
have been four clear stages.
- Public sector phase (1987 – 1993), during which the likes of SBI,BOB and Canara
Bank comes in to existence
- Post UTI phase (2003 – 2007), when domestic players along with some global
players have consolidated the MF industry.
And now we are entering Phase V of the industry, when not only are newer players
readying to enter the market but are also looking at penetration and market
expansion. All in all, this is a win-win situation for Indian investors. We have also come
up a long way from plain vanilla equity funds to hybrid funds, from balanced funds to
arbitrage funds, from sectoral funds to quant strategies.
Our economy is booming, we have now a sustained GDP growth of approximately 8%,
which is likely to remain at this level for years to come. India's per capita income
grew by 10.5 per cent to Rs 44345 in 2009-10. The number of AMCs is increasing.
Their presence across India is expending. Distributors too are expending their
networks. Besides, the regulator has taken up measures to safeguard investor
interests. These are all drivers for the fund industry. Together, these greet investor
warmly. The need of the investor populace has changed, resulting in a change in asset
management styles. In a way, this is leading to the design of new and competitively-
priced products, implying greater emphasis on higher quality of intermediation. This in
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itself is both an opportunity and a challenge. As our economy continuous to grow at a
spectacular rate there is a huge amount of wealth creating opportunities surfacing
everywhere. Financial Planners have an immensely responsible role to play by
identifying these opportunities and channeling them into wealth creating initiatives
that would enable people to adequately address their financial needs.
INTRODUCTION
A mutual fund is a professionally-managed form of collective investments that pools
money from many investors and invests it in stocks, bonds, short-term money market
instruments, and/or other securities. In a mutual fund, the fund manager, who is also
known as the portfolio manager, trades the fund's underlying securities, realizing
capital gains or losses, and collects the dividend or interest income. The investment
proceeds are then passed along to the individual investors. The value of a share of the
mutual fund, known as the net asset value per share (NAV) is calculated daily based
on the total value of the fund divided by the number of shares currently issued and
outstanding.
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portion of the fund’s portfolio and income proportional to the number of shares they
purchase. Individual shareholders of the mutual funds have voting rights in the
operation of the fund, just as most holders of common stocks in corporations have the
right to vote on certain issues involving the running of the company. The key attribute
of a mutual fund, regardless of how it is structured, is that the investor is entitled to
receive on demand, or within a specified period after demand, an amount computed
by reference to the value of the investor’s proportionate interest in the net assets of
the mutual fund. This means that the owner of mutual fund shares can "cash in," or
redeem his or her shares at any time.
Mutual funds, therefore, are considered a liquid investment. The investor’s selling
(redemption) price may be higher or lower than the purchase price. It all depends on
the performance of the fund’s portfolio. The fund has an adviser who charges a fee for
managing the portfolio. The adviser decides when and what securities to buy and sell,
and is responsible for providing or causing to be provided all services required by the
mutual fund in carrying on its day-to-day activities. All fund investors get this built-in
portfolio management whether they own 50 shares or 10,000.The adviser generally
purchases many different securities for the portfolio, since investment theory holds
that diversification reduces risk. It is this diminished risk that is one of the attractions
of mutual funds. The fund also has a custodian, usually a financial institution such as a
bank, which holds all cash and securities for the fund.
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History of Mutual Fund in India
The Evolution
The formation of Unit Trust of India marked the evolution of the Indian mutual fund
industry in the year 1963. The primary objective at that time was to attract the small
investors and it was made possible through the collective efforts of the Government of
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India and the Reserve Bank of India. The history of mutual fund industry in India can
be better understood divided into following phases:
Unit Trust of India enjoyed complete monopoly when it was established in the year
1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it
continued to operate under the regulatory control of the RBI until the two were de-
linked in 1978 and the entire control was transferred in the hands of Industrial
Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as
Unit Scheme 1964 (US-64), which attracted the largest number of investors in any
single investment scheme over the years.
UTI launched more innovative schemes in 1970s and 80s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's
Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Master share
(India’s first equity diversified scheme) in 1987 and Monthly Income Schemes (offering
assured returns) during 1990s. By the end of 1987, UTI's assets under management
grew ten times to Rs 6700 crores.
The Indian mutual fund industry witnessed a number of public sector players entering
the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank
of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later
followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of
India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under
management of the industry increased seven times to Rs. 47,004 crores. However, UTI
remained to be the leader with about 80% market share.
The mutual fund industry witnessed robust growth and stricter regulation from the
SEBI after the year 1996. The mobilization of funds and the number of players
operating in the industry reached new heights as investors started showing more
interest in mutual funds.
Inventors’ interests were safeguarded by SEBI and the Government offered tax
benefits to the investors in order to encourage them. SEBI (Mutual Funds) Regulations,
1996 was introduced by SEBI that set uniform standards for all mutual funds in India.
The Union Budget in 1999 exempted all dividend incomes in the hands of investors
from income tax. Various Investor Awareness Programmes were launched during this
phase, both by SEBI and AMFI, with an objective to educate investors and make them
informed about the mutual fund industry.
In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal
status as a trust formed by an Act of Parliament. The primary objective behind this
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was to bring all mutual fund players on the same level. UTI was re-organized into two
parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund
The industry has also witnessed several mergers and acquisitions recently, examples
of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C
Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more
international mutual fund players have entered India like Fidelity, Franklin Templeton
Mutual Fund etc. There were 29 funds as at the end of March 2006. This is a continuing
phase of growth of the industry through consolidation and entry of new international
and private sector players.
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Types of mutual funds
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1. Schemes according to Maturity Period:-
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An open-ended fund or scheme is one that is available
for subscription and repurchase on a continuous basis.
These schemes do not have a fixed maturity period.
Investors can conveniently buy and sell units at Net
Asset Value (NAV) related prices which are declared on a
daily basis. The key feature of open-end schemes is
liquidity.
Balanced Fund:-
These funds are also income funds and their aim is to provide
easy liquidity, preservation of capital and moderate income.
These schemes invest exclusively in safer short-term
instruments such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money, government
securities, etc. Returns on these schemes fluctuate much less
compared to other funds. These funds are appropriate for
corporate and individual investors as a means to park their
surplus funds for short periods.
Gilt Fund:-
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These funds invest exclusively in government securities.
Government securities have no default risk. NAVs of these schemes
also fluctuate due to change in interest rates and other economic
factors as is the case with income or debt oriented schemes.
Index Funds :-
These are the funds/schemes which invest in the securities of only those
sectors or industries as specified in the offer documents. e.g.
Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),
Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries. While these funds may
give higher returns, they are more risky compared to diversified funds.
Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time. They may also
seek advice of an expert.
These schemes offer tax rebates to the investors under specific provisions
of the Income Tax Act, 1961 as the Government offers tax incentives for
investment in specified avenues. e.g. Equity Linked Savings Schemes
(ELSS). Pension schemes launched by the mutual funds also offer tax
benefits. These schemes are growth oriented and invest pre-dominantly in
equities. Their growth opportunities and risks associated are like any
equity-oriented scheme.
A scheme that invests primarily in other schemes of the same mutual fund
or other mutual funds is known as a FoF scheme. An FoF scheme enables
the investors to achieve greater diversification through one scheme. It
spreads risks across a greater universe.
S.
Advantage Particulars
No.
Profession
Fund manager undergoes through various research works and has better
al
2. investment management skills which ensure higher returns to the investor than
Manageme
what he can manage on his own.
nt
Low
Due to the economies of scale (benefits of larger volumes), mutual funds pay
4. Transactio
lesser transaction costs. These benefits are passed on to the investors.
n Costs
An investor may not be able to sell some of the shares held by him very easily
5. Liquidity
and quickly, whereas units of a mutual fund are far more liquid.
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Mutual funds provide investors with various schemes with different investment
Choice of objectives. Investors have the option of investing in a scheme having a
6.
Schemes correlation between its investment objectives and their own financial goals.
These schemes further have different plans/options
Funds provide investors with updated information pertaining to the markets and
Transpare
7. the schemes. All material facts are disclosed to investors as required by the
ncy
regulator.
Investors also benefit from the convenience and flexibility offered by Mutual
Funds. Investors can switch their holdings from a debt scheme to an equity
8. Flexibility
scheme and vice-versa. Option of systematic (at regular intervals) investment
and withdrawal is also offered to the investors in most open-end schemes.
S. Disadvanta
Particulars
No. ge
Costs
Control Not
Investor has to pay investment management fees and fund distribution costs
in the
1. as a percentage of the value of his investments (as long as he holds the
Hands of
units), irrespective of the performance of the fund.
an
Investor
3. Difficulty Many investors find it difficult to select one option from the plethora of
in funds/schemes/plans available. For this, they may have to take advice from
Selecting a financial planners in order to invest in the right fund to achieve their
Suitable objectives.
Fund
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Scheme
These are best suited for young people who have started their careers and need to build
their wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in
mutual fund scheme the investor has chosen. For instance an investor opting for SIP in xyz
mutual fund scheme will need to invest a certain sum of money every month / quarter
/half year in the scheme.
These plans are best suited for people nearing retirement. In these plans an investor
invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at
regular intervals to take care of expenses.
They allow the investors to transfer on a periodic basis a specified amount from one
scheme to another within the same fund family meaning two schemes belonging to the
same mutual fund. A transfer will be treated as redemption of units from the scheme from
which the transfer is made .Such redemption or investment will be at the applicable NAV.
This service allows the investor to manage his investment actively to achieve his
objectives. Many funds do not even charge even any transaction feed for this service an
added advantage for the active investor.
Performance Evaluation
PARAMETERS OF MUTUAL FUND EVALUATION:
Risk
Returns
Liquidity
Expense Ratio
Composition of Portfolio
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Risks Associated With Mutual Funds
Investing in mutual funds as with any security, does not come without risk. One of the
most basic economic principles is that risk and reward are directly correlated. In other
words, the greater the potential risk, the greater the potential return. The types of risk
commonly associated with mutual funds are:
Market Risk:
Market risk relate to the market value of a security in the future. Market prices fluctuate
and are susceptible to economic and financial trends, supply and demand, and many
other factors that cannot be precisely predicted or controlled.
Political Risk:
Changes in the tax laws, trade regulations, administered prices etc. is some of the many
political factors that create market risk. Although collectively, as citizens, we have indirect
control through the power of our vote, individually as investors, we have virtually no
control.
Inflation Risk:
Inflation or purchasing power risk, relates to the uncertainty of the future purchasing
power of the invested rupees. The risk is the increase in cost of the goods and services, as
measured by the Consumer Price Index.
Interest Rate risk relates to the future changes in interest rates. For instance, if an
investor invests in a long term debt mutual fund scheme and interest rate increase, the
NAV of the scheme will fall because the scheme will be end up holding debt offering
lowest interest rates.
Business Risk:
Business Risk is the uncertainty concerning the future existence, stability and profitability
of the issuer of the security. Business Risk is inherent in all business ventures. The future
financial stability of a company can not be predicted or guaranteed, nor can the price of
its securities. Adverse changes in business circumstances will reduce the market price of
the company’s equity resulting in proportionate fall in the NAV of mutual fund scheme,
which has invested in the equity of such a company.
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Economic Risk:
Economic Risk involves uncertainty in the economy, which, in turn can have an
adverse effect on a company’s business. For instance, if monsoons fall in a year, equity
stocks of agriculture bases companies will fall and NAVs of mutual funds, which have
invested in such stocks, will fall proportionately.
There are 3 different methods with the help of which we can measure the risk.
Measurement of Risk
I. Beta Coefficient Measure Of Risk :
Beta relates a fund’s return with a market index. It basically measures the sensitivity of
funds return to changes in market index.
If Beta = 1
Fund moves with the market i.e. Passive fund
If Beta < 1
Fund is less volatile than the market i. e Defensive Fund
If Beta > 1
Funds will give higher returns when market rises & higher losses when market falls i.e.
Aggressive Fund
Ex –Marks represents co relation with markets. Higher the Ex-marks lower the risk of the
fund because a fund with higher Ex-marks is better diversified than a fund with lower Ex-
marks.
The investors’ funds are deployed in a portfolio of securities by the fund manager. The
value of these investments keeps changing as the market price of the securities change.
Since investors are free to enter and exit the fund at any time, it is essential that the
market value of their investments is used to determine the price at which such entry and
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exit will take place. The net assets represent the market value of assets, which belong to
the investors, on a given date.
Net Asset Value or NAV of a mutual fund is the value of one unit of investment in the fund,
in net asset terms.
(Market value of investments + current assets and other assets + Accrued income –
current liabilities and other liabilities – less accrued expenses) / No. of Units Outstanding
as at the NAV date
NAV of all schemes must be calculated and published at least weekly for closed-end
schemes and daily for open-end schemes.
SEBI requires that the fund must ensure that repurchase price is not lower than 93% of
NAV (95% in the case of a closed-fund). On the other side, a fund may sell new units at a
price that is different from the NAV, but the sale price cannot be higher than 107 % of
NAV. Also the difference between the repurchase price and the sale price of the unit is not
permitted to exceed 7% of the sale price.
Percentage change in NAV is an absolute measure of return, which finds the NAV
appreciation between two points of time, as a percentage.
e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 12 months then
Absolute return = (22 – 20)/20 X 100 =10%
Converting a return value for a period other than one year, into a value for one year, is
called as annualisation. In order to annualize a rate, we find out what the return would be
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for a year, if the return behaved for a year, in the same manner it did, for any other
fractional period.
E .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months then
Annual Return = (22 – 20) /20 X 12/6 X 100 = 20%
The total return method takes into account the dividends distributed by the mutual fund,
and adds it to the NAV appreciation, to arrive at returns.
Total Return =
(Dividend distributed + Change in NAV)/ NAV at the start X 100
e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months if in between dividend of
Rs. 4 has been distributed then
Total Return = {4 + (22 – 20)}/20 X 100 = 30%
This method is also called the return on investment (ROI) method. In this method, the
dividends are reinvested into the scheme as soon as they are received at the then
prevailing NAV (ex-dividend NAV).
= ((Value of holdings at the end of the period/ value of the holdings at the beginning) –
1)*100
E.g. An investor buys 100 units of a fund at Rs. 10.5 on January 1, 2007. On June 30, 2007
he receives dividends at the rate of 10%. The ex-dividend NAV was Rs. 10.25. On
December 31, 2007, the fund’s NAV was Rs. 12.25.
Value of holdings at the beginning period= 10.5*100= 1050
Number of units re-invested = 100/10.25 = 9.756
End period value of investment = 109.756*12.25 = 1344.51 Rs.
Return on Investment = ((1344.51/1050)-1)*100
= 28.05%
This method is basically used for calculating the return for more than 1 year. In this
method return is calculated with the following formula:
A = P X (1 + R / 100) N
Where P = Principal invested
A = maturity value
N = period of investment in years
R = Annualized compounded interest rate in %
R = {(Nth root of A / P) – 1} X 100
E. g: If amount invested is Rs. 100 & in the end we get return of Rs. 200 & period of
investment is 10 years then annualized compounded return is
200 = 100 (1 + R / 100) 10
Rate = 7.2 %
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Returns:
Returns have to be studied along with the risk. A fund could have earned higher return
than the benchmark. But such higher return may be accompanied by high risk. Therefore,
we have to compare funds with the benchmarks, on a risk adjusted basis. William Sharpe
created a metric for fund performance, which enables the ranking of funds on a risk
adjusted basis.
Liquidity:
Most of the funds being sold today are open-ended. That is, investors can sell their
existing units, or buy new units, at any point of time, at prices that are related to the NAV
of the fund on the date of the transaction. Since investors continuously enter and exit
funds, funds are actually able to provide liquidity to investors, even if the underlying
markets, in which the portfolio is invested, may not have the liquidity that the investor
seeks.
Expense Ratio:
Expense ratio is defined as the ratio of total expenses of the fund to the average net
assets of the fund. Expense ratio can actually understate the total expenses, because
brokerage paid on transactions of a fund are not included in the expenses. According to
the current SEBI norms, brokerage commissions are capitalized and included in the cost of
the transactions.
Composition of Portfolio
Credit quality of the portfolio is measured by looking at the credit ratings of the
investments in the portfolio. Mutual Fund fact sheets show the composition of the portfolio
and the investments in various asset classes over time.
Portfolio turnover rate is the ratio of lesser of asset purchased or sold by funds in the
market to the net assets of the fund.
If Portfolio ratio is 100% means portfolio has been changed fully. When Portfolio ratio is
high means expense ratio is high.
In order to meaningfully compare funds some level of similarity in the following factors has
to be ensured:
Funds can be evaluated against some performance indicators which are known as
benchmarks.
There are 3 types of benchmarks:
Relative to market as whole
Relative to other comparable financial products
Relative to other mutual funds
Relative to market as whole
There are different ways to measure the performance of fund with respect to market as
• Equity Funds
o Index Fund– An Index fund invests in the stock comprising of the index in
the same ratio. This is a passive management style.
For example,
The difference between the return of this fund and its index benchmark can be explained
by “TRACKING ERROR”.
The fund manager actively manages this fund. To evaluate performance in such case we
have to select an appropriate benchmark.
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• Debt Funds:
Debt fund can also be judged against a debt market index e.g. I-BEX
Company Fixed
Moderate Low Low Low
Deposits Moderate
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Schemes Investment Risk Investment
Objective Tolerance Horizon
Equity Term Capital Appreciation High Long
As per the taxation laws in force as at the date of the Offer Document, some broad
income tax implications of investing in the units of the Scheme are stated below. The
information so stated is based on the Mutual Fund's understanding of the tax laws in
force as of the date of the Offer Document, which have been confirmed by its auditors.
The information stated below is only for the purposes of providing general information
to the investors and is neither designed nor intended tobe a substitute for professional
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tax advice. As the tax consequences are specific to each investor and in view of the
changing tax laws, each investor is advised to consult his or her or its own tax
consultant with respect to the specific tax implications arising out of his or her or its
participation in the Scheme.
In accordance with the provisions of section 10(35)(a) of the Act, income received by
all categories of unit holders in respect of units of the Fund will be exempt from
income-tax in their hands.
Exemption from income tax under section 10(35) of the Act would, however, not apply
to any income arising from the transfer of these units.
As per the provisions of section 2(42A) of the Act, a unit of a Mutual Fund, held by the
investor as a capital asset, is considered to be a short-term capital asset, if it is held
for 12 months or less from the date of its acquisition by the unit holder. Accordingly, if
the unit is held for a period of more than 12 months, it is treated as a long-term capital
asset.
Further, in case of individuals/ HUFs, being residents, where the total income
excluding short-term capital gains is below the maximum amount not chargeable to
tax1, then the difference between the current maximum amount not chargeable to tax
and total income excluding short-term capital gains, shall be adjusted from short-term
capital gains. Therefore only the balance short term capital gains will be liable to
income tax at the rate of 10 percent plus surcharge, if applicable and education cess.
Non-residents
In case of non-resident unit holder who is a
resident of a country with which India has signed a Double Taxation Avoidance
Agreement (which is in force) income tax is payable at the rates provided in the Act,
as discussed above, or the rates provided in the such agreement, if any, whichever is
more beneficial to such non-resident unit holder.
Investment by Minors
Where sale / repurchase is made during the
minority of the child, tax will be levied on either of the parents, whose income is
greater, where the said income is not covered by the exception in the proviso to
section 64(1A) of the Act. When the child attains majority, such tax liability will be on
the child.
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Losses arising from sale of units
- As per the provisions of section 94(7) of the Act, loss arising on transfer
of units, which are acquired within a period of three months prior to the
record date (date fixed by the Fund for the purposes of entitlement of the
unit holder to receive the income from units) and sold within a period of
nine months after the record date, shall not be allowed to the extent of
income distributed by the Fund in respect of such units.
- As per the provisions of section 94(8) of the Act, where any units
("original units") are acquired within a period of three months prior to the
record date (date fixed by the Fund for the purposes of entitlement of the
unit holder to receive bonus units) and any bonus units are allotted (free of
cost) based on the holding of the original units, the loss, if any, on sale of
the original units within a period of nine months after the record date, shall
be ignored in the computation of the unit holder's taxable income. Such
loss will however, be deemed to be the cost of acquisition of the bonus
units.
--Each Unit holder is advised to consult his / her or its own professional tax
advisor before claiming set off of long-term capital loss arising on sale /
repurchase of units of an equity oriented fund referred to above, against
long-term capital gains arising on sale of other assets.
- No tax needs to be withheld from capital gains arising to a FII on the basis of the
provisions of section 196D of the Act.
- In case of non-resident unit holder who is a resident of a country with which India has
signed a double taxation avoidance agreement (which is in force) the tax should be
deducted at source under section 195 of the Act at the rate provided in the Finance
Act of the relevant year or the rate provided in the said agreement, whichever is
beneficial to such non-resident unit holder. However, such a nonresident unit holder
will be required to provide appropriate documents to the Fund, to be entitled to the
beneficial rate provided under such agreement.
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- No tax needs to be withheld from capital gains arising to a resident unit holder on the
basis of the Circular no. 715 dated 8 August 1995 issued by the CBDT.
Subject to the above, the provisions relating to tax withholding in respect of gains
arising from the sale of units of the various schemes of the fund are as under:
- No tax is required is to be withheld from long term capital gains arising from sale of
units in equity oriented fund schemes, that are subject to securities transaction tax.
Units held under the Schemes of the Fund are not treated as assets
within the meaning of section 2(ea) of the Wealth Tax Act, 1957 and therefore, not
liable to wealth-tax.
Nature of Transaction Current tax rate Tax rate effective (%) 1 June
2006 (%) Delivery based purchase transaction in equity shares or units of equity
oriented fund entered in a recognized stock exchange 0.1 0.125 Delivery based sale
transaction in equity shares or units of equity oriented fund entered in a recognized
stock exchange 0.1 0.125 Non-delivery based sale transaction in equity shares or units
of equity oriented fund entered in a recognized stock exchange. 0.02 0.025 Sale of
units of an equity oriented fund to the mutual fund 0.2 0.25 Value of taxable securities
transaction in case of units shall be the price at which such units are purchased or
sold.
A deduction in respect of securities transaction tax
paid is not permitted for the purpose of computation of business income or capital
gains.
However, if the total income of an assessee
includes any business income arising from taxable securities transactions, he shall be
entitled to a rebate3 from income-tax of an amount equal to the securities transaction
tax paid by him in respect of the taxable securities transactions entered during the
course of his business.
The maximum amounts of total income, not chargeable to tax are as under:
Type of person Maximum amount of income not chargeable to tax
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Women Rs. 135,000
Senior citizens Rs. 185,000
Other individuals and HUFs Rs. 100,000
SEBI Regulations require that at least two thirds of the directors of trustee company or
board of trustees must be independent i.e. they should not be associated with the
sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are
required to be registered with SEBI before they launch any scheme.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to
a professional and healthy market with ethical lines enhancing and maintaining
standards. It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holders.
33 | P a g e
The Association of Mutual Funds of India works with 30 registered AMCs of the country.
It has certain defined objectives which juxtaposes the guidelines of its Board of
Directors. The objectives are as follows:-
It also recommends and promotes the top class business practices and code
of conduct which is followed by members and related people engaged in the
activities of mutual fund and asset management. The agencies who are by
any means connected or involved in the field of capital markets and financial
services also involved in this code of conduct of the association.
AMFI interacts with SEBI and works according to SEBIs guidelines in the
mutual fund industry.
At last but not the least association of mutual fund of India also disseminate
information on Mutual Fund Industry and undertakes studies and research either
directly or in association with other bodies.
Institutions -
- GIC Asset Management Co. Ltd.
Indian -
- BenchMark Asset Management Co. Pvt. Ltd.
2. Always obtain all available information before you invest. Request the prospectus,
the Statement of Additional Information and the latest shareholder report from each
fund you are considering.
3. Never invest in periodic payment plans unless you are virtually certain that you will
not have to redeem early. If you redeem early or do not complete the plan, you may
have to pay sales charges of up to 51% of your investment.
4. Be on the alert for incorporation by reference. You will have "no excuse" for not
knowing this information, if a problem arises. You may be legally presumed to know
materials incorporated by reference in a prospectus or other documents.
5. Always determine all sales charges, fees and expenses before you invest. Fees such
as 12b-1 fees can cost you dearly and charges for reinvestment of dividends and
capital gains distributions can substantially add to your costs. Shop around among the
many funds offered and compare the various fees and costs connected with funds that
appeal to you.
6. Learn the costs of redemption. Sometimes investors are surprised to learn that they
have to pay to get out of funds through back-end loads or redemption fees. Find out
the redemption costs before you invest so you won’t be unpleasantly surprised when
you redeem your shares.
7. Never treat the risks of investment in a fund lightly. Weigh the risks of the funds you
want to buy against your ability to tolerate the ups and downs of the market and your
investment goals. Be extra cautious when considering investing in funds with high
yield/high risk portfolios. Junk bond problems, for example, invariably affect the fund’s
performance.
36 | P a g e
8. Don’t be misled by the name of a fund. Some funds have been given names
denoting safety, stability and low risk, despite the fact that the underlying investments
in the portfolio are volatile and highly risky.
37 | P a g e
29. Reliance Mutual Fund 9843093.38 0
30. Sahara Mutual Fund 19814.33 0
31. SBI Mutual Fund 3179496.78 0
32. Sundaram BNP Paribas Mutual Fund 1459384.72 0
33. Tata Mutual Fund 2449586.66 0
34. Taurus Mutual Fund 33550.65 0
35. UTI Mutual Fund 5465168.28 0
Grand Total 60026632.68 134961.73
38 | P a g e
COMPANY PROFILE
Lately this innovation was again brought to the fore with the launch of the Standard
Chartered Enterprise Equity Fund, a close-ended fund that sought to invest a portion in
Equity IPOs. The fund also launched the Standard Chartered Premier Equity fund an
equity fund that seeks to generate wealth by investing in relatively smaller companies.
We manage our schemes through well-researched and thoroughly tested processes
like the 3 D Factor (For debt funds and helps us in predicting interest rate movements)
and the Equity Circle process. SCMF also pioneered several service initiatives that
helped increase transactional ease. It was the first mutual fund to initiate
Across the counter redemptions for all classes of investors in liquid funds,
Phone transact service wherein investors can redeem without having any
Personal Identification Number
39 | P a g e
Standard Chartered Mutual Fund currently manages assets in excess of Rs 15801.53Cr
as on 5th February 2008 and has touched the lives of more than lakhs of investors
residing in more than 1000 Indian towns.
Schemes Managed
Scheme Name
Grindlays Cash Fund (G)
Grindlays CF - Inst Plan (G)
Grindlays Dynamic Bond (G)
Grindlays FRF - LTP Inst (G)
Grindlays Floating Rate (G)
Grindlays FRF- Inst Plan (G)
Grindlays FRF - LTP (RP) (G)
Grindlays GSec - Inv Plan (G)
Grindlays GSec Fund - PF (G)
Grindlays GSec - STP (G)
Grindlays SSIF - MTP A (G)
Grindlays SSIF STP - Inst (G)
GSSIF STP - MF Plan C (G)
GSSIF STP - Super Inst C (G)
Grindlays SSIF (G)
Grindlays SSIF - STP (G)
SC All Seasons Bond - RP (G)
StanChart Arbitrage - Inst (G)
StanChart Arbitrage Fund (G)
StanChart Classic Equity (G)
StanChart Enterprise Equity(G)
StanChart Imperial Equity (G)
StanChart Imperial Equity (G)
StanChart Liquidity Manager –G
StanChart Liq. Manager Plus-G
StanChart Premier Equity (G)
40 | P a g e
StanChart Small&Midcap Eqty –G
StanChart Tax Saver Fund (G)
No. of schemes 84
No. of schemes including 269
options
Equity Schemes 24
Debt Schemes 209
Short term debt Schemes 19
41 | P a g e
Equity & Debt 0
Money Market 0
Gilt Fund 13
Fund Size
Performance ( % Return )
30 91 Rs. in As on
As On 1 Year 3 Year
Days Days Cr.
IDFC Arbitrage Fund - Jun 24, 0.4876 1.4962 7.492 May 30,
NA 953.23
Plan A (Regular) - Growth 2008 2008
IDFC Arbitrage Fund - Jun 24, 0.5326 1.625 8.027 May 30,
NA 953.23
Plan B (I P) - Dividend 2008 2008
IDFC Arbitrage Fund - Jun 24, 0.5317 1.6241 8.0317 May 30,
NA 953.23
Plan B (I P) - Growth 2008 2008
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IDFC Arbitrage Plus Fund Jun 24,
NA NA NA NA NA NA
- Plan A - Dividend 2008
- 5.820
IDFC ASBF - Plan A - Jun 24, 0.2939 6.8617
7 May 30,
5.3391 35.34
Annual Dividend 2008 2008
6.761
IDFC ASBF - Plan A - Jun 24, 0.2935 1.5911 8.2078 1 May 30,
35.34
Growth 2008 2008
5.933
IDFC ASBF - Plan A - Half Jun 24, 0.293 7.3385
6 May 30,
-0.806 35.34
Yly Div 2008 2008
6.019
IDFC ASBF - Plan A - Qtly Jun 24, 0.2937 0.1307 7.1652 2 May 30,
35.34
Dividend 2008 2008
4.952
IDFC Cash Fund - Plan A - Jun 24, 0.4832 1.2309 4.602
1 May 31,
75.61
Daily Dividend 2008 2008
5.971
IDFC Cash Fund - Plan A - Jun 24, 0.6198 1.5808 5.9411 2 May 31,
75.61
Growth 2008 2008
4.942
IDFC Cash Fund - Plan A - Jun 24, 0.4063 1.1466 4.5146 2 May 31,
75.61
Wkly Div 2008 2008
IDFC Cash Fund - Plan B - Jun 24, 0.4832 1.2365 4.6088 4.977 75.61 May 31,
43 | P a g e
3
IP - Daily Div 2008 2008
IDFC Cash Fund - Plan B - Jun 24, 0.6206 1.5821 5.9428 5.981 May 31,
75.61
IP - Growth 2008 2008
Dec - 0.548
IDFC Cash Fund - Plan B - - 5 Jun 30,
10, 0.3388 NA 315.07
IP - Periodic Dividend 0.3388 2007
2006
4.982
IDFC Cash Fund - Plan B - Jun 24, 0.4991 1.2401 4.6164 8 May 31,
75.61
IP - Wkly Div 2008 2008
5.292
IDFC Cash Fund - Plan C - Jun 24, 0.5137 1.3128 4.913
2 May 31,
75.61
Super I P - Daily Div 2008 2008
- -
IDFC Cash Fund - Plan C - Jun 24, Sep 30,
NA NA 16.434 1.869 160.04
Super I P - Growth 2008 2007
1 3
Dec - 2.7921
IDFC Cash Fund - Plan C - - Jun 30,
10, 0.6724 NA 315.07
Super I P - Mtly Div 0.6724 2007
2006
5.195
IDFC Cash Fund - Plan C - Nov 4, 0.2482 1.1995 5.5526 2 Oct 31,
204.83
Super I P - Wkly Div 2007 2007
- - 0.0176
IDFC Classic Equity Fund - Jun 24, May 30,
12.855 4.9533 NA 375.65
Dividend 2008 2008
3
- - 0.0152
IDFC Classic Equity Fund - Jun 24, May 30,
12.856 4.9534 NA 375.65
Growth 2008 2008
2
6.532
IDFC D B F - Plan A - Jun 24, - 9.0802 May 30,
-5.258 7 21.9
Annual Dividend 2008 0.3287 2008
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- 6.657
IDFC D B F - Plan A - Qtly Jun 24, - 9.1944 May 30,
0.9222 7 21.9
Div 2008 0.3288 2008
10.400 7.397
IDFC D B F- Plan A - Jun 24, - 1.4593 May 30,
2 3 21.9
Growth 2008 0.3294 2008
0.298
IDFC F R F - IP - LTP - Plan Dec 7, 0.6768 5 Nov 30,
NA NA 4659.8
B - Annual Div. 2007 2007
IDFC F R F - IP - LTP - Plan Jun 24, 0.6358 1.8665 7.357 3416.1 May 30,
NA
B - Daily Div 2008 5 2008
IDFC F R F - IP - LTP - Plan Jun 24, 0.7264 2.133 8.4368 6.934 3416.1 May 30,
B - Growth 2008 5 2008
3.400
IDFC F R F - IP - LTP - Plan Jun 24, 0.0577 1.2852 6.7581 5 3416.1 May 30,
B - Mtly Div 2008 5 2008
- 6.187
IDFC F R F - IP - LTP - Plan Jun 24, 0.726 7.2733
6 3416.1 May 30,
0.3002
B - Qtly Div 2008 5 2008
4.019
IDFC F R F - IP - LTP - Plan Jun 24, 0.6483 1.8515 7.3721 3 3416.1 May 30,
B - Wkly Div 2008 5 2008
IDFC F R F - LTP - Plan A - Jun 24, 0.5893 1.733 6.8208 3416.1 May 30,
NA
Daily Div. 2008 5 2008
6.543
IDFC F R F - LTP - Plan A - Jun 24, 0.6727 1.9831 7.8407 8 3416.1 May 30,
Growth 2008 5 2008
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- 5.807
IDFC F R F - LTP - Plan A - Jun 24, 0.6722 6.6976
5 3416.1 May 30,
0.4767
Qtly Div. 2008 5 2008
4.998
IDFC F R F - LTP - Plan A- Jun 24, 0.6728 1.9793 6.8914 4 3416.1 May 30,
Annual Div. 2008 5 2008
4.953
IDFC F R F - STP - Plan A - Jun 24, 0.414 1.2201 4.6269
8 May 31,
117.63
Daily Div 2008 2008
5.964
IDFC F R F - STP - Plan A - Jun 24, 0.5317 1.5688 5.9976 7 May 31,
117.63
Growth 2008 2008
4.889
IDFC F R F - STP - Plan A - Jun 24, 0.4198 1.2276 4.8518 3 May 31,
117.63
Mthly Div 2008 2008
4.959
IDFC F R F - STP - Plan A - Jun 24, 0.4259 1.2227 4.6509 9 May 31,
117.63
Wkly Div 2008 2008
IDFC F R F - STP - Plan B - Jun 24, 0.4144 1.2212 4.6456 4.969 May 31,
117.63
IP - Daily Div 2008 2008
5.968
IDFC F R F - STP - Plan B - Jun 24, 0.5315 1.5692 5.9992 6 May 31,
117.63
IP - Growth 2008 2008
Feb 4.770
IDFC F R F - STP - Plan B - 0.4808 1.4559 5.5025 Jul 31,
21, 9 140.47
IP - Mthly Div 2007
2007
IDFC F R F - STP - Plan B - Jun 24, 0.4228 1.2227 4.6507 4.980 May 31,
117.63
IP - Wkly Div 2008 5 2008
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5.251
IDFC F R F - STP - Plan C - Jun 24, 0.4342 1.2668 4.8759 3 May 31,
117.63
Super I P - Daily Div 2008 2008
- - -
IDFC F R F - STP - Plan C - Nov 7, Jul 31,
NA 17.080 13.053 0.910 140.47
Super I P - Growth 2007 2007
8 5 3
Dec 2.259
IDFC F R F - STP - Plan C - Nov 30,
10, 0 0 NA 364.26
Super I P - Weekly Div 2006
2006
- 4.078
IDFC G Sec Fund - Short Jun 24, - 4.1879 May 30,
0.3116 3 0.29
Term - Plan A - Growth 2008 0.3101 2008
- 3.623
IDFC G Sec Fund - Short Jun 24, - 3.7783 May 30,
0.1873 9 0.29
Term - Plan A - Mthly Div. 2008 0.3097 2008
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- 3.110
IDFC G Sec Fund - Short Jun 24, - 2.1828 May 30,
1.2873 4 0.29
Term - Plan A - Qtly Div. 2008 0.3094 2008
10.298 7.125
IDFC G-Sec Fund - IP- PF Jun 24, - 1.5199 May 30,
8 8 17.64
Plan - Plan B - Growth 2008 0.0665 2008
- 6.377
IDFC G-Sec Fund - PF Plan Jun 24, 8.9937 May 30,
-0.066 5.2848 5 17.64
- Plan A - Annual Dividend 2008 2008
10.330 7.203
IDFC G-Sec Fund - PF Plan Jun 24, - 1.5199 May 30,
7 9 17.64
- Plan A - Growth 2008 0.0659 2008
IDFC G-Sec Fund - PF Plan Jun 24, - 9.217 6.498 May 30,
-0.861 17.64
- Plan A - Qtly Dividend 2008 0.0662 2008
- - 6.4711
IDFC Imperial Equity Fund Jun 24, May 30,
12.498 5.0837 NA 144.49
- Dividend 2008 2008
6
- - 6.0593
IDFC Imperial Equity Fund Jun 24, May 30,
12.499 5.4539 NA 144.49
- Growth 2008 2008
5
IDFC Liquidity Manager Jun 24, 0.4837 1.2568 4.7504 May 31,
NA 34.65
Fund - Daily Div 2008 2008
IDFC Liquidity Manager Jun 24, 0.504 1.2843 4.8135 May 31,
NA 34.65
Fund - Monthly Div 2008 2008
48 | P a g e
IDFC Liquidity Manager Jun 24, 0.4989 1.2631 4.7622 May 31,
NA 34.65
Fund - Weekly Div 2008 2008
IDFC Liquidity Manager Jun 24, 0.6205 1.6159 6.1409 May 31,
NA 34.65
Fund -Growth 2008 2008
IDFC Liquidity Manager Jun 24, 0.5514 1.6129 6.0924 2420.4 May 31,
NA
Fund Plus - Daily Div 2008 1 2008
IDFC Liquidity Manager Jun 24, 0.7084 2.0725 7.8835 2420.4 May 31,
NA
Fund Plus - Growth 2008 1 2008
IDFC Liquidity Manager Jun 24, 0.5616 1.6275 6.1181 2420.4 May 31,
NA
Fund Plus - Monthly Div 2008 1 2008
IDFC Liquidity Manager Jun 24, 0.568 1.618 6.1035 2420.4 May 31,
NA
Fund Plus - Weekly Div 2008 1 2008
- 12.003
IDFC Premier Equity Fund Jun 24, 0.4989 May 30,
12.631 7 NA 785.32
- Dividend 2008 2008
5
- 12.003
IDFC Premier Equity Fund Jun 24, 0.4989 May 30,
12.631 7 NA 785.32
- Growth 2008 2008
5
5.483
IDFC SSIF - Invt. Plan - Jun 24, - 8.5943 May 30,
-5.639 9 68.94
Plan A - Ann Div. 2008 0.4539 2008
6.193
IDFC SSIF - Invt. Plan - Jun 24, - 1.0729 9.9139 May 30,
1 68.94
Plan A - Growth 2008 0.4535 2008
- 4.689
IDFC SSIF - Invt. Plan - Jun 24, - 8.8549 May 30,
3.4994 9 68.94
Plan A - H Y Div. 2008 0.4536 2008
IDFC SSIF - Invt. Plan - Jun 24, - - 8.8493 5.615 68.94 May 30,
49 | P a g e
1.2874 5
Plan A - Qtly Div. 2008 0.4522 2008
5.626
IDFC SSIF - MTP - Plan A - Jun 24, 0.1003 0.6906 6.2578 7 May 30,
181.93
Bimonthly Dividend 2008 2008
IDFC SSIF - MTP - Plan A - Jun 24, 0.1575 1.5463 6.2093 May 30,
NA 181.93
Daily Dividend 2008 2008
IDFC SSIF - MTP - Plan A - Jun 24, 0.1601 1.5166 6.0223 May 30,
NA 181.93
Fortnightly Dividend 2008 2008
6.460
IDFC SSIF - MTP - Plan A - Jun 24, 0.19 1.7778 7.0329 May 30,
5 181.93
Growth 2008 2008
IDFC SSIF - MTP - Plan A - Jun 24, 0.1091 1.5082 6.0738 May 30,
NA 181.93
Monthly Dividend 2008 2008
IDFC SSIF - Short Term - Jun 24, - 0.9306 6.7801 May 30,
NA 261.54
Plan A - Fortnightly Div 2008 0.2826 2008
6.746
IDFC SSIF - Short Term - Jun 24, - 1.1583 7.7508 May 30,
3 261.54
Plan A - Growth 2008 0.2652 2008
5.804
IDFC SSIF - Short Term - Jun 24, - 0.9134 6.6321 May 30,
9 261.54
Plan A - Monthly Dividend 2008 0.3178 2008
IDFC SSIF - Short Term - Jun 24, - 0.9887 7.0197 May 30,
NA 261.54
Plan B - Fortnightly Div 2008 0.2618 2008
IDFC SSIF - Short Term - Jun 24, 1.219 8.0156 May 30,
-0.243 NA 261.54
Plan B - Growth 2008 2008
IDFC SSIF - Short Term - Jun 24, - 0.9688 6.9434 NA 261.54 May 30,
Plan B - Monthly Dividend 2008 0.2987
50 | P a g e
2008
IDFC SSIF - Short Term - Jun 18, 0.1099 1.7759 8.4959 May 30,
NA 261.54
Plan C - Super IP - Growth 2008 2008
Standard Chartered MF has around Rs 14,000 crore in assets of which Rs 4,000 crore is
in equity while rest is in debt. With this IDFC acquires Standard Chartered Trustee
Company and Standard Chartered Asset Management Company, both of which
represent Standard Chartered's mutual fund business in India.
IDFC is one of the leading infrastructure finance institutions, and the acquisition would
give it a foothold in the retail sector and improve its high margin fee based income.
51 | P a g e
STUDY AND SURVEY
Objective
This study is conducted in order to find out:-
RATIONALE OF STUDY
The study of this nature is being conducted on the behalf of IDFC AMC (Standard
charted) for prediction of future of mutual funds in Indian emerging market. A high
level of competition entering the mutual funds sector, companies need to catch up
with the ever changing demands of the industry. The study is being conducted to get
an edge over other MFs houses in the mutual fund industry. It is also done in order to
know as to how much knowledge and money the consumers contribute in the MFs
schemes.
Survey Methodology
Survey comprises collecting, organizing, and evaluating data, reaching at a specific
conclusion and at the same time careful evaluation of the conclusion. Collection of
data has been done by two ways (1) primary data collection; and (2) secondary data
collection, through questionnaires and websites, magazines, newspapers, documents,
etc. Area of data collection was Bank of India branches at Hazratganj and Gomti Nagar
(Lucknow). Analysis of data has been done with the help of these recorded data.
Articles are attached from various magazines. Conclusion is drawn from result of
different data processing.
1. The survey was conducted in Hazratganj and Gomti Nagar. The standard of
living, per capita income of people, earning style, etc. of this region is different
from other areas. Therefore, the inferences drawn from the survey can’t be
generalized.
FINDINGS
1. This graph clearly shows that young people are more likely to visit
bank branches. Thus more chances of getting long term, more risk taker
and aggressive investors.
Figure 1
Age group
2. Here data shows that people are willing to earn more return than that
of they earn in traditional ways of investment.
53 | P a g e
Expected returns
Figure 2
% of disposable income
Figure 3
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4. This graphical representation clearly shows that investors give smaller
part of their investment pool to mutual funds investment.
% of total investment
Figure 4
55 | P a g e
No. of persons
Figure 5
6. This chart is showing that Indian investors are willing to stay invested
for a time duration of more than 12 months. They have patience, they
want to earn more money on their investment, and this is a bright sign for
mutual funds industry.
Figure 6
Key findings:-
This survey shows that surveyed persons are not having knowledge of more than 10
AMCs name and not more than 7 schemes of any one of mutual fund houses. Also,
there source of information of mutual funds products and information are mostly
professional than the other ways like newspapers, journals etc. This indicates that
brand awareness among Indian customers are either very low or not up to a
significant level i.e. poor.
Other Findings:
56 | P a g e
# Study found that more young people are likely to involved in financial activities.
They more frequently visit banks and meet financial advisors. This is an opportunity
for mutual funds houses to attract these people.
# More than 50% of surveyed persons willing to take high risk for high rate of return.
This indicates that riskier investment options can also attract big pool of money if
investors are properly convinced.
# Another observation made by study was, many a time advisors themselves do not
get timely updates from AMs. This leads them not to offer some of schemes those may
give good returns.
# Surveyed persons are not having knowledge of more than 10 AMCs name and not
more than 7 schemes of any one of mutual fund houses. This requires an aggressive
marketing of funds. So that awareness level of investor can be improved.
Professional advisors think that investors are not educated properly. They (investor)
rely on what others say or what they (advisors) say. It’s easy to convince them for
investment but not so easy to make them clear about market affecting factors. “Stock
market is going low and I am already losing, you are asking for investment in market,
sorry I am not interested.” An investor grievance.
We know that Indians are earning more therefore spending more, but how much they
save/invest in order to secure future. There are numbers of traditional ways of saving.
They give guaranteed return with low risk. High risk associated investment options
was not considered a right decision. India is a young country having a considerably big
part of young people. They are more risk taker. They need a right direction for
investment options.
57 | P a g e
This study and survey on mutual funds is a small eye hole to see the picture of mutual
funds industry in India. This provides almost clear view to the readers.
Mutual funds industry is enlarging its size in India. JVs, foreign JVs and acquisitions are
in trend. AUM is increasing, number of investors is rising, and number of AMCs is going
up. These changes are likely to happen. Indian monetary policy is supporting new
business. Private sector is aggressively participating in mutual funds business.
Numbers of schemes are much more than earlier.
With such shining sides, double digit inflation rate, bearish stock market, RBI’s high
bank rates, squeezing liquidity and other dark sides putting pressure on consumers
saving. This situation pushes investors back from investment. They wait and hold cash
rather than investing. This study found that investors are willing to invest with high
rate of return. They know high return always adhere to high risk but market still is not
in correction mode. It will take time.
Indian market potential is high, investors are willing to pour money in mutual funds,
despite some temporary restraints, and other economic factors are in favorable mode.
Thus we need proper management of advisory services, more schemes, financial
advisors and institutions to cater untouched markets.
Industry need to revise its business strategy. Investor’s perception is not prioritized
yet. Investors have no idea about the leading mutual fund schemes which suit them
best and thus they depend on experts’ advice. There is a serious need of
advertisement of mutual fund products so that customer may take his decision
himself. That will help them and subsequently the AMCs who are particularly doing
well as far as their products are concerned..
Questionnaires
58 | P a g e
4. Industry is changing, consumer`s perception is changing, Indian economy is
also dynamic, growing, how do you justify your job with such a changing
scenario?
6. If I keep all recommendations aside and simply ask you, what factors do you
consider before suggesting any scheme to a prospective client?
Less than 21
21 to 25
25 to 35
35 to 60
Above 60
Your pension
Your salary
Up to 8%
Between 8% to 18%
Above 18%
59 | P a g e
Low level of knowledge
6. What percent of your disposable income do you keep aside for different
investment options?
0% to 5%
5% to 10%
10% to 15%
15% to 20%
20% to 30%
Above 30%
0% to 5%
5% to 10%
10% to 20%
20% to 30%
30% to 50%
Above 50%
8. Which of the following source of mutual funds information do you like to opt
for?
Professional advisory
60 | P a g e
Company advisory
10. How likely are you stay invested during volatile times?
Glossary:-
Back-end Load - Charge imposed by a mutual fund when an investor redeems
shares. Redemption fees and contingent deferred sales charges are examples.
Dividend Reinvestment Fee - Fee charged when an investor uses dividends paid
by a mutual fund to purchase additional shares of the mutual fund.
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Exchange Fee - Fee charged when an investor switches from one mutual fund to
another in the same family of funds.
Front-end Load - Sales charge applied at the time the investor purchases shares.
Management Companies - There are two types: open-end and closed-end. Open-
end funds, which sell and buy shares back on demand, are called mutual funds.
Closed-end funds have a fixed number of shares. After the initial public offering,
shares in closed-end funds trade only on exchanges. The price is determined by
the market and does not necessarily reflect the net asset value of the shares.
Management Fee - A fee paid by the mutual fund to its investment adviser and
charged against fund assets, generally 1% or less per year.
Net Asset Value - In effect, the share price of a fund computed daily by adding
the value of the fund’s securities and other assets, subtracting liabilities, and
dividing by the number of shares outstanding. For a mutual fund with a front-end
load, net asset value is identical to the "asked price" or "offering price."
Prospectus - A disclosure document which should provide the investor with full
and complete disclosure of all material information needed by the investor to
make a decision whether or not to invest. The prospectus generally incorporates
the SAI by "reference." (See SAI definition.)
Rule 12b-1 Fee - An asset-based sales load, permitted by SEC Rule 12b-1,
representing annual charges of up to 1-1/4% for specific sales or promotional
activities of the mutual fund. Over time, the amount paid in Rule 12b-1 fees can
surpass the amount paid in sales fees charged by load funds.
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Total Return - A computation of mutual fund performance which measures
changes in total value over a specified time period. Included in the computation
are distributions paid to investors, capital gains distributions and unrealized
capital gains and losses. Since all fund activity which has an effect on net asset
value is represented, this measure provides a picture of performance which is
more complete than yield.
References:-
http://www.IDFCMF.com
http://www.moneycontrolindia.com
http://www.nse-india.com
http://www.amfiindia.com
http://www.mutualfundsindia.com
http://www.sebi.gov.in
http://www.economictimes.com
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