Report On Summer Training

MUTUAL FUNDS IN INDIA

Submitted To:

Punjab Institute Of Management And Technology

In partial fulfillment of the

Requirements for the award of degree of

Master of Business Administration

Submitted By:-

MD. EHSANUL HAQUE

University Roll no. - 94982238376

DEPARTMENT OF MANAGEMENT

PANJAB INSTITUTE OF MANAGEMENT AND

TECHNOLOGY

MANDI GOBINDGARH
2009-2011

1
 Certificate by the project-Incharge

This is to certify that the Project Report at

MUTUAL FUNDS IN INDIA

Submitted in partial fulfillment of the requirements for the award of

The degree of

MASTER OF BUSINESS ADMINISTRATION

TO

PUNJAB INSTITUTE OF MANAGEMENT AND TECHNOLOGY

Is a record of bonafide Training carried out by

SUNIL KUMAR PANDEY

Under my supervision and guidance and that no part of this report has

been submitted for the award of any other degree / diploma /

fellowship or similar titles or prizes.

FACULTY GUIDE

Signature:

Name : Ms. MANISHA GUPTA

Signature & seal of the Learning Center

2
 STUDENT’S DECLARATION

I hereby declare that the Project Report conducted at

Place: ---------------------

MUTUAL FUNDS IN INDIA

Under the guidance of

Ms. Manisha Gupta

Submitted in Partial fulfillment of the requirements for the

Degree of

MASTER OF BUSINESS ADMINISTRATION

TO

PUNJAB INSTITUTE OF MANAGEMENT AND TECHNOLOGY

Is my original work and the same has not been submitted for the
award of any other Degree/diploma /fellowship or other similar titles
or prizes.

3
 Date:
PREFACE
For management career, it is important to develop managerial skills. In order to

achieve positive and concrete results, along with theoretical concepts, the exposure of

real life situation existing in corporate world is very much needed. To fulfill this need,

this practical training is required.

I took training in KARVY STOCK BROKING located at Firoz Gandhi

market in Ludhyana It was my fortune to get training in a very healthy atmosphere. I got

ample opportunity to view the overall working of the mutual funds.

This report is the result of my 45 days of summer training in KARVY STOCK

BROKING, as a part of M.B.A. The subject of my report is- MUTUAL FUNDS IN

INDIA.

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 ACKNOWLEDGEMENT

If words are considered as a symbol of approval and token of appreciation then let the
words play the heralding role expressing my gratitude

The working of mutual funds was far from me but I got an opportunity to understand the
mutual funds in India at KARVY STOCK BROKING. While training I learnt many
things about mutual funds in India and its structure. So I am very thankful to KARVY
STOCK BROKING for giving me such opportunity.

First of all I thank to that Gracie god who blessed me with all kinds of facilities that had
been provided to me for completion of my report.

I am also grateful to Mr. Sunil Kumar Pandey for permitting me to take the training at
KARVY STOCK BROKING.

I acknowledge my deepest sense of gratitude and sincere feeling of in debtness divine all
my faculty members and Mr. Sunil kumar pandey (zonal head) under whose guidance
and through their sustained efforts and encouraging attitude, I was able to complete my
project. It would have been difficult to achieve the results in such a short span of time.

I want to express my sincere gratitude to all the staff members of KARVY STOCK
BROKING for spending their precious time and sharing the value able information with
me and in helping my project to be a success.

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 TABLE OF CONTENT

1. Conceptualisation & Operationalisation

2. Objectives Of Study

3. Mutual Funds

4. History & Growth Of Mutual Funds In India

5. Research Methodology

6. Interpretation And Analysis Of Data

7. Analysis Of Data

8. Finding & Suggestion

9. Limitations Of The Study

10. Questionnaire

11. Bibliography

6
Conceptualisation & Operationalisation

A mutual fund is a trust that pools the savings of a number of investors who share a

common financial goal the money this collected by the fund manager in different type of

securities depending upon the objective of the scheme. These could range from shares to

debentures to money market instruments.

Investor’s attitude has a very special effect on the formulation and the success of any

project. Attitude of the investors can be defined as the attitude which the investors

display in searching for purchasing, using, evaluating and disposing of products and

services that they expect will satisfy their needs. As a lot of options are there before the

investors to invest their surplus in order to make it grow. The main focus of the study to

know the perception of investors towards mutual funds as an investment tool.

Focus of the Study

The main focus of the problem was to know the attitude of present mutual fund investors

and measuring the current level of awareness among non-investors also. It was an attempt

to know that why people don’t invest in mutual finds and what are their investment needs

& what they expect from the mutual funds cos.

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Objectives of the study

The primary objective

The primary purpose of this study is to know the awareness among investors about

the investments. It would provide insights about the criterion used by the investors for

the evaluation of a M.F. scheme.

The Secondary objectives

1. To know the saving behavior of the respondents.

2. To know what investors think of Budgetary changes in MF industry

8
 Mutual Funds

In the financial industry the talk of the day is “Mutual Funds”. Of late MFs have

become a hot favorite of millions of people all over the world.

A MF is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is invested by the fund manager in

different types of securities depending upon the objective of the scheme. These could

range from shares to debentures to money market instruments. The income earned

through these investments and the capital appreciation realized by the scheme are shared

by its unit holders in proportion to the number of units owned by them (pro-rata). Thus a

MF is the most suitable investment for the common man as it offers an opportunity to

invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody

with an investible surplus of as little as a few thousand rupees can invest in Mutual

Funds. Each Mutual Fund scheme has a defined investment objectives and strategy.

Hence Mutual Fund is nothing but a form of collective investment made at a high

level, to enjoy the economies of large-scale operations.

A Mutual Fund is the ideal investment vehicle for today’s complex and modern

financial scenario. Markets for equity shares, bonds and other fixed income securities,

real estate, derivatives and other assets have become mature and information driven.

Price changes in these assets are driven by global events occurring in faraway places.

A typical individual is unlikely to have the knowledge, skills, inclination and time

to keep track of events, understand their implications and act speedily. An individual also

9
finds it difficult to keep track of ownership of his assets, investments, brokerage dues and

bank transactions etc.

A Mutual Fund is the answer to all these situations. It appoints professionally

qualified and experienced staff that manages each of these functions on a full time basis.

While the concept of individuals coming together to invest money collectively is not new,

the Mutual Fund in its present form is a 20th century phenomenon. In fact, Mutual Funds

gained popularity only after the Second World War. Globally, there are thousands of

firms offering tens of thousands of Mutual Funds with different investment objectives.

Today Mutual Funds collectively manage almost as much as or more money as compared

to Banks.

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HISTORY AND GROWTH OF MUTUAL FUNDS IN INDIA

The mutual fund industry in India strted in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank. The history of

mutual funds in India can be broadly divided into four distinct phases.

First Phase – 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the

Reserve Bank of India and functioned under the Regulatory and administrative control of

the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

Development Bank of India (IDBI) took over the regulatory and administrative control in

place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of

1988 UTI had Rs.6, 700 crores of assets under management.

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

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector

banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation

of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June

1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund

(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda

Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set

up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had

assets under management of Rs.47, 004 crores.

11
Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the

year in which the first Mutual Fund Regulations came into being, under which all mutual

funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer

(now merged with Franklin Templeton) was the first private sector mutual fund registered

in July 1993. The number of mutual fund houses went on increasing, with many foreign

mutual funds setting up funds in India and also the industry has witnessed several

mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with

total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44,541 crores of

assets under management was way ahead of other mutual funds.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust

of India with assets under management of Rs.29, 835 crores as at the end of January

2003, representing broadly, the assets of US 64 scheme, assured return and certain other

schemes. The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the

12
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of

assets under management and with the setting up of a UTI Mutual Fund, conforming to

the SEBI Mutual Fund Regulations, and with recent mergers taking place among

different private sector funds, the mutual fund industry has entered its current phase of

consolidation and growth. As at the end of September, 2004, there were 29 funds, which

manage assets of Rs.153108 crores under 421 schemes. By the end of June 2005 the total

assets of mutual fund industry are Rs.164546 crores.

SET UP OF A MF

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset

Management Company (AMC) and custodian. The trust is established by a sponsor or

more than one sponsor who is like promoter of a company. The trustees of the mutual

fund hold its property for the benefit of the unit holders. Asset Management Company

(AMC) approved by SEBI manages the funds by making investments in various types of

securities. Custodian, who is registered with SEBI, holds the securities of various

schemes of the fund in its custody. The trustees are vested with the general power of

superintendence and direction over AMC. They monitor the performance and compliance

of SEBI Regulations by the mutual fund.

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. However, Unit Trust

of India (UTI) is not registered with SEBI (as on January 15, 2002).

13
TYPES OF MF SCHEMES

Schemes according to Maturity Period

A mutual fund scheme can be classified into open-ended scheme or close-ended scheme

depending on its maturity period.

Open-ended Fund/ Scheme

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.

Close-ended Fund/ Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is

open for subscription only during a specified period at the time of launch of the scheme.

Investors can invest in the scheme at the time of the initial public issue and thereafter

they can buy or sell the units of the scheme on the stock exchanges where the units are

listed. In order to provide an exit route to the investors, some close-ended funds give an

option of selling back the units to the mutual fund through periodic repurchase at NAV

related prices. SEBI Regulations stipulate that at least one of the two exit routes is

provided to the investor i.e. either repurchase facility or through listing on stock

exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

14
Schemes according to Investment Objectives

A scheme can also be classified as growth scheme, income scheme, or balanced scheme

considering its investment objective. Such schemes may be open-ended or close-ended

schemes as described earlier. Such schemes may be classified mainly as follows:

Growth / Equity Oriented Scheme

The aim of growth funds is to provide capital appreciation over the medium to long-

term. Such schemes normally invest a major part of their corpus in equities. Such funds

have comparatively high risks. These schemes provide different options to the investors

like dividend option, capital appreciation, etc. and the investors may choose an option

depending on their preferences. The investors must indicate the option in the application

form. The mutual funds also allow the investors to change the options at a later date.

Growth schemes are good for investors having a long-term outlook seeking appreciation

over a period of time.

Income / Debt Oriented Scheme.

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate debentures,

Government securities and money market instruments. Such funds are less risky

compared to equity schemes. These funds are not affected because of fluctuations in

equity markets. However, opportunities of capital appreciation are also limited in such

15
funds. The NAVs of such funds are affected because of change in interest rates in the

country. If the interest rates fall, NAVs of such funds are likely to increase in the short

run and vice versa. However, long term investors may not bother about these fluctuations.

Balanced Fund

The aim of balanced funds is to provide both growth and regular income as such schemes

invest both in equities and fixed income securities in the proportion indicated in their

offer documents. These are appropriate for investors looking for moderate growth. They

generally invest 40-60% in equity and debt instruments. These funds are also affected

because of fluctuations in share prices in the stock markets. However, NAVs of such

funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid 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.

16
Gilt Fund

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

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index,

S&P NSE 50 index (Nifty), etc. these schemes invest in the securities in the same

weightage comprising of an index. NAVs of such schemes would rise or fall in

accordance with the rise or fall in the index, though not exactly by the same percentage

due to some factors known as "tracking error" in technical terms. Necessary disclosures in

this regard are made in the offer document of the mutual fund scheme.

There are also exchange traded index funds launched by the mutual funds, which are

traded on the stock exchanges.

Sector specific 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 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-

17
dominantly in equities. Their growth opportunities and risks associated are like any

equity-oriented scheme

Load or no-load Fund

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time

one buys or sells units in the fund, a charge will be payable. This charge is used by the

mutual fund for marketing and distribution expenses.

A no-load fund is one that does not charge for entry or exit. It means the investors can

enter the fund/scheme at NAV and no additional charges are payable on purchase or sale

of units.

Advantages of Mutual Fund

Affordability

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the

investment objective of the scheme. An investor can buy in to a portfolio of equities,

which would otherwise be extremely expensive. Each unit holder thus gets an exposure to

such portfolios with an investment as modest as Rs.500/-. Thus it would be affordable for

an investor to build a portfolio of investments through a mutual fund rather than investing

directly in the stock market.

Diversification

Simply means that you must spread your investment across different

securities (money market instruments, bonds, stocks, real estate, fixed deposits etc.) and

18
different sectors (banking, textile, IT, etc.). This kind of a diversification may add to the

stability of returns, so as to offset any underperformance by any one sector or instrument

and help the investor meet his investment objective.

Variety

Mutual funds offer a whole variety of schemes. This variety is beneficial in two

ways: first, it offers different types of schemes to investors with different needs and risk

appetites; secondly, it offers an opportunity to an investor to invest sums across a variety

of schemes, both debt and equity. For example, an investor can invest his money in a debt

scheme and an equity scheme depending on his risk appetite to create a balanced

portfolio easily or simply just buy a Balanced Scheme.

Professional Management

Qualified investment professionals seek to maximize returns and minimize risk

monitor investor's money. In a mutual fund, the investor is handling his money to an

investment professional that has experience in making investment decisions. It is then the

Fund Manager's job to (a) find the best securities for the fund, given the fund's stated

investment objectives; and (b) keep track of investments and changes in market

conditions and adjust the mix of the portfolio, as and when required.

Liquidity

One is free to take his money out of open-ended mutual funds whenever

required. Most open-ended funds mail your redemption proceeds, which are linked to the

19
fund's prevailing NAV (net asset value), within three to five working days of putting in

request.

Regulations

Securities and Exchange Board of India ("SEBI"), the Capital Markets regulator has

clearly defined rules, which govern mutual funds. These rules relate to the formation,

administration and management of mutual funds and also prescribe disclosure and

accounting requirements. Such a high level of regulation seeks to protect the interest of

investors.

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 Research Methodology

This section will describe the methodological tools adopting in conducting the present

research. Properly conducted research reduces the uncertainties level for the top

management in making critical decisions. Hence it is extremely important to describe the

research methodology.

Research design

Research Design is diagnostic and descriptive because it is an attempt to find out the

reasons why people don’t invest in mutual funds as well as it studies the behavior of

respondents.

Universe and survey population

The universe of the survey was the investor of Rewari City. The survey population was 50.

Sample size

The sample constituted 50 respondents. The respondents were of various age

groups, varying income groups and having different occupations. Due care has been

taken to make the sample a representative one for the Mutual Fund Investors.

The investment decisions are influenced by a no of variables. The age,

income, no of dependents is some of the factors, which have an impact upon the decision

of making investment. As there occurs some change in these variables the decisions of

investment changes accordingly.

21
Data collection

Both Primary as well as Secondary Data was collected for the study. Secondary

Data was collected from various sources such as books, magazines, and newspaper and

also through Internet to make analysis healthier.

Making a Structured Questionnaire fulfilled primary data collection need. The

investors’ problems and needs can be best understood by themselves. So the

methodology adopted was interview of investors through structured questionnaire. The

questionnaire consisted of questions related to the socio economic position of the

investors, their awareness about MFs and their views regarding Globalization of Indian

Mutual Fund industry. It consisted of both open ended and close-ended questions.

22
 INTERPRETATION AND ANALYSIS OF DATA

Table No. 1

SAMPLE COMPOSITION BY MONTHLY INCOME

Sr. No. Monthly No. of %age

Income(Rupees) Respondents
1 4500-8500 5 10
2 8500-12500 12 24
3 12500-16500 15 30
4 16500-20500 11 22
5 More Than 20000 7 14
Total 50 100
Source: Primary data collected through questionnaire

Table No. 2

SAMPLE COMPOSITION BY OOCUPATION

Sr. No. Occupation No. of Respondents %age

1. Service 10 20
2. Business 15 30
3. Professional 20 40
4. Others 5 10
Total 50 100
Source: Primary data collected through questionnaire

Table No. 3

SAMPLE COMPOSITION BY EDUCATIONAL QUALIFICATION

Sr. No. Educational No. of Respondents %age

Qualification
1. Under Graduate 2 4

23
2. Graduate 13 26
3. Post Graduate 35 70
Total 50 100
Source: Primary data collected through questionnaire

24
 ANALYSIS OF DATA

SAVING BEHAVIOUR OF RESPONDENTS

Table no 4

LEVEL OF ANNUAL SAVINGS

Sr. No. Level of Savings No. of %age

Respondents
1. Less than 50000 12 24
2. More than 50000& Less than 100000 15 30
3. More than 100000& Less than 250000 10 20
4. More than 250000 4 8
Total 50 100
Source: Primary data collected through questionnaire

Level Of savings

15

10

No. Of respondents
5

0
<50000 >100000&<250000

o Around 305 of people are saving in between Rs. 50000 to Rs. 100000. This can be

effectively mobilized towards Mutual Funds. Efforts should be towards diverting

their savings from traditional investment to stock market.

25
 o Mostly (around 98%) people know the various options of investment like Bank

Deposits, Insurance, Real estate, Gold and they prefer to invest in these.

Comparatively less no. of people is aware of mutual funds but this no. is

increasing day by day.

o When respondents were asked about their purpose of investment then the

response showed that financial security is the first thing that comes to the mind

while making any kind of investment. It is then followed by regular income and

tax savings.

o Mostly (50%) people want to invest in medium term as compared to short term

and long term. People want liquidity as well as safety.

Table No. 5

Preferred time for investment

S.No. Time Period No. of Respondents %age

1. Short Term 15 30

2. Medium Term 25 50

3. Long Term 10 20

Total 50 100

Source: Primary Data collected through questionnaire.

Preferred time Period

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 25

20

15

10 No. of Respondents

0
Short Term Medium Term Long Term

o While choosing any investment plan most important criteria used is returns

followed by liquidity and safety. Investors want their money to earn more and

more at first place followed by easy withdrawal of money.

Table No.6

Criteria Used for making Investment

S. No. Criteria No. of %age

Respondents
1. Tax Saving 8 16

2. Returns 22 44

3. Liquidity 14 28

4. Safety 10 20

5. Security 6 12

Total 50 100
Source: Primary Data collected through questionnaire

Criteria for Investment

27
 25

20

15

10 No. of Respondents

0
Tax Saving Returns Liquidity Safety Security

o Decisions For 30% investors are influenced by their colleagues, followed by their

Financial Advisors, family and Neighbors.

Table no.7

Factors influencing Decisions

S. No Factors No.of respondents %age

1. Colleagues 15 30

2. Family 8 16

3. Friends 7 14

4. Neighbors 8 16

5. Financial Advisors 12 24

Total 50 100
Source: Primary Data collected through questionnaire

28
 Factors Affecting Decisions for Investments

No. of Respondents 20
15
10 no. of Respondents
5
0
Colleagues Family Friends Neighbors Financial
Advisors
Factors

o More than 70% of investors don’t take the services of financial advisors because

they think that their analysis is more than sufficient. But they expect that financial

advisors should have enough knowledge about the market so that other investors

will not be cheated by them.

29
 MUTUAL FUND AWARENESS OF INVESTORS

 As the respondents are mutual fund investors as well as non investors so overall

analysis is that mutual fund investors are having good knowledge about mutual

funds whereas other people slowly know about mutual funds. Well they are aware

about mutual funds but they hesitate to invest in it.

Table no.8

RATING OF AWARENESS OF MUTUAL FUNDS

S.No. Responses No. Of Respondents %age

1. Very Much 10 20

2. Somewhat 20 40

3. Neutral 5 10

4. Not Aware 15 30

Total 50 100

Source: Primary Data collected through questionnaire

30
 Rating of Awareness

20

15

10
No. of Respondents

0
Not aw are Neutral Somew hat Very Much

 Less than 40% respondents know about mutual fund companies operating. Well-

known companies are HDFC, Reliance, SBI, UTI etc.

 More than 70% respondents know that mutual fund companies invest money in

shares. Others don’t know mutual fund invest where. There are also some respondents

who haven’t heard the term Mutual Fund.

 Safety and Risk reduction has been found as its two main advantages.

 Fluctuation in prices has been considered as the main disadvantage of mutual fund.

 Around 80% respondents don’t know about present offers in mutual fund.

 Only 15 out of 50 respondents know about Net Asset Value. Others didn’t even heard

about NAV.

31
 Table No. 9

AWARENESS OF NET ASSET VALUE

S.No Responses No. of Respondents %age

1. YES 15 30

2. NO 35 70

Total 50

100
Source: Primary Data collected through questionnaire

Awareness about NAV

YES
NO

32
 20

15

10
No. of Respondents
5

0
Strong Agreement
Disagreement

MUTUAL FUNDS INVESTMENT BEHAVIOUR

Comparatively less no. Of respondents invest their money in mutual funds

because they hesitate to invest in this option. They prefer to invest in Bank

Deposits, Post Office schemes, Real Estate etc.

 Level of savings invested in mutual funds is also very less. 30 respondents don’t

invest a single penny in mutual funds.

 Mostly investors prefer to invest in equity funds followed by balanced funds. A

very less no. Of investors invest their money in Money Market Instruments etc.

 Past performance is most important factor influencing the investors followed by

return and risk.

 This question gained mixed responses as respondents who don’t know about

mutual funds, made neutral response. Some investors were agree because their

investments got diversified in various co. s which ultimately reduces risk.

33
 Table No. 10

MUTUAL FUNDS ARE BETTER THAN DIRECT STOCKS

S.No Responses No. of Respondents %age

1. Strong Agreement 7 14

2. Agreement 8 16

3. Neutral 20 40

4. Disagreement 10 20

5. Strong 5 10

Disagreement 50 100

Total
Source: Primary Data collected through questionnaire

20

15

10
No. of Respondents
5

0
Strong Agreement
Disagreement

MUTUAL FUNDS BETTER THAN STOCKS

 Liquidity attracts the consumers most because investors don’t want to block their

money, they want quick encashing of their money.

34
 Only 15 respondents were agree to the factor that attracts only when it is

booming. All other responses were either in the disagreement or neutral.

 A very huge percentage of respondents were in the opinion that if a little risk can

give them lot of comfort and wealth then they will be interested in adopting that

option in long run. They will prefer the investment in the opinion that has no risk

but gives lessor or no returns.

 Studying of portfolio is very important so as to know where the hard earned

money is being invested but a very little percentage wants to know the portfolio of

a particular fund.

Table No. 11

STUDY OF PORTFOLIO IS VERY IMPORTANT

35
S.No Responses No. of Respondents %age
1. Strong Agreement 5 10

2. Agreement 8 16

3. Neutral 20 40

4. Disagreement 7 14

5. Strong 10 20

Disagreement 50 100

Total

 Very less percentage of respondents invest in those schemes that consist of sectors on

which they are bullish.

 Most of the respondents suggest that if greater economies of scale, professional

management, more tax benefits, more savings, more awareness will motivate them to

invest in mutual funds.

 Some respondents suggested that M.F. should tack the market on day to day basis and

exploit the arbitrage opportunities and restrictions on the investment by mutual funds

should be removed.

36
 FINDINGS AND SUGGESTIONS

On the basis of detailed study of various mutual funds operated in India, it is clear that

mutual funds in India have played an imported role to route the scattered small household

savings towards investment in economic activities. But these are not as we expected from

them. There are various reasons for this slow mobilization. These reasons are depressing

trends in money market as well as some adverse result shown by some mutual funds

schemes. This eroded the confidence level of investors in mutual funds and I also tried to

give some suggestions for improvements of working of these mutual funds, so that they

may continue the process of resources mobilization and capital formation. The various

findings and suggestions for improvement of working of mutual funds are following:

 Whenever a mutual fund scheme is launched it involves various expenditure for

planning and promotion of fund scheme, printing and stationary, advertisement,

commission to merchandising bank, dealers and agent. Almost all mutual fund are

charging 6% for these expenditures. It is required to bring down the annual expense

to a reasonable level.

 Whenever a mutual fund is launched, it states its portfolio according to the objectives

of funds, But is experienced that many mutual fund operators ignored the basic

objective of fund portfolio, particularly those mutual fund which are income oriented

required to invest their many mainly in debt instrument of high yielding. A large part

of resources of these funds is invested in IPOs, small and mid cap stocks which are

the not traded frequently at stock exchanges. The investors are big losers by investing

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 in these funds as the NAV of these funds has liquidated to great extent of their

original investments.

 Due to lack of clear guidelines, sometimes the holdings of one fund are purchased by

other fund of the same group. In accounting records such transactions are shown at

profit which is increasing the NAV of the funds without real increase in intrinsic

value of their assets. The loser is investor. It is suggested that it should be made

obligatory for mutual funds to mention these transactions in their monthly/ weekly

reports that are published for the information of the public.

 Some mutual fund managers are favoring by the way of routing exceptionally high

volume of transactions through some brokers in contravention of SEBI norms.

Apparently it seems a case of favoritism by the mutual funds.

The 5% norm is determined by the SEBI to safeguard the interests of investors. It

should be followed strictly and SEBI should take necessary action against the

defaulting funds.

 It is also noticed that sometimes some funds are involving in high volume of

transactions in one go just to inflate the market price of a particular scrip. It creates

the unnecessary speculation in such shares. In such transactions original investors of

the fund as well as other investors lose their money. It brings frustration in

prospective investors. The SEBI should take care that such transactions are not made

by mutual funds.

 The entry regulations in the mutual funds business are very easy to complete by a

skilled manipulator. Thus a person of ulterior motive may enter onto mutual fund

business easily and may cheat the investors. It is suggested that to check the entry of

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 such unscrupulous operator, the regulation for granting permission for starting a

mutual fund AMC should be made strict. The whole process of granting permission

should be effectively controlled and supervised.

 Investor’s satisfaction is an important factor for the mutual funds. Investors are

entrusting their hard-earned savings to mutual funds for effective management of

their interests. But due to increasing no. of investors, various problems related to

investors service TAURUS MUTUAL FUND has set up a 24 hour phone service in

Delhi and Bombay to its subscribers. A separate “Investors Service Cell” should be

established by all mutual funds and should be regulated by Senior Management from

time to time.

 Mutual fund activities are mainly confined to urban areas. A little effort is being

made to attract the savings of rural and agricultural sector.

It is suggested that no cover potential investors of vast section of society, these

organisations should open some branches in rural areas and specially recruit the

agents the in from rural area. These agents should be given some additional incentives

comparing to others agents.

 For marketing a scheme, the various mutual funds AMCs are giving attractive

advertisements in newspapers, magazines and other media, they are highlighting the

qualities of their schemes to attract the investors. Sometimes it is noticed that some

MFs operators created an artificial market conditions to boost the sales of their

scheme.

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 It is suggested that advertisement should be screened and necessary action should be

taken against such organisation, because this is an unfair trade practice to allure the

innocent investors.

 The various mutual funds are following different methods of calculation of their

NAVs. This is creating a problem to the investors.

It is suggested that the SEBI should effectively instruct all mutual funds to follow the

uniform procedure for calculation of NAV.

 In practice it is found that some fund schemes are not disclosing this information

about their portfolio so that other competitors may not get benefit from their strategy.

It is suggested that the norms of portfolio disclosure should be followed by all mutual

funds and SEBI should strictly supervise this aspect.

Key terms used in mutual funds industry

ADVISOR

The organization employed by a mutual fund to give professional advice the funds

investments and to supervise the management of its assets.

ASKING AND OFFERING PRICE

The price at which a mutual fund’s shares can be purchased. The asked or offering price

means the current net asset value (NAV) per share plus sales charge, any. For a no-load

fund, the asked price is the same as the NAV.

ASSET ALLOCATION FUND

A fund that spreads its portfolio among a wide variety of investments, including domestic

and foreign stocks and bonds, government securities, gold bullion and real estate stocks.

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This gives small investors far more diversification than they could get allocating money

on their own. Some of these funds keep the proportions allocated between different

sectors relatively constant, while others alter the mix as market conditions change.

AUTOMATIC REINVESTMENT

A service offered by most mutual funds whereby income dividends and capital gain

distributions are automatically invested into the fund by buying additional shares and thus

building up holdings through the effects of compounding.

BALANCED FUND

A mutual fund that maintains a balanced portfolio, generally 60% bonds or preferred

stocks and 40% common stocks.

BID OR SELL PRICE

The price at which a mutual fund’s shares are redeemed (bought back) by the fund. The

bid or redemption price means the current net asset value per share, less any redemption

fee or back-end load.

BOND FUND

A mutual fund whose portfolio consists primarily of corporate or Government bonds.

These funds generally emphasize income rather than growth.

BOND RATING

System of evaluating the probability of whether a bond issuer will default. Various firms

analyze the financial stability of both corporate and government bond issuers. Ratings

range from AAA or Aaa (extremely unlikely) to D (currently in default). Bonds rated

BBB or below are not considered to be of investment grade. Mutual Funds generally

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restrict their bond purchases to issues of certain quality ratings,which are specified in

their prospectuses.

CAPITAL APPRECIATION FUND

A mutual fund that seeks maximum capital appreciation through the use of investment

techniques involving greater than ordinary risk, such as borrowing money in order to

provide leverage, short-selling and high turnover.

CAPITAL GAINS DISTRIBUTIONS

Payments (usually annually) to mutual fund shareholders of gains realized on the sale of

portfolio securities.

CAPITAL GROWTH

A risk in market value of a mutual fund’s securities, reflected in its net asset value per

share. This is a specific long-term objective of many mutual funds.

CERTIFICATE DEPOSIT

Interest-bearing, short-term debt instrument issued by banks and thrifts.

CLOSED-END INVESTMENT COMPANY

An investment company that offers a limited number of shares. They are traded in the

securities markets, usually through brokers. Price is determined by supply and demand.

Unlike open-end investment companies (mutual funds), closed-end funds do not redeem

their shares.

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COMMERCIAL PAPER

Short term, unsecured promissory notes with maturities no longer than 270 days. They

are issued by corporations, to fund short term credit needs.

COMMON STOCK FUND

An open end investment company whose holdings consist mainly of common stocks and

usually emphasize growth.

CUSTODIAN

The bank or trust company that maintains a mutual fund’s assets includes its portfolio of

securities or some record of them. Provides safekeeping of securities but has no role in

portfolio management.

DAILY DIVIDEND FUND

This term applies to funds that declare their income dividends on a daily basis and

reinvest or distribute monthly.

DISTRIBUTOR

An individual or a corporation serving as principal underwriter of a mutual fund’s shares,

buying shares directly from the fund, and reselling them to the other investors.

DIVERSIFICATION

The policy of spreading investments among a range of different securities to reduce the

risks inherent in investing.

EXCHANGE PRIVILEGE (OR SWITCHING PRIVILEGE)

The right to transfer investments from one fund into another, generally within the same

fund group, at nominal cost.

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EX-DIVIDEND DATE

The date on which a fund’s Net Asset Value (NAV) will fall by an amount equal to the

dividend and/or capital gains distribution (although market movements may alter the

fund’s closing NAV somewhat). Most publications which list closing NAV place an “X”

after a fund’ name on its ex-dividend date.

EXPENSE RATIO

The ratio of total expenses to net assets of the fund. Expenses include management fees,

the cost of shareholder mailings and other administrative expenses.The ratio is listed in a

fund’ prospectus. Expense ratio may be a function of a fund’s size rather than of its

success in controlling expenses.

FISCAL YEAR

An accounting period consisting of 12 consecutive months.

GLOBAL FUND

An fund that invests in both Indian and foreign securities.

GROWTH FUND

A mutual fund whose primary investment objective is long-term growth of capital. It

invests principally in common stocks with significant growth potential.

INCOME DIVIDEND

Payment of interest and dividends earned on the fund’s portfolio securities after operating

expenses are deducted.

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INCOME FUND

A mutual fund that primarily seeks current income rather than growth of capital. It will

tend to invest in stocks and bonds that normally pay high dividends and interest.

INDEX FUND

A mutual fund that seeks to mirror general stock-market performance by matching its

portfolio to a broad-based index, most often the S&P CNX Nifty index.

INTERNATIONAL FUND

A fund that invests in securities traded in markets outside India.

INVESTMENT COMPANY

A corporation, partnership or trust that invests the pooled monies of many investors.It

provides greater professional management and diversification of investments than most

investors can obtain independently. Mutual funds, or “open-end” investment companies,

is the most popular form of company.

INVESTMENT OBJECTIVE

The financial goal (long-term growth, current income, etc. ) that an investor or a mutual

fund pursues.

LOAD FUND

A mutual fund that levies a sales charge up to 6%, which is included in the offering price

of its shares, and is sold by a broker or salesman. A front-end load is the fee charged

when buying into a fund; a back-end load is the fee charged when getting out of a fund.

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LOW-LOAD FUND

A mutual funds that charges small sales commission, usually 3.5% or less, for the

purchase of its shares.

MANAGEMENT FEE

The amount a mutual fund pays to its investment adviser for services rendered, including

management of the fund’s portfolio. In general, this fee ranges from .5% to 1% of the

fund’s asset value.

MONEY MARKET FUND

A mutual fund that aims to pay money market interest rates. This is accomplished by

investing in safe, highly liquid securities, including bank certificates of deposit,

commercial paper, government securities and repurchase agreements. Money Market

Funds make these high interest securities available to the average investor seeking

immediate income and high investment safety.

MUTUAL FUND

An open-end investment companies that buys back or redeems its shares at current net

asset value. Most mutual funds continuously offer new shares to investors.

NET ASSET VALUE PER SHARE

The current market worth of a mutual fund share. Calculated daily by taking the funds

total asset securities, cash and any accrued earnings deducting liabilities, and dividing the

remainder by the number of shares outstanding.

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NO-LOAN FUND

A commission-free mutual fund that sells its shares at net asset value, either directly to

the public or through an affiliated distributor, without the addition of a sales charge.

PAYABLE DATE

The date on which distributions are paid to shareholders who do not want to reinvest

them. This date can be anywhere from one week to one month after the Record Date.

PORTFOLIO TURNOVER RATE

The rate at which the fund’s portfolio securities are changed each year. If a fund’s assets

total Rs 100mm and the fund bought and sold Rs100mm worth of securities that year, its

portfolio turnover rate would be 100%. Aggressively managed funds generally have

higher portfolio turnover rates than do conservative funds that invest for the long term.

High portfolio turnover rates generally add to the expenses of a fund.

PROSPECTUS

An official document that each investment company must publish, describing the mutual

fund and offering its shares for sale. It contains information required by the Securities

and Exchange Commission.

RECORD DATE

The date the fund determines who its shareholder are

’shareholder of record” who will receive the fund’s income dividend and/or net capital

gains distribution. Frequently the business day immediately prior to the Ex-Dividend

Date.

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REDEMPTION FEE

A fee charged by a limited number of funds for redeeming, or buying back, fund shares.

REDEMPTION PRICE

The price at which a mutual fund’s shares are redeemed (bought back) by the less

expensive fund. The redemption price is usually equal to the current net asset value per

share.

REGIONAL FUND

A mutual fund that concentrates its investments within a specific geographic area, usually

the fund’s local region. The objective is to take advantage of regional growth potential

before the national investment community does.

REINVESTMENT DATE (PAYABLE DATE)

The date on which a share’s dividend and/or capital gains will be reinvested (if requested)

in additional fund shares.

REINVESTMENT PRIVILEGE

A service that most mutual funds offer whereby a shareholder’s income dividends and

capital gains distributions are automatically reinvested in additional shares.

SECTOR FUND

A fund that operates several specialized industries sectors portfolios under one umbrella.

Transfers between the various portfolios can usually be executed by telephone at little or

no cost.

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SHORT SELLING

The sale of a security, which is not owned by the “seller”, borrows stock for delivery to

the buyer, and must eventually purchase the security for return to the lender.

SPECIALTY FUND

A mutual fund specializing in the securities of a particular industry or group of industries

or special types of securities.

SYSTEMATIC INVESTMENT PLANS

In case of Systematic Investment Plans, instead of a lump sum amount, investor invests a

pre-specified amount in a scheme at pre-specified intervals at the then prevailing NAV.

UNDERWRITER

The organization that acts as the distributor of a mutual fund’s shares to broker/dealers

and the public.

YIELD

Income or return received from an investment, usually expressed as a percentage of

market price, over a designated period. For a mutual fund, yield is interest or dividend

before any gain or loss in the price per share.

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 Limitations of the Study

In every research work the researcher has to face one or another kind of problem.

This research work also suffered certain limitations, which are mentioned below: -

• The sample size taken by me for the study is 30 of Rewari city, so it may or may

not represent the true picture.

• Time spent with the respondents was very less.

• Market predictions are never true and are based on individual perceptions and

being a study dominated by individual responses it is subjected to individual

limitations.

• Due to changing environment, what is relevant today may not be relevant

tomorrow.

• I, being a fresher in the market, study may suffer from some limitations.

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 QUESTIONNAIRE

I like investing for (Short Term/ Medium Term/ Long Term)

 Short Term

 Medium Term

 Long Term

1. Most important criterion to make any investment is

 Tax Saving

 Return

 Liquidity

 Safety

 Security

 Any Other, Please specify_______________

2. My decisions for investment are strongly influenced by

 Colleagues

 Family

 Friends

 Neighbours

 Financial Advisors

 Any Other, Please specify________________

3. Are you having any financial advisor/s? If yes, how many?

______________________________________________________________

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 MF AWARENESS OF INVESTORS

1. Rate your level of awareness about ‘Mutual Fund’?

 Very Much

 Somewhat

 Neutral

 Don’t Have

2. List any 5 Mutual Funds Companies

1) ___________________

2) ___________________

3) ___________________

4) ___________________

5) ___________________

3. The Mutual Fund Company invests the money in

_______________________________________________________________________

________________________________________________________

4. List any 3. main advantages of investing in M.F.s.

1) ________________________

2) ________________________

3) ________________________

5. List Any 3 main disadvantages of investing in M.F.s.

1) ________________________

2) ________________________

3) ________________________

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6. Do you know what are present offers in M.F.s?

If yes, Please specify

____________________________________________________________________

________________________________________________________

7. DO you know the meaning of NET ASSET VALUE?

 Yes

 No

MUTUAL FUNDS INVESTMENT BEHAVIOUR

1. What percentage of savings on an average do you invest in M.F.?(Please tick)

 < 10 %

 > 10% and < 25%

 . 25% and < 50%

 > 50%

1. In which securities, you prefer investing in(Please mention)

FUNDS %age

 Equity Funds

 Debt Funds

 Balanced Funds

 Any other

3. While investing in a Mutual Fund, the first thing that comes to my mind are(Please

rank)

53
  OPTIONS RANK

 The Company

 Fund Manager

 The Risk involved

 Past Performance

 Media Reports

 The Return

 Any Other

4. Mutual Funds investments are better as compared to investment in direct stocks.

 Strong Agreement

 Agreement

 Indifferent

 Disagreement

 Strong disagreement

5. Liquidity is the most attractive feature of the Mutual Funds.

 Strong Agreement

 Agreement

 Indifferent

 Disagreement

 Strong disagreement

6. Market attracts the consumer only when it is booming.

 Strong Agreement

54
  Agreement

 Indifferent

 Disagreement

 Strong disagreement

7. If a little risk can give me a lot of comfort & wealth I will be interested to look for that

option in the long run.

 Strong Agreement

 Agreement

 Indifferent

 Disagreement

 Strong disagreement

8. I would prefer investing in the option with some risk, which gives me a better return

than in the option that has no risk but gives lessor or no return.

 Strong Agreement

 Agreement

 Indifferent

 Disagreement

 Strong disagreement

9. The portfolio of any Mutual Fund scheme is a very important thing and I use to study it

whenever I invest in any scheme.

55
  Strong Agreement

 Agreement

 Indifferent

 Disagreement

 Strong disagreement

10. What would motivate you to invest in M.F.s?

_______________________________________________________________________

_______________________________________________________________________

__

11. Any suggestions that you would like to give in order to make the Mutual Funds

performance better________________________________________________________

_______________________________________________________________________

THANKS FOR YOUR COOPERATION

56
 BIBLIOGRAPHY

1. Kothari C.R., (2007) Research Methodology, October – December, vol. 4, New

age International Publishing Company.

2. Garg R.K. Elements of Insurance, January, February 2007, vol.3 Dhanpat Rai

Publishing Company

3. The journal of insurance of India, vol. 24 January, June 2003

WEBSITE: -

www.karvy.com

www.google.com

www.indiacorporateadvisor.com

www.moneycapital.com

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