Project Report On CHANNELS OF DISTRIBUTION OF MUTUALS FUNDS

Submitted towards partial fulfilment of requirements for award of POST GRADUATE DIPLOMA IN MANAGEMENT (BATCH-2010-12)
SUBMITTED BY: M.UMAR ADIL (PGDM) SUPERVISED BY: DR.RACHNA SHARMA

ROLL NO - 2010015

JAIPURIA INSTITUTE OF MANAGEMENT STUDIES SECTOR 14C, VASUNDHARA, GHAZIABAD, 201012

CERTIFICATE

I hereby certify that the work which is being presented in this training report entitled CHANNELS OF DISTRIBUTION OF MUTUAL FUNDS in partial fulfilment of the requirements for the award of Post Graduation Diploma in Management of Jaipuria Institute of Management Studies, Vasundhara is an authentic record of my own work carried under the supervision of DR.RACHNA SHARMA (Faculty PGDM) and Mr. Gyanendra Prakash (Assistance Vice President- Sales), IDFC Mutual Fund.

M.UMAR ADIL ROLL NO:2100015

This is to certify that the above statement made by the student is correct to the best of my knowledge. I recommend submission of the report for the purpose of evaluation.

DR.RACHNA SHARMA
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Faculty, PGDM

ACKNOWLEDGEMENT My Research project with CHANNELS OF DISTRIBITION OF MUTUAL FUNDS proved to be highly valuable and informative.. I got some valuable insights from this exercise, which has definitely enabled me to improve my vision ,skills and widen my perspective towards banking in its modern prospect.

We would like to take this opportunity to express our deep gratitude to Mr. Gyanendra Prakash (Assistance Vice President- Sales), IDFC Mutual Fund. IDFC Mutual Fund, for providing the facilities to get an exposure for management system in organization.

I express my gratitude towards DR.RACHNA SHARMA, (Faculty PGDM) who gave me opportunity to complete my Research Project. I am also thankful to her for providing me her able guidance, valuable suggestions and for sharing her experiences with me without which this project may not have been successful.

I am also grateful to all my colleagues who continuously helped me in my project and for their kind co-operation and by sparing their valuable time in providing me the information needed. DatePlace- Vashundhra, Ghaziabad Submitted by- M.UMAR ADIL
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Roll. No. 2010015 Jaipuria Institute of Management Studies Executive Summary

This project was undertaken to understand the distribution of mutual funds through various channels.During the summer training in IDFC Mutual Fund, I learnt so many things related to the mutual fund.

The project reflects performance of the IDFC Mutual Fund. This also includes various products which are offered by the IDFC to the customer.

Also I have studied the mutual funds on different parameters such as broker commission, Buyer and broker relationship ,various channels in supporting its distribution channels

TABLE OF CONTENTS

Page No.

1. Introduction

1.1 Profile of the Organization 1.2 Profile of the Study

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2. Objectives of the Study

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3. Research Methodology

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3.1 Research Design 3.2Data Collection 3.3 Analytical Tools

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4. Findings

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5. Recommendations

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6. Limitations of the study

76

7. Bibliography

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8. Annexure

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1. Introduction 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 global scenario. If one look at the global mutual fund industry, one has see that assets have grown by 185% between 2000 and 2006. In comparison, Indian assets outgrew at a staggering 446%, where as the US only grew by 158% and Europe by 242%. As our economy continues 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 channelling them into wealth creating initiatives that would enable people to address their financial needs. To give an overview of a recent study conducted by Invest India, there are about 321.8 millions paid workers in India. Of this only 5.3 millions have an exposure to mutual funds. This is less than 2% of total work force. Even more interesting fact is that 77% of them reside in super metros and Tier I cities. Again, about 4 millions come in the Rs
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90,000-5 lack income bracket. The penetration among the less than Rs 90,000 and more than Rs 5 lack income bracket is very low. The need for the hour is to expend the market boundaries and expand scope in Tier II and Tier III cities. 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 per cent during April-December 2007. This now stands at Rs 30314 billion as against Rs 13476 billion for the corresponding period last year. As on January 31, 2008, Indian assets stood at $ 137 billion and are growing. 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 Rs 12 trillion 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 households 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 2000% 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.

1.1 Profile of the IDFC MUTUAL FUND

1.1 (a) History The fund was established on March 13, 2000. Now the management of the fund has been taken over by Standard Chartered Bank, the UK based banking conglomerate. The name of the AMC too has been changed from ANZ AMC. Previously sponsored by ANZ Banking Group, Australia, this fund has just set up its operations in the year 2000. Australia and New Zealand Banking Group Limited, the previous sponsor of the fund, is a leading international bank and is also one of the "Big Four" Australian commercial banks providing a full range of banking and financial services with total assets of US $ 97.35 billion as on 30th Sept, 1999. ANZ Funds Management is a core business unit of the group and is one of Australia s large fund managers. It has a full range of investment products and services managing more than AUD $ 13267.7 million in customer funds on 30th Sept., 1999. ANZ Banking Group has significant presence in 35 nations from the Middle East thorough South Asia and East Asia to the Pacific
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1.1 (b) IDFC ASSET MANAGEMENT COMPANY

1.1 (b) (a) Sponsor Infrastructure Development Finance Company Limited (IDFC). 1.1 (b) (b) Trustee IDFC AMC Trustee Company Private Limited. 1.1 (b) (c) Chairman Dr. Rajiv Lall.

1.1 (b) (d) CEO / MD Mr. Naval Bir Kumar President 1.1 (b) (e) Compliance Officer Ms. Jyothi Krishnan 1.1 (b) (f) Investor Service Officer Mr. Praveen Bhatt 1.1 (b) (g) Assets Managed Rs. 19,266.05 crore (Jun-25-2010)

1.1 (c) IDFC AMC (ASSET MANAGEMENT COMPANY)

IDFC is a leading private sector diversified financial institution established by a consortium of strong global and local institutions with the support and sponsorship of the Government of India.

A majority of IDFCs shareholding (67% as of March 31, 2008) is held by reputed global stalwarts that include respectable names like Government of India, International Finance Corporation (IFC) - a member of the World Bank Group, Government of Singapore, AIG, Morgan Stanley, Goldman Sachs, Citigroup, JP Morgan among others. The best Indian financial institutions such as HDFC, LIC, SBI, and IDBI are owners in IDFC, making it an institution of high repute and standing.

We are determined to construct a comprehensive asset management business that consists of:

Private equity investments through IDFC Private Equity Company Limited Project equity through IDFC Project Equity Company Limited, and Public markets investment advisory services through IDFC Investment Advisors Limited. IDFC Private Equity manages a corpus of US$ 630 million and is Indias largest and most active private equity fund focused on infrastructure. The two funds under management are India Development Fund (IDF) and IDFC Private Equity Fund II. . 1.1 (c) (a) IDFC Acquires Standard chartered Mutual Fund
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Infrastructure Finance Development Company Ltd today acquired mutual fund business of Standard Chartered Bank. The company has received all necessary approvals from the concerned regulatory authority, IDFC informed the Bombay Stock Exchange in a communiqu here. The company had earlier signed an agreement with Standard Chartered Bank in March for a consideration of Rs 820 crore.

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 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.

1.1 (d) COMPETITIVE ADVANTAGES

1.1 (d) (a) Research

IDFC have our roots in equity research. Their original business model was to provide research and information services on Indian business and capital markets to institutional customers. IDFC executive directors have equity research and investment experience in leading banks and brokerage houses

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1.1 (d) (b) Experienced management team Management team has hands on experience in financial services, especially targeted at retail sales and relationship management.

1.1 (d) (c) Customer Relationship Management IDFC MUTUAL FUND, ASSET MANAGEMENT COMPANY has developed a team of Customer Relationship Managers across India to handle key customer accounts. These people are experienced in financial services and have undergone in-house training. This allows them to offer unbiased advice on investment products like mutual funds and other investment products.

1.1 (d) (d) Robust Risk Management Systems: IDFC asset Management Company manage the risks associated with their risk management procedures rely primarily on internally developed Risk Management System and systems provided by their vendors. 1.1 (d) (e) Business Decisions An employee must not permit a decision about whether IDFC Asset Management Company Pvt. Ltd. will do business with a current or prospective customer or supplier to be influenced by unrelated interests. Decisions relating to placing IDFC Asset Management Company Pvt. Ltd.'s business with current or prospective customers and suppliers, and the volume of such business, must be based upon business considerations.

1.1 (e) SWOT ANALYSIS

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1.1 (e) (a) STRENGTHS Research. Customer Relationship Management. Risk Management System.

1.1 (e) (b) WEAKNESS Lack of banking arm to complete the bank broker depositary chain Insignificance presence in institutional segments.

1.1 (e) (c) OPPORTUNITIES Changing demographic with higher disposable income and increasing complex financial instruments will drive the demand for investment advisory services Rapid penetration of internet and computer needs that technology enabled services will gain market share.

1.1 (e) (d) THREATS Economic slowdown Stock market fall will have a cascading effect on mutual fund mobilization Increase or decrease in interest rates can effect debt or income mobilizations Future changes in personal taxation rules can impact mutual funds sales Increasing competition from large and particularly foreign players
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1.1 (f) IDFC Schemes

Table 1.1 IDFC Schemes No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes Equity and Debt Money Market Gilt Fund 84 269 24 209 19 3 0 13

1.1 (f) (a) Open Ended Schemes

IDFC All Seasons Bond Fund IDFC Arbitrage Fund IDFC Arbitrage Plus Fund IDFC Asset Allocation Fund Aggressive plan IDFC Asset Allocation Fund Conservative Plan IDFC Asset Allocation Fund Moderate plan IDFC Monthly Income Plan IDFC All Seasons Bond Fund

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IDFC Cash Fund IDFC Classic Equity Fund IDFC Dynamic Bond Fund IDFC Government Securities Fund Investment Plan IDFC Government Securities Fund Short Term Plan IDFC Imperial Equity Fund IDFC Liquidity Manager IDFC Enterprise Equity Fund IDFC Nifty Fund IDFC India GDP Growth Fund IDFC Strategic Sector(50-50) Equity Fund IDFC Small and Midcap Equity (SME) Fund IDFC Premier Equity Fund IDFC Super Saver Income Fund Investment Plan IDFC Super Saver Income Fund Medium Term Plan IDFC Super Saver Income Fund Short Term Plan IDFC Tax Advantage (ELSS) Fund

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1.2 Profile of the Study

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.[1In 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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Legally known as an "open-end company" under the Investment Company Act of 1940(the primary regulatory statute governing investment companies), a mutual fund is one of three basic types of investment companies available in the United States.[2] Outside of the United States (with the exception of Canada, which follows the U.S. model), mutual fund may be used as a generic term for various types of collective investment vehicle. In the United Kingdom and Western Europe (including offshore jurisdictions), other forms of collective investment vehicle are prevalent, including unit trusts, openended investment companies (OEICs), SICAVs and unitized insurance funds. In Australia and New Zealand the term "mutual fund" is generally not used; the name "managed fund" is used instead.

1.2 (a) what is a Mutual Fund? Mutual funds belong to the class of firms known as investment companies. While companies may offer a "family" of funds under a single umbrella name and common administration - for example, the Vanguard Group, Fidelity Investments, or Strong Funds - each fund offered is a separately incorporated investment company. These are entities that pool investor money to buy the securities that make up the funds portfolio. The idea behind this pooling of investor money is to give each investor the benefits that come from the ownership of a diversified portfolio of securities chosen and monitored daily by experience professional advisers.

The funds create and sell new shares on demand. Investors` shares represent a portion of the funds 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

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within a specified period after demand, an amount computed by reference to the value of the investors 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 investors selling (redemption) price may be higher or lower than the purchase price. It all depends on the performance of the funds 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.

Figure 1.1 Concept of Mutual Fund

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1.2 (b) History of Mutual Fund in India

1.2 (b) (a) 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 India and the Reserve Bank of India. The history of mutual fund industry in India can be better understood divided into following phases:

1.2(b) (b) Phase 1. Establishment and Growth of Unit Trust of India - 1964-87
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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 (Indias 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.

1.2 (b) (c) Phase II. Entry of Public Sector Funds - 1987-1993

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.

1.2 (b) (d) Phase III. Emergence of Private Sector Funds - 1993-96
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The permission given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutal fund industry in 1993, provided a wide range of choice to investors and more competition in the industry. Private funds introduced innovative products, investment techniques and investor-servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.

1.2 (b) (e) Phase IV. Growth and SEBI Regulation - 1996-2004 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 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

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1.2 (b) (f) Phase V. Growth and Consolidation - 2004 Onwards 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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1.2 (c) Types of Mutual Funds

Figure 1.2 Types of Mutual Fund

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1.2 (d) Advantages of Mutual Fund Table 1.2 Advantages of Mutual Fund S. No. Advantage 1. Portfolio Diversification Particulars Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment 2. Professional Management is big or small). Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what 3. Less Risk he can manage on his own. Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in 4. Low Transaction 5. Costs Liquidity merely 2 or 3 securities. Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors. An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a 6. Choice Schemes mutual fund are far more liquid. of Mutual funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options

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7.

Transparency

Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the 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 scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes.

8.

Flexibility

1.2 (e) Disadvantage of Investing Through Mutual Funds Table 1.3 Disadvantage of the Mutual Fund S. No. 1. Disadvantage Costs Control of 2. Investor No Customized Portfolios Particulars Investor has to pay investment management fees and Not fund distribution costs as a percentage of the value of an irrespective of the performance of the fund. The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors have no right to interfere in the decision making process of a fund manager, which some investors find as a constraint in achieving their financial objectives.

in the Hands his investments (as long as he holds the units),

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3.

Difficulty Selecting Suitable

in Many investors find it difficult to select one option a from the plethora of funds/schemes/plans available. For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.

Fund Scheme

1.2 (f) Mutual Fund Investment Strategies

1.2 (f) (a) Systematic Investment Plan (SIPs) 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.

1.2 (f) (b) Systematic Withdrawal Plan (SWPs) 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.

1.2 (f) (c) Systematic Transfer Plan (STPs) 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
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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.

1.2 (g) Performance Evaluation Parameters of mutual fund evaluation Risk Returns Liquidity Expense ratio Composition of portfolio

1.2 (g) (a)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:

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1.2 (g) (a) (a) 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.

1.2 (g) (a) (b) 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.

1.2 (g) (a) (c) 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.

1.2 (g) (a) (d) Interest Rate Risk 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.

1.2 (g) (a) (e) Business Risk

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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 cannot be predicted or guaranteed, nor can the price of its securities. Adverse changes in business circumstances will reduce the market price of the companys equity resulting in proportionate fall in the NAV of mutual fund scheme, which has invested in the equity of such a company.

1.2 (g) (a) (f) Economic Risk Economic Risk involves uncertainty in the economy, which, in turn can have an adverse effect on a companys 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.

1.2 (g) (b) 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.

Sharpe Ratio

Risk Premium Funds Standard Deviation

Trey nor Ratio

Risk Premium Funds Beta

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Risk Premium

Difference between the Funds Average return and Risk free

return on government security or treasury bill over a given period .

1.2 (g) (c) 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.

1.2 (g) (d) 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. Expense ratio = Total Expenses Average Net Assets

1.2 (g) (e) Composition of the 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.

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If Portfolio ratio is 100% means portfolio has been changed fully. When Portfolio ratio is high means expense ratio is high. Portfolio Ratio = Total Sales & Purchase Net Assets of fund In order to meaningfully compare funds some level of similarity in the following factors has to be ensured: Size of the funds Investment objective Risk profile Portfolio composition Expense ratios

1.2

(h) How Is A Mutual Fund Set Up?

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.

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1.2 (i) Association of Mutual Funds in India (AMFI) With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995.AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of its Board of Directors. 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. The objectives of Association of Mutual Funds in India: --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: This mutual fund association of India maintains high professional and ethical

standards in all areas of operation of the industry. 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.

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 Association of Mutual Fund of India do represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry.
AMFI undertakes all India awareness programme for investors in order to

promote proper understanding of the concept and working of mutual funds. 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. The sponsorers of Association of Mutual Funds in India: -- Bank Sponsored SBI Fund Management Ltd. BOB Asset Management Co. Ltd. Canbank Investment Management Services Ltd. UTI Asset Management Company Pvt. Ltd.

1.2 (j) GLOSSARY

1.2 (j) (a) Back-end Load Charge imposed by a mutual fund when an investor redeems shares. Redemption fees and contingent deferred sales charges are examples.

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1.2 (j) (b) Contingents Deferred Sales Charges Back-end load imposed on an investor who redeems shares. It is usually expressed as a percentage of the original purchase price or of the value of shares redeemed. In most cases, the longer the investor holds his shares, the smaller the deferred sales charge.

1.2 (j) (c) Distribution Payments made to shareholders by the mutual fund. Interest and stock dividends earned by the funds portfolio are passed to shareholders as dividends, while capital gains are passed as capital gains distributions. 1.2 (j) (d) Dividend Reinvestment Fee Fee charged when an investor uses dividends paid by a mutual fund to purchase additional shares of the mutual fund.

1.2 (j) (e) Exchange Fee Fee charged when an investor switches from one mutual fund to another in the same family of funds.

1.2 (j) (f) Front-end Load Sales charge applied at the time the investor purchases shares. Investment Companies The companies that pool investor monies to purchase securities. The Investment Company Act of 1940 created three types of investment companies: face-amount certificate companies, unit investment trusts and management companies.

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1.2 (j) (g) 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.

1.2 (j) (h) Management Fee A fee paid by the mutual fund to its investment adviser and charged against fund assets, generally 1% or less per year. 1.2 (j) (i) Net Asset Value In effect, the share price of a fund computed daily by adding the value of the funds 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."

1.2 (j) (j) 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."

1.2 (j) (k) Redemption Fee

35

A fee charged to an investor who redeems shares. It is generally expressed as a percentage of the value of shares redeemed.

1.2 (j) (l) 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.

1.2 (j) (m) SAI A disclosure document called a Statement of Additional Information. The SAI is not required to be furnished by mutual funds to investors unless investors specifically request it. Investors are responsible for information in the SAI, even if they dont request it.

1.2 (j) (n) 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.

36

1.2 (j) (o) Yield A measure of mutual fund performance, which is figured by dividing the income generated (dividends, capital gains distribution, etc.) per share for a specific time period by the funds current price per share. For example if, during a year, a single share of a fund had paid income totalling $1 and its share price was $10, the annual yield for that year would be figured by dividing 1 by 10, which equals one tenth, or a yield of 10%.

2. OBJECTIVE OF THE STUDY This study is conducted in order to find out:

To study the performance of channels being used in its distribution of MUTUAL FUND.

To study the performance of channels MUTUAL FUND. To study the current marketing trends of mutual funds in the Indian market. Risk and Return involved in distribution MUTUAL FUNDS.

37

3. RESEARCH METHODOLOGY

3.1 RESEARCH Methodology plays a significant role in any study including social science research. It provides the essential tools/techniques to carry out the study in a scientific manner. The concept of truth, usefulness, acceptability could be ascertained through paper quantification, verification of fact through different method of study/procedures used.

3.2 RESEARCH METHODOLOGY A system of models, procedures and techniques used to find the results of a research is called a research methodology.

38

3.3 RESEARCH DESIGN A research design is a framework or blueprint for conducting the marketing research project. It details the procedures necessary for obtaining the information needed to structure or solve marketing research problems. A research can be classified into three parts: Explanatory Research Descriptive Research Experimental Research

For my study, I have used Descriptive research.

3.4 DATA COLLECTION Data are the input to any decision- making process in a business. The processing of data gives statistics of importance of the study. Data can be classified into primary data and secondary data.

3.4

(a) PRIMARY DATA

The data which are collected from the field under the control and supervision of an investigator is known as primary data.

3.4 (b) SECONDARY DATA

39

93.55%

If data collected from journals, magazines, government publications, annual reports of companies, etc; then such data are called as secondary data. For my study purpose, I have used secondary data.

Table 3.1 Asset Allocation

40

3.60%

2.85%

Equity Debt Cash

93.55%

3.5 (a) (b) Interpretation IDFC- IEF is the conservative fund. The investment objective of the scheme is to seek to generate capital appreciation. In this fund, mostly part of the fund invested into equity (93%) in large- cap companies, only approx. 4% part invested into debt and remaining into cash (3%). Table 3.2 Fund Performance in terms of capital appreciation SIP Returns Period Since Inception Last 3 Years Last 2 Years Last 1 Years Investment (in Rs.) 51,000 36,000 24,000 12,000 Value (in Rs.) 72,356 46,696 32,052 13,032 Scheme Returns 16.29% 14.41% 30.09% 15.87%

Figure 3.2 Fund Performance in terms of capital appreciation

41

80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Amount (in Rs.) Value (in Rs.) Since Inception 51,000 72,356 Last 3 Year 36,000 46,696 Last 2 Years 24,000 32,052 Last 1 Year 12,000 13,032

3.5 (a) (c) Interpretation IDFC- IEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12,000 in 2009-10 (Rs. 1,000 p.m.) the amount is Rs. 13,032. After 24 months, the time period is 2008-10 (Rs. 1,000 p.m.) the amount is Rs. 32,052 and from the inception time at the amount of Rs. 51,000 the current value of the fund is Rs. 72,356. Figure3.3 Fund performances in terms of return on capital

42

3 5 .0 0 % 3 0 .0 0 % 2 5 .0 0 % 2 0 .0 0 % 1 5 .0 0 % 1 0 .0 0 % 5 .0 0% 0 .0 0% 1 6 .2 9 % 1 7 .6 9 %

3 0 .7 3 %

16.47%

S in c e In c e p t io nL a s t 3 Y e a rs L a s t 2 Y e a rs L a s t 1 Y e a r

3.5 (a) (d) Interpretation IDFC- IEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12,000 in 2009-10 (Rs. 1,000 p.m.) the return on capital is 16.47%. After 24 months, the time period is 2008-10 (Rs. 1,000 p.m.) the return on capital is 30.73% and from the inception time the fund providing the return on capital is 16.29%.

Table 3.3 Fund Performance in terms of Dividend

43

Last 3 Dividends (Rs. /Unit) 8 June 2009 15 June 2009 14 May 2008 1.20 1.20 1.50 NAV 12.452 NAV 12.0942 NAV 13.9431

3.5

(a) (e) Interpretation

Since inception IDFC- IEF declared the dividend three times. First time it declared on 14 May 2008 @ Rs. 1.50 at the NAV 13.9431. Second time it declared on 15June 2009 @ Rs. 1.20 at the NAV 12.0942 and last time it declared on 8 June 2009 @ Rs. 1.50 at the NAV 12.452.

3.5 (b) IDFC Enterprise Equity Fund (An open-ended fund)

44

(IDFC- EEF) 3.5 (b) (a) Fund Features Nature Equity

Average AUM Rs. 602.54 Crore

Fund manager Mr. Kenneth Andrade

Inception Date 9 June 2006

Minimum Investment Amount Rs. 5,000

SIP (Minimum Amount) Rs. 1,000 Table 3.4 Asset Allocation

45

Equity Debt Cash

Asset Allocation 93.68% 5.87% 0.45%

Figure 3.4 Asset Allocation

5.87% 0.45%

Equity Debt Cash

93.68%

3.5 (b) (b) Interpretation IDFC- IEF is the initial level fund. The investment objective of the scheme is to seek to generate capital appreciation. In this fund, mostly part of the fund invested into equity (93%) in large- cap companies, only approx. 6% part invested into debt and only 1% part invested into cash. Table 3.5 Fund Performance in terms of Capital Appreciation SIP Returns
46

Period Since Inception Last 3 Years Last 2 Years Last 1 Years

Investment (in Rs.) 48,000 36,000 24,000 12,000

Value (in Rs.) 60,743 44,002 31,523 12,983

Scheme Returns 11.49% 13.56% 28.91% 15.67%

Figure 3.5 Fund Performance in terms of Capital Appreciation

70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Amount (in Rs.) Value (in Rs.) Since Inception 48,000 60,743 Last 3 Year 36,000 44,002 Last 2 Years 24,000 31,523 Last 1 Year 12,000 12,983

3.5 (b) (c) Interpretation IDFC- EEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12,000 in 2009-10 (Rs. 1,000 p.m.) the amount is Rs. 12,983. After 24 months, the time period is 2008-10 (Rs. 1,000 p.m.) the amount is Rs. 31,523 and from the inception time at the amount of Rs. 48,000 the current value of the fund is Rs. 60,743. Figure 3.6 Fund performances in terms of return on capital

47

3 0 .0 0 % 2 5 .0 0 % 2 0 .0 0 % 1 5 .0 0 % 1 0 .0 0 % 5 .0 0 % 0 .0 0 % S in c e In c e p t io n L a s t 3 Y e a rs 1 3 .5 6 % 1 1 .4 9 %

2 8 .9 1 %

1 5 .6 7 %

L a s t 2 Y e a rs

Las t 1 Y ear

3.5 (b) (d) Interpretation IDFC- EEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12,000 in 2009-10 (Rs. 1,000 p.m.) the return on capital is 15.67%. After 24 months, the time period is 2008-10 (Rs. 1,000 p.m.) the return on capital is 28.91% and from the inception time the fund providing the return on capital is 11.49%.

Table 3.6 Fund Performance in terms of Dividend

48

Last Dividends (Rs. /Unit) 28 July 2009 14 May 2008 1.00 1.50 NAV 10.7430 NAV 13.0106

3.5 (b) (e) Interpretation Since inception IDFC- EEF declared the dividend two times. First time it declared on 14 May 2008 @ Rs. 1.50 at the NAV 13.0106. Second time it declared on 28 July 2009 @ Rs. 1.00 at the NAV 10.7430.

3.5 (c) IDFC Classic Equity Fund (An open-ended fund)

49

(IDFC- CEF) 3.5 (c) (a) Fund Features Nature Equity

Average AUM Rs. 268.84 Crore

Fund manager Mr. Tridib Pathak

Inception Date 9 August 2005

Minimum Investment Amount Rs. 5,000

SIP (Minimum Amount) Rs. 1,000 Table 3.7 Asset Allocation

50

Equity Debt Cash

Asset Allocation 94.75% 2.90% 2.36%

Figure 3.7 Asset Allocation

2.90%

2.36%

Equity Debt Cash

94.75%

3.5 (c) (b) Interpretation IDFC- CEF is the moderate risky fund. The investment objective of the scheme is to seek to generate capital appreciation. In this fund, mostly part of the fund invested into equity (95%) in large, small and mid- cap companies, only approx. 3% part invested into debt and only 2% part invested into cash. Table 3.8 Fund Performance in terms of capital appreciation SIP Returns

51

Period Since Inception Last 3 Years Last 2 Years Last 1 Years

Investment (in Rs.) 58,000 36,000 24,000 12,000

Value (in Rs.) 77,290 43,007 31,176 12,920

Scheme Returns 11.59% 11.93% 27.54% 14.64%

Figure 3.8 Fund Performance in terms of capital appreciation

80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Amount (in Rs.) Value (in Rs.) Since Inception 58,000 77,290 Last 3 Year 36,000 43,007 Last 2 Years 24,000 31,176 Last 1 Year 12,000 12,920

3.5 (c) (c) Interpretations IDFC- CEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12,000 in 2009-10 (Rs. 1,000 p.m.) the amount is Rs. 12,920. After 24 months, the time period is 2008-10 (Rs. 1,000 p.m.) the amount is Rs. 31,176 and from the inception time at the amount of Rs. 58,000 the current value of the fund is Rs. 77,290. Figure 3.9 Fund performances in terms of return on capital

52

30.00% 25.00% 20.00%

27.54%

14.64% 15.00% 10.00% 5.00% 0.00% Since Inception Last 3 Years Last 2 Years Last 1 Year 11.59% 11.93%

3.5 (c) (d) Interpretation IDFC- CEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs.12, 000 in 2009-10 (Rs.1, 000 p.m.) the return on capital is 14.64%. After 24 months, the time period is 2008-10 (Rs. 1,000 p.m.) the return on capital is 27.54% and from the inception time the fund providing the return on capital is 11.59%.

Table 3.9 Fund Performance in terms of Dividend

53

Last Dividends (Rs. /Unit) 22 August 2006 28 May 2007 22 Oct 2007 1.50 1.50 1.50 NAV 11.5580 NAV 13.2659 NAV 15.2703

3.5 (c) (e) Interpretation Since inception IDFC- CEF declared the dividend three times. First time it declared on 22 August @ Rs. 1.50 at the NAV 11.5580. Second time it declared on 28 May @ Rs. 1.50 at the NAV 13.2659 and last time it declared on 22 October @ Rs. 1.50 at the NAV 15.2703.

3.5 (d) IDFC Premier Equity Fund (An open-ended fund)

54

(IDFC- PEF) 3.5 (d) (a) Fund Features Nature Equity

Average AUM Rs. 1,498.77 Crore

Fund manager Mr. Kenneth Andrade

Inception Date 28 September2005

Minimum Investment Amount Nil

SIP (Minimum Amount) Rs. 2,000 Table 3.10 Asset Allocation

55

Asset Allocation Equity Debt Cash 93.55% 3.60% 2.85%

Figure 3.10 Asset Allocation

7.28%

3.10%

Equity Debt Cash 89.62%

3.5 (d) (b) Interpretation IDFC- PEF is the aggressive fund. The investment objective of the scheme is to seek to generate capital appreciation. In this fund, mostly part of the fund invested into equity (90%) in small and mid- cap companies, only approx. 7% part invested into debt and only 3% part invested into cash.

Table 3.11 Fund Performance in terms of capital appreciation

56

SIP Returns Period Since Inception Last 3 Years Last 2 Years Last 1 Years Investment (in Rs.) 1,12,000 72,000 48,000 24,000 Value (in Rs.) 2,16,678 1,11,751 77,535 28,833 Scheme Returns 28.09% 30.83% 54.23% 39.72%

Figure 3.11 Fund Performance in terms of capital appreciation

250,000 200,000 150,000 100,000 50,000 0 Amount (in Rs.) Value (in Rs.)

Since Inception 112,000 216,678

Last 3 Year 72,000 111,751

Last 2 Years 48,000 77,535

Last 1 Year 24,000 28,833

3.5 (d) (c) Interpretation IDFC- PEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 24,000 in 2009-10 (Rs. 2,000 p.m.) the amount is Rs. 28,833. After 24 months, the time period is 2008-10 (Rs. 2,000 p.m.) the amount is Rs. 77,535 and from the inception time at the amount of Rs. 1, 12,000 the current value of the fund is Rs. 2,16,678. Figure 3.12 Fund performances in terms of return on capital

57

6 0 .0 0 % 5 0 .0 0 %

5 4 .2 3 %

39.72% 4 0 .0 0 % 3 0 .0 0 % 2 0 .0 0 % 1 0 .0 0 % 0 .0 0 % S in c e In c e p tio n L a s t 3 Y e a rs L a s t 2 Y e a rs Las t 1 Y ear 2 8 .0 9 % 30.83%

3.5 (d) (d) Interpretation IDFC- PEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 24, 000 in 2009-10 (Rs.2, 000 p.m.) the return on capital is 39.72%. After 24 months, the time period is 2008-10 (Rs. 2,000 p.m.) the return on capital is 54.23% and from the inception time the fund providing the return on capital is 28.09%.

Table 3.12 Fund Performance in terms of Dividend

58

Last Dividends (Rs. /Unit) 28 Apr 2009 29 March 2010 1.50 2.40 NAV 13.1031 NAV 22.3426

3.5 (d) (e) Interpretation Since inception IDFC- PEF declared the dividend two times. First time it declared on 28 April 2009 @ Rs. 1.50 at the NAV 13.1031. Second time it declared on 29 March 2010 @ Rs. 2.40 at the NAV 22.3426.

3.5 (e) IDFC Small & Midcap Equity Fund (An open-ended fund)

59

(IDFC- SMEF) 3.5 (e) (a) Fund Features Nature Equity

Average AUM Rs. 705.91 Crore

Fund manager Mr. Kenneth Andrade

Inception Date 7 march 2008

Minimum Investment Amount Rs. 5,000

SIP (Minimum Amount) Rs. 1,000 Table 3.13 Asset Allocation

60

Equity Debt Cash

Asset Allocation 94.75% 2.90% 2.36%

Figure 3.13 Asset Allocation

11.33%

4.75%

Equity Debt Cash 83.92%

3.5 (e) (b) Interpretation IDFC- SMEF is the aggressive fund. The investment objective of the scheme is to seek to generate capital appreciation. In this fund, mostly part of the fund invested into equity (84%) in small and mid- cap companies, only approx. 11% part invested into debt and only 5% part invested into cash. Table 3.14 Fund Performance in terms of capital appreciation SIP Returns

61

Period Since Inception Last 2 Years Last 1Years

Investment (in Rs.) 27,000 24,000 12,000

Value (in Rs.) 46,811 40,975 14,729

Scheme Returns 53.75% 61.96% 45.23%

Figure 3.14 Fund Performance in terms of capital appreciation

50,000 40,000 30,000 20,000 10,000 0 Amount (in Rs.) Value (in Rs.)

Since Inception 27,000 46,811

Last 2 Years 24,000 40,975

Last 1 Year 12,000 14,729

3.5 (e) (c) Interpretation IDFC- SMEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12,000 in 2009-10 (Rs. 1,000 p.m.) the amount is Rs. 14,729. After 24 months, the time period is 2008-10 (Rs. 1,000 p.m.) the amount is Rs. 40,975 and from the inception time at the amount of Rs. 27,000 the current value of the fund is Rs. 46,811.

Figure 3.15 Fund performances in terms of return on capital

62

7 0 .0 0 % 6 0 .0 0 % 5 0 .0 0 % 4 0 .0 0 % 3 0 .0 0 % 2 0 .0 0 % 1 0 .0 0 % 0 .0 0 % S in c e In c e p tio n 53.75%

61.96%

45.23%

L a s t 2 Y e a rs

L a s t 1 Y e a rs

3.5 (e) (d) Interpretation IDFC- SMEF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12, 000 in 2009-10 (Rs.1, 000 p.m.) the return on capital is 45.23%. After 24 months, the time period is 2008-10 (Rs. 1,000 p.m.) the return on capital is 61.96% and from the inception time the fund providing the return on capital is 53.75%.

Table 3.15 Fund Performance in terms of Dividend

63

Last Dividends (Rs. /Unit) 29 Sep. 2009 29 Apr. 2010 1.50 1.60 NAV 12.3972 NAV 13.9863

3.5 (e) (e) Interpretation Since inception IDFC- SMEF declared the dividend two times. First time it declared on 29 September 2009 @ Rs. 1.50 at the NAV 12.3972 and Second time it declared on 29 April 2010 @ Rs. 1.60 at the NAV 13.9863.

3.5 (f) IDFC Strategic Sector (50-50) Equity Fund (An open-ended fund)

64

IDFC- SS (50-50) - EF 3.5 (f) (a) Fund Features Nature Equity

Average AUM Rs. 32.71 Crore

Fund manager Mr. Kenneth Andrade

Inception Date 3 October 2008

Minimum Investment Amount Rs. 5,000

SIP (Minimum Amount) Rs. 1,000 Table 3.16 Asset Allocation

65

Equity Debt Cash

Asset Allocation 88.41% 9.76% 1.82%

Figure 3.16 Asset Allocation

9.76%

1.82%

Equity Debt Cash 88.41%

3.5 (f) (b) Interpretation IDFC- SS (50-50) - EF is the aggressive fund. The investment objective of the scheme is to seek to generate capital appreciation. In this fund, mostly part of the fund invested into equity (88%) invested amount up to 50% of the assets of the scheme in a chosen sector (sector specific exposure) while the balance amount may be invested in companies across market capitalization and across sectors (diversified exposure), only approx. 10% part invested into debt and only 2% part invested into cash. Table 3.17 Fund Performance in terms of capital appreciation SIP Returns Period Investment (in Rs.) Value (in Rs.)
66

Scheme Returns

Since Inception Last 1 Years

20,000 12,000

25,634 12,929

29.32% 14.79%

Figure 3.17 Fund Performance in terms of capital appreciation

30,000 25,000 20,000 15,000 10,000 5,000 0 Amount (in Rs.) Value (in Rs.) Since Inception 20,000 25,634 Last 1 Year 12,000 12,929

3.5 (f) (c) Interpretation IDFC- SS (50-50) - EF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12,000 in 2009-10 (Rs. 1,000 p.m.) the amount is Rs. 12,929 and from the inception time at the amount of Rs. 20,000 the current value of the fund is Rs. 25,634.

Figure 3.18 Fund performances in terms of return on capital

67

29.32% 30 .00% 25 .00% 20 .00% 15 .00% 10 .00% 5.00% 0.00% S in c e In c e p t io n L a s t 1 Y e a rs 1 4.79%

3.5 (f) (d) Interpretation IDFC- SS (50-50) - EF regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 12, 000 in 2009-10 (Rs.1, 000 p.m.) the return on capital is 14.79% and from the inception time the fund providing the return on capital is 29.32%.

3.5 (f) (e) Fund Performance in terms of Dividend

68

Last Dividends (Rs. /Unit)NA

69

3.5 (g) IDFC Tax Advantage (ELSS) Equity Fund (An open-ended fund) IDFC Equity Linked Saving Scheme 3.5 (g) (a) Fund Features Nature Equity

Average AUM Rs. 84.51 Crore

Fund manager Mr. Kenneth Andrade

Inception Date 26 December 2008

Minimum Investment Amount Rs. 5,000

SIP (Minimum Amount)

70

Rs. 500 Table 3.18 Asset Allocation

Equity Debt

Asset Allocation 94.01% 5.99%

Figure 3.19 Asset Allocation

5.99%

Equity Debt

94.01%

3.5 (g) (b) Interpretation IDFC- TA (ELSS) Fund is the tax saving fund with the 3 years lock in period. The investment objective of the scheme is to seek to generate capital appreciation with tax rebate. In this fund, mostly part of the fund invested into equity (94%) in large, small and mid- cap companies, only approx. 6% part invested into debt.

71

Table 3.19 Fund Performance in terms of capital appreciation SIP Returns Period Since Inception Last 1 Years Investment (in Rs.) 9,000 6,000 Value (in Rs.) 12,018 6,808 Scheme Returns 41.88% 18.54%

Figure 3.20 Fund Performance in terms of capital appreciation

14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Amount (in Rs.) Value (in Rs.) Since Inception 9,000 12,018 Last 1 Year 6,000 6,808

3.5 (g) (c) Interpretation IDFC TA (ELSS) Fund regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 6,000 in 2009-10 (Rs. 500 p.m.) the amount is Rs. 6,808 and from the inception time at the amount of Rs. 9,000 the current value of the fund is Rs. 12,018.

72

Figure 3.21 Fund performances in terms of return on capital

41.88% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Since Inception Last 1Years 26.14%

3.5 (g) (d) Interpretation IDFC TA (ELSS) Fund regularly provides the good capital appreciation to the investors. According to the data amount invested by investors Rs. 6, 000 in 2009-10 (Rs.500 p.m.) the return on capital is 26.14% and from the inception time the fund provided the capital appreciation 41.88%.

73

Table 3.20 Fund Performance in terms of Dividend

Last Dividends (Rs. /Unit) 20 January 2010 23 March 2010 2.50 1.00 NAV 14.9373 NAV 14.3869

3.5 (g) (e) Interpretation Since inception IDFC TA (ELSS) Fund declared the dividend two times. First time it declared on 29 January 2010 @ Rs. 2.50 at the NAV 14.9373 and Second time it declared on 23 March 2010 @ Rs. 1.00 at the NAV 14.3869.

74

3.5 (h) IDFC Monthly Income Plan (An open-ended fund) (IDFC MIP) 3.5 (h) (a) Fund Features Nature Fund of fund

Average AUM Rs. 264.48 Crore

Fund manager Mr. Ashwin Patni

Inception Date: 25 February 2010

Minimum Investment Amount Rs. 5,000

Dividend frequency

75

Monthly and such other frequency as decided from time to time. Table 3.21 Asset Allocation

Equity Debt Cash

21.67% Asset Allocation 78% 0.33%

Figure 3.22 Asset Allocation

0.33%

21.67% Equity Debt Cash

78.00%

3.5 (h) (b) Interpretation IDFC- MIP is the regular income fund. The investment objective of the scheme is to seek to generate capital appreciation with the security of principal amount. In this fund, mostly part of the fund invested into debt (78%) in large, only approx. 22% part invested into equity and only hardly 0.5% part invested into cash.
76

Table 3.22 Fund Performance in terms of capital appreciation One Time Returns Period Since Inception Investment (in Rs.) 5,000 Value (in Rs.) 5,179 Scheme Returns 3.58%

Figure 3.23 Fund Performance in terms of capital appreciation

Since Inception (As on 31/ 07/ 2010)

5,200 5,150 5,100 5,050 5,000 4,950 4,900 Since Inception (As on 31/ 07/ 2010) Amount (in Rs.) 5,000 Value (in Rs.) 5,179

3.5 (h) (c) Interpretation IDFC MIP regularly provides regular to the investors. According to the data amount invested by investors Rs. 5,000 since the inception time the current value of the fund is Rs. 5,179.

77

Figure 3.24 Fund performances in terms of return on capital

Since Inception (As on 31/07/2010)

3.58% 4.00% 3.00% 2.00% 1.00% 0.00% Since Inception (As on 31/07/2010)

3.5 (h) (d) Interpretation IDFC MIP regularly provides regular income to the investors. According to the data amount invested by investors since the inception time the fund provided the capital appreciation 3.58%

78

Table 3.23 Fund Performance in terms of Dividend

Last Dividends (Rs. /Unit) 01 Jun 2010 05 July 2010 0.0326 0.0327 NAV 10.1653 NAV 10.2869

3.5 (h) (e) Interpretation Since inception MIP declared the dividend two times. First time it declared on 01 Jun 2010 @ Rs. 0.0326 at the NAV 10.1653 and Second time it declared on 23 March 2010 @ Rs. 0.0327 at the NAV 10.2869.

79

4. Results & discussions/Findings

I found the MIP is the best investment option for that investors, who is looking to the regular income with secure his principal.

IDFC- IEF is the better for those customerss who want to invest for long period. It is the conservative fund, which provides the good rate of return with better capital appreciation.

IDFC- ELSS is entitled to deductions of the amount invested in Units of the Scheme, subject to maximum of Rs. 1, 00,000 under and in terms of Section 80 C (2) (XIII) of the Income Tax Act, 1961.

IDFC- SME Fund for those customerss who want the good return with the short period of time. It is one of the best funds in todays growing period.

IDFC- PEF is the one of the fund which has continues provide the better return since 2005. It got the best performance award to the ICRA Online MF Rank, LIPPER Fund Awards 2010 India, and Business world.

Now the IDFC is focusing to the IDFC- PEF and IDFC- SME Fund, for those customerss who want to invest in equity.

During my training time I found that the customers who are looking the better return with secure his principal the best portfolio is IDFC- MIP (30%), IDFC- IEF (30%) and IDFC- SMEF (40%).

During my training time I found that banks are effective enough in increasing the total assets under management (AUM) of the mutual fund industry as compared to independent financial advisors (IFAs), brokers & other agents.

80

Banks are increasingly turning their focus on mutual fund distribution due to the scope of earning higher revenues by brokerage fee.
5. Recommendations

Indian market potential is high, investors are willing to pour money in mutual funds, despite some temporary restraints, and other economic factors are in favourable mode. Thus IDFC need proper management of advisory services, more schemes, financial advisors and institutions to cater untouched markets.

IDFC need to revise its business strategy. Investors perception is not prioritized yet. Instead of completing targets, advisors working under institutions should consider the requirement of investors. We need to change pattern of selling mutual funds schemes.

IDFC should provide better after sales service, so it helps to the investors become loyal to the company.

As the competitors provide the better incentives to the banks employs, so they were attract to do more investments. So IDFC should try to give better incentive to them.

IDFC is not doing advertisement of its products. So IDFC should focus more on advertisement, so as to increase the sales and create awareness in the public.

IDFC only focus on metro cities it should be focusing on urban and as well as rural areas.

81

LIMITATIONS OF THE STUDY

Limited resources are available to collect the information about the Mutual fund.

Time period was limited to get the knowledge of the mutual fund in detail. During the project knowledge was one of the constraints. The busy schedule of the employees, so they did not enough time to discuss the implications in detail.

Market is so much volatile, so it is difficult to forecast anything about it.

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6. BIBLIOGRAPHY

Book References

By Abhijit Dutta, Mutual Funds In India, C- 14, D.S.I.D.C. Work Centre Jhilmil Colony, Delhi- 110095, 1st Edition, Wisdom Publications, 2007. By Nalini Prava Tripathy, Mutual Funds In India, Emerging Issues, A-45, Naraina Phase-1, Delhi- 110028, 1st Edition, Excel Books Publications, 2007.

Web References

www.idfcmf.com www.moneycontrolindia.com http://www.nse-india.com http://www.amfiindia.com http://www.mutualfundsindia.com http://www.sebi.gov.in www.economictimes.com www.valueresearchonline.com

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