Professional Documents
Culture Documents
ON
PERFERENCE OF THE ADVISORS TOWARDS MUTUAL
FUND
AT
KARVY SECURITIES LTD., LUCKNOW
SUBMITED BY
SHAILESH KUMAR RAO
(MBA – III SEM.)
ACEDAMIC YEAR
2008-10
SUBMITTED TO
LUCKNOW INSTITUTE OF MANAGEMENT &
TECHNOLOGY
AFFILIATED TO
UTTAR PRADESH TECHNICAL UNIVERSITY
LUCKNOW.
1
ACKNOWLEDGEMENT
I am really happy and exited in representing this summer training project report before
you.
I must express my gratitude towards KARVY Stock Broking LTD for giving mean
opportunity to work with on this report.
And of course I am very much thankful to our honorable Dy. Director Prof. Ajay Shah
(PROJECT GUIDE) for giving me opportunity and his guidance help me through out
preparing this report. He has also provided me a valuable suggestions and excellence
guidance about this training, which proved very helpful to me to utilize my theoretical
knowledge in practical field.
At last I am also thankful to my friends, to all known and unknown individuals who have
given me their constructive advise, educative suggestion, encouragement, co-operation
and motivation to prepare this report.
2
EXECUTIVE SUMMARY
India’s economy is highly developing. The development is taken place due to the growth
in the financial system. This financial system provides the background to various
investors regarding varied options to invest. Thus, development of the economy depends
on how these investors invest for the well being in long run.
As financial markets become more sophisticated and complex, investors need a financial
intermediary who provides the required knowledge and professional expertise on
successful investing. Mutual Funds represent perhaps the most appropriate investment
opportunity for investors. No wonder the concept of Mutual Fund was initially developed
in the U.S. market, but the entry of the concept in the Indian Financial Market was in the
year 1964 with the formulation of the UTI, at the initiative of the RBI and Govt. of India.
For most people, money is a delicate matter and when it comes to investing they are wary.
Simply because there are many investment options out there, each out promising the
other. An important question facing many investors is whether to invest in Banks,
National Savings, Post office, Non-banking finance companies, Fixed deposits, Shares
etc. or to invest distinctively in Mutual Funds.
It has been perceived that there is huge potential market in the region of Saurashtra. Thus
an exploratory research with the hypothesis “The region of Saurashtra being progressively
industrializing & developing should provide a large & wider market share for Mutual
Fund” has been done.
Thus the purpose of this research was to find why people do not actively invest in mutual
fund in spite of various benefits like Professional management, Diversification,
Convenience liquidity, Flexibility, Tax benefits etc. as well as to find out potential of
business of KARVY in distribution of Mutual Fund in Jamnagar City.
After performing the detailed exploratory research by interviewing different persons who
act as investment advisor like Insurance advisor and Post office advisor etc. with the help
of questionnaire, certain facts were revealed regarding the view about Mutual Funds in the
mind of investors.
I have observed that approximately 60% of the people are unaware of Mutual Funds but
most of them are interested to know about Mutual Funds and ready to attend seminar
arranged by KARVY. They are also interested to work with KARVY if sufficient
information is provided to them about Mutual Fund and KARVY.
People from service class prefers safety of income plus the regular income as well as tax
benefits while on the other hand Professional and Businessman focus on high return with
some risk.
For growth and development of the Mutual Fund Industry, the misconception regarding
Mutual Fund should be removed & the awareness for the same should be made.
3
INTRODUCTION
COMPANY DETAILS
Background
In starting it was only offering auditing and taxation services. Later, it acts into the
Registrar and Share transfer activities and subsequently into financial services and other
services like Financial Product Distribution, Investment Advisory Services, Demat
Services, Corporate Finance, Insurance etc.
All along, Karvy’s strong work ethics and professional background leveraged with
Information Technology enabled it to deliver quality to the individual. A decade of
commitment, professional integrity and vision helped Karvy achieving a leadership
position in its field when it handled largest number of corporate and retail that proved to
be a sound business synergy.
Today, Karvy has access to millions of Indian shareholders, besides companies, banks,
financial institutions and regulatory agencies. Over the past one and half decades, Karvy
has evolved as a veritable link between industry, finance and people.
In January 1998, Karvy became first Depository Participant in Andhra Pradesh. An ISO
9002 Company, Karvy’s commitment to quality and retail reach has made it an Integrated
Financial Services Company.
Today, company has 230 branch offices in 164 cities all over the India. The company adds
5 new offices every month to the company’s ever growing national network in every nook
and corner of the country. The company service over 16 million individual investors, 180
corporate and handle corporate disbursements that exceed Rs.2500 Corers.
4
WHERE KARVY STAND IN THE MARKET?
KARVY is a legendary name in financial services, Karvy’s credit is defined by its mission
to succeed, passion for professionalism, excellent work ethics and customer centric
values.
Today KARVY is well known as a premier financial services enterprise, offering a broad
spectrum of customized services to its clients, both corporate and retail. Services that
KARVY constantly upgrade and improve are because of company’s skill in leveraging
technology. Being one of the most techno-savvy organizations around helps company to
deliver even more cost effective financial solutions in the shortest possible time.
What bears ample testimony to Karvy’s success is the faith reposed in company by valued
investors and customers, all across the country. Indeed, with Karvy’s wide network
touching every corner of the country, even the most remote investor can easily access
Karvy’s services and benefit from company’s expert advice.
5
KARVY GROUP
Board of Directors
Parthasarathy C
Yugandhar M
Ramakrishna M S
Prasad V Potluri
Robert Gibson
Sanjay Kumar Dhir
R Shyamsunder
Parthasarathy C
Yugandhar M
Ramakrishna M S
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Karvy Securities Limited
Parthasarathy C
Yugandhar M
Ramakrishna M S
Ajay Kumar K
William Samuel
Nicholas Tully
Parthasarathy C
Yugandhar M
Ramakrishna M S
Ajay Kumar K
Kutumba Rao V
William Samuel
Nicholas Tully
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Mission Statement of ‘Karvy’
Karvy’s mission statement is “To Bring Industry, Finance and People together.”
Karvy is work as intermediary between industry and people. Karvy work as investment
advisor and helps people to invest their money same way Karvy helps industry in
achieving finance from people by issuing shares, debentures, bonds, mutual funds, fixed
deposits etc.
Vision of Karvy
Company’s vision is crystal clear and mind frame very directed. “To be pioneering
financial services company. And continue to grow at a healthy pace, year after year,
decade after decade.” Company’s foray into IT-enabled services and internet business
has provided an opportunity to explore new frontiers and business solutions. To build a
corporate that sets benchmarks for others to follow.
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Behind the Picture: What Customers matter for KARVY?
The underlying picture forming answer for above question is given below.
RELATIONSHIPS
OUR COMPETITIVE ADVANTAGE
Every year with this picture keeping in mind ‘Karvy accelerate with Recovery, Revival
and Reappearance.’
Karvy has started 2004 on a strong note with the realization to signal some of the
challenges it faced previous year. In a competitive market and a branded business, Karvy
need to carefully manage itself to avoid down trading or brand shifts by consumers.
For Karvy, Jamnagar branch 2003 was truly exhilarating because of:
Some competitive advantages are long lasting. These are intangible, difficult to replicate
and thus more sustainable. Karvy has focused on some of these to gain competitive
advantages. There are:
Karvy value and carefully nurture relationships with customers. Karvy truly believe that
more than technological prowess and business process innovations, it is the ‘focus on
relationships’ which has been the corner stone of satisfying and successful presence in
India over many years.
This has been possible with deep insight of consumer behavior as well as market demand
drivers, understanding of the arena where to operate and quality execution – all thanks to a
‘greater team’ that makes this happen.
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Karvy’s customers consider themselves part of Karvy family and share their experiences
and dreams with other customers and thus Karvy becomes successful not only in relating
customers but also gains new customers from satisfied prevailing customers.
Karvy want to create a strong emotional bond with new customers promoted by prevailing
customers.
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Karvy Values:
Integrity
Responsibility
Reliability
Unity
Understanding
Excellence
Confidentiality
Karvy has adequate internal control systems and procedures commensurate with the size
nature of its business. These system and procedures provide reasonable assurance of
maintenance of proper accounting records, reliability of financial information, protection
of resources and safeguarding of assets against unauthorized use.
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KARVY SERVICES – AN OVERVIEW
1. Stock broking
2. Demat services
3. Investment product distribution
4. Investment advisory services
5. Corporate finance & Merchant banking
6. Insurance
7. Mutual fund services
8. IT enabled services
9. Registrars & Transfer agents
10. Loans
1. Stock Broking:
2. Demat Services:
Karvy is a depository participant with the National Securities Depository Limited (NSDL)
for trading and settlement of dematerialized shares.
Depository Participants (DPs) are described as an agent of the depository. They are
intermediaries between the depository and the investors. The relationship between the
DPs and the depository is governed by an agreement made between the two under
Depositories Act.
Since Karvy is also in the broking business, investors who use Karvy’s depository
services get a dual benefit. They can use Karvy’s brokerage services to execute
transactions and Karvy’s depository services to settle them.
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Company is also concern with the distribution of investment products like
KARVY is dealer of 34 fixed deposits of various types which includes fixed deposits of
Public Sector, Non Banking Finance Companies, Housing Finance Companies and
Manufacturing Companies.
PUBLIC SECTOR
Sl. No. Company Name
1 HUDCO
2 Sardar Sarovar Narmada Nigam Ltd.
3 Tamilnadu Power Finance Corporation Ltd.
4 NTPC
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MANUFACTURING COMPANIES
Sl. No. Company Name
1 A P Paper Mills Ltd.
2 Amtek India Ltd.
3 Atul Ltd.
4 Ballarpur Industries Ltd.
5 Chambal Fertilizers & Chemicals Ltd.
6 Escort Ltd.
7 Greaves Ltd.
8 Gujarat Alkalies & Chemicals Ltd.
9 Indian Express
10 Ind-Swift Ltd.
11 JK Industries Ltd.
12 Jindal Steel & Power Ltd.
13 Sound Craft Industries Ltd.
14 Supreme Industries Ltd.
15 Zuari Industries Ltd.
(b). Bonds:
(c). IPO:
Company is also provides services related to Initial Public Offer of company. Company
provides stationary at the time of IPO as well as provides information to investors
regarding IPO and solves their queries.
This division provides portfolio management services to high net-worth individuals and
corporate. The expertise of Karvy in research and stock broking gives it the right
perspective to provide investment advisory services. Company provides advisory services
to its clients.
Financial goal of each individual investor varies according to his dream, ambition and
family size and future financial planning for the children & old age pension for self and
wife so does the pathway to achieve it. Karvy apply the principles of Financial Planning
as both science & art, it understands the time horizon, risk bearing capacity and
investment goals of investors keeping in mind their psyche and financial needs. Based
upon this Karvy helps individual investors to plan their entire life up to retirement, Taxes,
Insurance needs and other important personal financial goals. It designs portfolio for
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investor to invest their saving in various financial products like shares, bonds, debentures,
mutual funds, fixed deposits, insurance etc., Company design portfolio by considering
following factors.
Corporate finance is the financial activity of corporation. It deals with the firm's
operations with regard to investing and financing. It concerned with how firms raise
capital and the consequences of alternative methods of raising capital. Firm’s capital can
be raised by raising loans, issuing shares, and acquiring or merging with other businesses
by public or private companies.
Merchant banking is a financial intermediation that matches entities that need capital and
those that have capital. Hence they facilitate the flow of capital in the market.
Karvy enjoys SEBI category (I) authorization for Merchant Banking. Karvy offers the full
spectrum of Merchant Banking Services, beginning from identifying the best time for an
issue to final stage of marketing it, to harvest unparalleled success.
• Issue management
• Instrument designing
• Pricing of the issue
• Registration process for the issue of shares
• Marketing efforts
• Final allotment to investors
• Listing details on stock exchanges
• Loan syndication
• Lease financing
• Corporate advisory services
• Underwriting
• Portfolio management
6. Insurance:
Karvy is also dealer of many private life insurance companies. At Jamnagar branch,
company is associated with dealing of following companies.
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Since its inception in 1982, Karvy has demonstrated a dedication coupled with dynamism
that has inspired trust from various segments – corporate, government bodies and
individuals. Karvy has since been performing a pivotal role as the intermediary – the
interface – between these players.
With Mutual Funds emerging as a distinct asset class, Karvy has made a strategic choice
to leverage the power of latest technology to provide a cutting edge to its services. Karvy,
today, service nearly 80% of the asset management companies (AMCs) across an
extensive network of service centers with assets under service in excess of Rs.10,000
crores.
Karvy's ability to mass customize and offer a diverse range of products for a diverse range
of customers has helped mutual fund companies to uniquely position themselves in the
market place. These diverse range of services cut across multiple delivery channels –
service centers, web, mobile phones, call center – has brought home the benefits of
technology to investors, distributors, and the mutual funds.
Going forward, Karvy shall strive to create new products and services, which would
address the needs of the end customer. Company’s single minded focus in delivering
products for customers has given it the distinguished position of being the preferred
provider of financial services in the country.
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List of Mutual Fund Clients of KARVY:
Karvy has been started this service since March, 2004. Karvy is work as TIN Facilitation
Centre it provides following IT enabled services.
Karvy work as an intermediary between NSDL and IT payers. Karvy provides various
form for different IT enabled services and guide people to fill that forms. It also solves
queries of the tax payers. It also distributes PAN and TAN card to the tax payers.
TIN Overview
National Securities Depository Ltd. (NSDL) has established a nationwide Tax Information
Network (TIN) on behalf of the Income Tax Department (ITD). This is designed to make
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the tax administration more effective, furnishing of returns convenient, reduce compliance
cost and bring greater transparency.
While NSDL will be the primary agency responsible for the design, implementation and
maintenance of TIN as per the requirements of ITD, other agencies will also play key
roles in the TIN system.
Karvy has established infrastructure required to provide IT enabled services so, Karvy
provides TIN facilitation centers all over India on behalf of NSDL. Besides Karvy
following companies can also work as intermediary between NSDL and customers.
The banking system, being the agency that collects the money on behalf of the ITD
against tax obligations from the tax payers will be linked to the TIN central system to
provide accounting information on tax paid by various entities under various heads. As
banks are relatively technology-enabled entities, they will directly be linked electronically
to the TIN central system enabling online tax accounting.
On the other hand, the entities depositing the tax (deductors) vary substantially with
respect to their computer skills and hence TIN design provides for TIN Facilitation
Centers managed by NSDL to help digitization and upload of tax payment related
information to the TIN central system.
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Besides NSDL, UTI Investor Services Ltd. may also provides IT Enabled services.
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9. Registrars & Transfer agents:
In 1985, Karvy entered the Registrar and Share Transfer Business to create a market niche
in the competitive field of financial services. In 1994-95, it reached a milestone when it
processed 104 Public Issues constituting 46 per cent market share. Now in its second
decade of existence, Karvy is the leader in the industry: In an opinion poll conducted by
an independent market research agency - MARG, Karvy has been rated as India’s Most
Admired Registrar on various parameters: -
• Overall Excellence.
• Handling of Volumes
• Timely Dispatch
• Quality Management and Technological Up gradation.
A SEBI Category 1 Registrar, So far, Karvy has handled over 675 ISSUES as Registrars
to public issues processed over 52 million applications and is servicing over 16 million
investors from various locations spread over 205 clients.
10. Loan:
Karvy has recently started this service at selected branches of metro cities. This service
has not been started in Saurashtra-Kucch region. Karvy provides loans for following.
• Vehicle Loan
• Home Loan
• Personal Loan
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MARKETING STRATEGY OF KARVY
Market Positioning:
Market positioning statements of Karvy are “At Karvy we give you single window
service” and “We also ensure your comfort”.
So, Karvy focus on the consumers who prefer almost all investment activities at same
place by providing number of various financial services. At Karvy a person can
purchase or sell shares, debentures etc. and at the same place also demat it. Karvy
also provides other investment option to the same person at same place like Mutual
Fund, Insurance, Fixed Deposit, and Bonds etc. and help the person in designing his
portfolio. By this way Karvy provides comfort to its customers.
Karvy is also positioned according to Ries and Trout. Karvy is promoted as a no. 1
investment product distributor and R & T agent of India.
Target Market:
Karvy uses demographic segmentation strategy and segment people based on their
occupation. Karvy uses selective specialization strategy for market targeting. Target
person for the Karvy Stock Broking and Karvy Investment Service are persons who can
work as sub-broker for the companies. Companies focus on Advisors of Insurance and
post office, Tax consultants and CAs for making sub-broker.
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Marketing channel System:
Karvy uses one level marketing channel for investment product distribution. Sub-brokers
work as intermediary between consumer and company. Company has both forward and
backward flow of activity through channel. Company distributes stationery, brokerage,
and information forward to its sub-broker. The sub-brokers send filled forms, queries,
amount of investment etc. back to the company.
Karvy provides training to the sub-brokers because they will be viewed as the company by
the investors. The executives of Karvy explain various new schemes of investment to the
sub-brokers with its objective, risk factors and expected return. Company also periodically
arrange seminar to guide sub-brokers.
Company doesn’t give advertisement in media like TV, Newspapers, and Magazines etc.
Karvy’s advertisement is made indirectly by the companies associate with it. Karvy is R
& T agent of around 700 companies. They publish name, address and logo of Karvy on
their annual report.
Karvy also publish its weekly Stock Market Newsletter ‘Karvy Bazaar Baatein’ and
monthly magazine ‘The Finapolis’ to guide investors and sub-brokers about market.
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HR POLICY OF KARVY
The upper level members like zonal managers, regional managers, branch managers and
senior executives are recruited by publishing recruitment advertisement in leading
national level newspaper. The qualified applicant are then called for interview and
selected.
The regional manager has authority to select lower level employee like peon, marketing
executives, accountant etc. by approval of zonal manager.
Continuous training and upgrading technical, behavioral and managerial skills is a way of
life in Karvy. Karvy encourages employees to hone their skills regularly to enable them to
face the challenges of the changing requirements of customers that fit market up and
down.
Training needs analysis is done on a regular basis and systematic methodologies are
ensured that skills and capabilities of all employees are constantly upgraded to enable
them to perform in the challenging work environment.
New employee has given training under experienced employee. The new employee work
under experience employee and observe his all activities. When company employs new
technology or there is any change in the working of company the training program is
arranged.
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Employee Motivation:
Karvy’s employees are highly empowered. They don’t have to report any person of the
same branch but they report upper level branch. E.e. Marketing executive of Jamnagar
branch directly reports Senior Marketing executive of Baroda zonal office.
If particular branch earn certain profit then Karvy gives them special incentives. E.g. last
year Karvy had arranged two days tour of Div for their employees of Rajkot, Jamnagar,
Junagadh and Bhavnagar branch which was totally free of cost. This also helps in
maintaining co-operation between employees.
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NATIONAL LEVEL ORGANIZATION CHART
CM & MD
(Hyderabad)
GM GM GM
(Marketing) (Finance) (HRM)
Zonal Manager
(Baroda)
Regional Manager
(Rajkot)
Executives
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BRANCH LEVEL ORGANIZATION CHART
Branch Manager
Marketing Clerk
Executives-3
Executive
(Demat) Accountant
Peon Peon
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Quality Policy Of Karvy:
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial
services. In the process, Karvy will strive to exceed Customer’s expectations.
• Provide high quality of work life for all its employees and equip
them with adequate knowledge & skills so as to respond to customer's needs.
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Achievements of Karvy:
28
SWOT ANALYSIS OF KARVY
Strengths:
Weaknesses:
Opportunity:
Threats:
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About Jamnagar Branch:
Jamnagar branch comes under Rajkot branch which is a regional office of Karvy for
Saurashtra Kutch region. It was established on Jan. 2002. In Saurashtra there are four
Branch Offices of Karvy:
• Rajkot
• Jamnagar
• Junagadh
• Bhavnagar
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INDUSTRY DETAILS
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history of
mutual funds in India can be broadly divided into four distinct phases
31
FirstPhase-1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6,700 crores of assets under management.
32
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.
The graph indicates the growth of assets over the years.
180000
160000
154018
140000
100000
80000 79464
60000
47000
40000
20000
4564
0 25
Mar-65 Mar-87 Mar-93 Jan-03 Mar-03 Sep-03 May-04
Years
There are many entities involved and the diagram below illustrates the organizational set
up of a mutual fund:
33
34
45% 42%
40%
36%
35%
30%
25%
20%
15% 14%
10%
5% 3% 4%
1%
0%
ELSS
Market
Gilt
Income
Growth
Money
Balanced
Fund Type
40% 38%
35%
30% [Fig.
25%
21%
20% 19%
17%
15%
10%
5%
5%
0%
Bank
Joint-I
Joint-F
Private
Institutions
Fund Type
35
REGULATORY BODIES
Financial System is basically responsible for the major up and downs in the economy. So,
there are some regulatory bodies on it which ensures effectiveness in the management of
fund of the investors and transparency in the transactions.
Ministry of Finance
36
COMPETITORS DETAILS
1. Bajaj Capital
Services provided
• Merchant banking
• Buying and Selling of Money Market Investments
• Distribution of financial products
• Investment Advisory Service
37
• Financial Planning
» Investment planning
» Retirement planning
» Insurance planning
» Children's future planning
» Tax planning
» Short-term cash flow planning
2.MCS Ltd.
It is established in 1985 in Delhi. It is one of the largest Data Processing House employing
more than 600 people.
Volumes Handled
Services Offered:
MCS is a major player in these activities in the Country with a market share of about 25%.
MCS today provides these services to over 140 Corporate and Mutual Funds for a total
investor base of 15 million.
3. N.J.India Investments Pvt. Ltd.
NJ India Invest (formerly known as NJ Capital stocks) was started in 1994 to cater to the
growing financial services sector. NJ India Invest evolved out as a client focused need
based investment advisory firm. NJ regards mutual fund as one of the best investment
avenue available to satisfy any kind of investment need.
• Rajkot
• Jamnagar
38
• Bhavnagar
ICICI Brokerage Services Limited (IBSL) set up in March 1995, IBSL is a 100%
subsidiary of i-SEC. It commenced its securities brokerage activities in February 1996 and
is registered with the National Stock Exchange of India Limited and The Stock Exchange,
Mumbai.
ICICI has started a website ICICIdirect.com which is the most comprehensive website,
which allows you to invest in Shares, Mutual funds, Derivatives (Futures and Options)
and other financial products.
39
Services offered:
• Merchant Banking
• Demat Service
• Stock Broking
5. HDFC
HDFC is the leading financial company in India. IT has large network of branches all over
India. HDFC Securities which is fully subsidiary of HDFC provides demat service.
• Demat Service
• Life Insurance
• Banking Service
• Housing Finance
• Vehicle Finance
• Education Loan
• Personal Loan
• Mutual Fund
Kotak Securities needs no introduction as one of the largest stock broking houses in the
country and a leading distributor of primary market offerings. Kotak Securities limited is a
joint venture between Kotak Mahindra Bank and Goldman Sachs, the international
investment banking and brokerage firm.
Kotak Securities is a corporate member of both the BSE and the NSE. It is also a
depository participant with the National Securities Depository Limited (NSDL) for trading
and settlement of dematerialized shares.
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Services offered:
• Stock Broking
• Financial Product Distribution
• Demat Services
• Investment Advisory Services
Motilal Oswal Securities Ltd (MOSt) is one of the leading equity research and broking
houses of India. MOSt has a 20-member research team, which is engaged round the clock
in analyzing the Indian economy and corporate sectors to identify equity investment ideas.
Asia Money Broker's Poll 2002 has rated MOSt as one of the best Indian broking house,
for research, for the second time since 2000.
Motilal Oswal is member of NSDL and CDSIL for DP. It has wide network of branches.
It has 158 branches all over India.
Services Offered:
• Demat Services
• Stock Broking
• Investment Advisory Service
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PRODUCT DETAILS
Mutual funds serve as a link between the saving people and the capital market in that they
mobilize saving from investors and bring them to borrowers in the capital markets. In
short, it is a common pool of money into which investors place their contribution that is to
be invested in accordance with a stated objective.
A mutual fund uses the money collected from the investors to buy those assets, which are
specially permitted by its stated investment objective. When an investor subscribes to a
mutual fund, he/she buys a part of asset or the pool of funds that are outstanding at that
time.
A mutual fund is constituted as an investment company and an investor buys into the
fund, means he buys the share of the fund and is known as a unit holder. Since each unit
holder is a part of owner of a mutual fund, it is necessary to establish the value of his part.
Since the unit held by an investor evidences the ownership of the fund’s assets, the value
of the total asset of the fund when divided by the total number of units issued by the
mutual fund gives us the value of one unit. This is called as Net Asset Value (NAV).
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STRUCTURE OF INDIAN MUTUAL FUNDS
Mutual fund industry is highly regulated by the government keeping in view of the
protection of investor’s interest as well as to maintain operational transparency.
In India SEBI Regulations Act, 1996, guides the formation and operation of Mutual
Funds. A Mutual Fund comprises of 4 separate entities.
1. Sponsor
2. Board of Trusties
3. Asset Management Company
4. Custodian and Depositories
5. Distributors
1. Sponsor:
“Sponsor” is defined under SEBI regulation as any person who, acting alone or in
combination with another body corporate, establishes a mutual fund. The sponsor gets the
fund registered with SEBI. The sponsors form a trust and appoint a Board of Trustees.
• The sponsor must contribute at least 40% of the net worth of the
AMC.
• The sponsor must posses a sound financial track record over 5 years
prior to registration.
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2. Board of Trustees:
Mutual funds are managed by Board of Trustees. Trust is created by a document called the
Trust Deed that is executed by fund sponsor in favour of trustees.
• The trustees appoint the AMC and custodian with the prior
approval of SEBI.
• They also approve all the schemes floated by the AMC.
• They have right to dismiss the AMC, with the approval of SEBI.
• Half of the trustees should be independent persons. Neither the
AMC, nor its employees can act as trustee.
• A trustee can not be appointed as a trustee of two or more mutual
funds until and unless he is an independent person or has permission from the Mutual
Fund where he is trustee.
• Trustees can be removed only by prior approval of SEBI.
The role of an AMC is to act as the investment manager of the Trust under the Board
supervision and direction of the Trustees.
The AMC is required to be approved and registered with SEBI.
• The AMC of a Mutual Fund must have a net worth of at least Rs.
10 crore at all time.
• The AMC can not act as a trustee of any other Mutual Fund.
• They will float schemes only after obtaining the prior approval of
the Trustees and SEBI.
• The director of AMC should be a person of reputed of high
standing and at least have five years experience in relevant field.
• AMC can be terminated with 75% unit holders or majority of
trustees.
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4. Custodian and Depositories:
As per SEBI Regulations Mutual Funds shall have a custodian who is not any way
associated with the AMC. It carry outs the activity of safe keeping the securities or
participating, in any clearing system. The custodian should be independent from sponsors
and AMC and should have a sound track record and adequate relevant experience.
As Indian capital markets are moving away from having physical certificates to ownership
of these securities in “dematerialized” form with Depository. Mutual Fund’s
“dematerialized” securities are hold by depository participant.
5. Distributors:
For a fund to sell units across a wide retail base of individual investors, an established
network of distribution agents is essential. AMCs usually appoint Distributors or Brokers,
who sell units on behalf of the fund. A broker usually acts on behalf of several mutual
funds simultaneously and may have several sub-brokers under him for the purpose of
distribution of units.
45
MUTUAL FUND – A GLOBALLY PROVEN INVESTMENT
Worldwide, the mutual fund has a long and successful history. The popularity of mutual
fund has increased manifold. In developed financial market, like US mutual funds have
almost overtaken bank deposits and total assets of over US $ 3 trillion.
In India, Mutual Fund industry started with the setting up of UTI in 1964. Public sector
banks and financial institution began to establish Mutual Funds in 1987. The private
sector and foreign institutions were allowed to set up Mutual Fund in 1993.
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realized is shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.
46
Critical View About Mutual Fund
Advantages:
1. Portfolio Diversification:
Each investor in a fund is a part owner of all the funds assets, thus enabling investor to
hold a diversified investment portfolio even with a small amount of investment, which
would otherwise require big capital.
2. Professional Management:
Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyze the performance and prospect of
companies and selects suitable investments to achieve the objectives of the scheme.
3. Diversification:
The investors bear all the cost of investing such as brokerage or custody of securities.
When going through the fund investor has the benefit of economies of scale; the funds pay
lesser cost because of larger volumes, a benefit passed on to its investors.
5. Liquidity:
By investing in Mutual Funds the investors can cash their investment by selling their units
to the fund if open-ended, or selling them in the stock market if the fund is close ended.
Mutual Funds Companies offer investor to transfer their holding from one scheme to
other.
7. Tax Benefits:
The investors are totally exempt from paying any tax on the income they receive from the
Mutual Funds.
Investment up to 10000 in ELSS qualifies for tax rebate of 20%.
8. Regulatory oversight:
Mutual funds are subject to many government regulations that protect investors from
fraud.
9. Convenience:
47
You can usually buy mutual fund shares by mail, phone, or over the Internet.
Limitations:
An investor in a mutual fund has no control over the overall cost of investing. He/she has
to pay investment management fees as long as he/she remains with the fund. Fees are
payable even while the value of the investment may be declining.
Investors who invest on their own can build their own portfolios of shares and bonds and
other securities. Investing through fund means he/she delegates this decision to the fund
managers.
Availability of a large number of funds can actually mean too much choice for the
investor. He/she may again need advice on how to select a fund to achieve his/her
objectives, quite similar to the situation when he/she has to select individual shares or
bonds to invest in.
When large bodies like a fund invest in shares, the concentrated buying or selling often
result in adverse price movements i.e. at the time of buying, fund has to pay high and vise-
versa.
5. No Guarantees:
No investment is risk free. If the entire stock market declines in value, the value of mutual
fund shares will go down as well, no matter how balanced the portfolio. Investors
encounter fewer risks when they invest in mutual funds than when they buy and sell
stocks on their own. However, anyone who invests through a mutual fund runs the risk of
losing money.
48
MUTUAL FUND CYCLE
From above cycle, it can be observed clearly that how the money from the investors flow
and they get returns out of it. With a very small amount of fund, investors pool their
money with fund managers.
After studying the market, the fund manager invests money of the investors in various
securities like shares, bonds, debentures, government securities etc. to achieve goal of the
investors.
With ups and downs in the market returns are generated and they are passed on to the
investors in form of dividend or capital gain or lost. The above cycle is very clear and also
very effective.
The fund manager while investing on behalf of investors takes into consideration various
factors like time, risk; amount etc. so that he/she can make proper investment decision.
49
Types of Mutual Fund
By Objective
Balanced Money
Equity Fund Debt Fund Gilt Fund
Fund Market
By Duration
By Load
Other Fund
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1. By objective:
Investment goals vary from person to person. While somebody wants security, others
might give more weightage to returns alone. Somebody else might want to plan for his
child’s education while somebody might be saving for the proverbial rainy day or even
life after retirement. With objectives defying any range, it is obvious that the products
required will vary as well. So, Mutual funds can be classified based on the objectives of
the investor.
Equity funds invest a major portion of their corpus in equity shares issued by companies.
NAV of equity funds are fluctuated by fluctuation in price of shares that it holds. So there
is a high risk as well as high return in equity fund. Potential to earn in such funds is higher
when they are invested for long term.
Debt funds invest in debt instruments debt instruments issued by governments, private
companies, banks and financial institutions. By investing in debt, these funds target low
risk and stable income investors. These funds are low risk low return funds.
A balanced fund is one that has a portfolio comprising debt instruments as well as
preference and equity shares. The idea is to reduce volatility of funds, while providing
some upside for capital appreciation. They are best suitable for the people looking for a
combination for capital appreciation and regular income and best time spend for such
investment is more than 3 years.
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(d). Money Market Fund:
Money market funds invest in securities of a short-term nature, which generally means
securities of less than one-year maturity such as Treasury Bills issued by governments,
Certificates of deposit issued by banks and Commercial paper issued by companies.
The major strength of money market funds are the liquidity and safety of principal that the
investors can normally expect from short term investments.
The leading examples are
These funds are sort of government funds wherein the investments are made in debt
instrument of government, which carry no risk of non payment of interest as the RBI
manages the payment of interest and principal on the investments. These funds are best
suited for regular income and long term investment objectives.
2. By Duration:
An open ended fund 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 NAV related prices which are declared daily basis. The
key feature of this fund is liquidity.
A close ended fund 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 initial public issue and thereafter they can buy or
sell units on stock exchange where the units are listed at NAV. These mutual fund
schemes disclose NAV generally on weekly basis.
Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during pre determined intervals at NAV related prices.
52
Risk Return Grid
Risk
Tolerance/Return Focus Suitable Products Benefits offered by MFs
Expected
Bank/ Company FD, Debt Liquidity, Better Post-
Low Debt
based Funds Tax returns
Partially Balanced Funds, Some Liquidity, Better Post-
Debt, Diversified Equity Funds and Tax returns, Better
Medium
Partially some debt Funds, Mix of Management,
Equity shares and Fixed Deposits Diversification
Diversification, Expertise
Capital Market, Equity Funds in stock picking,
High Equity
(Diversified as well as Sector)Liquidity, Tax free
dividends
3. By Load:
Marketing of new mutual fund scheme involves initial expenses. These initial expenses
may be recovered from the investors by entry or exit load.
If initial expenses recovered from investors at the time of investor’s entry into the fund, by
deducting a specific amount from his initial contribution it is called Entry Load.
53
(ii). Exit Load or Back-end Load:
If initial expenses recovered at the time of the investor’s exit from the scheme, by
deducting a specified amount from the redemption proceeds payable to the investor it is
called exit load.
The load amount charged to the scheme over a period of time is called a deferred load.
Funds that don’t charge entry, exit, or deferred load or any other charges for sales
expenses are called no load funds.
54
4. Other types of fund:
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 Saving Scheme (ELSS). Pension schemes also offer tax
benefits.
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. NAV of such funds are changed accordance with the
change in the index.
55
(C). Sector Funds:
These are the funds which invest in the securities of only those sectors or industries as
specified in the offer documents. E.g. Pharmaceuticals, Software, Petroleum etc. These
types of funds are more risky compared to diversified funds.
Birla IT Fund,
Pru. ICICI FMCG Fund,
Franklin India Pharma Fund etc.
Commodity funds invest into the different commodities directly or through shares of
commodity companies. E.g. Commodity fund invest in gold or shares of gold mines.
Commodity funds have not yet developed in India.
These funds invest in equities in one or more foreign countries there by achieving
diversification across the country’s borders. However they also have additional risks such
as the foreign exchange rate risk and their performance depends on the economic
conditions of the countries they invest in.
56
PROBLEM FORMULATION
In today’s competitive world companies can not afford to reactive, instead the trend is
toward proactive. It is due to the increasing competition that the companies can not afford
to undertake research until something goes wrong. This can curtail the future growth or
even affect the very existence of the organization seeing to the trend of being proactive in
the future; companies are allocating more resources to the disciplines of research. In such
case it becomes a duty of researcher to ensure that the organization gets an optimum
return on the resources it has invested. Thus, Problem Formulation assumes great
importance in Marketing Research.
The Marketing Research project undertaken by me for the ‘Karvy Securities Limited’
encompasses within its scope, the study of “The Mutual Fund and to find out market
potential of KARVY Investor Service Ltd. with special reference to distribution of
Mutual Fund in Jamnagar City. Company wants to increase it’s sub-brokers who
can work as intermediary between company and the investors.”
57
RESEARCH OBJECTIVES
Any activity done without an objective in a mind cannot turn fruitful. An objective
provides a specific direction to an activity. Objectives may range from very general to
very specific, but they should be clear enough to point out with reasonable accuracy what
researcher wants to achieve through the study and how it will be helpful to the decision
maker in solving the problem.
Primary Objective:
Secondary Objectives:
58
RESEARCH METHODOLOGY
1. Research Design:
A research design serves as a bridge between what has been established i.e., the research
objectives and what is to be done, in conduct of the study to relish those objectives. If
there were no research design, the research would have only foggy notions as about what
is to be done.
2. Unit of Analysis:
Characteristics of interest:
59
3. Sources of Data:
a. Primary Source:
The primary data is collected using sampling method and by survey using questionnaire.
b. Secondary Source:
4. Sample Planning:
Sampling Design:
A Sample Design is a definite plan for obtaining a sample from a given population. It
refers to the technique or method the researcher would adopt in selecting items for the
sample.
I have used both ‘Convenience Sampling Method’ and ‘Snow Ball Sampling Method’.
60
5. Data Collection Method:
I have used ‘Survey Method’ to collect data. I have collected data using questionnaire.
Questionnaire Plan
I have used ‘Structured Questionnaire’ for gathering the required data through
contacting respondent personally.
Type of Information:
I have collected Fact, Awareness, Attitude, Future action plan and reason using
questionnaire.
Type of Questions:
‘Close-ended questions’ of ‘Dichotomous’ and ‘Multiple Choice’ type are asked in the
questionnaire for data collection.
Data Analysis is based on the data collected by way of Questionnaires. From the collected
data findings are extracted. The data is tabulated and frequency distribution chart is
prepared.
61
RESEARCH ANALYSIS AND INTERPRETATION
Shares
Mutual Fund
Insurance
FD
Tax Bond
PPF
Returns
Risk
Safety
Tax Benefite
Others
15 15
12
No. of Advisors
10
8
6
5 5
4
0
<100 100-300300-500500-750 750- >1000
1000
No. of Clients
62
60% 55%
50%
40%
30%
20%
14% 14%
11%
10% 5%
1%
0%
ELSS
Insurance
PPF
Bond
Pension
NSC
Plan
Inve stme nt Options
60%
60%
50%
40% 40%
30%
20%
10%
0%
Interested Not
Interested
100%
90%
80%
60%
40%
20%
10%
0%
Know Don't KNOW
63
[Fig.22: Advisor know about MF services provided by Karvy]
70% 66%
60%
50%
40% 34%
30%
20%
10%
0%
Interested Not
Interested
75% 70%
60%
45%
30% 24%
15%
6%
0%
No Time Not Answered Not Interested
60%
54%
50% 46%
40%
30%
20%
10%
Interested Not Inteested
64
60%
52%
50%
40%
30%
22%
20%
11%
10% 5%
0%
Not No time Lack of Don't want to
Answered Knowledge expand
services
65
FINDINGS
66
LIMITATIONS
• Data Analysis and interpretation done may not be that strong due to
small sample and ‘Convenience Sampling Method’.
67
CONCLUSIONS
68
RECOMMENDATIONS
• Company should also provide knowledge about the growth rate and
the expected growth rate of Mutual Fund industry in India.
• Most of people aware of life insurance, NSC and PPF for tax saving
so, company should market various tax saving schemes of Mutual Funds and their
benefits.
• The interface among the investors and the Mutual Fund Companies
is the agents, so the agents should have proper knowledge about Mutual Funds as well as
market so that they can help investors in their investment decisions. The quality of agents
performance and investors trust on them can be improved only if they are permanent in
nature.
69
ANNEXURE
QUESTIONNAIRE
We assure you that all the information that will be collected from you will remain fully
confidential and it is used for study purpose only.
Returns Risk
Safety Tax Benefits
Timely Brokerage
Other
6. If a service person who pays Income Tax wants to invest, generally which
option do you suggest for investment?
Insurance
Pension Plan
PPF
Infrastructure Bond
ELLS Scheme
Other _______________________________________
7. Are you interested to deal in MF?
Yes
No
If No Why?
Yes
No
70
Yes
No
If No Why?
10. Will you like to work with Karvy Securities Ltd for dealing in mutual fund?
Yes
No
If No Why?
11. Name :
Address :
Thank You
71
GLOSSARY
Merchant bankers offer customised solutions to solve the financial problems of their
clients. Merchant bankers study the working capital practices that exist within the
company and suggest alternative policies. They also advise the company on rehabilitation
and turnaround strategies, which would help companies to recover from their current
position. They also provide advice on appropriate risk management strategies.
Loan syndication
Arrangement of loans for clients, by analysing their cash flow pattern, so that the terms of
borrowing meet the client’s cash requirements and offer assistance in loan documentation
procedures.
Portfolio
Total number of all holdings held by a company is called portfolio. The portfolio mix is
aimed at spreading the risk over different sectors. It consists of all assets of company.
NAV
Net Asset Value is the current market worth of the mutual fund shares. It is calculated
daily by taking the funds total asset securities, cash and any accrued earning deducting
liabilities, and dividing the reminder by the number of shares outstanding.
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Depository
Capital gain
IPO
Abbreviation for initial public offering. Generally associated with admission to listing of
the share capital on the stock exchange.
73
DETAILS OF TABLES & FIGURES
Tables:
74
Figures:
75
BIBLIOGRAPHY
1. www.mutualfundsindia.com
2. www.amfiindia.com
3. www.themanagementor.com
4. www.dewb-vc.com
5. www.karvy.com
6. www.indiacorporateadvisor.com
7. www.nsdl.co.in
8. www.incometaxdelhi.nic.in
9. www.incometaxindia.gov.in
10. David J. Luck & Ronald S. Rubin, “Marketing Research”,
Ed. – 7 (ISBN)
11. D.C.Anjaria & Dhaivat Anjaria, “AMFI Workbook”, Ed. – 2 (Association of
Mutual Funds in India)
76