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MUTUAL FUNDS IN INDIA
Submitted To: Punjab Institute Of Management And Technology In partial fulfillment of the Requirements for the award of degree of Master of Business Administration Submitted By:MD. EHSANUL HAQUE University Roll no. - 94982238376 DEPARTMENT OF MANAGEMENT PANJAB INSTITUTE OF MANAGEMENT AND TECHNOLOGY MANDI GOBINDGARH 2009-2011
Certificate by the project-Incharge
This is to certify that the Project Report at
MUTUAL FUNDS IN INDIA
Submitted in partial fulfillment of the requirements for the award of The degree of
MASTER OF BUSINESS ADMINISTRATION
TO PUNJAB INSTITUTE OF MANAGEMENT AND TECHNOLOGY Is a record of bonafide Training carried out by SUNIL KUMAR PANDEY Under my supervision and guidance and that no part of this report has been submitted for the award of any other degree / diploma / fellowship or similar titles or prizes.
Signature: Name : Ms. MANISHA GUPTA
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I hereby declare that the Project Report conducted at Place: ---------------------
MUTUAL FUNDS IN INDIA
Under the guidance of
Ms. Manisha Gupta
Submitted in Partial fulfillment of the requirements for the Degree of
MASTER OF BUSINESS ADMINISTRATION TO
PUNJAB INSTITUTE OF MANAGEMENT AND TECHNOLOGY Is my original work and the same has not been submitted for the award of any other Degree/diploma /fellowship or other similar titles or prizes.
For management career, it is important to develop managerial skills. In order to achieve positive and concrete results, along with theoretical concepts, the exposure of real life situation existing in corporate world is very much needed. To fulfill this need, this practical training is required.
I took training in KARVY STOCK BROKING located at Firoz Gandhi market in Ludhyana It was my fortune to get training in a very healthy atmosphere. I got ample opportunity to view the overall working of the mutual funds.
This report is the result of my 45 days of summer training in KARVY STOCK BROKING, as a part of M.B.A. The subject of my report is- MUTUAL FUNDS IN INDIA.
If words are considered as a symbol of approval and token of appreciation then let the words play the heralding role expressing my gratitude The working of mutual funds was far from me but I got an opportunity to understand the mutual funds in India at KARVY STOCK BROKING. While training I learnt many things about mutual funds in India and its structure. So I am very thankful to KARVY STOCK BROKING for giving me such opportunity. First of all I thank to that Gracie god who blessed me with all kinds of facilities that had been provided to me for completion of my report. I am also grateful to Mr. Sunil Kumar Pandey for permitting me to take the training at KARVY STOCK BROKING. I acknowledge my deepest sense of gratitude and sincere feeling of in debtness divine all my faculty members and Mr. Sunil kumar pandey (zonal head) under whose guidance and through their sustained efforts and encouraging attitude, I was able to complete my project. It would have been difficult to achieve the results in such a short span of time. I want to express my sincere gratitude to all the staff members of KARVY STOCK BROKING for spending their precious time and sharing the value able information with me and in helping my project to be a success.
7. 5. 4. 8. 9. 3. Conceptualisation & Operationalisation 2. Objectives Of Study Mutual Funds History & Growth Of Mutual Funds In India Research Methodology Interpretation And Analysis Of Data Analysis Of Data Finding & Suggestion Limitations Of The Study Questionnaire Bibliography 6 . 11. 10. 6.TABLE OF CONTENT 1.
As a lot of options are there before the investors to invest their surplus in order to make it grow. Investor’s attitude has a very special effect on the formulation and the success of any project. It was an attempt to know that why people don’t invest in mutual finds and what are their investment needs & what they expect from the mutual funds cos. Focus of the Study The main focus of the problem was to know the attitude of present mutual fund investors and measuring the current level of awareness among non-investors also. using. These could range from shares to debentures to money market instruments. 7 .Conceptualisation & Operationalisation A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal the money this collected by the fund manager in different type of securities depending upon the objective of the scheme. evaluating and disposing of products and services that they expect will satisfy their needs. The main focus of the study to know the perception of investors towards mutual funds as an investment tool. Attitude of the investors can be defined as the attitude which the investors display in searching for purchasing.
The Secondary objectives 1. 2.F.Objectives of the study The primary objective The primary purpose of this study is to know the awareness among investors about the investments. To know what investors think of Budgetary changes in MF industry 8 . It would provide insights about the criterion used by the investors for the evaluation of a M. scheme. To know the saving behavior of the respondents.
A typical individual is unlikely to have the knowledge. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. skills. to enjoy the economies of large-scale operations. Price changes in these assets are driven by global events occurring in faraway places. bonds and other fixed income securities. professionally managed portfolio at a relatively low cost. Each Mutual Fund scheme has a defined investment objectives and strategy. A Mutual Fund is the ideal investment vehicle for today’s complex and modern financial scenario. Markets for equity shares. understand their implications and act speedily. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro-rata).Mutual Funds In the financial industry the talk of the day is “Mutual Funds”. A MF is a trust that pools the savings of a number of investors who share a common financial goal. real estate. inclination and time to keep track of events. Hence Mutual Fund is nothing but a form of collective investment made at a high level. Thus a MF is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. derivatives and other assets have become mature and information driven. An individual also 9 . Of late MFs have become a hot favorite of millions of people all over the world.
Mutual Funds gained popularity only after the Second World War. 10 . Today Mutual Funds collectively manage almost as much as or more money as compared to Banks. the Mutual Fund in its present form is a 20th century phenomenon. Globally. brokerage dues and bank transactions etc. there are thousands of firms offering tens of thousands of Mutual Funds with different investment objectives. While the concept of individuals coming together to invest money collectively is not new. In fact.finds it difficult to keep track of ownership of his assets. investments. A Mutual Fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis.
At the end of 1993. 11 . the mutual fund industry had assets under management of Rs. SBI Mutual Fund was the first non. Bank of India (Jun 90). At the end of 1988 UTI had Rs. Punjab National Bank Mutual Fund (Aug 89). First Phase – 1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).UTI. The history of mutual funds in India can be broadly divided into four distinct phases. 700 crores of assets under management. 004 crores. Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India.6. 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.47. Indian Bank Mutual Fund (Nov 89).HISTORY AND GROWTH OF MUTUAL FUNDS IN INDIA The mutual fund industry in India strted in 1963 with the formation of Unit Trust of India. LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87). The first scheme launched by UTI was Unit Scheme 1964. Bank of Baroda Mutual Fund (Oct 92). at the initiative of the Government of India and Reserve Bank.
assured return and certain other schemes. 835 crores as at the end of January 2003. With the 12 .29. 21. except UTI were to be registered and governed. Fourth Phase – since February 2003 In February 2003. 1. The Unit Trust of India with Rs. following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities.541 crores of assets under management was way ahead of other mutual funds. As at the end of January 2003. The number of mutual fund houses went on increasing. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. 1993 was the year in which the first Mutual Fund Regulations came into being.805 crores. Also. functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.44.Third Phase – 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993. the assets of US 64 scheme. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. giving the Indian investors a wider choice of fund families. sponsored by SBI. with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. It is registered with SEBI and functions under the Mutual Fund Regulations. a new era started in the Indian mutual fund industry. there were 33 mutual funds with total assets of Rs. PNB. The Specified Undertaking of Unit Trust of India. BOB and LIC. representing broadly. The second is the UTI Mutual Fund Ltd. under which all mutual funds.
000 crores of assets under management and with the setting up of a UTI Mutual Fund. they should not be associated with the sponsors. As at the end of September. Custodian. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. By the end of June 2005 the total assets of mutual fund industry are Rs. 50% of the directors of AMC must be independent. 13 . holds the securities of various schemes of the fund in its custody.e. conforming to the SEBI Mutual Fund Regulations. which manage assets of Rs. Unit Trust of India (UTI) is not registered with SEBI (as on January 15. 2004. The trustees are vested with the general power of superintendence and direction over AMC. The trustees of the mutual fund hold its property for the benefit of the unit holders. SET UP OF A MF A mutual fund is set up in the form of a trust.76. Also. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i. 2002). there were 29 funds. All mutual funds are required to be registered with SEBI before they launch any scheme. Asset Management Company (AMC) and custodian. trustees. and with recent mergers taking place among different private sector funds. which has sponsor. the mutual fund industry has entered its current phase of consolidation and growth. who is registered with SEBI.bifurcation of the erstwhile UTI which had in March 2000 more than Rs. However. They monitor the performance and compliance of SEBI Regulations by the mutual fund.153108 crores under 421 schemes.164546 crores.
some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity period e. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i. These schemes do not have a fixed maturity period. 14 . Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. In order to provide an exit route to the investors. The key feature of open-end schemes is liquidity. These mutual funds schemes disclose NAV generally on weekly basis. either repurchase facility or through listing on stock exchanges.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 conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed.TYPES OF MF SCHEMES Schemes according to Maturity Period A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period.e.
Such funds have comparatively high risks. The investors must indicate the option in the application form. Income / Debt Oriented Scheme. These funds are not affected because of fluctuations in equity markets. Such schemes may be open-ended or close-ended schemes as described earlier. The aim of income funds is to provide regular and steady income to investors. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. corporate debentures. Such funds are less risky compared to equity schemes.Schemes according to Investment Objectives A scheme can also be classified as growth scheme. The mutual funds also allow the investors to change the options at a later date. opportunities of capital appreciation are also limited in such 15 . Government securities and money market instruments. income scheme. capital appreciation. and the investors may choose an option depending on their preferences. However. or balanced scheme considering its investment objective. These schemes provide different options to the investors like dividend option. etc. Such schemes generally invest in fixed income securities such as bonds. Such schemes normally invest a major part of their corpus in equities. Such schemes may be classified mainly as follows: Growth / Equity Oriented Scheme The aim of growth funds is to provide capital appreciation over the medium to longterm.
The NAVs of such funds are affected because of change in interest rates in the country. Balanced Fund The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. If the interest rates fall. However. However. These funds are also affected because of fluctuations in share prices in the stock markets. etc. They generally invest 40-60% in equity and debt instruments. commercial paper and interbank call money. NAVs of such funds are likely to increase in the short run and vice versa. long term investors may not bother about these fluctuations. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. certificates of deposit. NAVs of such funds are likely to be less volatile compared to pure equity funds. These schemes invest exclusively in safer short-term instruments such as treasury bills. Returns on these schemes fluctuate much less compared to other funds. government securities. These are appropriate for investors looking for moderate growth. preservation of capital and moderate income.funds. Money Market or Liquid Fund These funds are also income funds and their aim is to provide easy liquidity. 16 .
E. which are traded on the stock exchanges. these schemes invest in the securities in the same weightage comprising of an index. Equity Linked Savings Schemes (ELSS).Gilt Fund These funds invest exclusively in government securities. S&P NSE 50 index (Nifty). Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index.g. E. Fast these schemes offer tax rebates to the investors under specific provisions of the Income Tax Act. Pharmaceuticals. Software. though not exactly by the same percentage due to some factors known as "tracking error" in technical terms.g. Pension schemes launched by the mutual funds also offer tax benefits. There are also exchange traded index funds launched by the mutual funds. These schemes are growth oriented and invest pre- 17 . etc. Government securities have no default risk. 1961 as the Government offers tax incentives for investment in specified avenues. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. Sector specific funds These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents.
e. stocks. Diversification Simply means that you must spread your investment across different securities (money market instruments. That is. bonds. This charge is used by the mutual fund for marketing and distribution expenses. real estate.dominantly in equities. i. Their growth opportunities and risks associated are like any equity-oriented scheme Load or no-load Fund A Load Fund is one that charges a percentage of NAV for entry or exit. depending upon the investment objective of the scheme. Advantages of Mutual Fund Affordability A mutual fund invests in a portfolio of assets. bonds.500/-. etc. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units. fixed deposits etc. which would otherwise be extremely expensive. shares. A no-load fund is one that does not charge for entry or exit. each time one buys or sells units in the fund. a charge will be payable. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.) and 18 . Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market. An investor can buy in to a portfolio of equities.
Variety Mutual funds offer a whole variety of schemes. given the fund's stated investment objectives. It is then the Fund Manager's job to (a) find the best securities for the fund. so as to offset any underperformance by any one sector or instrument and help the investor meet his investment objective. In a mutual fund.). IT. For example. it offers an opportunity to an investor to invest sums across a variety of schemes. as and when required. which are linked to the 19 . the investor is handling his money to an investment professional that has experience in making investment decisions.different sectors (banking. both debt and equity. and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio. This variety is beneficial in two ways: first. it offers different types of schemes to investors with different needs and risk appetites. Professional Management Qualified investment professionals seek to maximize returns and minimize risk monitor investor's money. textile. Liquidity One is free to take his money out of open-ended mutual funds whenever required. Most open-ended funds mail your redemption proceeds. etc. secondly. This kind of a diversification may add to the stability of returns. an investor can invest his money in a debt scheme and an equity scheme depending on his risk appetite to create a balanced portfolio easily or simply just buy a Balanced Scheme.
the Capital Markets regulator has clearly defined rules. administration and management of mutual funds and also prescribe disclosure and accounting requirements. Regulations Securities and Exchange Board of India ("SEBI").fund's prevailing NAV (net asset value). These rules relate to the formation. 20 . Such a high level of regulation seeks to protect the interest of investors. within three to five working days of putting in request. which govern mutual funds.
21 . The respondents were of various age groups. The investment decisions are influenced by a no of variables. Properly conducted research reduces the uncertainties level for the top management in making critical decisions. Universe and survey population The universe of the survey was the investor of Rewari City. As there occurs some change in these variables the decisions of investment changes accordingly. varying income groups and having different occupations. Hence it is extremely important to describe the research methodology. Due care has been taken to make the sample a representative one for the Mutual Fund Investors. The survey population was 50.Research Methodology This section will describe the methodological tools adopting in conducting the present research. Research design Research Design is diagnostic and descriptive because it is an attempt to find out the reasons why people don’t invest in mutual funds as well as it studies the behavior of respondents. no of dependents is some of the factors. Sample size The sample constituted 50 respondents. The age. income. which have an impact upon the decision of making investment.
It consisted of both open ended and close-ended questions. Making a Structured Questionnaire fulfilled primary data collection need. magazines.Data collection Both Primary as well as Secondary Data was collected for the study. So the methodology adopted was interview of investors through structured questionnaire. their awareness about MFs and their views regarding Globalization of Indian Mutual Fund industry. 22 . and newspaper and also through Internet to make analysis healthier. The questionnaire consisted of questions related to the socio economic position of the investors. The investors’ problems and needs can be best understood by themselves. Secondary Data was collected from various sources such as books.
3 SAMPLE COMPOSITION BY EDUCATIONAL QUALIFICATION Sr. of Respondents 2 23 %age 4 . Occupation No. 1. No. No. 4. No. 3. 2 SAMPLE COMPOSITION BY OOCUPATION Sr. 1 2 3 4 5 Monthly No. 2.INTERPRETATION AND ANALYSIS OF DATA Table No. of Respondents Service 10 Business 15 Professional 20 Others 5 Total 50 Source: Primary data collected through questionnaire %age 20 30 40 10 100 Table No. 1 SAMPLE COMPOSITION BY MONTHLY INCOME Sr. of %age 10 24 30 22 14 100 Income(Rupees) Respondents 4500-8500 5 8500-12500 12 12500-16500 15 16500-20500 11 More Than 20000 7 Total 50 Source: Primary data collected through questionnaire Table No. Educational Qualification Under Graduate No. 1.
2. Graduate 13 Post Graduate 35 Total 50 Source: Primary data collected through questionnaire 26 70 100 24 . 3.
Level of Savings No. 3. Of respondents 5 0 <50000 >100000&<250000 o Around 305 of people are saving in between Rs. 2. 1. No. 50000 to Rs. 100000. This can be effectively mobilized towards Mutual Funds. Efforts should be towards diverting their savings from traditional investment to stock market. 4. Respondents 12 15 10 4 50 of %age 24 30 20 8 100 Less than 50000 More than 50000& Less than 100000 More than 100000& Less than 250000 More than 250000 Total Source: Primary data collected through questionnaire Level Of savings 15 10 No. 25 .ANALYSIS OF DATA SAVING BEHAVIOUR OF RESPONDENTS Table no 4 LEVEL OF ANNUAL SAVINGS Sr.
People want liquidity as well as safety. Comparatively less no. 5 Preferred time for investment S. o Mostly (50%) people want to invest in medium term as compared to short term and long term. It is then followed by regular income and tax savings. of Respondents 15 25 10 50 %age 30 50 20 100 Total Source: Primary Data collected through questionnaire. Insurance. o When respondents were asked about their purpose of investment then the response showed that financial security is the first thing that comes to the mind while making any kind of investment. Time Period Short Term Medium Term Long Term No.No. Preferred time Period 26 . Real estate. Table No. 2. of people is aware of mutual funds but this no.o Mostly (around 98%) people know the various options of investment like Bank Deposits. 3. Gold and they prefer to invest in these. is increasing day by day. 1.
Investors want their money to earn more and more at first place followed by easy withdrawal of money. 5. of Respondents o While choosing any investment plan most important criteria used is returns followed by liquidity and safety. of Respondents 8 22 14 10 6 %age 16 44 28 20 12 100 Total 50 Source: Primary Data collected through questionnaire Criteria for Investment 27 . 2.25 20 15 10 5 0 Short Term Medium Term Long Term No. 3.6 Criteria Used for making Investment S. Criteria Tax Saving Returns Liquidity Safety Security No. No. 4. 1. Table No.
2. Table no.of respondents 15 8 7 8 12 %age 30 16 14 16 24 100 Total 50 Source: Primary Data collected through questionnaire 28 .25 20 15 10 5 0 Tax Saving Returns Liquidity Safety Security No. followed by their Financial Advisors. 5. of Respondents o Decisions For 30% investors are influenced by their colleagues. 4. family and Neighbors.7 Factors influencing Decisions S. Factors Colleagues Family Friends Neighbors Financial Advisors No. 3. No 1.
Factors Affecting Decisions for Investments No. of Respondents 20 15 10 5 0 Colleagues Family Friends Factors Neighbors Financial Advisors no. But they expect that financial advisors should have enough knowledge about the market so that other investors will not be cheated by them. of Respondents o More than 70% of investors don’t take the services of financial advisors because they think that their analysis is more than sufficient. 29 .
Of Respondents 10 20 5 15 50 %age 20 40 10 30 100 Source: Primary Data collected through questionnaire 30 .8 RATING OF AWARENESS OF MUTUAL FUNDS S. 2. Well they are aware about mutual funds but they hesitate to invest in it.No. 4. 1. 3. Table no.MUTUAL FUND AWARENESS OF INVESTORS As the respondents are mutual fund investors as well as non investors so overall analysis is that mutual fund investors are having good knowledge about mutual funds whereas other people slowly know about mutual funds. Responses Very Much Somewhat Neutral Not Aware Total No.
Safety and Risk reduction has been found as its two main advantages. 31 . Reliance. More than 70% respondents know that mutual fund companies invest money in shares. Fluctuation in prices has been considered as the main disadvantage of mutual fund. Around 80% respondents don’t know about present offers in mutual fund. of Respondents Less than 40% respondents know about mutual fund companies operating. There are also some respondents who haven’t heard the term Mutual Fund. UTI etc. Others didn’t even heard about NAV. Wellknown companies are HDFC. SBI.Rating of Awareness 20 15 10 5 0 Not aw are Neutral Somew hat Very Much No. Others don’t know mutual fund invest where. Only 15 out of 50 respondents know about Net Asset Value.
Table No.No 1. Responses YES NO No. 2. 9 AWARENESS OF NET ASSET VALUE S. of Respondents %age 15 30 35 50 100 70 Total Source: Primary Data collected through questionnaire Awareness about NAV YES NO 32 .
Past performance is most important factor influencing the investors followed by return and risk. made neutral response. Level of savings invested in mutual funds is also very less. Of investors invest their money in Money Market Instruments etc. A very less no. of Respondents 5 0 Strong Disagreement Agreement MUTUAL FUNDS INVESTMENT BEHAVIOUR Comparatively less no. 30 respondents don’t invest a single penny in mutual funds. s which ultimately reduces risk. Some investors were agree because their investments got diversified in various co. This question gained mixed responses as respondents who don’t know about mutual funds. Of respondents invest their money in mutual funds because they hesitate to invest in this option. Mostly investors prefer to invest in equity funds followed by balanced funds. Real Estate etc. They prefer to invest in Bank Deposits. 33 . Post Office schemes.20 15 10 No.
3.Table No. they want quick encashing of their money. Responses Strong Agreement Agreement Neutral Disagreement Strong Disagreement No. 10 MUTUAL FUNDS ARE BETTER THAN DIRECT STOCKS S. 4. of Respondents 5 0 Strong Disagreement Agreement MUTUAL FUNDS BETTER THAN STOCKS Liquidity attracts the consumers most because investors don’t want to block their money. 2. of Respondents %age 7 14 8 20 10 5 50 16 40 20 10 100 Total Source: Primary Data collected through questionnaire 20 15 10 No. 5. 34 .No 1.
All other responses were either in the disagreement or neutral. They will prefer the investment in the opinion that has no risk but gives lessor or no returns. Table No. Only 15 respondents were agree to the factor that attracts only when it is booming. A very huge percentage of respondents were in the opinion that if a little risk can give them lot of comfort and wealth then they will be interested in adopting that option in long run. 11 STUDY OF PORTFOLIO IS VERY IMPORTANT 35 . Studying of portfolio is very important so as to know where the hard earned money is being invested but a very little percentage wants to know the portfolio of a particular fund.
36 . more savings. professional management. Responses Strong Agreement Agreement Neutral Disagreement Strong Disagreement No.No 1. 3. 5. should tack the market on day to day basis and exploit the arbitrage opportunities and restrictions on the investment by mutual funds should be removed. Most of the respondents suggest that if greater economies of scale. more awareness will motivate them to invest in mutual funds. 4. Some respondents suggested that M. of Respondents 5 8 20 7 10 50 %age 10 16 40 14 20 100 Total Very less percentage of respondents invest in those schemes that consist of sectors on which they are bullish. more tax benefits. 2.F.S.
FINDINGS AND SUGGESTIONS On the basis of detailed study of various mutual funds operated in India. particularly those mutual fund which are income oriented required to invest their many mainly in debt instrument of high yielding. The various findings and suggestions for improvement of working of mutual funds are following: Whenever a mutual fund scheme is launched it involves various expenditure for planning and promotion of fund scheme. These reasons are depressing trends in money market as well as some adverse result shown by some mutual funds schemes. dealers and agent. This eroded the confidence level of investors in mutual funds and I also tried to give some suggestions for improvements of working of these mutual funds. There are various reasons for this slow mobilization. it states its portfolio according to the objectives of funds. printing and stationary. it is clear that mutual funds in India have played an imported role to route the scattered small household savings towards investment in economic activities. advertisement. A large part of resources of these funds is invested in IPOs. Almost all mutual fund are charging 6% for these expenditures. Whenever a mutual fund is launched. It is required to bring down the annual expense to a reasonable level. But these are not as we expected from them. so that they may continue the process of resources mobilization and capital formation. commission to merchandising bank. But is experienced that many mutual fund operators ignored the basic objective of fund portfolio. small and mid cap stocks which are the not traded frequently at stock exchanges. The investors are big losers by investing 37 .
It creates the unnecessary speculation in such shares. It should be followed strictly and SEBI should take necessary action against the defaulting funds. It is suggested that it should be made obligatory for mutual funds to mention these transactions in their monthly/ weekly reports that are published for the information of the public. Apparently it seems a case of favoritism by the mutual funds. The entry regulations in the mutual funds business are very easy to complete by a skilled manipulator. It is also noticed that sometimes some funds are involving in high volume of transactions in one go just to inflate the market price of a particular scrip. The SEBI should take care that such transactions are not made by mutual funds.in these funds as the NAV of these funds has liquidated to great extent of their original investments. Some mutual fund managers are favoring by the way of routing exceptionally high volume of transactions through some brokers in contravention of SEBI norms. Thus a person of ulterior motive may enter onto mutual fund business easily and may cheat the investors. Due to lack of clear guidelines. The loser is investor. In accounting records such transactions are shown at profit which is increasing the NAV of the funds without real increase in intrinsic value of their assets. The 5% norm is determined by the SEBI to safeguard the interests of investors. In such transactions original investors of the fund as well as other investors lose their money. sometimes the holdings of one fund are purchased by other fund of the same group. It brings frustration in prospective investors. It is suggested that to check the entry of 38 .
39 . A separate “Investors Service Cell” should be established by all mutual funds and should be regulated by Senior Management from time to time. the regulation for granting permission for starting a mutual fund AMC should be made strict. they are highlighting the qualities of their schemes to attract the investors. magazines and other media. the various mutual funds AMCs are giving attractive advertisements in newspapers. For marketing a scheme. A little effort is being made to attract the savings of rural and agricultural sector. these organisations should open some branches in rural areas and specially recruit the agents the in from rural area. Investors are entrusting their hard-earned savings to mutual funds for effective management of their interests. Mutual fund activities are mainly confined to urban areas. The whole process of granting permission should be effectively controlled and supervised.such unscrupulous operator. various problems related to investors service TAURUS MUTUAL FUND has set up a 24 hour phone service in Delhi and Bombay to its subscribers. These agents should be given some additional incentives comparing to others agents. But due to increasing no. It is suggested that no cover potential investors of vast section of society. Sometimes it is noticed that some MFs operators created an artificial market conditions to boost the sales of their scheme. Investor’s satisfaction is an important factor for the mutual funds. of investors.
gold bullion and real estate stocks. government securities. any. It is suggested that the SEBI should effectively instruct all mutual funds to follow the uniform procedure for calculation of NAV. the asked price is the same as the NAV. This is creating a problem to the investors. For a no-load fund. The asked or offering price means the current net asset value (NAV) per share plus sales charge. including domestic and foreign stocks and bonds. Key terms used in mutual funds industry ADVISOR The organization employed by a mutual fund to give professional advice the funds investments and to supervise the management of its assets. 40 . because this is an unfair trade practice to allure the innocent investors. ASSET ALLOCATION FUND A fund that spreads its portfolio among a wide variety of investments. The various mutual funds are following different methods of calculation of their NAVs. In practice it is found that some fund schemes are not disclosing this information about their portfolio so that other competitors may not get benefit from their strategy. It is suggested that the norms of portfolio disclosure should be followed by all mutual funds and SEBI should strictly supervise this aspect.It is suggested that advertisement should be screened and necessary action should be taken against such organisation. ASKING AND OFFERING PRICE The price at which a mutual fund’s shares can be purchased.
less any redemption fee or back-end load. BALANCED FUND A mutual fund that maintains a balanced portfolio.This gives small investors far more diversification than they could get allocating money on their own. generally 60% bonds or preferred stocks and 40% common stocks. These funds generally emphasize income rather than growth. Some of these funds keep the proportions allocated between different sectors relatively constant. AUTOMATIC REINVESTMENT A service offered by most mutual funds whereby income dividends and capital gain distributions are automatically invested into the fund by buying additional shares and thus building up holdings through the effects of compounding. BID OR SELL PRICE The price at which a mutual fund’s shares are redeemed (bought back) by the fund. Various firms analyze the financial stability of both corporate and government bond issuers. while others alter the mix as market conditions change. The bid or redemption price means the current net asset value per share. BOND FUND A mutual fund whose portfolio consists primarily of corporate or Government bonds. BOND RATING System of evaluating the probability of whether a bond issuer will default. Bonds rated BBB or below are not considered to be of investment grade. Ratings range from AAA or Aaa (extremely unlikely) to D (currently in default). Mutual Funds generally 41 .
They are traded in the securities markets. short-term debt instrument issued by banks and thrifts. Unlike open-end investment companies (mutual funds). CAPITAL GAINS DISTRIBUTIONS Payments (usually annually) to mutual fund shareholders of gains realized on the sale of portfolio securities. reflected in its net asset value per share.which are specified in their prospectuses. CAPITAL GROWTH A risk in market value of a mutual fund’s securities.restrict their bond purchases to issues of certain quality ratings. CAPITAL APPRECIATION FUND A mutual fund that seeks maximum capital appreciation through the use of investment techniques involving greater than ordinary risk. Price is determined by supply and demand. 42 . usually through brokers. such as borrowing money in order to provide leverage. This is a specific long-term objective of many mutual funds. short-selling and high turnover. closed-end funds do not redeem their shares. CLOSED-END INVESTMENT COMPANY An investment company that offers a limited number of shares. CERTIFICATE DEPOSIT Interest-bearing.
They are issued by corporations. EXCHANGE PRIVILEGE (OR SWITCHING PRIVILEGE) The right to transfer investments from one fund into another. DISTRIBUTOR An individual or a corporation serving as principal underwriter of a mutual fund’s shares. CUSTODIAN The bank or trust company that maintains a mutual fund’s assets includes its portfolio of securities or some record of them. at nominal cost. COMMON STOCK FUND An open end investment company whose holdings consist mainly of common stocks and usually emphasize growth. generally within the same fund group. DIVERSIFICATION The policy of spreading investments among a range of different securities to reduce the risks inherent in investing.COMMERCIAL PAPER Short term. DAILY DIVIDEND FUND This term applies to funds that declare their income dividends on a daily basis and reinvest or distribute monthly. 43 . unsecured promissory notes with maturities no longer than 270 days. and reselling them to the other investors. buying shares directly from the fund. Provides safekeeping of securities but has no role in portfolio management. to fund short term credit needs.
EXPENSE RATIO The ratio of total expenses to net assets of the fund. 44 . GROWTH FUND A mutual fund whose primary investment objective is long-term growth of capital. Expenses include management fees. FISCAL YEAR An accounting period consisting of 12 consecutive months.EX-DIVIDEND DATE The date on which a fund’s Net Asset Value (NAV) will fall by an amount equal to the dividend and/or capital gains distribution (although market movements may alter the fund’s closing NAV somewhat). GLOBAL FUND An fund that invests in both Indian and foreign securities. It invests principally in common stocks with significant growth potential. the cost of shareholder mailings and other administrative expenses. Expense ratio may be a function of a fund’s size rather than of its success in controlling expenses. INCOME DIVIDEND Payment of interest and dividends earned on the fund’s portfolio securities after operating expenses are deducted.The ratio is listed in a fund’ prospectus. Most publications which list closing NAV place an “X” after a fund’ name on its ex-dividend date.
45 . ) that an investor or a mutual fund pursues. most often the S&P CNX Nifty index. which is included in the offering price of its shares. INVESTMENT OBJECTIVE The financial goal (long-term growth. INVESTMENT COMPANY A corporation. or “open-end” investment companies. INDEX FUND A mutual fund that seeks to mirror general stock-market performance by matching its portfolio to a broad-based index. and is sold by a broker or salesman. is the most popular form of company.It provides greater professional management and diversification of investments than most investors can obtain independently. current income. etc. Mutual funds. partnership or trust that invests the pooled monies of many investors. INTERNATIONAL FUND A fund that invests in securities traded in markets outside India. LOAD FUND A mutual fund that levies a sales charge up to 6%. a back-end load is the fee charged when getting out of a fund. A front-end load is the fee charged when buying into a fund.INCOME FUND A mutual fund that primarily seeks current income rather than growth of capital. It will tend to invest in stocks and bonds that normally pay high dividends and interest.
Most mutual funds continuously offer new shares to investors. highly liquid securities. Calculated daily by taking the funds total asset securities. This is accomplished by investing in safe. MUTUAL FUND An open-end investment companies that buys back or redeems its shares at current net asset value.5% or less. cash and any accrued earnings deducting liabilities. government securities and repurchase agreements. and dividing the remainder by the number of shares outstanding. MONEY MARKET FUND A mutual fund that aims to pay money market interest rates. this fee ranges from . MANAGEMENT FEE The amount a mutual fund pays to its investment adviser for services rendered. NET ASSET VALUE PER SHARE The current market worth of a mutual fund share. for the purchase of its shares. commercial paper. including management of the fund’s portfolio. Money Market Funds make these high interest securities available to the average investor seeking immediate income and high investment safety. In general.LOW-LOAD FUND A mutual funds that charges small sales commission. usually 3. including bank certificates of deposit.5% to 1% of the fund’s asset value. 46 .
47 . RECORD DATE The date the fund determines who its shareholder are ’shareholder of record” who will receive the fund’s income dividend and/or net capital gains distribution. PAYABLE DATE The date on which distributions are paid to shareholders who do not want to reinvest them. It contains information required by the Securities and Exchange Commission.NO-LOAN FUND A commission-free mutual fund that sells its shares at net asset value. This date can be anywhere from one week to one month after the Record Date. High portfolio turnover rates generally add to the expenses of a fund. either directly to the public or through an affiliated distributor. If a fund’s assets total Rs 100mm and the fund bought and sold Rs100mm worth of securities that year. Aggressively managed funds generally have higher portfolio turnover rates than do conservative funds that invest for the long term. Frequently the business day immediately prior to the Ex-Dividend Date. PROSPECTUS An official document that each investment company must publish. its portfolio turnover rate would be 100%. describing the mutual fund and offering its shares for sale. PORTFOLIO TURNOVER RATE The rate at which the fund’s portfolio securities are changed each year. without the addition of a sales charge.
fund shares. REINVESTMENT DATE (PAYABLE DATE) The date on which a share’s dividend and/or capital gains will be reinvested (if requested) in additional fund shares. REDEMPTION PRICE The price at which a mutual fund’s shares are redeemed (bought back) by the less expensive fund. REINVESTMENT PRIVILEGE A service that most mutual funds offer whereby a shareholder’s income dividends and capital gains distributions are automatically reinvested in additional shares. 48 .REDEMPTION FEE A fee charged by a limited number of funds for redeeming. usually the fund’s local region. Transfers between the various portfolios can usually be executed by telephone at little or no cost. or buying back. The redemption price is usually equal to the current net asset value per share. REGIONAL FUND A mutual fund that concentrates its investments within a specific geographic area. SECTOR FUND A fund that operates several specialized industries sectors portfolios under one umbrella. The objective is to take advantage of regional growth potential before the national investment community does.
usually expressed as a percentage of market price.SHORT SELLING The sale of a security. YIELD Income or return received from an investment. 49 . SPECIALTY FUND A mutual fund specializing in the securities of a particular industry or group of industries or special types of securities. UNDERWRITER The organization that acts as the distributor of a mutual fund’s shares to broker/dealers and the public. and must eventually purchase the security for return to the lender. borrows stock for delivery to the buyer. which is not owned by the “seller”. investor invests a pre-specified amount in a scheme at pre-specified intervals at the then prevailing NAV. yield is interest or dividend before any gain or loss in the price per share. over a designated period. For a mutual fund. instead of a lump sum amount. SYSTEMATIC INVESTMENT PLANS In case of Systematic Investment Plans.
so it may or may not represent the true picture. • Due to changing environment. • • Time spent with the respondents was very less. 50 .Limitations of the Study In every research work the researcher has to face one or another kind of problem. study may suffer from some limitations. This research work also suffered certain limitations. which are mentioned below: • The sample size taken by me for the study is 30 of Rewari city. what is relevant today may not be relevant tomorrow. being a fresher in the market. Market predictions are never true and are based on individual perceptions and being a study dominated by individual responses it is subjected to individual limitations. • I.
Tax Saving Return Liquidity Safety Security Any Other. Are you having any financial advisor/s? If yes.QUESTIONNAIRE I like investing for (Short Term/ Medium Term/ Long Term) Short Term Medium Term Long Term Most important criterion to make any investment is 1. Please specify_______________ My decisions for investment are strongly influenced by 2. how many? ______________________________________________________________ 51 . Colleagues Family Friends Neighbours Financial Advisors Any Other. Please specify________________ 3.
________________________ ________________________ ________________________ List Any 3 main disadvantages of investing in M.s.s. List any 3. main advantages of investing in M.F.MF AWARENESS OF INVESTORS 1. Rate your level of awareness about ‘Mutual Fund’? Very Much Somewhat Neutral Don’t Have 2. 1) 2) 3) 5. The Mutual Fund ___________________ ___________________ ___________________ ___________________ ___________________ Company invests the money in _______________________________________________________________________ ________________________________________________________ 4. 1) 2) 3) ________________________ ________________________ ________________________ 52 . List any 5 Mutual Funds Companies 1) 2) 3) 4) 5) 3.F.
6. DO you know the meaning of NET ASSET VALUE? Yes No MUTUAL FUNDS INVESTMENT BEHAVIOUR 1. What percentage of savings on an average do you invest in M. Please specify ____________________________________________________________________ ________________________________________________________ 7. 25% and < 50% > 50% 1. While investing in a Mutual Fund. the first thing that comes to my mind are(Please rank) 53 . In which securities.?(Please tick) < 10 % > 10% and < 25% .F.s? If yes. you prefer investing in(Please mention) FUNDS %age Equity Funds Debt Funds Balanced Funds Any other 3. Do you know what are present offers in M.F.
Liquidity is the most attractive feature of the Mutual Funds. Strong Agreement 54 . Market attracts the consumer only when it is booming. OPTIONS RANK The Company Fund Manager The Risk involved Past Performance Media Reports The Return Any Other 4. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 5. Mutual Funds investments are better as compared to investment in direct stocks. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 6.
If a little risk can give me a lot of comfort & wealth I will be interested to look for that option in the long run. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 9. The portfolio of any Mutual Fund scheme is a very important thing and I use to study it whenever I invest in any scheme. I would prefer investing in the option with some risk. which gives me a better return than in the option that has no risk but gives lessor or no return. 55 . Strong Agreement Agreement Indifferent Disagreement Strong disagreement 8. Agreement Indifferent Disagreement Strong disagreement 7.
s? _______________________________________________________________________ _______________________________________________________________________ __ 11.F. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 10. Any suggestions that you would like to give in order to make the Mutual Funds performance better________________________________________________________ _______________________________________________________________________ _ THANKS FOR YOUR COOPERATION 56 . What would motivate you to invest in M.
February 2007. vol.karvy. Kothari C. 24 January. June 2003 WEBSITE: www.. 4. (2007) Research Methodology. October – December. January.com www.3 Dhanpat Rai Publishing Company 3. The journal of insurance of India. Garg R.com www. vol.indiacorporateadvisor. 2. New age International Publishing Company.R.K.google.com www. Elements of Insurance. vol.com 57 .moneycapital.BIBLIOGRAPHY 1.