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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.
3. 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 . 4. 5.TABLE OF CONTENT 1. 8. 6. 11. 7. 9. Conceptualisation & Operationalisation 2. 10.
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. 7 . The main focus of the study to know the perception of investors towards mutual funds as an investment tool. using. These could range from shares to debentures to money market instruments. Attitude of the investors can be defined as the attitude which the investors display in searching for purchasing. 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. evaluating and disposing of products and services that they expect will satisfy their needs. Investor’s attitude has a very special effect on the formulation and the success of any project. As a lot of options are there before the investors to invest their surplus in order to make it grow.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.
2. scheme. It would provide insights about the criterion used by the investors for the evaluation of a M. The Secondary objectives 1. To know the saving behavior of the respondents.Objectives of the study The primary objective The primary purpose of this study is to know the awareness among investors about the investments.F. To know what investors think of Budgetary changes in MF industry 8 .
A typical individual is unlikely to have the knowledge. An individual also 9 . derivatives and other assets have become mature and information driven. A Mutual Fund is the ideal investment vehicle for today’s complex and modern financial scenario. understand their implications and act speedily. to enjoy the economies of large-scale operations. real estate. skills. 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”. These could range from shares to debentures to money market instruments. Price changes in these assets are driven by global events occurring in faraway places. Markets for equity shares. Each Mutual Fund scheme has a defined investment objectives and strategy. professionally managed portfolio at a relatively low cost. Hence Mutual Fund is nothing but a form of collective investment made at a high level. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. Of late MFs have become a hot favorite of millions of people all over the world. Thus a MF is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. bonds and other fixed income securities. A MF is a trust that pools the savings of a number of investors who share a common financial goal. inclination and time to keep track of events.
the Mutual Fund in its present form is a 20th century phenomenon. In fact. investments. there are thousands of firms offering tens of thousands of Mutual Funds with different investment objectives.finds it difficult to keep track of ownership of his assets. brokerage dues and bank transactions etc. While the concept of individuals coming together to invest money collectively is not new. A Mutual Fund is the answer to all these situations. Globally. Today Mutual Funds collectively manage almost as much as or more money as compared to Banks. Mutual Funds gained popularity only after the Second World War. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. 10 .
Bank of Baroda Mutual Fund (Oct 92). 004 crores.47. public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).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. Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non. Punjab National Bank Mutual Fund (Aug 89). Indian Bank Mutual Fund (Nov 89). At the end of 1993.6.UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87). First Phase – 1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. 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. SBI Mutual Fund was the first non. the mutual fund industry had assets under management of Rs. The first scheme launched by UTI was Unit Scheme 1964. The history of mutual funds in India can be broadly divided into four distinct phases. At the end of 1988 UTI had Rs.UTI. 700 crores of assets under management. LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. 11 . at the initiative of the Government of India and Reserve Bank. Bank of India (Jun 90).
As at the end of January 2003. The Unit Trust of India with Rs. representing broadly.805 crores.29. Also. 21. the assets of US 64 scheme. under which all mutual funds. It is registered with SEBI and functions under the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd. giving the Indian investors a wider choice of fund families. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.541 crores of assets under management was way ahead of other mutual funds. PNB. sponsored by SBI.44.Third Phase – 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993. assured return and certain other schemes. The Specified Undertaking of Unit Trust of India. except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. there were 33 mutual funds with total assets of Rs. 835 crores as at the end of January 2003. following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. With the 12 . 1993 was the year in which the first Mutual Fund Regulations came into being. BOB and LIC. 1. with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. Fourth Phase – since February 2003 In February 2003. a new era started in the Indian mutual fund industry. functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The number of mutual fund houses went on increasing.
The trustees of the mutual fund hold its property for the benefit of the unit holders. 2004.000 crores of assets under management and with the setting up of a UTI Mutual Fund. Asset Management Company (AMC) and custodian. there were 29 funds. The trust is established by a sponsor or more than one sponsor who is like promoter of a company.bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 13 . They monitor the performance and compliance of SEBI Regulations by the mutual fund. 50% of the directors of AMC must be independent. By the end of June 2005 the total assets of mutual fund industry are Rs. the mutual fund industry has entered its current phase of consolidation and growth. which has sponsor.164546 crores. conforming to the SEBI Mutual Fund Regulations. Unit Trust of India (UTI) is not registered with SEBI (as on January 15. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. who is registered with SEBI.76. Custodian. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.153108 crores under 421 schemes. they should not be associated with the sponsors. 2002). and with recent mergers taking place among different private sector funds. The trustees are vested with the general power of superintendence and direction over AMC. However.e. All mutual funds are required to be registered with SEBI before they launch any scheme. SET UP OF A MF A mutual fund is set up in the form of a trust. As at the end of September. trustees. holds the securities of various schemes of the fund in its custody. which manage assets of Rs. Also.
some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. These schemes do not have a fixed maturity period.e. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. 14 . These mutual funds schemes disclose NAV generally on weekly basis. either repurchase facility or through listing on stock exchanges.g. In order to provide an exit route to the investors. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i. The key feature of open-end schemes is liquidity. 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. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme.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. Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity period e.
Such schemes generally invest in fixed income securities such as bonds. These funds are not affected because of fluctuations in equity markets. 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. income scheme. or balanced scheme considering its investment objective. etc. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. Such funds are less risky compared to equity schemes.Schemes according to Investment Objectives A scheme can also be classified as growth scheme. The aim of income funds is to provide regular and steady income to investors. and the investors may choose an option depending on their preferences. Such schemes normally invest a major part of their corpus in equities. Government securities and money market instruments. opportunities of capital appreciation are also limited in such 15 . capital appreciation. These schemes provide different options to the investors like dividend option. Such schemes may be open-ended or close-ended schemes as described earlier. The investors must indicate the option in the application form. Income / Debt Oriented Scheme. Such funds have comparatively high risks. However. corporate debentures. The mutual funds also allow the investors to change the options at a later date.
NAVs of such funds are likely to increase in the short run and vice versa. certificates of deposit. government securities. preservation of capital and moderate income. The NAVs of such funds are affected because of change in interest rates in the country. long term investors may not bother about these fluctuations. etc. NAVs of such funds are likely to be less volatile compared to pure equity funds. They generally invest 40-60% in equity and debt instruments. However. These are appropriate for investors looking for moderate growth. 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.funds. These funds are also affected because of fluctuations in share prices in the stock markets. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. commercial paper and interbank call money. Returns on these schemes fluctuate much less compared to other funds. However. These schemes invest exclusively in safer short-term instruments such as treasury bills. If the interest rates fall. Money Market or Liquid Fund These funds are also income funds and their aim is to provide easy liquidity. 16 .
Equity Linked Savings Schemes (ELSS). E.g.Gilt Fund These funds invest exclusively in government securities. Fast these schemes offer tax rebates to the investors under specific provisions of the Income Tax Act.g. which are traded on the stock exchanges. There are also exchange traded index funds launched by the mutual funds. 1961 as the Government offers tax incentives for investment in specified avenues. Pension schemes launched by the mutual funds also offer tax benefits. Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index. though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. 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. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. These schemes are growth oriented and invest pre- 17 . etc. Pharmaceuticals. these schemes invest in the securities in the same weightage comprising of an index. Software. E. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index. S&P NSE 50 index (Nifty).
This charge is used by the mutual fund for marketing and distribution expenses.) and 18 . Diversification Simply means that you must spread your investment across different securities (money market instruments. That is. 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. fixed deposits etc.dominantly in equities. each time one buys or sells units in the fund. real estate. a charge will be payable.500/-. An investor can buy in to a portfolio of equities.e. Advantages of Mutual Fund Affordability A mutual fund invests in a portfolio of assets. shares. bonds. which would otherwise be extremely expensive. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units. bonds. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs. i. etc. stocks. depending upon the investment objective of the scheme. A no-load fund is one that does not charge for entry or exit. 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.
Variety Mutual funds offer a whole variety of schemes. It is then the Fund Manager's job to (a) find the best securities for the fund. secondly. it offers different types of schemes to investors with different needs and risk appetites. so as to offset any underperformance by any one sector or instrument and help the investor meet his investment objective. it offers an opportunity to an investor to invest sums across a variety of schemes. and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio. In a mutual fund. which are linked to the 19 . For example. given the fund's stated investment objectives. as and when required. IT. Professional Management Qualified investment professionals seek to maximize returns and minimize risk monitor investor's money. Most open-ended funds mail your redemption proceeds. the investor is handling his money to an investment professional that has experience in making investment decisions.). etc.different sectors (banking. 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. Liquidity One is free to take his money out of open-ended mutual funds whenever required. both debt and equity. This variety is beneficial in two ways: first. textile.
which govern mutual funds. Such a high level of regulation seeks to protect the interest of investors. 20 .fund's prevailing NAV (net asset value). within three to five working days of putting in request. These rules relate to the formation. administration and management of mutual funds and also prescribe disclosure and accounting requirements. Regulations Securities and Exchange Board of India ("SEBI"). the Capital Markets regulator has clearly defined rules.
varying income groups and having different occupations. Hence it is extremely important to describe the research methodology. The survey population was 50. income. Sample size The sample constituted 50 respondents. The investment decisions are influenced by a no of variables. The respondents were of various age groups.Research Methodology This section will describe the methodological tools adopting in conducting the present research. which have an impact upon the decision of making investment. Due care has been taken to make the sample a representative one for the Mutual Fund Investors. 21 . no of dependents is some of the factors. 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. The age. As there occurs some change in these variables the decisions of investment changes accordingly. Universe and survey population The universe of the survey was the investor of Rewari City. Properly conducted research reduces the uncertainties level for the top management in making critical decisions.
The investors’ problems and needs can be best understood by themselves. So the methodology adopted was interview of investors through structured questionnaire. 22 . Making a Structured Questionnaire fulfilled primary data collection need. The questionnaire consisted of questions related to the socio economic position of the investors. Secondary Data was collected from various sources such as books. their awareness about MFs and their views regarding Globalization of Indian Mutual Fund industry. It consisted of both open ended and close-ended questions. magazines.Data collection Both Primary as well as Secondary Data was collected for the study. and newspaper and also through Internet to make analysis healthier.
No. No. 4. 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. of Respondents 2 23 %age 4 . Educational Qualification Under Graduate No. 3. 1 2 3 4 5 Monthly No. 2 SAMPLE COMPOSITION BY OOCUPATION Sr. 1.INTERPRETATION AND ANALYSIS OF DATA Table No. 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. 3 SAMPLE COMPOSITION BY EDUCATIONAL QUALIFICATION Sr. 1 SAMPLE COMPOSITION BY MONTHLY INCOME Sr. 2. Occupation No. 1. No.
Graduate 13 Post Graduate 35 Total 50 Source: Primary data collected through questionnaire 26 70 100 24 . 3.2.
3. 2. This can be effectively mobilized towards Mutual Funds. 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. 50000 to Rs. 100000. Efforts should be towards diverting their savings from traditional investment to stock market. 25 . Of respondents 5 0 <50000 >100000&<250000 o Around 305 of people are saving in between Rs. Level of Savings No. 1. 4.ANALYSIS OF DATA SAVING BEHAVIOUR OF RESPONDENTS Table no 4 LEVEL OF ANNUAL SAVINGS Sr. No.
Comparatively less no. 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. 1. It is then followed by regular income and tax savings. Real estate. Gold and they prefer to invest in these. of people is aware of mutual funds but this no. is increasing day by day.o Mostly (around 98%) people know the various options of investment like Bank Deposits. 3. Preferred time Period 26 . Insurance. Time Period Short Term Medium Term Long Term No. 5 Preferred time for investment S. of Respondents 15 25 10 50 %age 30 50 20 100 Total Source: Primary Data collected through questionnaire.No. Table No. o Mostly (50%) people want to invest in medium term as compared to short term and long term. 2. People want liquidity as well as safety.
6 Criteria Used for making Investment S. Table No. 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 . No. 1. 3. 4.25 20 15 10 5 0 Short Term Medium Term Long Term No. 2. Criteria Tax Saving Returns Liquidity Safety Security No. Investors want their money to earn more and more at first place followed by easy withdrawal of money.
25 20 15 10 5 0 Tax Saving Returns Liquidity Safety Security No. 4. family and Neighbors. of Respondents o Decisions For 30% investors are influenced by their colleagues. 5. Table no. followed by their Financial Advisors. Factors Colleagues Family Friends Neighbors Financial Advisors No.of respondents 15 8 7 8 12 %age 30 16 14 16 24 100 Total 50 Source: Primary Data collected through questionnaire 28 . 2. No 1.7 Factors influencing Decisions S. 3.
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.Factors Affecting Decisions for Investments No. 29 . 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 20 15 10 5 0 Colleagues Family Friends Factors Neighbors Financial Advisors no.
No. 4. Responses Very Much Somewhat Neutral Not Aware Total No. 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. 2. Well they are aware about mutual funds but they hesitate to invest in it. 1.8 RATING OF AWARENESS OF MUTUAL FUNDS S. Of Respondents 10 20 5 15 50 %age 20 40 10 30 100 Source: Primary Data collected through questionnaire 30 .
Rating of Awareness 20 15 10 5 0 Not aw are Neutral Somew hat Very Much No. SBI. Fluctuation in prices has been considered as the main disadvantage of mutual fund. of Respondents Less than 40% respondents know about mutual fund companies operating. Safety and Risk reduction has been found as its two main advantages. There are also some respondents who haven’t heard the term Mutual Fund. Others didn’t even heard about NAV. Reliance. UTI etc. More than 70% respondents know that mutual fund companies invest money in shares. Around 80% respondents don’t know about present offers in mutual fund. Only 15 out of 50 respondents know about Net Asset Value. Others don’t know mutual fund invest where. 31 . Wellknown companies are HDFC.
of Respondents %age 15 30 35 50 100 70 Total Source: Primary Data collected through questionnaire Awareness about NAV YES NO 32 . 9 AWARENESS OF NET ASSET VALUE S. Responses YES NO No.Table No. 2.No 1.
Of respondents invest their money in mutual funds because they hesitate to invest in this option. Post Office schemes. Past performance is most important factor influencing the investors followed by return and risk. Of investors invest their money in Money Market Instruments etc. 33 . Level of savings invested in mutual funds is also very less. A very less no. of Respondents 5 0 Strong Disagreement Agreement MUTUAL FUNDS INVESTMENT BEHAVIOUR Comparatively less no. This question gained mixed responses as respondents who don’t know about mutual funds. 30 respondents don’t invest a single penny in mutual funds. Real Estate etc.20 15 10 No. They prefer to invest in Bank Deposits. Some investors were agree because their investments got diversified in various co. Mostly investors prefer to invest in equity funds followed by balanced funds. s which ultimately reduces risk. made neutral response.
Responses Strong Agreement Agreement Neutral Disagreement Strong Disagreement No.No 1. 34 .Table No. 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. 2. 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. 4. they want quick encashing of their money. 10 MUTUAL FUNDS ARE BETTER THAN DIRECT STOCKS S. 3. 5.
A very huge percentage of respondents were in the opinion that if a little risk can give them lot of comfort and wealth then they will be interested in adopting that option in long run. They will prefer the investment in the opinion that has no risk but gives lessor or no returns. 11 STUDY OF PORTFOLIO IS VERY IMPORTANT 35 . All other responses were either in the disagreement or neutral. Only 15 respondents were agree to the factor that attracts only when it is booming. Studying of portfolio is very important so as to know where the hard earned money is being invested but a very little percentage wants to know the portfolio of a particular fund. Table No.
F. 5. more awareness will motivate them to invest in mutual funds. 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.S. Some respondents suggested that M. 3. Most of the respondents suggest that if greater economies of scale. more tax benefits. 4. Responses Strong Agreement Agreement Neutral Disagreement Strong Disagreement No. 36 . 2. 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.No 1. more savings. professional management.
so that they may continue the process of resources mobilization and capital formation. The various findings and suggestions for improvement of working of mutual funds are following: Whenever a mutual fund scheme is launched it involves various expenditure for planning and promotion of fund scheme. small and mid cap stocks which are the not traded frequently at stock exchanges. A large part of resources of these funds is invested in IPOs. The investors are big losers by investing 37 .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. It is required to bring down the annual expense to a reasonable level. 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. advertisement. it states its portfolio according to the objectives of funds. But is experienced that many mutual fund operators ignored the basic objective of fund portfolio. printing and stationary. dealers and agent. There are various reasons for this slow mobilization. Almost all mutual fund are charging 6% for these expenditures. But these are not as we expected from them. commission to merchandising bank. Whenever a mutual fund is launched. 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. These reasons are depressing trends in money market as well as some adverse result shown by some mutual funds schemes.
Due to lack of clear guidelines. 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. In such transactions original investors of the fund as well as other investors lose their money.in these funds as the NAV of these funds has liquidated to great extent of their original investments. Thus a person of ulterior motive may enter onto mutual fund business easily and may cheat the investors. It should be followed strictly and SEBI should take necessary action against the defaulting funds. Some mutual fund managers are favoring by the way of routing exceptionally high volume of transactions through some brokers in contravention of SEBI norms. Apparently it seems a case of favoritism by the mutual funds. It brings frustration in prospective investors. It is suggested that to check the entry of 38 . sometimes the holdings of one fund are purchased by other fund of the same group. It creates the unnecessary speculation in such shares. 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. The loser is investor. 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. The entry regulations in the mutual funds business are very easy to complete by a skilled manipulator. The 5% norm is determined by the SEBI to safeguard the interests of investors.
the regulation for granting permission for starting a mutual fund AMC should be made strict. magazines and other media. 39 . Investors are entrusting their hard-earned savings to mutual funds for effective management of their interests. Sometimes it is noticed that some MFs operators created an artificial market conditions to boost the sales of their scheme. of investors. A little effort is being made to attract the savings of rural and agricultural sector. Mutual fund activities are mainly confined to urban areas. Investor’s satisfaction is an important factor for the mutual funds. A separate “Investors Service Cell” should be established by all mutual funds and should be regulated by Senior Management from time to time.such unscrupulous operator. But due to increasing no. they are highlighting the qualities of their schemes to attract the investors. various problems related to investors service TAURUS MUTUAL FUND has set up a 24 hour phone service in Delhi and Bombay to its subscribers. These agents should be given some additional incentives comparing to others agents. The whole process of granting permission should be effectively controlled and supervised. It is suggested that no cover potential investors of vast section of society. these organisations should open some branches in rural areas and specially recruit the agents the in from rural area. the various mutual funds AMCs are giving attractive advertisements in newspapers. For marketing a scheme.
40 . the asked price is the same as the NAV. any. 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. This is creating a problem to the investors. government securities. gold bullion and real estate stocks. including domestic and foreign stocks and bonds. ASKING AND OFFERING PRICE The price at which a mutual fund’s shares can be purchased. The asked or offering price means the current net asset value (NAV) per share plus sales charge. It is suggested that the SEBI should effectively instruct all mutual funds to follow the uniform procedure for calculation of NAV. The various mutual funds are following different methods of calculation of their NAVs.It is suggested that advertisement should be screened and necessary action should be taken against such organisation. It is suggested that the norms of portfolio disclosure should be followed by all mutual funds and SEBI should strictly supervise this aspect. For a no-load fund. 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. 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.
BOND RATING System of evaluating the probability of whether a bond issuer will default. generally 60% bonds or preferred stocks and 40% common stocks. These funds generally emphasize income rather than growth.This gives small investors far more diversification than they could get allocating money on their own. Various firms analyze the financial stability of both corporate and government bond issuers. Ratings range from AAA or Aaa (extremely unlikely) to D (currently in default). 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. 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. Mutual Funds generally 41 . less any redemption fee or back-end load. while others alter the mix as market conditions change. Some of these funds keep the proportions allocated between different sectors relatively constant. Bonds rated BBB or below are not considered to be of investment grade. BID OR SELL PRICE The price at which a mutual fund’s shares are redeemed (bought back) by the fund. BALANCED FUND A mutual fund that maintains a balanced portfolio.
which are specified in their prospectuses.restrict their bond purchases to issues of certain quality ratings. CLOSED-END INVESTMENT COMPANY An investment company that offers a limited number of shares. Unlike open-end investment companies (mutual funds). such as borrowing money in order to provide leverage. 42 . CAPITAL GROWTH A risk in market value of a mutual fund’s securities. CAPITAL APPRECIATION FUND A mutual fund that seeks maximum capital appreciation through the use of investment techniques involving greater than ordinary risk. They are traded in the securities markets. closed-end funds do not redeem their shares. usually through brokers. short-term debt instrument issued by banks and thrifts. This is a specific long-term objective of many mutual funds. short-selling and high turnover. CAPITAL GAINS DISTRIBUTIONS Payments (usually annually) to mutual fund shareholders of gains realized on the sale of portfolio securities. CERTIFICATE DEPOSIT Interest-bearing. Price is determined by supply and demand. reflected in its net asset value per share.
They are issued by corporations. DIVERSIFICATION The policy of spreading investments among a range of different securities to reduce the risks inherent in investing. COMMON STOCK FUND An open end investment company whose holdings consist mainly of common stocks and usually emphasize growth. EXCHANGE PRIVILEGE (OR SWITCHING PRIVILEGE) The right to transfer investments from one fund into another. generally within the same fund group.COMMERCIAL PAPER Short term. Provides safekeeping of securities but has no role in portfolio management. and reselling them to the other investors. DISTRIBUTOR An individual or a corporation serving as principal underwriter of a mutual fund’s shares. at nominal cost. 43 . to fund short term credit needs. unsecured promissory notes with maturities no longer than 270 days. buying shares directly from the fund. CUSTODIAN The bank or trust company that maintains a mutual fund’s assets includes its portfolio of securities or some record of them. DAILY DIVIDEND FUND This term applies to funds that declare their income dividends on a daily basis and reinvest or distribute monthly.
INCOME DIVIDEND Payment of interest and dividends earned on the fund’s portfolio securities after operating expenses are deducted. 44 . Expenses include management fees. GROWTH FUND A mutual fund whose primary investment objective is long-term growth of capital. EXPENSE RATIO The ratio of total expenses to net assets of the fund.EX-DIVIDEND DATE The date on which a fund’s Net Asset Value (NAV) will fall by an amount equal to the dividend and/or capital gains distribution (although market movements may alter the fund’s closing NAV somewhat). Most publications which list closing NAV place an “X” after a fund’ name on its ex-dividend date. FISCAL YEAR An accounting period consisting of 12 consecutive months. GLOBAL FUND An fund that invests in both Indian and foreign securities. It invests principally in common stocks with significant growth potential.The ratio is listed in a fund’ prospectus. Expense ratio may be a function of a fund’s size rather than of its success in controlling expenses. the cost of shareholder mailings and other administrative expenses.
INVESTMENT OBJECTIVE The financial goal (long-term growth. partnership or trust that invests the pooled monies of many investors. or “open-end” investment companies.INCOME FUND A mutual fund that primarily seeks current income rather than growth of capital. INDEX FUND A mutual fund that seeks to mirror general stock-market performance by matching its portfolio to a broad-based index. Mutual funds. current income. and is sold by a broker or salesman. which is included in the offering price of its shares. LOAD FUND A mutual fund that levies a sales charge up to 6%.It provides greater professional management and diversification of investments than most investors can obtain independently. A front-end load is the fee charged when buying into a fund. INVESTMENT COMPANY A corporation. etc. 45 . a back-end load is the fee charged when getting out of a fund. most often the S&P CNX Nifty index. ) that an investor or a mutual fund pursues. It will tend to invest in stocks and bonds that normally pay high dividends and interest. is the most popular form of company. INTERNATIONAL FUND A fund that invests in securities traded in markets outside India.
46 . commercial paper.5% or less.5% to 1% of the fund’s asset value. MONEY MARKET FUND A mutual fund that aims to pay money market interest rates. highly liquid securities. NET ASSET VALUE PER SHARE The current market worth of a mutual fund share. MANAGEMENT FEE The amount a mutual fund pays to its investment adviser for services rendered. MUTUAL FUND An open-end investment companies that buys back or redeems its shares at current net asset value. and dividing the remainder by the number of shares outstanding. including management of the fund’s portfolio. Most mutual funds continuously offer new shares to investors. In general. government securities and repurchase agreements. cash and any accrued earnings deducting liabilities. including bank certificates of deposit. for the purchase of its shares. this fee ranges from . Calculated daily by taking the funds total asset securities. usually 3.LOW-LOAD FUND A mutual funds that charges small sales commission. Money Market Funds make these high interest securities available to the average investor seeking immediate income and high investment safety. This is accomplished by investing in safe.
PROSPECTUS An official document that each investment company must publish. This date can be anywhere from one week to one month after the Record Date. PAYABLE DATE The date on which distributions are paid to shareholders who do not want to reinvest them. without the addition of a sales charge. either directly to the public or through an affiliated distributor. its portfolio turnover rate would be 100%. 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. describing the mutual fund and offering its shares for sale. High portfolio turnover rates generally add to the expenses of a fund. Aggressively managed funds generally have higher portfolio turnover rates than do conservative funds that invest for the long term. PORTFOLIO TURNOVER RATE The rate at which the fund’s portfolio securities are changed each year. Frequently the business day immediately prior to the Ex-Dividend Date. 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. If a fund’s assets total Rs 100mm and the fund bought and sold Rs100mm worth of securities that year.
Transfers between the various portfolios can usually be executed by telephone at little or no cost. The objective is to take advantage of regional growth potential before the national investment community does.REDEMPTION FEE A fee charged by a limited number of funds for redeeming. 48 . SECTOR FUND A fund that operates several specialized industries sectors portfolios under one umbrella. fund shares. usually the fund’s local region. REGIONAL FUND A mutual fund that concentrates its investments within a specific geographic area. The redemption price is usually equal to the current net asset value per share. 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. or buying back. 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.
For a mutual fund. SYSTEMATIC INVESTMENT PLANS In case of Systematic Investment Plans. usually expressed as a percentage of market price. investor invests a pre-specified amount in a scheme at pre-specified intervals at the then prevailing NAV. borrows stock for delivery to the buyer. which is not owned by the “seller”. yield is interest or dividend before any gain or loss in the price per share. over a designated period.SHORT SELLING The sale of a security. and must eventually purchase the security for return to the lender. YIELD Income or return received from an investment. UNDERWRITER The organization that acts as the distributor of a mutual fund’s shares to broker/dealers and the public. 49 . SPECIALTY FUND A mutual fund specializing in the securities of a particular industry or group of industries or special types of securities. instead of a lump sum amount.
study may suffer from some limitations. 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. • Due to changing environment. what is relevant today may not be relevant tomorrow. This research work also suffered certain limitations. 50 .Limitations of the Study In every research work the researcher has to face one or another kind of problem. so it may or may not represent the true picture. which are mentioned below: • The sample size taken by me for the study is 30 of Rewari city. being a fresher in the market. • • Time spent with the respondents was very less.
Tax Saving Return Liquidity Safety Security Any Other. Please specify_______________ My decisions for investment are strongly influenced by 2. 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. how many? ______________________________________________________________ 51 . Colleagues Family Friends Neighbours Financial Advisors Any Other. Please specify________________ 3.
Rate your level of awareness about ‘Mutual Fund’? Very Much Somewhat Neutral Don’t Have 2. ________________________ ________________________ ________________________ List Any 3 main disadvantages of investing in M. List any 5 Mutual Funds Companies 1) 2) 3) 4) 5) 3. main advantages of investing in M. List any 3.s.s.F. 1) 2) 3) ________________________ ________________________ ________________________ 52 .MF AWARENESS OF INVESTORS 1.F. 1) 2) 3) 5. The Mutual Fund ___________________ ___________________ ___________________ ___________________ ___________________ Company invests the money in _______________________________________________________________________ ________________________________________________________ 4.
F.s? If yes. Do you know what are present offers in M. What percentage of savings on an average do you invest in M. DO you know the meaning of NET ASSET VALUE? Yes No MUTUAL FUNDS INVESTMENT BEHAVIOUR 1. the first thing that comes to my mind are(Please rank) 53 .?(Please tick) < 10 % > 10% and < 25% . you prefer investing in(Please mention) FUNDS %age Equity Funds Debt Funds Balanced Funds Any other 3. 25% and < 50% > 50% 1. While investing in a Mutual Fund.F. In which securities.6. Please specify ____________________________________________________________________ ________________________________________________________ 7.
Strong Agreement Agreement Indifferent Disagreement Strong disagreement 6. Liquidity is the most attractive feature of the Mutual Funds. Mutual Funds investments are better as compared to investment in direct stocks. OPTIONS RANK The Company Fund Manager The Risk involved Past Performance Media Reports The Return Any Other 4. Strong Agreement 54 . Market attracts the consumer only when it is booming. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 5.
55 . The portfolio of any Mutual Fund scheme is a very important thing and I use to study it whenever I invest in any scheme. Agreement Indifferent Disagreement Strong disagreement 7. I would prefer investing in the option with some risk. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 8. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 9. which gives me a better return than in the option that has no risk but gives lessor or no return. 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.
F. What would motivate you to invest in M. Any suggestions that you would like to give in order to make the Mutual Funds performance better________________________________________________________ _______________________________________________________________________ _ THANKS FOR YOUR COOPERATION 56 . Strong Agreement Agreement Indifferent Disagreement Strong disagreement 10.s? _______________________________________________________________________ _______________________________________________________________________ __ 11.
com www. New age International Publishing Company. 4. June 2003 WEBSITE: www. 24 January.R.. (2007) Research Methodology.BIBLIOGRAPHY 1. vol.3 Dhanpat Rai Publishing Company 3.google.com 57 .karvy. February 2007. 2.com www. Garg R. vol. Elements of Insurance. The journal of insurance of India. October – December. January. Kothari C.indiacorporateadvisor.moneycapital.com www.K. vol.
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