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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
Signature & seal of the Learning Center
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.
5. 10. 3. 11. 4.TABLE OF CONTENT 1. 6. 8. 7. 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 . 9. Conceptualisation & Operationalisation 2.
using.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. 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. 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. The main focus of the study to know the perception of investors towards mutual funds as an investment tool. These could range from shares to debentures to money market instruments. 7 . As a lot of options are there before the investors to invest their surplus in order to make it grow. Attitude of the investors can be defined as the attitude which the investors display in searching for purchasing.
It would provide insights about the criterion used by the investors for the evaluation of a M.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 . scheme. To know the saving behavior of the respondents. The Secondary objectives 1.F. 2.
to enjoy the economies of large-scale operations. Thus a MF is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. These could range from shares to debentures to money market instruments. Each Mutual Fund scheme has a defined investment objectives and strategy. 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. Of late MFs have become a hot favorite of millions of people all over the world. skills. Price changes in these assets are driven by global events occurring in faraway places. Hence Mutual Fund is nothing but a form of collective investment made at a high level. A typical individual is unlikely to have the knowledge. real estate. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds.Mutual Funds In the financial industry the talk of the day is “Mutual Funds”. 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). professionally managed portfolio at a relatively low cost. An individual also 9 . A MF is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. bonds and other fixed income securities. inclination and time to keep track of events. understand their implications and act speedily. Markets for equity shares.
the Mutual Fund in its present form is a 20th century phenomenon. While the concept of individuals coming together to invest money collectively is not new. brokerage dues and bank transactions etc. there are thousands of firms offering tens of thousands of Mutual Funds with different investment objectives. A Mutual Fund is the answer to all these situations.finds it difficult to keep track of ownership of his assets. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. 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. In fact. investments. 10 .
The first scheme launched by UTI was Unit Scheme 1964.UTI. At the end of 1988 UTI had Rs. Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non.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.UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. Indian Bank Mutual Fund (Nov 89). SBI Mutual Fund was the first non. at the initiative of the Government of India and Reserve Bank. 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 . the mutual fund industry had assets under management of Rs. 700 crores of assets under management. The history of mutual funds in India can be broadly divided into four distinct phases. First Phase – 1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. Bank of Baroda Mutual Fund (Oct 92). At the end of 1993. 004 crores. Punjab National Bank Mutual Fund (Aug 89).47.6. 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. Bank of India (Jun 90). public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
The Unit Trust of India with Rs. 1. Fourth Phase – since February 2003 In February 2003. 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 erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.29. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 835 crores as at the end of January 2003. BOB and LIC. assured return and certain other schemes. Also. following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. there were 33 mutual funds with total assets of Rs.541 crores of assets under management was way ahead of other mutual funds. giving the Indian investors a wider choice of fund families. With the 12 . PNB.Third Phase – 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993. a new era started in the Indian mutual fund industry. 1993 was the year in which the first Mutual Fund Regulations came into being. representing broadly. It is registered with SEBI and functions under the Mutual Fund Regulations.44. the assets of US 64 scheme.805 crores. The number of mutual fund houses went on increasing. except UTI were to be registered and governed. The second is the UTI Mutual Fund Ltd. under which all mutual funds. As at the end of January 2003. 21. sponsored by SBI. The Specified Undertaking of Unit Trust of India. with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions.
trustees. As at the end of September. They monitor the performance and compliance of SEBI Regulations by the mutual fund. 2004. 2002). Asset Management Company (AMC) and custodian. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. All mutual funds are required to be registered with SEBI before they launch any scheme.164546 crores. the mutual fund industry has entered its current phase of consolidation and growth. The trustees of the mutual fund hold its property for the benefit of the unit holders. The trustees are vested with the general power of superintendence and direction over AMC. However. holds the securities of various schemes of the fund in its custody. there were 29 funds. Custodian. Also. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i. SET UP OF A MF A mutual fund is set up in the form of a trust. Unit Trust of India (UTI) is not registered with SEBI (as on January 15. which manage assets of Rs. 50% of the directors of AMC must be independent.76.bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 13 . The trust is established by a sponsor or more than one sponsor who is like promoter of a company.e.000 crores of assets under management and with the setting up of a UTI Mutual Fund. they should not be associated with the sponsors.153108 crores under 421 schemes. and with recent mergers taking place among different private sector funds. which has sponsor. who is registered with SEBI. conforming to the SEBI Mutual Fund Regulations. By the end of June 2005 the total assets of mutual fund industry are Rs.
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. some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i. 14 . The fund is open for subscription only during a specified period at the time of launch of the scheme. either repurchase facility or through listing on stock exchanges. In order to provide an exit route to the investors. These schemes do not have a fixed maturity period. Open-ended Fund/ Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. Close-ended Fund/ Scheme A close-ended fund or scheme has a stipulated maturity period e.e.g. The key feature of open-end schemes is liquidity.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. These mutual funds schemes disclose NAV generally on weekly basis. 5-7 years.
Schemes according to Investment Objectives A scheme can also be classified as growth scheme. corporate debentures. The investors must indicate the option in the application form. Such funds have comparatively high risks. Income / Debt Oriented Scheme. These schemes provide different options to the investors like dividend option. Such funds are less risky compared to equity schemes. capital appreciation. etc. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. income scheme. 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 mutual funds also allow the investors to change the options at a later date. Such schemes normally invest a major part of their corpus in equities. Government securities and money market instruments. Such schemes may be open-ended or close-ended schemes as described earlier. and the investors may choose an option depending on their preferences. The aim of income funds is to provide regular and steady income to investors. opportunities of capital appreciation are also limited in such 15 . These funds are not affected because of fluctuations in equity markets. Such schemes generally invest in fixed income securities such as bonds. However. or balanced scheme considering its investment objective.
commercial paper and interbank call money. NAVs of such funds are likely to increase in the short run and vice versa. However. etc. long term investors may not bother about these fluctuations. These funds are also affected because of fluctuations in share prices in the stock markets. preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills. government securities. Returns on these schemes fluctuate much less compared to other funds. Money Market or Liquid Fund These funds are also income funds and their aim is to provide easy liquidity.funds. certificates of deposit. They generally invest 40-60% in equity and debt instruments. These are appropriate for investors looking for moderate growth. NAVs of such funds are likely to be less volatile compared to pure equity funds. However. 16 . The NAVs of such funds are affected because of change in interest rates in the country. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. If the interest rates fall. 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.
etc. 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. 1961 as the Government offers tax incentives for investment in specified avenues. Equity Linked Savings Schemes (ELSS). E. E. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index. These schemes are growth oriented and invest pre- 17 . Government securities have no default risk. Pharmaceuticals. There are also exchange traded index funds launched by the mutual funds. S&P NSE 50 index (Nifty). Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Software. Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index.Gilt Fund These funds invest exclusively in government securities.g. 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. which are traded on the stock exchanges. these schemes invest in the securities in the same weightage comprising of an index. Fast these schemes offer tax rebates to the investors under specific provisions of the Income Tax Act. Pension schemes launched by the mutual funds also offer tax benefits.g.
fixed deposits etc. That is. bonds. stocks. each time one buys or sells units in the fund. which would otherwise be extremely expensive. Diversification Simply means that you must spread your investment across different securities (money market instruments.) and 18 . bonds. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs. etc. This charge is used by the mutual fund for marketing and distribution expenses.500/-. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units. 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. a charge will be payable. depending upon the investment objective of the scheme. real estate.dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme Load or no-load Fund A Load Fund is one that charges a percentage of NAV for entry or exit. Advantages of Mutual Fund Affordability A mutual fund invests in a portfolio of assets. A no-load fund is one that does not charge for entry or exit. shares. i. An investor can buy in to a portfolio of equities.e.
Professional Management Qualified investment professionals seek to maximize returns and minimize risk monitor investor's money. Liquidity One is free to take his money out of open-ended mutual funds whenever required. It is then the Fund Manager's job to (a) find the best securities for the fund. IT. This variety is beneficial in two ways: first. 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. as and when required. In a mutual fund.). Most open-ended funds mail your redemption proceeds. textile. and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio. it offers different types of schemes to investors with different needs and risk appetites. secondly. so as to offset any underperformance by any one sector or instrument and help the investor meet his investment objective. the investor is handling his money to an investment professional that has experience in making investment decisions. Variety Mutual funds offer a whole variety of schemes. This kind of a diversification may add to the stability of returns. which are linked to the 19 . given the fund's stated investment objectives. both debt and equity. For example.different sectors (banking. it offers an opportunity to an investor to invest sums across a variety of schemes. etc.
within three to five working days of putting in request. These rules relate to the formation. which govern mutual funds. Such a high level of regulation seeks to protect the interest of investors. administration and management of mutual funds and also prescribe disclosure and accounting requirements. the Capital Markets regulator has clearly defined rules.fund's prevailing NAV (net asset value). 20 . Regulations Securities and Exchange Board of India ("SEBI").
The survey population was 50. no of dependents is some of the factors. which have an impact upon the decision of making investment.Research Methodology This section will describe the methodological tools adopting in conducting the present research. varying income groups and having different occupations. 21 . 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. Sample size The sample constituted 50 respondents. Hence it is extremely important to describe the research methodology. 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. Properly conducted research reduces the uncertainties level for the top management in making critical decisions. The age. Due care has been taken to make the sample a representative one for the Mutual Fund Investors. The investment decisions are influenced by a no of variables. income. The respondents were of various age groups.
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. It consisted of both open ended and close-ended questions. Secondary Data was collected from various sources such as books. Making a Structured Questionnaire fulfilled primary data collection need.Data collection Both Primary as well as Secondary Data was collected for the study. The questionnaire consisted of questions related to the socio economic position of the investors. 22 . magazines. The investors’ problems and needs can be best understood by themselves. and newspaper and also through Internet to make analysis healthier.
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. 4. Occupation No. 2. 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. No. No. 1. 2 SAMPLE COMPOSITION BY OOCUPATION Sr. No. Educational Qualification Under Graduate No. 1 SAMPLE COMPOSITION BY MONTHLY INCOME Sr. of Respondents 2 23 %age 4 .INTERPRETATION AND ANALYSIS OF DATA Table No. 1 2 3 4 5 Monthly No. 3 SAMPLE COMPOSITION BY EDUCATIONAL QUALIFICATION Sr.
3. Graduate 13 Post Graduate 35 Total 50 Source: Primary data collected through questionnaire 26 70 100 24 .2.
50000 to Rs. 25 . 100000. This can be effectively mobilized towards Mutual Funds. Level of Savings No. 2. 3. 1. Of respondents 5 0 <50000 >100000&<250000 o Around 305 of people are saving in between Rs. 4.ANALYSIS OF DATA SAVING BEHAVIOUR OF RESPONDENTS Table no 4 LEVEL OF ANNUAL SAVINGS Sr. 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. No. Efforts should be towards diverting their savings from traditional investment to stock market.
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. People want liquidity as well as safety. is increasing day by day. 1. Real estate. Comparatively less no. o Mostly (50%) people want to invest in medium term as compared to short term and long term. Gold and they prefer to invest in these.No. It is then followed by regular income and tax savings. 2. of Respondents 15 25 10 50 %age 30 50 20 100 Total Source: Primary Data collected through questionnaire. Preferred time Period 26 . 3.o Mostly (around 98%) people know the various options of investment like Bank Deposits. of people is aware of mutual funds but this no. 5 Preferred time for investment S. Insurance. Table No. Time Period Short Term Medium Term Long Term No.
1. of Respondents o While choosing any investment plan most important criteria used is returns followed by liquidity and safety. 5.6 Criteria Used for making Investment S. Investors want their money to earn more and more at first place followed by easy withdrawal of money. 4. No. 2.25 20 15 10 5 0 Short Term Medium Term Long Term No. Criteria Tax Saving Returns Liquidity Safety Security No. 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 . Table No. 3.
of Respondents o Decisions For 30% investors are influenced by their colleagues.of respondents 15 8 7 8 12 %age 30 16 14 16 24 100 Total 50 Source: Primary Data collected through questionnaire 28 . family and Neighbors. 5.7 Factors influencing Decisions S. Factors Colleagues Family Friends Neighbors Financial Advisors No. followed by their Financial Advisors.25 20 15 10 5 0 Tax Saving Returns Liquidity Safety Security No. 4. 3. No 1. 2. Table no.
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 .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.
Responses Very Much Somewhat Neutral Not Aware Total No. Of Respondents 10 20 5 15 50 %age 20 40 10 30 100 Source: Primary Data collected through questionnaire 30 .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. 3.8 RATING OF AWARENESS OF MUTUAL FUNDS S. 4. Table no. Well they are aware about mutual funds but they hesitate to invest in it.No. 1.
31 . UTI etc. There are also some respondents who haven’t heard the term Mutual Fund. Reliance. Others didn’t even heard about NAV. 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. Safety and Risk reduction has been found as its two main advantages. Others don’t know mutual fund invest where. SBI.Rating of Awareness 20 15 10 5 0 Not aw are Neutral Somew hat Very Much No. of Respondents Less than 40% respondents know about mutual fund companies operating. Fluctuation in prices has been considered as the main disadvantage of mutual fund. 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 .No 1. 9 AWARENESS OF NET ASSET VALUE S. 2.Table No. Responses YES NO No.
Some investors were agree because their investments got diversified in various co. 30 respondents don’t invest a single penny in mutual funds. 33 . A very less no. made neutral response. Mostly investors prefer to invest in equity funds followed by balanced funds.20 15 10 No. Of respondents invest their money in mutual funds because they hesitate to invest in this option. s which ultimately reduces risk. Real Estate etc. of Respondents 5 0 Strong Disagreement Agreement MUTUAL FUNDS INVESTMENT BEHAVIOUR Comparatively less no. Of investors invest their money in Money Market Instruments etc. They prefer to invest in Bank Deposits. Post Office schemes. Level of savings invested in mutual funds is also very less. Past performance is most important factor influencing the investors followed by return and risk. This question gained mixed responses as respondents who don’t know about mutual funds.
10 MUTUAL FUNDS ARE BETTER THAN DIRECT STOCKS S. 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. they want quick encashing of their money.No 1.Table No. Responses Strong Agreement Agreement Neutral Disagreement Strong Disagreement No. 5. 3. 2. 34 . 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. 4.
They will prefer the investment in the opinion that has no risk but gives lessor or no returns. Studying of portfolio is very important so as to know where the hard earned money is being invested but a very little percentage wants to know the portfolio of a particular fund. All other responses were either in the disagreement or neutral. 11 STUDY OF PORTFOLIO IS VERY IMPORTANT 35 . 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. Only 15 respondents were agree to the factor that attracts only when it is booming. Table No.
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. 2. 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.No 1.S. Responses Strong Agreement Agreement Neutral Disagreement Strong Disagreement No. professional management. 5. 3. Some respondents suggested that M. more awareness will motivate them to invest in mutual funds. Most of the respondents suggest that if greater economies of scale. 4. 36 .F. more tax benefits. more savings.
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. 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. But is experienced that many mutual fund operators ignored the basic objective of fund portfolio. But these are not as we expected from them. dealers and agent. Almost all mutual fund are charging 6% for these expenditures. particularly those mutual fund which are income oriented required to invest their many mainly in debt instrument of high yielding. printing and stationary. These reasons are depressing trends in money market as well as some adverse result shown by some mutual funds schemes. A large part of resources of these funds is invested in IPOs. Whenever a mutual fund is launched. advertisement. so that they may continue the process of resources mobilization and capital formation. The investors are big losers by investing 37 . it states its portfolio according to the objectives of funds. 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. small and mid cap stocks which are the not traded frequently at stock exchanges. commission to merchandising bank. There are various reasons for this slow mobilization.FINDINGS AND SUGGESTIONS On the basis of detailed study of various mutual funds operated in India.
It is suggested that to check the entry of 38 . The SEBI should take care that such transactions are not made by mutual funds. It creates the unnecessary speculation in such shares. It brings frustration in prospective investors. Some mutual fund managers are favoring by the way of routing exceptionally high volume of transactions through some brokers in contravention of SEBI norms. 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. 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.in these funds as the NAV of these funds has liquidated to great extent of their original investments. The 5% norm is determined by the SEBI to safeguard the interests of investors. sometimes the holdings of one fund are purchased by other fund of the same group. 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. Due to lack of clear guidelines. 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 entry regulations in the mutual funds business are very easy to complete by a skilled manipulator. Apparently it seems a case of favoritism by the mutual funds. In such transactions original investors of the fund as well as other investors lose their money.
Investors are entrusting their hard-earned savings to mutual funds for effective management of their interests. of investors. 39 . A separate “Investors Service Cell” should be established by all mutual funds and should be regulated by Senior Management from time to time. Investor’s satisfaction is an important factor for the mutual funds. they are highlighting the qualities of their schemes to attract the investors. Mutual fund activities are mainly confined to urban areas.such unscrupulous operator. these organisations should open some branches in rural areas and specially recruit the agents the in from rural area. For marketing a scheme. These agents should be given some additional incentives comparing to others agents. magazines and other media. the regulation for granting permission for starting a mutual fund AMC should be made strict. Sometimes it is noticed that some MFs operators created an artificial market conditions to boost the sales of their scheme. the various mutual funds AMCs are giving attractive advertisements in newspapers. various problems related to investors service TAURUS MUTUAL FUND has set up a 24 hour phone service in Delhi and Bombay to its subscribers. A little effort is being made to attract the savings of rural and agricultural sector. 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. But due to increasing no.
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. any. ASKING AND OFFERING PRICE The price at which a mutual fund’s shares can be purchased. government securities. This is creating a problem to the investors. 40 . It is suggested that the SEBI should effectively instruct all mutual funds to follow the uniform procedure for calculation of NAV. gold bullion and real estate stocks. 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. For a no-load fund. The asked or offering price means the current net asset value (NAV) per share plus sales charge. ASSET ALLOCATION FUND A fund that spreads its portfolio among a wide variety of investments. including domestic and foreign stocks and bonds. the asked price is the same as the NAV. The various mutual funds are following different methods of calculation of their NAVs. 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. because this is an unfair trade practice to allure the innocent investors.
BOND FUND A mutual fund whose portfolio consists primarily of corporate or Government bonds.This gives small investors far more diversification than they could get allocating money on their own. less any redemption fee or back-end load. Ratings range from AAA or Aaa (extremely unlikely) to D (currently in default). Bonds rated BBB or below are not considered to be of investment grade. generally 60% bonds or preferred stocks and 40% common stocks. These funds generally emphasize income rather than growth. 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. Mutual Funds generally 41 . 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. BOND RATING System of evaluating the probability of whether a bond issuer will default. while others alter the mix as market conditions change. BALANCED FUND A mutual fund that maintains a balanced portfolio. Some of these funds keep the proportions allocated between different sectors relatively constant.
reflected in its net asset value per share. short-selling and high turnover. usually through brokers. 42 .which are specified in their prospectuses. CAPITAL GROWTH A risk in market value of a mutual fund’s securities. CLOSED-END INVESTMENT COMPANY An investment company that offers a limited number of shares.restrict their bond purchases to issues of certain quality ratings. short-term debt instrument issued by banks and thrifts. They are traded in the securities markets. CAPITAL APPRECIATION FUND A mutual fund that seeks maximum capital appreciation through the use of investment techniques involving greater than ordinary risk. such as borrowing money in order to provide leverage. closed-end funds do not redeem their shares. CERTIFICATE DEPOSIT Interest-bearing. CAPITAL GAINS DISTRIBUTIONS Payments (usually annually) to mutual fund shareholders of gains realized on the sale of portfolio securities. Price is determined by supply and demand. Unlike open-end investment companies (mutual funds). This is a specific long-term objective of many mutual funds.
and reselling them to the other investors. They are issued by corporations. COMMON STOCK FUND An open end investment company whose holdings consist mainly of common stocks and usually emphasize growth. CUSTODIAN The bank or trust company that maintains a mutual fund’s assets includes its portfolio of securities or some record of them. DISTRIBUTOR An individual or a corporation serving as principal underwriter of a mutual fund’s shares. DIVERSIFICATION The policy of spreading investments among a range of different securities to reduce the risks inherent in investing. unsecured promissory notes with maturities no longer than 270 days. to fund short term credit needs. 43 . Provides safekeeping of securities but has no role in portfolio management. at nominal cost.COMMERCIAL PAPER Short term. EXCHANGE PRIVILEGE (OR SWITCHING PRIVILEGE) The right to transfer investments from one fund into another. buying shares directly from the fund. DAILY DIVIDEND FUND This term applies to funds that declare their income dividends on a daily basis and reinvest or distribute monthly. generally within the same fund group.
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.The ratio is listed in a fund’ prospectus. It invests principally in common stocks with significant growth potential. INCOME DIVIDEND Payment of interest and dividends earned on the fund’s portfolio securities after operating expenses are deducted. Expenses include management fees. GLOBAL FUND An fund that invests in both Indian and foreign securities. Expense ratio may be a function of a fund’s size rather than of its success in controlling expenses. FISCAL YEAR An accounting period consisting of 12 consecutive months. 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. the cost of shareholder mailings and other administrative expenses.
etc. partnership or trust that invests the pooled monies of many investors. a back-end load is the fee charged when getting out of a fund. 45 . A front-end load is the fee charged when buying into a fund. which is included in the offering price of its shares. INVESTMENT COMPANY A corporation. is the most popular form of company. Mutual funds. ) that an investor or a mutual fund pursues. INVESTMENT OBJECTIVE The financial goal (long-term growth. INTERNATIONAL FUND A fund that invests in securities traded in markets outside India. current income. or “open-end” investment companies.INCOME FUND A mutual fund that primarily seeks current income rather than growth of capital. and is sold by a broker or salesman. LOAD FUND A mutual fund that levies a sales charge up to 6%. It will tend to invest in stocks and bonds that normally pay high dividends and interest. INDEX FUND A mutual fund that seeks to mirror general stock-market performance by matching its portfolio to a broad-based index. most often the S&P CNX Nifty index.It provides greater professional management and diversification of investments than most investors can obtain independently.
This is accomplished by investing in safe. Calculated daily by taking the funds total asset securities. usually 3. including bank certificates of deposit. Money Market Funds make these high interest securities available to the average investor seeking immediate income and high investment safety. for the purchase of its shares.5% to 1% of the fund’s asset value. In general. MANAGEMENT FEE The amount a mutual fund pays to its investment adviser for services rendered. and dividing the remainder by the number of shares outstanding. highly liquid securities. government securities and repurchase agreements. 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. Most mutual funds continuously offer new shares to investors.LOW-LOAD FUND A mutual funds that charges small sales commission. including management of the fund’s portfolio. NET ASSET VALUE PER SHARE The current market worth of a mutual fund share. 46 . this fee ranges from . MONEY MARKET FUND A mutual fund that aims to pay money market interest rates. commercial paper.
47 . PAYABLE DATE The date on which distributions are paid to shareholders who do not want to reinvest them. If a fund’s assets total Rs 100mm and the fund bought and sold Rs100mm worth of securities that year. describing the mutual fund and offering its shares for sale. its portfolio turnover rate would be 100%. without the addition of a sales charge. PORTFOLIO TURNOVER RATE The rate at which the fund’s portfolio securities are changed each year. Aggressively managed funds generally have higher portfolio turnover rates than do conservative funds that invest for the long term. 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. Frequently the business day immediately prior to the Ex-Dividend Date. It contains information required by the Securities and Exchange Commission. either directly to the public or through an affiliated distributor.NO-LOAN FUND A commission-free mutual fund that sells its shares at net asset value. PROSPECTUS An official document that each investment company must publish. 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.
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. fund shares. 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. usually the fund’s local region. 48 . REDEMPTION PRICE The price at which a mutual fund’s shares are redeemed (bought back) by the less expensive fund. 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 FEE A fee charged by a limited number of funds for redeeming. 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. SECTOR FUND A fund that operates several specialized industries sectors portfolios under one umbrella.
instead of a lump sum amount. which is not owned by the “seller”. and must eventually purchase the security for return to the lender. 49 . 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. investor invests a pre-specified amount in a scheme at pre-specified intervals at the then prevailing NAV.SHORT SELLING The sale of a security. SPECIALTY FUND A mutual fund specializing in the securities of a particular industry or group of industries or special types of securities. yield is interest or dividend before any gain or loss in the price per share. usually expressed as a percentage of market price. over a designated period. For a mutual fund. borrows stock for delivery to the buyer. SYSTEMATIC INVESTMENT PLANS In case of Systematic Investment Plans.
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. 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. • I. being a fresher in the market. 50 . This research work also suffered certain limitations. • • Time spent with the respondents was very less. • Due to changing environment. study may suffer from some limitations. what is relevant today may not be relevant tomorrow.Limitations of the Study In every research work the researcher has to face one or another kind of problem.
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 . Tax Saving Return Liquidity Safety Security Any Other. Please specify________________ 3. Colleagues Family Friends Neighbours Financial Advisors Any Other.
MF AWARENESS OF INVESTORS 1.F. main advantages of investing in M.s. The Mutual Fund ___________________ ___________________ ___________________ ___________________ ___________________ Company invests the money in _______________________________________________________________________ ________________________________________________________ 4. 1) 2) 3) ________________________ ________________________ ________________________ 52 .s. Rate your level of awareness about ‘Mutual Fund’? Very Much Somewhat Neutral Don’t Have 2.F. List any 3. ________________________ ________________________ ________________________ List Any 3 main disadvantages of investing in M. List any 5 Mutual Funds Companies 1) 2) 3) 4) 5) 3. 1) 2) 3) 5.
6. the first thing that comes to my mind are(Please rank) 53 .?(Please tick) < 10 % > 10% and < 25% .s? If yes. 25% and < 50% > 50% 1. you prefer investing in(Please mention) FUNDS %age Equity Funds Debt Funds Balanced Funds Any other 3. In which securities.F.F. What percentage of savings on an average do you invest in M. While investing in a Mutual Fund. Do you know what are present offers in M. Please specify ____________________________________________________________________ ________________________________________________________ 7. DO you know the meaning of NET ASSET VALUE? Yes No MUTUAL FUNDS INVESTMENT BEHAVIOUR 1.
Strong Agreement Agreement Indifferent Disagreement Strong disagreement 6. Market attracts the consumer only when it is booming. Liquidity is the most attractive feature of the Mutual Funds. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 5. 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 .
Agreement Indifferent Disagreement Strong disagreement 7. The portfolio of any Mutual Fund scheme is a very important thing and I use to study it whenever I invest in any scheme. 55 . which gives me a better return than in the option that has no risk but gives lessor or no return. I would prefer investing in the option with some risk. If a little risk can give me a lot of comfort & wealth I will be interested to look for that option in the long run. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 8. Strong Agreement Agreement Indifferent Disagreement Strong disagreement 9.
Strong Agreement Agreement Indifferent Disagreement Strong disagreement 10.s? _______________________________________________________________________ _______________________________________________________________________ __ 11. What would motivate you to invest in M.F. Any suggestions that you would like to give in order to make the Mutual Funds performance better________________________________________________________ _______________________________________________________________________ _ THANKS FOR YOUR COOPERATION 56 .
com www. vol. Elements of Insurance.R. New age International Publishing Company. Kothari C. vol.com 57 .K.3 Dhanpat Rai Publishing Company 3. (2007) Research Methodology. The journal of insurance of India.com www.. vol. 24 January.moneycapital.com www. June 2003 WEBSITE: www. Garg R. February 2007.karvy.BIBLIOGRAPHY 1. January. 4.indiacorporateadvisor.google. 2. October – December.
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